- Organic sales down 3.6 percent year
over year; reported sales down 7.1 percent
- Adjusted EPS of $1.37; diluted EPS of
$1.28
- Company narrows fiscal 2016 Adjusted
EPS guidance range to $5.75 - $6.15
Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2016
second quarter sales of $1,440.3 million, down 7.1 percent from
$1,550.8 million in the second quarter of fiscal 2015. Organic
sales declined 3.6 percent, and currency translation reduced sales
by 3.5 percent.
Fiscal 2016 second quarter Adjusted EPS was $1.37, down 14
percent compared to $1.59 in the second quarter of fiscal 2015.
Total segment operating earnings were $277.5 million in the second
quarter of fiscal 2016, down 17 percent from $334.2 million in the
same period of fiscal 2015. Total segment operating margin was 19.3
percent compared to 21.6 percent a year ago, primarily due to lower
sales, unfavorable mix and currency effects.
On a GAAP basis, fiscal 2016 second quarter net income was
$168.0 million or $1.28 per share, compared to $206.0 million or
$1.51 per share in the second quarter of fiscal 2015. Pre-tax
margin decreased to 15.1 percent in the second quarter of fiscal
2016 from 17.8 percent in the same period last year.
Commenting on the results, Keith D. Nosbusch, chairman and chief
executive officer, said, "Organic sales were in line with our
expectations. Challenging heavy industry end markets, particularly
oil and gas, outweighed modest growth in the consumer and
automotive verticals.
“Segment operating margins were slightly below expectations,
however I am pleased to see Control Products & Solutions able
to continue to maintain margins despite lower sales. Cash
generation was also strong in the quarter.”
Outlook
Commenting on the outlook, Nosbusch added, “Since we provided
guidance in January, oil and commodity prices seem to have
stabilized, and the most recent projections for economic growth,
including Industrial Production, continue to indicate modest
improvement in the balance of our fiscal year.
“Based on these factors, we continue to expect fiscal 2016 sales
of about $5.9 billion, which includes a currency headwind of about
3 percent, and an organic sales decline in the range of 1.5 to 4.5
percent. We are also narrowing the EPS guidance range to $5.75 to
$6.15.
“We are committed to delivering attractive financial returns,
balancing short-term financial performance with investments in
innovation and long-term profitable growth.
"I would like to thank our employees, partners and suppliers for
their continued commitment in serving our customers.”
Following is a discussion of fiscal 2016 second quarter results
for both segments.
Architecture &
Software
Architecture & Software quarterly sales were $629.5
million, a decrease of 6.6 percent compared to $674.3 million in
the same period last year. Organic sales decreased 3.3 percent, and
currency translation reduced sales by 3.3 percent. Segment
operating earnings were $154.6 million compared to $200.8 million
in the same period last year. Segment operating margin decreased to
24.6 percent from 29.8 percent a year ago, primarily due to lower
sales, unfavorable mix and currency effects, and increased
spending.
Control Products &
Solutions
Control Products & Solutions quarterly sales were
$810.8 million, a decrease of 7.5 percent compared to $876.5
million in the same period last year. Organic sales decreased 3.9
percent, and currency translation reduced sales by 3.6 percent.
Segment operating earnings were $122.9 million compared to $133.4
million in the same period last year. Segment operating margin was
15.2 percent, unchanged from the prior year.
Other Information
In the second quarter of fiscal 2016 free cash flow was $202.6
million and cash flow provided by operating activities was $214.5
million. Return on invested capital was 32.0 percent.
Fiscal 2016 second quarter general corporate-net expense was
$19.5 million compared to $21.4 million in the second quarter of
fiscal 2015.
The Adjusted Effective Tax Rate for the second quarter of fiscal
2016 was 23.7 percent compared to 26.0 percent in the second
quarter of fiscal 2015. On a GAAP basis, the effective tax rate in
the second quarter of fiscal 2016 was 22.6 percent compared to 25.5
percent a year ago. The decreases in the effective tax rate and the
Adjusted Effective Tax Rate were primarily due to a favorable
discrete tax item in the current quarter. The Company still expects
a full-year Adjusted Effective Tax Rate for fiscal 2016 of
approximately 25 percent.
