- Reported sales down 16.3 percent year over year; organic sales
down 17.6 percent
- Inorganic investments contributed 3 percent to reported
sales
- Diluted EPS of $2.73; Adjusted EPS of $1.27
- Liquidity position further enhanced by strong cash flow
generation
- Updating fiscal 2020 Diluted EPS guidance to $8.06 - $8.26 and
Adjusted EPS guidance to $7.40 - $7.60
- New operating segments effective Q1 fiscal 2021 to drive
simplification and accelerate profitable growth
Rockwell Automation, Inc. (NYSE: ROK) today reported third
quarter fiscal 2020 results.
Commenting on the third quarter results and current business
conditions, Blake Moret, Chairman and CEO, said "We continue to
build resiliency for ourselves and for our customers.
Year-over-year results are down, and conditions remain difficult,
but our employees have responded extraordinarily well, and we
remain focused on keeping them safe. Our earnings were higher than
expected for the quarter, primarily driven by better organic
sales."
Moret also announced, “We are taking the next step in
accelerating profitable growth by organizing our business in a way
that better aligns us with the evolving needs of our customers.
Beginning next fiscal year, we will operate with three operating
segments - Intelligent Devices, Software & Control, and
Lifecycle Services. These new segments will simplify our structure
around essential offerings, leverage our sharpened industry focus,
and add software talent, which will play a larger role in our
future value.”
Moret continued, “We are confident that this model will enable
us to provide even more value. Nobody is better positioned to bring
Information Technology (IT) and industrial Operational Technology
(OT) together than Rockwell and our partners.”
“This change builds on our success and accelerates our progress
to bring the Connected Enterprise to life. It’s the right time to
make these changes, as we strengthen the resilience of our business
model. Our growth framework remains gaining share in our core,
growing double digits in information solutions and connected
services, and adding a point or more of growth through inorganic
investments.”
Fiscal 2020 Q3 Financial
Results
Fiscal 2020 third quarter sales were $1,394.0 million, down 16.3
percent from $1,665.1 million in the third quarter of fiscal 2019.
Organic sales declined 17.6 percent, currency translation decreased
sales by 1.9 percentage points, and acquisitions increased sales by
3.2 percent.
Fiscal 2020 third quarter net income attributable to Rockwell
Automation was $317.8 million or $2.73 per share, compared to
$261.4 million or $2.20 per share in the third quarter of fiscal
2019. The increases in net income attributable to Rockwell
Automation and EPS were primarily due to fair-value adjustments
recognized in the third quarter of fiscal 2020 and 2019 in
connection with our investment in PTC (the "PTC adjustments"),
partially offset by lower sales. Fiscal 2020 third quarter Adjusted
EPS was $1.27, down 47 percent compared to $2.40 in the third
quarter of fiscal 2019, primarily due to lower sales. These results
include restructuring charges of approximately $15 million, which
are offset by a one-time gain from the sale of an asset.
Pre-tax margin was 24.0 percent in the third quarter of fiscal
2020 compared to 19.3 percent in the same period last year. The
increase in pre-tax margin was primarily due to the PTC adjustments
partially offset by lower sales volume leverage.
Total segment operating margin was 16.5 percent compared to 23.8
percent a year ago. The decrease in total segment operating margin
was primarily due to lower sales. Total segment operating earnings
were $229.4 million in the third quarter of fiscal 2020, down 42.1
percent from $395.9 million in the same period of fiscal 2019.
Cash flow provided by operating activities in the third quarter
of fiscal 2020 was $346.2 million, compared to $351.2 million in
the third quarter of fiscal 2019. Free cash flow was $310.9
million, compared to $323.4 million in the third quarter of fiscal
2019.
Outlook
The COVID-19 pandemic and global efforts to respond to it are
rapidly evolving. Our projections assume that a gradual recovery
continues, with no increase in pandemic-related facility closures
or disruptions to the supply chain.
Based on the information available to us at the time of this
release, the following table provides guidance for projected sales
growth and earnings per share for fiscal 2020:
Sales Growth Guidance
EPS Guidance
Reported sales growth
~ (5.5)%
Diluted EPS
$8.06 - $8.26
Organic sales growth
~ (8)%
Adjusted EPS
$7.40 - $7.60
Inorganic sales growth1
~ 4%
Currency translation
~ (1.5)%
1Estimate for incremental sales resulting from the formation of
the Sensia joint venture and sales from other acquired businesses
in fiscal year 2020.
