Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2014 first quarter sales of $1,591.7 million, up 7 percent from $1,489.2 million in the first quarter of fiscal 2013. Organic sales growth was also 7 percent as the net effect of acquisitions and currency translation was negligible.

Fiscal 2014 first quarter Adjusted EPS was $1.47, up 20 percent compared to Adjusted EPS of $1.23 in the first quarter of fiscal 2013. Total segment operating earnings were $328.0 million in the first quarter of fiscal 2014, up 19 percent from $276.0 million in the same period of fiscal 2013. Total segment operating margin increased to 20.6 percent from 18.5 percent a year ago, primarily due to higher sales.

On a GAAP basis, fiscal 2014 first quarter net income was $198.1 million or $1.41 per share, compared to $161.4 million or $1.14 per share in the first quarter of fiscal 2013. Pre-tax margin increased to 17.1 percent in the first quarter of fiscal 2014 from 14.6 percent in the same period last year.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, "Sales in the U.S. were robust and I was pleased to see the Asia Pacific region return to growth. Overall organic sales growth of 7 percent and Adjusted Earnings per Share growth of 20 percent provide a strong start to the fiscal year."

Outlook

Commenting on the outlook, Nosbusch added, "Given our performance in the first quarter, we are raising the low end of our guidance. We now expect organic sales growth of 3 to 6 percent and Adjusted EPS of $6.00 to $6.35."

Following is a discussion of first quarter results for both segments.

Architecture & Software

Architecture & Software fiscal 2014 first quarter sales were $695.9 million, an increase of 6 percent from $657.5 million in the same period last year. Segment operating earnings were $211.9 million in the first quarter of fiscal 2014 compared to $183.2 million in the first quarter of fiscal 2013. Segment operating margin increased to 30.4 percent in the first quarter of fiscal 2014 from 27.9 percent a year ago, primarily due to higher sales. The first quarter results also benefited from the favorable resolution of certain legal matters, which contributed approximately 1 percentage point to the segment operating margin in the quarter.

Control Products & Solutions

Control Products & Solutions fiscal 2014 first quarter sales were $895.8 million, an increase of 8 percent from $831.7 million in the same period last year. Organic sales increased 9 percent and currency translation reduced sales by 1 percentage point. Segment operating earnings were $116.1 million in the first quarter of fiscal 2014 compared to $92.8 million in the first quarter of fiscal 2013. Segment operating margin increased to 13.0 percent in the first quarter of fiscal 2014 from 11.2 percent a year ago, primarily due to higher sales.

Other Information

Free cash flow was $178.6 million in the first quarter of fiscal 2014. Cash flow provided by operating activities was $203.5 million in the first quarter of fiscal 2014. Return on invested capital was 31.4 percent.

Fiscal 2014 first quarter general corporate-net expense was $21.7 million compared to $18.5 million in the first quarter of fiscal 2013.

The effective tax rate in the first quarter of fiscal 2014 was 27.4 percent compared to 25.7 percent in the first quarter of fiscal 2013. The Adjusted Effective Tax Rate for the first quarter of fiscal 2014 was 27.8 percent compared to 26.6 percent a year ago. The Company now expects the full-year Adjusted Effective Tax Rate for fiscal 2014 to be in the range of 26 to 27 percent.

During the first quarter of fiscal 2014, the Company repurchased 1.0 million shares of its common stock at a cost of $110.7 million. At December 31, 2013, $424.4 million remained available under the $1.0 billion 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 January 29, 2014. 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, 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 operations due to natural disasters, acts of war, strikes, terrorism, social unrest or other causes;
  • intellectual property infringement claims by others and the ability to protect our intellectual property;
  • our ability to address 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 about 22,000 people serving customers in more than 80 countries.

