Rockwell Automation Reports Third Quarter 2013 Results

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Rockwell Automation Reports Third Quarter 2013 Results

  • Sales up 4 percent year over year; up 7 percent sequentially
  • Adjusted EPS of $1.54, up 12 percent
  • Diluted EPS of $1.45
  • Company narrows Adjusted EPS guidance for fiscal 2013 to $5.50 - $5.70

MILWAUKEE--(BUSINESS WIRE)-- Rockwell Automation, Inc. (NYS: ROK) today reported fiscal 2013 third quarter sales of $1,624.2 million, up 4 percent from $1,560.4 million in the third quarter of fiscal 2012. Organic sales growth was also 4 percent as acquisitions and currency translation had a negligible impact. Fiscal 2013 third quarter sales were up 7 percent sequentially compared to the second quarter of fiscal 2013.

Fiscal 2013 third quarter Adjusted EPS was $1.54, up 12 percent compared to Adjusted EPS of $1.37 in the third quarter of fiscal 2012. Total segment operating earnings were $317.8 million compared to $292.1 million in the same period of 2012. Total segment operating margin increased to 19.6 percent from 18.7 percent a year ago, primarily due to volume leverage and productivity.


On a GAAP basis, fiscal 2013 third quarter net income was $203.7 million or $1.45 per share, compared to $190.7 million or $1.33 per share in the third quarter of fiscal 2012. Pre-tax margin increased to 15.8 percent from 15.7 percent in the same period last year.

In order to provide transparency into the operating results of its business, effective with the first quarter of fiscal 2013, the Company is providing non-GAAP measures (Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate) that exclude non-operating pension costs and their related tax effects. The Company defines 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. In addition, the Company has redefined segment operating earnings to exclude non-operating pension costs. Prior year results are provided on a comparable basis.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, "I am very pleased with 4 percent year-over-year organic growth this quarter and sequential growth in all regions. We expected to see an improvement in sales in the second half of our fiscal year, and the third quarter results support that. Adjusted EPS in the quarter was up 12 percent with strong operating margin performance. Free cash flow was very good again this quarter.

"Through nine months, organic sales are up 1 percent year over year and segment operating margin has expanded 30 basis points. Our entire organization has done a great job driving productivity in what continues to be a low growth environment."

Outlook

Commenting on the outlook, Nosbusch added, "We expect market conditions to remain stable through the fourth quarter. We now project our fiscal full-year sales to be about $6.3 billion. This represents full-year organic growth of approximately 1 percent. Based on this revised sales outlook and our year-to-date earnings performance, we are narrowing our Adjusted EPS guidance, while maintaining the high end of the previous range. The new Adjusted EPS guidance range is $5.50 to $5.70.

"In this low growth environment, we will remain flexible and continue to balance investing in innovation and customer-facing resources with delivering strong shareowner returns."

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

Architecture & Software

Architecture & Software fiscal 2013 third quarter sales were $671.0 million, an increase of 1 percent from $663.8 million last year. Segment operating earnings were $188.6 million in the third quarter of fiscal 2013 compared to $185.2 million in 2012. Segment operating margin increased to 28.1 percent from 27.9 percent a year ago.

Control Products & Solutions

Control Products & Solutions fiscal 2013 third quarter sales were $953.2 million, an increase of 6 percent from $896.6 million last year. Segment operating earnings were $129.2 million in the third quarter of fiscal 2013 compared to $106.9 million in 2012. Segment operating margin increased to 13.6 percent from 11.9 percent a year ago, primarily due to volume leverage and productivity.

Other Information

Free cash flow was $263.6 million in the third quarter of fiscal 2013. Cash flow provided by operating activities was $293.9 million in the third quarter of fiscal 2013. Return on invested capital was 31.0 percent.

Fiscal 2013 third quarter general corporate-net expense was $20.9 million compared to $18.3 million in 2012.

The effective tax rate in the third quarter of 2013 was 20.9 percent compared to 22.1 percent in the third quarter of 2012. The Adjusted Effective Tax Rate for the third quarter of fiscal 2013 was 22.0 percent compared to 22.6 percent a year ago. The Company now expects the full-year Adjusted Effective Tax Rate for fiscal 2013 to be approximately 24 percent.

During the third quarter of fiscal 2013, the Company repurchased 1.2 million shares of its common stock at a cost of $104.3 million. At June 30, 2013, $618.6 million remained available under the $1.0 billion share repurchase authorization. On April 3, 2013, the Board of Directors declared an 11 percent increase in the quarterly dividend to 52 cents per share on common stock, which was paid on June 10, 2013.