“While we, as a company, are managing well in this environment,
we are highly sensitive to the toll this is taking on our employees
during this time. Beyond the fear of a loved one getting sick,
racial injustice is on our minds as we develop actions as a company
and as individuals that will help put a permanent end to the denial
of fundamental human rights. Additionally, thousands of employees
continue to work under very difficult conditions, including the
temporary pay cuts we implemented in May. These actions were
necessary to better align our costs to current business conditions
while preserving jobs, and we intend to reverse them by the end of
December, hopefully sooner. Additionally, we are making another
recognition payment to our manufacturing associates worldwide, who
are on the front lines of maintaining our essential operations,”
Moret concluded.
Architecture & Software
Architecture & Software quarterly sales were $621.4 million,
a decrease of 16.9 percent compared to $747.9 million in the same
period last year. Organic sales decreased 15.9 percent, currency
translation decreased sales by 1.8 percentage points, and an
acquisition increased sales by 0.8 percentage points. Segment
operating earnings were $147.8 million compared to $222.9 million
in the same period last year. Segment operating margin decreased to
23.8 percent from 29.8 percent a year ago.
Control Products &
Solutions
Control Products & Solutions quarterly sales were $772.6
million, a decrease of 15.8 percent compared to $917.2 million in
the same period last year. Organic sales decreased 18.9 percent,
currency translation decreased sales by 2.0 percent, and inorganic
investments increased sales by 5.1 percent. Segment operating
earnings were $81.6 million compared to $173.0 million in the same
period last year. Segment operating margin decreased to 10.6
percent from 18.9 percent a year ago.
Supplemental Information
General Corporate Net - Fiscal 2020 third quarter general
corporate-net expense was $26.4 million compared to $23.8 million
in the third quarter of fiscal 2019. The increase was primarily due
to benefit-related adjustments.
Purchase Accounting Depreciation and Amortization - Fiscal 2020
third quarter purchase accounting depreciation and amortization
expense was $10.6 million, up $6.5 million from the third quarter
of fiscal 2019, resulting in a year-over-year decrease in Adjusted
EPS of $0.03.
Tax - On a GAAP basis, the effective tax rate in the third
quarter of fiscal 2020 was 6.1 percent compared to 18.7 percent in
the third quarter of fiscal 2019. The lower effective tax rate in
the third quarter of fiscal 2020 was primarily due to the PTC
adjustments. The Adjusted Effective Tax Rate for the third quarter
of fiscal 2020 was 13.6 percent compared to 17.3 percent in the
prior year. The lower Adjusted Effective Tax Rate in 2020 is
primarily due to discrete items.
Share Repurchases - During the third quarter of fiscal 2020, the
Company repurchased 0.3 million shares of its common stock at a
cost of $48.5 million. At June 30, 2020, $853.7 million remained
available under our existing share repurchase authorization.
ROIC - Return on invested capital was 27.9 percent.
Non-GAAP Measures - 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.
New Operating Segments
Beginning in fiscal year 2021, the company will report revenue
and operating earnings based on three operating segments:
Intelligent Devices, Software & Control, and Lifecycle
Services. This change simplifies our structure around essential
offerings, leverages our sharpened industry focus, and recognizes
the growing importance of software in delivering value to our
customers.
The Intelligent Devices segment will be led by Fran Wlodarczyk,
currently the Senior Vice President of our Architecture &
Software segment, and will include drives, motion, safety, sensing,
industrial components, and configured-to-order products.
The Software and Control segment will be led on an interim basis
by Chris Nardecchia, currently Senior Vice President of Information
Technology and Chief Information Officer, while an external search
is conducted for a new Senior Vice President for this segment. This
segment will include control and visualization software and
hardware, information software, and network and security
infrastructure.
The Lifecycle Services segment will be led by Frank Kulaszewicz,
currently Senior Vice President of our Control Products &
Solutions segment, and will include consulting, professional
services, connected services, and maintenance services, as well as
the Sensia joint venture with Schlumberger.
In addition, to accelerate the evolution of our culture, Becky
House has taken the role of Chief Administrative and Legal Officer,
which includes leadership of our talent, legal, ethics and
compliance, and environmental, health and safety teams.
Rockwell will begin to operate under the new segment structure
effective Q1 fiscal 2021. Rockwell expects to announce its
financial results for the fiscal first quarter in late January 2021
and will report financial performance based on these three
operating segments. To aid investors with the transition, revenue
and segment operating earnings for fiscal 2019-2020 will be
provided by our fiscal Q4 2020 earnings call.