 
ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts)
 
    Three Months Ended
December 31,
2013     2012
Sales
Architecture & Software (a) $ 695.9 $ 657.5
Control Products & Solutions (b) 895.8   831.7  
Total sales (c) $ 1,591.7   $ 1,489.2  
 
Segment operating earnings
Architecture & Software (d) $ 211.9 $ 183.2
Control Products & Solutions (e) 116.1   92.8  
Total segment operating earnings1 (f) 328.0 276.0
 
Purchase accounting depreciation and amortization (4.6 ) (5.2 )
General corporate--net (21.7 ) (18.5 )
Non-operating pension costs (14.0 ) (19.7 )
Interest expense (14.9 ) (15.4 )
Income before income taxes (g) 272.8 217.2
Income tax provision (74.7 ) (55.8 )
Net income $ 198.1   $ 161.4  
 
Diluted EPS $ 1.41   $ 1.14  
 

Adjusted EPS2

 $ 1.47   $ 1.23  
 
Average diluted shares 140.4   141.2  
 
Segment operating margin
Architecture & Software (d/a) 30.4 % 27.9 %
Control Products & Solutions (e/b) 13.0 % 11.2 %
Total segment operating margin1 (f/c) 20.6 % 18.5 %
 
Pre-tax margin (g/c) 17.1 % 14.6 %
 

1Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We believe that these measures are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our Company. Our measures of total segment operating earnings and total segment operating margin may be different from those used by other companies.

2Adjusted EPS is a non-GAAP earnings measure that excludes the non-operating pension costs and their related income tax effects. See "Other Supplemental Information - Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate" section for more information regarding non-operating pension costs and a reconciliation to GAAP measures.

 
ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions)
 
    Three Months Ended
December 31,
2013     2012
Sales $ 1,591.7 $ 1,489.2
Cost of sales (928.0 ) (881.9 )
Gross profit 663.7 607.3
 
Selling, general and administrative expenses (385.4 ) (373.5 )
Other income (expense) 9.4 (1.2 )
Interest expense (14.9 ) (15.4 )
Income before income taxes 272.8 217.2
Income tax provision (74.7 ) (55.8 )
 
Net income $ 198.1   $ 161.4  
 
ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET INFORMATION
(in millions)
 
    December 31,     September 30,
2013 2013
Assets
Cash and cash equivalents $ 1,246.0 $ 1,200.9
Short-term investments 364.6 372.7
Receivables 1,169.4 1,186.1
Inventories 645.6 615.4
Property, net 610.3 616.0
Goodwill and intangibles 1,293.6 1,235.8
Other assets 611.3   617.7
Total $ 5,940.8   $ 5,844.6
 
Liabilities and Shareowners' Equity
Short-term debt $ 251.0 $ 179.0
Accounts payable 513.6 546.7
Long-term debt 905.1 905.1
Other liabilities 1,583.3 1,628.3
Shareowners' equity 2,687.8   2,585.5
Total $ 5,940.8   $ 5,844.6
 
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
 
    Three Months Ended
December 31,
2013     2012
Continuing operations:
Operating activities:
Income from continuing operations $ 198.1 $ 161.4
Depreciation and amortization 35.9 35.2
Retirement benefits expense 33.3 42.8
Pension trust contributions (11.2 ) (9.3 )
Receivables/inventories/payables (24.5 ) (13.8 )
Compensation and benefits (67.6 ) (90.4 )
Income taxes 27.6 33.6
Other 11.9   7.8  
Cash provided by operating activities 203.5   167.3  
Investing activities:
Capital expenditures (35.6 ) (21.6 )
Acquisition of businesses, net of cash acquired (68.1 ) (84.4 )
Purchases of short-term investments (87.5 ) (87.5 )
Proceeds from maturities of short-term investments 95.5 87.5
Proceeds from sale of property and investments 0.2 0.2
Other investing activities (3.4 ) --  
Cash used for investing activities (98.9 ) (105.8 )
Financing activities:
Net issuance of short-term debt 72.0 96.0
Cash dividends (80.5 ) (65.5 )
Purchases of treasury stock (110.0 ) (92.9 )
Proceeds from the exercise of stock options 48.1 38.1
Excess income tax benefit from share-based compensation 10.7   10.6  
Cash used for financing activities (59.7 ) (13.7 )
Effect of exchange rate changes on cash 0.2   9.6  
Cash provided by continuing operations 45.1 57.4
Discontinued operations:
Cash used for discontinued operations --   (7.0 )
Increase in cash and cash equivalents $ 45.1   $ 50.4  
 

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, 2013 compared to sales for the three months ended December 31, 2012:

    Three Months Ended December 31,
2013   2012
Sales  

Effect of
Changes in
Currency

 

Sales
Excluding
Effect of
Changes in
Currency

 