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 July 30, 2013. 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, services and solutions and pricing pressures, and our ability to provide high quality products, services and solutions;
  • a disruption of our operations and supply chain due to natural disasters, acts of war, strikes, terrorism, social unrest or other causes;
  • our ability to protect confidential information and enforce our intellectual property rights;
  • our ability to successfully 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, services and solutions we sell or to alleged intellectual property infringements;
  • our ability to manage and mitigate the risks associated with our solutions business;
  • 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 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. (NYS: 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)
 
Three Months EndedNine Months Ended
June 30,June 30,
2013 20122013 2012
Sales
Architecture & Software (a)$671.0$663.8$1,967.7$1,979.1
Control Products & Solutions (b)953.2 896.6 2,668.5 2,616.3 
Total sales (c)$1,624.2 $1,560.4 $4,636.2 $4,595.4 
 
Segment operating earnings
Architecture & Software (d)$188.6$185.2$541.7$545.0
Control Products & Solutions (e)129.2 106.9 337.3 315.5 
Total segment operating earnings1 (f)317.8292.1879.0860.5
 
Purchase accounting depreciation and amortization(4.6)(5.0)(14.8)(14.9)
General corporate—net(20.9)(18.3)(57.5)(63.0)
Non-operating pension costs2(19.6)(8.8)(59.0)(26.4)
Interest expense(15.3)(15.2)(46.0)(45.2)
Income before income taxes (g)257.4244.8701.7711.0
Income tax provision(53.7)(54.1)(160.7)(169.2)
Net income$203.7 $190.7 $541.0 $541.8 
 
Diluted EPS$1.45 $1.33 $3.83 $3.76 
 
Adjusted EPS2$1.54 $1.37 $4.09  $3.87 
 
Average diluted shares140.4 143.5 141.1 144.0 
 
Segment operating margin
Architecture & Software (d/a)28.1%27.9%27.5%27.5%
Control Products & Solutions (e/b)13.6%11.9%12.6%12.1%
Total segment operating margin1 (f/c)19.6%18.7%19.0%18.7%
 
Pre-tax margin (g/c)15.8%15.7%15.1%15.5%

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.

2Beginning in fiscal 2013, we reclassified for all periods presented non-operating pension costs to a separate line item within the above table. Previously, these costs were included in segment operating earnings and general corporate, net. Adjusted 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 EndedNine Months Ended
June 30,June 30,
2013 20122013 2012
Sales$1,624.2$1,560.4$4,636.2$4,595.4
Cost of sales(971.3)(928.9)(2,759.6)(2,726.9)
Gross profit652.9631.51,876.61,868.5
 
Selling, general and administrative expenses(383.7)(369.8)(1,134.0)(1,105.3)
Other income (expense)3.5(1.7)5.1(7.0)
Interest expense(15.3)(15.2)(46.0)(45.2)
Income before income taxes257.4244.8701.7711.0
Income tax provision(53.7)(54.1)(160.7)(169.2)
 
Net income$203.7 $190.7 $541.0 $541.8 
  
ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET INFORMATION
(in millions)
 
June 30,September 30,
20132012
Assets
Cash and cash equivalents$1,024.7$903.9
Short-term investments372.3350.0
Receivables1,155.11,187.3
Inventories619.0619.0
Property, net581.4587.1
Goodwill and intangibles1,219.41,158.3
Other assets799.4 830.9
 
Total$5,771.3 $5,636.5
 
Liabilities and Shareowners' Equity
Short-term debt$220.0$157.0
Accounts payable499.3547.6
Long-term debt905.1905.0
Other liabilities2,139.12,175.2
Shareowners' equity2,007.8 1,851.7
 
Total$5,771.3 $5,636.5
 
ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
 
Nine Months Ended
June 30,
2013 2012
Continuing operations:
Operating activities:
Income from continuing operations$541.0$541.8
Depreciation and amortization109.1102.9
Retirement benefits expense127.878.6
Pension trust contributions(29.9)(328.5)
Receivables/inventories/payables(43.3)(78.7)
Advanced payments from customers and deferred revenue26.042.6
Compensation and benefits(55.5)(128.7)
Income taxes20.079.6
Other(31.4)19.0 
Cash provided by operating activities663.8 328.6 
Investing activities:
Capital expenditures(86.9)(94.9)
Acquisition of businesses, net of cash acquired(84.8)(16.2)
Purchases of short-term investments(284.6)(400.0)
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