Conference Call
A conference call to discuss the quarterly results will be held
at 8:30 a.m. Eastern Time on Tuesday, July 28, 2020. The call will
be an audio webcast and accessible on the Rockwell Automation
website (https://www.rockwellautomation.com/investors/).
Presentation materials will also be available on the website prior
to the call.
Interested parties can access the conference call by dialing the
following numbers: (833) 714-0916 in the U.S. and Canada; +1
778-560-2692 for other countries. Use the following passcode:
9504159. Please dial in 10 minutes prior to the start of the
call.
Both the presentation materials and a replay of the call will be
available on the Investor Relations section of the Rockwell
Automation website through August 29, 2020.
This news release contains statements (including certain
projections, guidance, 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:
- the severity and duration of disruptions to our business due to
pandemics, including the COVID-19 pandemic, natural disasters, acts
of war, strikes, terrorism, social unrest or other causes,
including the impacts of the COVID-19 pandemic and efforts to
manage it on the global economy, liquidity and financial markets,
demand for our hardware and software products, solutions and
services, our supply chain, our work force, our liquidity and the
value of the assets we own;
- macroeconomic factors, including global and regional business
conditions (including adverse impacts in certain markets, such as
Oil & Gas), 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, including those
related to tariffs, taxation, and trade controls;
- the availability and price of components and materials;
- the successful execution of our cost productivity
initiatives;
- the availability, effectiveness and security of our information
technology systems;
- our ability to manage and mitigate the risk related to security
vulnerabilities and breaches of our hardware and software products,
solutions and services;
- the successful development of advanced technologies and demand
for and market acceptance of new and existing hardware and software
products;
- our ability to manage and mitigate the risks associated with
our solutions and services businesses;
- competitive hardware and software products, solutions and
services and pricing pressures, and our ability to provide high
quality products, solutions and services;
- disruptions to our distribution channels or the failure of
distributors to develop and maintain capabilities to sell our
products;
- the successful integration and management of strategic
transactions and achievement of the expected benefits of these
transactions;
- 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, develop, and retain qualified
personnel;
- the uncertainties of litigation, including liabilities related
to the safety and security of the hardware and software products,
solutions and services we sell;
- risks associated with our investment in common stock of PTC
Inc., including the potential for volatility in our reported
quarterly earnings associated with changes in the market value of
such stock;
- our ability to manage costs related to employee retirement and
health care benefits; and
- other risks and uncertainties, including but not limited to
those detailed from time to time in our Securities and Exchange
Commission (SEC) filings.
Rockwell Automation, Inc. (NYSE: ROK), is a global leader in
industrial automation and digital transformation. We connect the
imaginations of people with the potential of technology to expand
what is humanly possible, making the world more productive and more
sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell
Automation employs approximately 23,000 problem solvers dedicated
to our customers in more than 100 countries. To learn more about
how we are bringing The Connected Enterprise to life across
industrial enterprises, visit www.rockwellautomation.com.
ROCKWELL AUTOMATION,
INC.