During the second quarter of fiscal 2016, the Company
repurchased 1.3 million shares of its common stock at a cost of
$126.5 million. At March 31, 2016, $196.9 million remained
available under the June 4, 2014 share repurchase authorization. On
April 6, 2016, the Board of Directors authorized the Company to
expend up to an additional $1.0 billion to repurchase shares of its
common stock.
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, April 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
approximately 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
Six Months Ended March 31, March
31, 2016 2015 2016
2015 Sales Architecture & Software (a) $ 629.5 $ 674.3 $
1,272.4 $ 1,382.1 Control Products & Solutions (b) 810.8
876.5 1,594.5 1,743.1 Total sales (c) $
1,440.3 $ 1,550.8 $ 2,866.9 $ 3,125.2
Segment operating earnings Architecture & Software (d) $
154.6 $ 200.8 $ 330.8 $ 422.2 Control Products & Solutions (e)
122.9 133.4 242.6 258.8 Total segment
operating earnings1 (f) 277.5 334.2 573.4 681.0 Purchase
accounting depreciation and amortization (4.5 ) (5.2 ) (9.2 ) (10.6
) General corporate—net (19.5 ) (21.4 ) (37.5 ) (44.2 )
Non-operating pension costs (18.9 ) (15.4 ) (37.8 ) (31.6 )
Interest expense (17.6 ) (15.7 ) (35.0 ) (30.6 ) Income before
income taxes (g) 217.0 276.5 453.9 564.0 Income tax provision (49.0
) (70.5 ) (100.4 ) (143.8 ) Net income $ 168.0 $ 206.0
$ 353.5 $ 420.2 Diluted EPS $ 1.28
$ 1.51 $ 2.68 $ 3.08 Adjusted
EPS2 $ 1.37 $ 1.59 $ 2.86 $ 3.23
Average diluted shares 131.3 136.0 132.0 136.5
Segment operating margin Architecture & Software
(d/a) 24.6 % 29.8 % 26.0 % 30.5 % Control Products & Solutions
(e/b) 15.2 % 15.2 % 15.2 % 14.8 % Total segment operating margin1
(f/c) 19.3 % 21.6 % 20.0 % 21.8 % Pre-tax margin (g/c) 15.1
% 17.8 % 15.8 % 18.0 %
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 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 Six Months
Ended March 31, March 31, 2016
2015 2016 2015 Sales $ 1,440.3 $
1,550.8 $ 2,866.9 $ 3,125.2 Cost of sales (846.2 ) (877.6 )
(1,660.1 ) (1,764.5 ) Gross profit 594.1 673.2 1,206.8 1,360.7
Selling, general and administrative expenses (358.7 ) (382.4
) (718.6 ) (769.3 ) Other (expense) income (0.8 ) 1.4 0.7 3.2
Interest expense (17.6 ) (15.7 ) (35.0 ) (30.6 ) Income before
income taxes 217.0 276.5 453.9 564.0 Income tax provision (49.0 )
(70.5 ) (100.4 ) (143.8 )
Net income $ 168.0 $
206.0 $ 353.5 $ 420.2
ROCKWELL
AUTOMATION, INC. CONDENSED BALANCE SHEET INFORMATION
(in millions) March 31,
September 30, 2016 2015 Assets
Cash and cash equivalents $ 1,396.3 $ 1,427.3 Short-term
investments 913.6 721.9 Receivables 1,028.0 1,041.0 Inventories
569.7 535.6 Property, net 571.6 605.6 Goodwill and intangibles
1,241.5 1,258.3 Other assets 818.9 815.0 Total $ 6,539.6
$ 6,404.7
Liabilities and Shareowners’ Equity
Short-term debt $ 277.6 $ — Accounts payable 500.3 521.7 Long-term
debt 1,513.2 1,500.9 Other liabilities 2,032.9 2,125.3 Shareowners’
equity 2,215.6 2,256.8 Total $ 6,539.6 $ 6,404.7
ROCKWELL AUTOMATION, INC. CONDENSED CASH FLOW
INFORMATION (in millions) Six