Effect of
Acquisitions

 

Organic
Sales

Sales
United States $ 836.4 $ 2.2 $ 838.6 $ -- $ 838.6 $ 761.1
Canada 99.6 5.9 105.5 -- 105.5 106.3
Europe, Middle East, Africa 324.4 (9.7 ) 314.7 (2.8 ) 311.9 296.1
Asia Pacific 206.8 5.4 212.2 -- 212.2 197.4
Latin America 124.5   8.1   132.6   --   132.6   128.3
Total $ 1,591.7   $ 11.9   $ 1,603.6   $ (2.8 ) $ 1,600.8   $ 1,489.2
 

The following is a reconciliation of reported sales to organic sales for our reporting segments for the three months ended December 31, 2013 compared to sales for the three months ended December 31, 2012:

    Three Months Ended December 31,
2013   2012
Sales  

Effect of
Changes in
Currency

 

Sales
Excluding
Effect of
Changes in
Currency

 

Effect of
Acquisitions

 

Organic
Sales

Sales
Architecture & Software $ 695.9 $ 2.5 $ 698.4 $ -- $ 698.4 $ 657.5
Control Products & Solutions 895.8   9.4   905.2   (2.8 ) 902.4   831.7
Total $ 1,591.7   $ 11.9   $ 1,603.6   $ (2.8 ) $ 1,600.8   $ 1,489.2
 

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 is a reconciliation 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,
2013       2012
Income from continuing operations $ 198.1 $ 161.4
Non-operating pension costs 14.0 19.7
Tax effect of non-operating pension costs (5.0 ) (7.2 )
Adjusted Income $ 207.1   $ 173.9  
 
Diluted EPS from continuing operations $ 1.41 $ 1.14
Non-operating pension costs per diluted share, before tax 0.10 0.14
Tax effect of non-operating pension costs per diluted share (0.04 ) (0.05 )
Adjusted EPS $ 1.47   $ 1.23  
 
Effective tax rate 27.4 % 25.7 %
Tax effect of non-operating pension costs 0.4 % 0.9 %
Adjusted Effective Tax Rate 27.8 % 26.6 %
 
   

Fiscal 2014
Guidance

  

Year Ended
September 30,
2013

 
Diluted EPS from continuing operations $5.74 - $6.09 $ 5.36
Non-operating pension costs per diluted share, before tax 0.40 0.55
Tax effect of non-operating pension costs per diluted share (0.14) (0.20 )
Adjusted EPS $6.00 - $6.35 $ 5.71  
 

ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions)

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,
2012 		  Mar. 31,
2013 		 

Jun. 30,
2013

 

Sep. 30,
2013

  Dec. 31,
2013
Cash provided by continuing operating activities $ 167.3 $ 202.6 $ 293.9 $ 351.0 $ 203.5
Capital expenditures of continuing operations (21.6 ) (33.4 ) (31.9 ) (59.3 ) (35.6 )
Excess income tax benefit from share-based compensation 10.6   10.4   1.6   9.3   10.7  
Free cash flow $ 156.3   $ 179.6   $ 263.6   $ 301.0   $ 178.6  
 

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

December 31,
2013     2012
(a) Return
Income from continuing operations $ 793.0 $ 715.1
Interest expense 60.4 60.5
Income tax provision 243.5 225.1
Purchase accounting depreciation and amortization 18.7   20.0  
Return 1,115.6   1,020.7  
(b) Average invested capital
Short-term debt 227.8 257.8
Long-term debt 905.1 905.0
Shareowners' equity 2,253.9 1,925.5
Accumulated amortization of goodwill and intangibles 774.4 760.0
Cash and cash equivalents (1,078.6 ) (871.9 )
Short-term investments (364.6 ) (302.5 )
Average invested capital 2,718.0   2,673.9  
(c) Effective tax rate
Income tax provision 243.5 225.1
Income from continuing operations before income taxes $ 1,036.5   $ 940.2  
Effective tax rate 23.5 % 23.9 %
(a) / (b) * (1-c) Return On Invested Capital 31.4 % 29.0 %
 

Rockwell Automation
John Bernaden
Media Relations
414.382.2555
or
Rockwell Automation
Rondi Rohr-Dralle
Investor Relations
414.382.8510