SALES AND EARNINGS
INFORMATION
(in millions, except per share
amounts and percentages)
Three Months Ended June
30,
Nine Months Ended June
30,
2020
2019
2020
2019
Sales
Architecture & Software (a)
$
621.4
$
747.9
$
2,130.1
$
2,240.7
Control Products & Solutions (b)
772.6
917.2
2,629.7
2,723.9
Total sales (c)
$
1,394.0
$
1,665.1
$
4,759.8
$
4,964.6
Segment operating earnings
Architecture & Software (d)
$
147.8
$
222.9
$
604.3
$
669.8
Control Products & Solutions (e)
81.6
173.0
335.7
454.8
Total segment operating earnings1 (f)
229.4
395.9
940.0
1,124.6
Purchase accounting depreciation and
amortization
(10.6
)
(4.1
)
(30.1
)
(12.5
)
General corporate—net
(26.4
)
(23.8
)
(76.9
)
(72.4
)
Non-operating pension and postretirement
benefit (cost) credit
(8.6
)
2.6
(25.9
)
7.8
Gain (loss) on investments
175.5
(25.6
)
101.7
(173.8
)
Valuation adjustments related to the
registration of PTC Shares
—
—
—
33.7
Interest (expense) income, net
(24.8
)
(23.6
)
(72.3
)
(62.8
)
Income before income taxes (g)
334.5
321.4
836.5
844.6
Income tax provision
(20.3
)
(60.0
)
(77.0
)
(156.9
)
Net income
314.2
261.4
759.5
687.7
Net (loss) attributable to noncontrolling
interests
(3.6
)
—
(1.2
)
—
Net income attributable to Rockwell
Automation
$
317.8
$
261.4
$
760.7
$
687.7
Diluted EPS
$
2.73
$
2.20
$
6.52
$
5.73
Adjusted EPS2
$
1.27
$
2.40
$
5.81
$
6.65
Average diluted shares for diluted EPS
116.4
118.6
116.5
120.0
Segment operating margin
Architecture & Software (d/a)
23.8
%
29.8
%
28.4
%
29.9
%
Control Products & Solutions (e/b)
10.6
%
18.9
%
12.8
%
16.7
%
Total segment operating margin1 (f/c)
16.5
%
23.8
%
19.7
%
22.7
%
Pre-tax margin (g/c)
24.0
%
19.3
%
17.6
%
17.0
%
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 and postretirement benefit (cost) credit,
gains and losses on investments, valuation adjustments related to
the registration of PTC Shares, interest (expense) income - net and
income tax provision because we do not consider these costs to be
directly related to the operating performance of our segments. We
believe total segment operating earnings and total segment
operating margin are useful to investors as measures of operating
performance. We use these measures to monitor and evaluate the
profitability of our operating segments. Our measures of total
segment operating earnings and total segment operating margin may
be different from measures used by other companies.
2Adjusted EPS is a non-GAAP earnings measure that excludes
non-operating pension and postretirement benefit (cost) credit, net
income (loss) attributable to noncontrolling interests, gains and
losses on investments, and valuation adjustments related to the
registration of PTC Shares, including their respective tax effects.
See "Other Supplemental Information - Adjusted Income, Adjusted EPS
and Adjusted Effective Tax Rate" section for more information
regarding non-operating pension and postretirement benefit (cost)
credit and a reconciliation to GAAP measures.
ROCKWELL AUTOMATION,
INC.
CONDENSED CONSOLIDATED
STATEMENT OF OPERATIONS
(in millions)
Three Months Ended June
30,
Nine Months Ended June
30,
2020
2019
2020
2019
Sales (a)
$
1,394.0
$
1,665.1
$
4,759.8
$
4,964.6
Cost of sales
(839.8
)
(934.8
)
(2,803.9
)
(2,787.4
)
Gross profit (b)
554.2
730.3
1,955.9
2,177.2
Selling, general and administrative
expenses (c)1
(370.2
)
(361.7
)
(1,125.4
)
(1,133.4
)
Change in fair value of investments2
175.5
(25.6
)
101.7
(140.1
)
Other income (expense)
0.4
5.2
(18.4
)
12.1
Interest expense
(25.4
)
(26.8
)
(77.3
)
(71.2
)
Income before income taxes
334.5
321.4
836.5
844.6
Income tax provision3
(20.3
)
(60.0
)
(77.0
)
(156.9
)
Net income
314.2
261.4
759.5
687.7
Net (loss) attributable to noncontrolling
interests
(3.6
)
—
(1.2
)
—
Net income attributable to Rockwell
Automation, Inc.
$
317.8
$
261.4
$
760.7
$
687.7
Gross profit as percent of sales
(b/a)
39.8
%
43.9
%
41.1
%
43.9
%
SG&A as percent of sales
(c/a)
26.6
%
21.7
%
23.6
%
22.8
%
1 In the three months ended June 30, 2020, Selling, general and
administrative expenses included approximately $30 million
associated with restructuring charges and the impact of
acquisitions made in fiscal 2020. In the nine months ended June 30,
2019, Selling, general and administrative expenses included
approximately $60 million associated with restructuring charges and
the impact of acquisitions made in fiscal 2020.
2In the three and nine months ended June 30, 2020, Change in
fair value of investments included a $175.5 million gain and a
$101.7 million gain, respectively, due to the change in value of
our investment in PTC. In the three months ended June 30, 2019,
Change in fair value of investments included a $25.6 million loss
due to the change in value of our investment in PTC, and in the
nine months ended June 30, 2019, Change in fair value of
investments included a $173.8 million loss due to the change in
value of our investment in PTC and a $33.7 million gain due to the
valuation adjustments related to the registration of PTC
Shares.