Months Ended March 31, 2016
2015 Operating activities: Income from continuing
operations $ 353.5 $ 420.2 Depreciation and amortization 86.4 79.7
Retirement benefits expense 78.2 71.3 Pension contributions (21.2 )
(21.3 ) Receivables/inventories/payables (17.0 ) 73.3 Advanced
payments from customers and deferred revenue 26.5 24.6 Compensation
and benefits (73.7 ) (70.3 ) Income taxes (58.0 ) (14.0 ) Other
24.6 (10.1 ) Cash provided by operating activities 399.3
553.4
Investing activities: Capital
expenditures (52.6 ) (58.0 ) Acquisition of businesses, net of cash
acquired (21.1 ) (21.2 ) Purchases of short-term investments (590.6
) (338.0 ) Proceeds from maturities of short-term investments 397.6
323.8 Proceeds from sale of property 0.2 0.2 Cash
used for investing activities (266.5 ) (93.2 )
Financing
activities: Net issuance (repayment) of short-term debt 277.6
(325.0 ) Issuance of long-term debt, net of discount and issuance
costs — 594.3 Cash dividends (190.4 ) (175.9 ) Purchases of
treasury stock (257.4 ) (293.0 ) Proceeds from the exercise of
stock options 12.8 22.7 Excess income tax benefit from share-based
compensation 1.2 6.6 Other financing activities — (1.6 )
Cash used for financing activities (156.2 ) (171.9 ) Effect of
exchange rate changes on cash (7.6 ) (76.7 )
(Decrease) increase
in cash and cash equivalents $ (31.0 ) $ 211.6
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 and six months ended March 31, 2016
compared to sales for the three and six months ended March 31,
2015:
Three Months Ended March 31, 2016 2015
Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales United States $ 804.8 $ 0.5 $ 805.3 $ — $ 805.3 $ 863.2
Canada 76.2 8.0 84.2 — 84.2 85.8 Europe, Middle East, Africa 274.6
9.4 284.0 — 284.0 285.9 Asia Pacific 179.4 10.5 189.9 (0.1 ) 189.8
199.4 Latin America 105.3 26.2 131.5 —
131.5 116.5 Total $ 1,440.3 $ 54.6 $ 1,494.9
$ (0.1 ) $ 1,494.8 $ 1,550.8 Six Months Ended
March 31, 2016 2015 Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales United States $ 1,592.1 $ 1.3 $ 1,593.4 $ (0.3 ) $
1,593.1 $ 1,700.0 Canada 154.9 21.4 176.3 — 176.3 185.8 Europe,
Middle East, Africa 548.8 49.3 598.1 — 598.1 582.8 Asia Pacific
352.4 22.3 374.7 (0.1 ) 374.6 406.6 Latin America 218.7 56.4
275.1 — 275.1 250.0 Total $ 2,866.9
$ 150.7 $ 3,017.6 $ (0.4 ) $ 3,017.2 $
3,125.2
The following is a reconciliation of reported sales to organic
sales for our operating segments for the three and six months ended
March 31, 2016 compared to sales for the three and six months
ended March 31, 2015:
Three Months Ended March 31, 2016 2015
Sales Excluding Effect of Effect of Changes in
Changes in Effect of Organic Sales Currency Currency Acquisitions
Sales Sales Architecture & Software $ 629.5 $ 22.9 $ 652.4 $
(0.1 ) $ 652.3 $ 674.3 Control Products & Solutions 810.8
31.7 842.5 — 842.5 876.5 Total $
1,440.3 $ 54.6 $ 1,494.9 $ (0.1 ) $ 1,494.8
$ 1,550.8 Six Months Ended March 31, 2016 2015 Sales
Excluding Effect of Effect of Changes in Changes in Effect of
Organic Sales Currency Currency Acquisitions Sales Sales
