10-QPeriod: Q3 FY2013

ROCKWELL AUTOMATION, INC Quarterly Report for Q3 Ended Jun 30, 2013

Filed August 7, 2013For Securities:ROK

Summary

Rockwell Automation, Inc.'s third quarter 2013 10-Q filing indicates a period of modest sales growth and improved profitability compared to the prior year. Total sales increased by 4% year-over-year, driven by solid performance in the United States, Canada, and Latin America, while the Asia-Pacific region saw a decline. The company experienced strong margin conversion, attributed to volume leverage and ongoing productivity initiatives. Profitability metrics show improvement, with Diluted EPS rising to $1.45 from $1.33 in the prior year's comparable quarter. Management highlighted the effective execution of their long-term strategy, focusing on market expansion, revenue diversification, and strategic acquisitions. The company also demonstrated robust cash flow generation, with free cash flow significantly increasing year-over-year, supporting share repurchases and dividend payments.

Financial Highlights

48 data points
Beta

Revenue

$1.62B

40.2% Gross Margin

Net Income

$203.70M

12.5% Net Margin

EPS (Diluted)

$1.45

Total Assets

$5.77B

Cash & Equivalents

$1.02B

Free Cash Flow

$262.00M

Financial Statements
Beta
Revenue$1.62B
Cost of Revenue$971.30M
Gross Profit$652.90M
SG&A Expenses$383.70M
Interest Expense$15.30M
Net Income$203.70M
EPS (Basic)$1.46
EPS (Diluted)$1.45
Shares Outstanding (Basic)138.90M
Shares Outstanding (Diluted)140.40M

Key Highlights

  • 1Total sales for the third quarter of fiscal year 2013 increased by 4% to $1.62 billion compared to the prior year, with notable strength in the Americas.
  • 2Diluted Earnings Per Share (EPS) increased to $1.45 for the quarter, up from $1.33 in the same period last year.
  • 3The Control Products & Solutions segment showed robust growth, with sales up 6% and operating margin improving to 13.6% from 11.9%.
  • 4Architecture & Software segment sales saw a modest 1% increase year-over-year, with operating margin remaining stable.
  • 5Free cash flow for the nine months ended June 30, 2013, significantly increased to $599.5 million from $251.0 million in the prior year, reflecting improved operating cash flow.
  • 6The company repurchased approximately 1.2 million shares of common stock during the quarter for $104 million under its authorized share repurchase program.
  • 7The effective tax rate decreased to 20.9% in the current quarter from 22.1% in the prior year quarter, partly due to favorable resolution of tax matters.

Frequently Asked Questions

Sales growth was primarily driven by the United States and Canada, with particular strength in the oil and gas industry. Latin America also showed strong growth, supported by the oil and gas, auto, and consumer industries. The increase in sales was also influenced by acquisitions and currency translation, especially in China.

Profitability improved, with Diluted EPS increasing to $1.45 from $1.33 in the prior year's third quarter. This improvement was supported by increased sales, strong margin conversion due to volume leverage and productivity initiatives, and a lower effective tax rate.

Rockwell Automation aims to grow at rates exceeding the automation market by expanding its served market and differentiating its offerings. Their strategy includes diversifying revenue, growing market share, enhancing market access through partners, making strategic acquisitions, investing in technology and intellectual capital, and driving cost productivity. They project long-term financial goals including 6-8% revenue growth and double-digit EPS growth.

The company generated strong free cash flow, which is being used for acquisitions, dividends, and share repurchases. They repurchased approximately $104 million worth of stock in the quarter and have substantial authorization remaining for future repurchases. They also maintain access to a $750 million unsecured revolving credit facility for liquidity and financial flexibility.