3In the nine months ended June 30, 2019, income tax provision
included the tax effects on the PTC adjustments.
ROCKWELL AUTOMATION,
INC.
CONDENSED BALANCE SHEET
INFORMATION
(in millions)
June 30, 2020
September 30, 2019
Assets
Cash and cash equivalents
$
909.8
$
1,018.4
Receivables
1,202.1
1,178.7
Inventories
674.8
575.7
Property, net
564.5
571.9
Operating lease right-of-use assets
320.3
—
Goodwill and intangibles
2,121.7
1,265.2
Long-term investments
900.1
793.9
Other assets
636.2
709.2
Total
$
7,329.5
$
6,113.0
Liabilities and Shareowners’
Equity
Short-term debt
$
422.8
$
300.5
Accounts payable
667.0
694.6
Long-term debt
1,974.4
1,956.4
Operating lease liabilities
250.6
—
Other liabilities
2,925.6
2,757.3
Shareowners' equity attributable to
Rockwell Automation, Inc.
770.5
404.2
Noncontrolling Interests
318.6
—
Total
$
7,329.5
$
6,113.0
ROCKWELL AUTOMATION,
INC.
CONDENSED CASH FLOW
INFORMATION
(in millions)
Nine Months Ended June
30,
2020
2019
Operating activities:
Net income
$
759.5
$
687.7
Depreciation and amortization
127.7
112.2
Change in fair value of investments1
(101.7
)
140.1
Retirement benefits expense
94.9
51.6
Settlement of interest rate
derivatives
22.0
(35.7
)
Pension contributions
(24.7
)
(22.0
)
Receivables/inventories/payables
(61.7
)
(149.6
)
Contract liabilities
63.6
26.5
Compensation and benefits
(52.1
)
(73.7
)
Income taxes
(81.8
)
(66.3
)
Other
49.0
36.2
Cash provided by operating activities
794.7
707.0
Investing activities:
Capital expenditures
(91.9
)
(108.7
)
Acquisition of businesses, net of cash
acquired
(545.9
)
(20.7
)
Purchases of investments
(10.7
)
(3.3
)
Proceeds from maturities and sales of
investments
43.9
258.7
Proceeds from sale of property
14.8
3.3
Other investing activities
(1.3
)
—
Cash (used for) provided by investing
activities
(591.1
)
129.3
Financing activities:
Net issuance (repayment) of short-term
debt
—
(550.4
)
Issuance of debt, net of discount and
issuance costs
422.7
987.6
Repayment of long-term debt
(300.7
)
—
Cash dividends
(354.3
)
(346.9
)
Purchases of treasury stock
(264.2
)
(787.4
)
Proceeds from the exercise of stock
options
187.4
36.5
Other financing activities
0.8
—
Cash used for financing activities
(308.3
)
(660.6
)
Effect of exchange rate changes on
cash
(3.9
)
(5.7
)
(Decrease) increase in cash and cash
equivalents
$
(108.6
)
$
170.0
1In the nine months ended June 30, 2020, Change in fair value of
investments included a $101.7 million gain due to the change in
value of our investment in PTC. In the nine months ended June 30,
2019, Change in fair value of investments included a $173.8 million
loss due to the change in value of our investment in PTC and a
$33.7 million gain due to the valuation adjustments related to the
registration of PTC Shares.