Architecture & Software $ 1,272.4 $ 68.8 $ 1,341.2 $ (0.1 ) $
1,341.1 $ 1,382.1 Control Products & Solutions 1,594.5
81.9 1,676.4 (0.3 ) 1,676.1 1,743.1 Total $
2,866.9 $ 150.7 $ 3,017.6 $ (0.4 ) $ 3,017.2
$ 3,125.2
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,
2016 and 2015:
Three Months Ended Six Months
Ended March 31, March 31, 2016
2015 2016 2015 Service cost $ 21.8 $
21.5 $ 43.9 $ 43.2 Amortization of prior service credit (0.7 ) (0.6
) (1.4 ) (1.3 ) Operating pension costs 21.1 20.9
42.5 41.9 Interest cost 42.2 41.6 84.7 83.9
Expected return on plan assets (54.4 ) (55.8 ) (109.1 ) (111.9 )
Amortization of net actuarial loss 31.1 29.6 62.2
59.6 Non-operating pension costs 18.9 15.4
37.8 31.6 Net
periodic pension cost $ 40.0 $ 36.3 $ 80.3 $
73.5
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, 2016
2015 2016 2015 Income from continuing
operations $ 168.0 $ 206.0 $ 353.5 $ 420.2 Non-operating pension
costs 18.9 15.4 37.8 31.6 Tax effect of non-operating pension costs
(6.9 ) (5.4 ) (13.7 ) (11.0 ) Adjusted Income $ 180.0 $
216.0 $ 377.6 $ 440.8 Diluted EPS from
continuing operations $ 1.28 $ 1.51 $ 2.68 $ 3.08 Non-operating
pension costs per diluted share 0.14 0.12 0.29 0.23 Tax effect of
non-operating pension costs per diluted share (0.05 ) (0.04 ) (0.11
) (0.08 ) Adjusted EPS $ 1.37 $ 1.59 $ 2.86 $
3.23 Effective tax rate 22.6 % 25.5 % 22.1 % 25.5 %
Tax effect of non-operating pension costs 1.1 % 0.5 % 1.1 % 0.5 %
Adjusted Effective Tax Rate 23.7 % 26.0 % 23.2 % 26.0 %
Fiscal 2016 Guidance
Year Ended September 30,
2015
Diluted EPS from continuing operations $5.38 - $5.78 $ 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 $5.75 - $6.15 $ 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, Mar. 31, 2014 2015
2015 2015 2015 2016 Cash provided by
continuing operating activities $ 268.2 $ 285.2 $ 286.3 $ 348.0 $
184.8 $ 214.5 Capital expenditures (40.0 ) (18.0 ) (25.2 ) (39.7 )
(40.2 ) (12.4 ) Excess income tax benefit from share-based
compensation 4.4 2.2 5.6 0.2 0.7
0.5 Free cash flow $ 232.6 $ 269.4 $ 266.7
$ 308.5 $ 145.3 $ 202.6
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,
2016 2015 (a) Return Income from
continuing operations $ 760.9 $ 868.6 Interest expense 68.1 60.0
Income tax provision 256.5 308.4 Purchase accounting depreciation
and amortization 19.6 21.8 Return 1,105.1
1,258.8
(b) Average invested capital Short-term debt
87.7 291.1 Long-term debt 1,500.9 1,025.5 Shareowners’ equity
2,366.3 2,654.6 Accumulated amortization of goodwill and
intangibles 802.2 783.2 Cash and cash equivalents (1,448.6 )
(1,260.2 ) Short-term investments (726.3 ) (588.8 ) Average
invested capital 2,582.2 2,905.4
(c) Effective tax
rate Income tax provision 256.5 308.4 Income from continuing
operations before income taxes $ 1,017.4 $ 1,177.0
Effective tax rate 25.2 % 26.2 %
(a) / (b) * (1-c) Return On
Invested Capital 32.0 % 32.0 %
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Rockwell AutomationDarice BrownMedia
Relations414.382.4852orRockwell AutomationPatrick GorisInvestor
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