10-QPeriod: Q2 FY2015

ROCKWELL AUTOMATION, INC Quarterly Report for Q2 Ended Mar 31, 2015

Filed May 6, 2015For Securities:ROK

Summary

Rockwell Automation, Inc. reported solid financial results for the six months ended March 31, 2015, demonstrating year-over-year growth in income before income taxes and net income. The company's total sales saw a slight decrease primarily due to unfavorable currency translation impacts, but organic sales showed positive growth, indicating underlying business strength. Key operational highlights include strong performance in the Architecture & Software segment, with improved operating margin, and significant growth in segment operating earnings for Control Products & Solutions. The company also generated substantial free cash flow, reflecting effective working capital management and higher earnings. Rockwell Automation continued to focus on its long-term strategy of expanding its market presence and offerings, supported by strategic acquisitions. The balance sheet remains robust, with ample liquidity and a well-managed debt structure, including a recently expanded revolving credit facility.

Financial Highlights

48 data points
Beta

Revenue

$1.55B

43.4% Gross Margin

Net Income

$206.00M

13.3% Net Margin

EPS (Diluted)

$1.51

Total Assets

$6.28B

Cash & Equivalents

$1.40B

Free Cash Flow

$267.20M

Financial Statements
Beta
Revenue$1.55B
Cost of Revenue$877.60M
Gross Profit$673.20M
SG&A Expenses$382.40M
Interest Expense$15.70M
Net Income$206.00M
EPS (Basic)$1.53
EPS (Diluted)$1.51
Shares Outstanding (Basic)134.90M
Shares Outstanding (Diluted)136.00M

Key Highlights

  • 1Net income increased to $420.2 million for the six months ended March 31, 2015, up from $378.4 million in the prior year period.
  • 2Organic sales showed growth of 2.4% for the six months ended March 31, 2015, despite a reported sales decrease of 2.1% due to currency translation headwinds.
  • 3Architecture & Software segment operating margin improved to 30.5% for the six months ended March 31, 2015, up from 29.1% in the prior year.
  • 4Control Products & Solutions segment operating earnings increased by 14% for the six months ended March 31, 2015, with operating margin improving to 14.8%.
  • 5Free cash flow generation was strong, reaching $502.0 million for the six months ended March 31, 2015, an increase from $366.6 million in the prior year period.
  • 6The company replaced its revolving credit facility in March 2015, increasing its capacity to $1.0 billion, enhancing financial flexibility.
  • 7Total shareowners' equity decreased slightly from $2,658.1 million at September 30, 2014 to $2,566.5 million at March 31, 2015, partly due to share repurchases and changes in accumulated other comprehensive loss.

Frequently Asked Questions

Total sales decreased by 2.1% to $3,125.2 million for the six months ended March 31, 2015, compared to $3,192.2 million in the prior year. This decrease was primarily driven by unfavorable currency translation effects, which reduced sales by 4.7 percentage points. However, organic sales, which exclude currency impacts and acquisitions, increased by 2.4%, indicating underlying business growth.

The company strengthened its financial flexibility by issuing $600.0 million in long-term notes in February 2015 and replacing its revolving credit facility with a larger $1.0 billion facility in March 2015. There were no commercial paper borrowings outstanding at March 31, 2015. The debt-to-total-capital ratio increased to 37.0% from 31.6%, reflecting the new debt issuance, but remained well within covenant limits. The company maintained strong liquidity and access to capital markets.

Non-operating pension costs increased for the six months ended March 31, 2015, primarily due to a decrease in the discount rate used for U.S. pension plans. While this impacts reported net income, the company uses 'Adjusted Income' and 'Adjusted EPS' to provide investors with a view of operating performance that excludes these non-cash, market-driven pension costs. Adjusted EPS for the six months increased to $3.23 from $2.82.

Rockwell Automation is focused on achieving revenue growth in excess of the automation market, diversifying its sales streams, and growing market share through acquisitions and organic expansion. The company's long-term goals include 6-8% revenue growth and double-digit EPS growth. The report indicates a softening in the U.S. manufacturing sector for the full year 2015 compared to 2014, with a stronger U.S. dollar and lower oil & gas spending as key factors, but expects higher industrial production growth outside the U.S.