ROCKWELL AUTOMATION, INC. OTHER SUPPLEMENTAL
INFORMATION (in millions)
Organic Sales
We translate sales of subsidiaries operating outside of the
United States using exchange rates effective during the respective
period. Therefore, changes in currency exchange rates affect our
reported sales. Sales by acquired businesses also affect our
reported sales. We believe that organic sales, defined as sales
excluding the effects of acquisitions and changes in currency
exchange rates, which is a non-GAAP financial measure, provides
useful information to investors because it reflects regional and
operating segment performance from the activities of our businesses
without the effect of acquisitions and changes in currency exchange
rates. We use organic sales as one measure to monitor and evaluate
our regional and operating segment performance. When we acquire
businesses, we exclude sales in the current period for which there
are no comparable sales in the prior period. We determine the
effect of changes in currency exchange rates by translating the
respective period’s sales using the same currency exchange rates
that were in effect during the prior year. When we divest a
business, we exclude sales in the prior period for which there are
no comparable sales in the current period. Organic sales growth is
calculated by comparing organic sales to reported sales in the
prior year, excluding divestitures. We attribute sales 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, 2020 compared to
sales for the three and nine months ended June 30, 2019:
Three Months Ended June
30,
2020
2019
Sales
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales
Sales
North America
$
826.0
$
(22.6
)
$
2.5
$
805.9
$
1,008.0
EMEA
280.4
(19.5
)
6.9
267.8
307.9
Asia Pacific
206.9
(5.3
)
6.8
208.4
232.7
Latin America
80.7
(5.9
)
15.7
90.5
116.5
Total
$
1,394.0
$
(53.3
)
$
31.9
$
1,372.6
$
1,665.1
Nine Months Ended June
30,
2020
2019
Sales
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales
Sales
North America
$
2,855.0
$
(85.4
)
$
3.1
$
2,772.7
$
2,993.9
EMEA
924.1
(59.1
)
26.5
891.5
933.4
Asia Pacific
637.3
(17.1
)
16.2
636.4
661.8
Latin America
343.4
(18.9
)
27.4
351.9
375.5
Total
$
4,759.8
$
(180.5
)
$
73.2
$
4,652.5
$
4,964.6
1Includes incremental sales resulting from the formation of the
Sensia joint venture and sales from other acquired businesses in
fiscal year 2020.
The following is a reconciliation of reported sales to organic
sales for our operating segments for the three and nine months
ended June 30, 2020 compared to sales for the three and nine months
ended June 30, 2019:
Three Months Ended June
30,
2020
2019
Sales
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales
Sales
Architecture & Software
$
621.4
$
(6.1
)
$
13.9
$
629.2
$
747.9
Control Products & Solutions
772.6
(47.2
)
18.0
743.4
917.2
Total
$
1,394.0
$
(53.3
)
$
31.9
$
1,372.6
$
1,665.1
Nine Months Ended June
30,
2020
2019
Sales
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales
Sales
Architecture & Software
$
2,130.1
$
(7.2
)
$
34.1
$
2,157.0
$
2,240.7
Control Products & Solutions
2,629.7
(173.3
)
39.1
2,495.5
2,723.9
Total
$
4,759.8
$
(180.5
)
$
73.2
$
4,652.5
$
4,964.6
1Includes incremental sales resulting from the formation of the
Sensia joint venture and sales from other acquired businesses in
fiscal year 2020.
The following is a reconciliation of reported sales growth to
organic sales growth for the three and nine months ended June 30,
2020 compared to sales for the three and nine months ended June 30,
2019:
Three Months Ended June 30,
2020
Reported Sales Growth
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales Growth
North America
(18.1
)%
2.2
%
(0.2
)%
(20.0
)%
EMEA
(8.9
)%
6.3
%
(2.2
)%
(13.0
)%
Asia Pacific
(11.1
)%
2.3
%
(3.0
)%
(10.4
)%
Latin America
(30.7
)%
5.1
%
(13.5
)%
(22.3
)%
Total
(16.3
)%
3.2
%
(1.9
)%
(17.6
)%
Nine Months Ended June 30,
2020
Reported Sales Growth
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales Growth
North America
(4.6
)%
2.9
%
(0.1
)%
(7.4
)%
EMEA
(1.0
)%
6.3
%
(2.8
)%
(4.5
)%
Asia Pacific
(3.7
)%
2.6
%
(2.5
)%
(3.8
)%
Latin America
(8.5
)%
5.0
%
(7.2
)%
(6.3
)%
Total
(4.1
)%
3.6
%
(1.4
)%
(6.3
)%
1Includes incremental sales resulting from the formation of the
Sensia joint venture and sales from other acquired businesses in
fiscal year 2020.
The following is a reconciliation of reported sales growth to
organic sales growth for our operating segments for the three and
nine months ended June 30, 2020 compared to sales for the three and
nine months ended June 30, 2019:
Three Months Ended June 30,
2020
Reported Sales Growth
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales Growth
Architecture & Software
(16.9
)%
0.8
%
(1.8
)%
(15.9
)%
Control Products & Solutions
(15.8
)%
5.1
%
(2.0
)%
(18.9
)%
Total
(16.3
)%
3.2
%
(1.9
)%
(17.6
)%
Nine Months Ended June 30,
2020
Reported Sales Growth
Effect of
Acquisitions1
Effect of Changes in
Currency
Organic Sales Growth
Architecture & Software
(4.9
)%
0.3
%
(1.5
)%
(3.7
)%
Control Products & Solutions
(3.5
)%
6.4
%
(1.5
)%
(8.4
)%
Total
(4.1
)%
3.6
%
(1.4
)%
(6.3
)%
1Includes incremental sales resulting from the formation of the
Sensia joint venture and sales from other acquired businesses in
fiscal year 2020.
