10-QPeriod: Q1 FY2016

ROCKWELL AUTOMATION, INC Quarterly Report for Q1 Ended Dec 31, 2015

Filed February 3, 2016For Securities:ROK

Summary

Rockwell Automation, Inc. (ROK) reported results for the first quarter of fiscal year 2016, ending December 31, 2015. The company experienced a net sales decline of 9.4% year-over-year, with organic sales down 3.3%, impacted by challenging macroeconomic conditions and a strong U.S. dollar. Profitability also declined, with Diluted EPS falling to $1.40 from $1.56 in the prior year period. Despite the top-line pressure, the company maintained a solid operating margin in its Architecture & Software segment, though it declined year-over-year. The Control Products & Solutions segment also saw a decrease in sales but improved its operating margin due to productivity gains. Management highlighted the impact of currency translation and weakness in heavy industries, particularly oil and gas, as key drivers of the sales decline. The company continues to focus on its long-term strategy of expanding its served market and diversifying its sales streams, while also managing costs.

Financial Highlights

48 data points
Beta

Revenue

$1.43B

42.9% Gross Margin

Net Income

$185.50M

13.0% Net Margin

EPS (Diluted)

$1.40

Total Assets

$6.42B

Cash & Equivalents

$1.45B

Free Cash Flow

$144.60M

Financial Statements
Beta
Revenue$1.43B
Cost of Revenue$813.90M
Gross Profit$612.70M
SG&A Expenses$359.90M
Interest Expense$17.40M
Net Income$185.50M
EPS (Basic)$1.41
EPS (Diluted)$1.40
Shares Outstanding (Basic)131.80M
Shares Outstanding (Diluted)132.60M

Key Highlights

  • 1Net sales decreased by 9.4% to $1,426.6 million compared to the prior year's $1,574.4 million.
  • 2Organic sales, excluding currency impacts and acquisitions, decreased by 3.3%.
  • 3Diluted Earnings Per Share (EPS) declined to $1.40 from $1.56 in the same period last year.
  • 4The Architecture & Software segment reported a sales decrease of 9.2% with a segment operating margin of 27.4%, down from 31.3%.
  • 5The Control Products & Solutions segment experienced a 9.6% sales decrease but improved its segment operating margin to 15.3% from 14.5% due to productivity.
  • 6Cash provided by operating activities was $184.8 million, down from $268.2 million in the prior year, leading to a decrease in Free Cash Flow to $145.3 million from $232.6 million.
  • 7The company repurchased approximately 1.17 million shares of common stock for $121.8 million during the quarter.

Frequently Asked Questions

The primary drivers of the sales decline were challenging macroeconomic factors, including softening in the manufacturing sector and weakness in heavy industries like oil and gas. Additionally, unfavorable currency translation effects reduced reported sales by 6.1 percentage points. Pricing contributed a modest 1 percentage point to sales growth.

Profitability declined year-over-year. Net income decreased to $185.5 million from $214.2 million. Diluted EPS fell to $1.40 from $1.56. Adjusted EPS, which excludes non-operating pension costs, also decreased to $1.49 from $1.64.

The report indicates a softening U.S. manufacturing sector, with key indicators like the IP Index and PMI showing declines or contraction. Non-U.S. IP growth projections have also been lowered across regions. While these indicators suggest a challenging near-term environment, Rockwell Automation still expects the automation market to grow at a higher rate in emerging countries over the long term.

Cash provided by operating activities and free cash flow decreased compared to the prior year, primarily due to lower net income and increased working capital. The company repurchased approximately $121.8 million of its common stock during the quarter, indicating a continued commitment to returning capital to shareholders. Approximately 90% of its cash and investments were held by non-U.S. subsidiaries, generally considered permanently reinvested.