The following is a reconciliation of reported sales to organic
sales for Logix for the three and nine months ended June 30,
2020:
Three Months Ended
Nine Months Ended
June 30, 2020
June 30, 2020
Logix
Reported growth
(18)%
(5)%
Effect of currency translation
2%
1%
Organic growth
(16)%
(4)%
ROCKWELL AUTOMATION, INC. OTHER SUPPLEMENTAL
INFORMATION (in millions, except per share amounts and
percentages)
Adjusted Income, Adjusted EPS and
Adjusted Effective Tax Rate
Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate
are non-GAAP earnings measures that exclude non-operating pension
and postretirement benefit cost (credit), net income (loss)
attributable to noncontrolling interests, gains and losses on
investments, and valuation adjustments related to the registration
of PTC Shares, including their respective tax effects.
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. Adjusted
EPS is also used as a financial measure of performance for our
annual incentive compensation. 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 net income attributable to
Rockwell Automation, diluted EPS and effective tax rate.
The following are the components of operating and non-operating
pension and postretirement benefit cost (credit) (in millions):
Three Months Ended June
30,
Nine Months Ended June
30,
2020
2019
2020
2019
Service cost
$
22.9
$
19.8
$
69.0
$
59.4
Operating pension and postretirement
benefit cost
22.9
19.8
69.0
59.4
Interest cost
34.4
40.3
103.5
120.6
Expected return on plan assets
(60.9
)
(61.2
)
(183.3
)
(183.6
)
Amortization of prior service credit
(1.2
)
(1.1
)
(3.4
)
(3.2
)
Amortization of net actuarial loss
37.1
19.6
111.4
59.0
Settlements
(0.8
)
(0.2
)
(2.3
)
(0.6
)
Non-operating pension and postretirement
benefit cost (credit)
8.6
(2.6
)
25.9
(7.8
)
Net periodic pension and postretirement
benefit cost
$
31.5
$
17.2
$
94.9
$
51.6
The components of net periodic pension and postretirement
benefit cost other than the service cost component are included in
the line "Other income (expense)" in the Statement of
Operations.
The following are reconciliations of net income attributable to
Rockwell Automation, diluted EPS, and effective tax rate to
Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate:
Three Months Ended June
30,
Nine Months Ended June
30,
2020
2019
2020
2019
Net Income attributable to Rockwell
Automation
$
317.8
$
261.4
$
760.7
$
687.7
Non-operating pension and postretirement
benefit cost (credit)
8.6
(2.6
)
25.9
(7.8
)
Tax effect of non-operating pension and
postretirement benefit cost (credit)
(2.4
)
0.3
(7.2
)
1.0
Change in fair value of investments1
(175.5
)
25.6
(101.7
)
140.1
Tax effect of the change in fair value of
investments1
—
—
—
(21.7
)
Adjusted Income
$
148.5
$
284.7
$
677.7
$
799.3
Diluted EPS
$
2.73
$
2.20
$
6.52
$
5.73
Non-operating pension and postretirement
benefit cost (credit)
0.07
(0.02
)
0.22
(0.07
)
Tax effect of non-operating pension and
postretirement benefit cost (credit)
(0.02
)
—
(0.06
)
0.01
Change in fair value of investments1
(1.51
)
0.22
(0.87
)
1.16
Tax effect of the change in fair value of
investments1
—
—
—
(0.18
)
Adjusted EPS
$
1.27
$
2.40
$
5.81
$
6.65
Effective tax rate
6.1
%
18.7
%
9.2
%
18.6
%
Tax effect of non-operating pension and
postretirement benefit cost (credit)
0.5
%
—
%
0.6
%
0.1
%
Tax effect of the change in fair value of
investments1
7.0
%
(1.4
)%
1.3
%
(0.5
)%
Adjusted Effective Tax Rate
13.6
%
17.3
%
11.1
%
18.2
%
1In the three and nine months ended June 30, 2020, Change in
fair value of investments included a $175.5 million gain and a
$101.7 million gain, respectively, due to the change in value of
our investment in PTC. In the three months ended June 30, 2019,
Change in fair value of investments included a $25.6 million loss
due to the change in value of our investment in PTC, and in the
nine months ended June 30, 2019, Change in fair value of
investments included a $173.8 million loss due to the change in
value of our investment in PTC and a $33.7 million gain due to the
valuation adjustments related to the registration of PTC
Shares.
Fiscal 2020 Guidance
Diluted EPS
$8.06 - $8.26
Non-operating pension and postretirement
benefit cost
0.30
Tax effect of non-operating pension and
postretirement benefit cost
(0.08)
Change in fair value of investments1
(0.88)
Tax effect of change in fair value of
investments
—
Adjusted EPS2
$7.40 - $7.60
Effective tax rate
~ 11.0%
Tax effect of non-operating pension and
postretirement benefit cost
~ 0.5%
Tax effect of change in fair value of
investments1
~ 1.0%
Adjusted Effective Tax Rate3
~ 12.5%
1The actual year-to-date adjustments, which are based on PTC's
share price at June 30, 2020, are used for guidance, as estimates
of these adjustments on a forward-looking basis are not available
due to variability, complexity and limited visibility of these
items.
2Fiscal 2020 guidance based on Adjusted Income, which excludes
Schlumberger's noncontrolling interest in Sensia.
3Fiscal 2020 guidance includes the impact of a tax benefit
recognized upon the formation of the Sensia joint venture on
October 1, 2019. This tax benefit is expected to reduce the full
year Effective tax rate and the Adjusted Effective Tax Rate by
approximately 150 basis points.
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.
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 our performance, including as a financial
measure for our annual incentive compensation. 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
Sep. 30, 2018
Dec. 31, 2018
Mar. 31, 20191
Jun. 30, 2019
Sep. 30, 2019
Dec. 31, 2019
Mar. 31, 20202
Jun. 30, 2020
Cash provided by operating activities
$
362.8
$
212.0
$
143.8
$
351.2
$
475.0
$
231.1
$
217.4
$
346.2
Capital expenditures
(46.9
)
(42.0
)
(38.9
)
(27.8
)
(24.1
)
(37.0
)
(19.6
)
(35.3
)
Free cash flow
$
315.9
$
170.0
$
104.9
$
323.4
$
450.9
$
194.1
$
197.8
$
310.9
1Includes a payment of $31.1 million for taxes due under the Tax
Act related to deemed repatriation of foreign earnings and a
payment of $35.7 million to settle hedges executed in connection
with our issuance of $1.0 billion of long-term notes in the second
quarter of fiscal 2019.
2Includes a payment of $31.2 million for taxes due under the Tax
Act related to deemed repatriation of foreign earnings in the
second quarter of fiscal 2020.
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 our
performance, including as a financial measure for our annual
incentive compensation. 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) Net Income, before interest expense, income tax provision,
and purchase accounting depreciation and amortization, 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,
short-term investments, and long-term investments (fixed income
securities), multiplied by;
(c) one minus the effective tax rate for the period.
ROIC is calculated as follows (in millions, except
percentages):
Twelve Months Ended
June 30,
2020
2019
(a) Return
Net Income
$
767.6
$
1,033.6
Interest expense
104.3
90.4
Income tax provision
125.3
292.7
Purchase accounting depreciation and
amortization
34.2
16.7
Return
1,031.4
1,433.4
(b) Average invested capital
Short-term debt
285.7
356.2
Long-term debt
1,959.0
1,512.2
Shareowners’ equity
924.8
1,365.8
Accumulated amortization of goodwill and
intangibles
907.7
877.9
Cash and cash equivalents
(857.0
)
(752.0
)
Short-term and long-term investments
(42.0
)
(348.4
)
Average invested capital
3,178.2
3,011.7
(c) Effective tax rate
Income tax provision1
125.3
238.1
Income before income taxes
$
892.9
$
1,326.3
Effective tax rate
14.0
%
18.0
%
(a) / (b) * (1-c) Return On Invested
Capital
27.9
%
39.0
%
1The income tax provision used to calculate the effective tax
rate is adjusted to remove amounts associated with the enactment of
the Tax Act. For the twelve months ended June 30, 2020 and June 30,
2019, these adjustments were zero and $54.6 million,
respectively.
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version on businesswire.com: https://www.businesswire.com/news/home/20200728005316/en/
Kolve Byrd Media Relations Rockwell Automation 414.382.5465
Jessica Kourakos Investor Relations Rockwell Automation
414.382.8510
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