Rockwell Automation Reports Second Quarter 2015 Results

29-Apr-2015 - Germany

Organic sales up 2.7 percent year over year; reported sales down 3.1 percent

Adjusted EPS of $1.59 — up 18 percent year over year; diluted EPS of $1.51

Company maintains 2015 Adjusted EPS guidance of $6.50 - $6.80 on lower sales

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Rockwell Automation, Inc. today reported fiscal 2015 second quarter sales of $1,550.8 million, down 3.1 percent from $1,600.5 million in the second quarter of fiscal 2014. Organic sales grew 2.7 percent, and currency translation reduced sales by 6.0 percent.

Fiscal 2015 second quarter Adjusted EPS was $1.59, up 18 percent compared to $1.35 in the second quarter of fiscal 2014. Total segment operating earnings were $334.2 million in the second quarter of fiscal 2015, up 11 percent from $302.1 million in the same period of fiscal 2014. Total segment operating margin expanded to 21.6 percent from 18.9 percent a year ago, primarily due to higher organic sales, strong productivity and favorable mix, partially offset by increased spending.

On a GAAP basis, fiscal 2015 second quarter net income was $206.0 million or $1.51 per share, compared to $180.3 million or $1.28 per share in the second quarter of fiscal 2014. Pre-tax margin increased to 17.8 percent in the second quarter of fiscal 2015 from 15.5 percent in the same period last year.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, "Earnings growth in the quarter was robust in spite of lower sales, as solid organic sales growth was more than offset by a large currency headwind. Margin expansion was very healthy and free cash flow was also strong in the quarter. I am extremely pleased with 15 percent first half growth in Adjusted EPS, an excellent result in this market environment. We have demonstrated that even in a lower growth environment, we can still grow earnings and deliver great value to shareowners."

Outlook

Commenting on the outlook, Nosbusch added, "Based on a softer forecast for industrial production growth, a reduced outlook for oil and gas, and our solutions and services backlog entering the second half, we are lowering our full-year organic growth by 1 point. We are also including a larger currency headwind and now expect fiscal 2015 reported sales of about $6.4 billion. In spite of the top line reduction, our expectation for a higher full-year margin enables us to maintain the Adjusted EPS guidance range of $6.50 to $6.80.

"Revenue diversification and agility are helping us to pursue the best growth opportunities. Our strong productivity culture will enable us to invest in innovation and organic growth."

Following is a discussion of fiscal 2015 second quarter results for both segments.

Architecture & Software
Architecture & Software quarterly sales were $674.3 million, a decrease of 1.8 percent from $686.8 million in the same period last year. Organic sales increased 4.8 percent, and currency translation reduced sales by 6.7 percent. Segment operating earnings were $200.8 million compared to $190.2 million in the same period last year. Segment operating margin increased to 29.8 percent from 27.7 percent a year ago.

Control Products & Solutions
Control Products & Solutions quarterly sales were $876.5 million, a decrease of 4.1 percent compared to $913.7 million in the same period last year. Organic sales increased 1.2 percent, and currency translation reduced sales by 5.5 percent. Segment operating earnings were$133.4 million compared to $111.9 million in the same period last year. Segment operating margin increased to 15.2 percent from 12.2 percent a year ago.

Other Information
In the second quarter of fiscal 2015 free cash flow was $269.4 million and cash flow provided by operating activities was $285.2 million. Return on invested capital was 32.0 percent.

Fiscal 2015 second quarter general corporate-net expense was $21.4 million compared to $18.9 million in the second quarter of fiscal 2014.

The Adjusted Effective Tax Rate for the second quarter of fiscal 2015 was 26.0 percent compared to 27.9 percent in the second quarter of fiscal 2014. The Company continues to expect a full-year Adjusted Effective Tax Rate for fiscal 2015 of approximately 26.5 percent. The full-year rates reflect the retroactive extension of the U.S. research and development credit for 2014. On a GAAP basis, the effective tax rate in the second quarter of fiscal 2015 was 25.5 percent compared to 27.4 percent a year ago.

During the second quarter of fiscal 2015, the Company repurchased 1.14 million shares of its common stock at a cost of $127.1 million. At March 31, 2015, $757.0 million remained available under the existing 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 April 30, 2015. 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, commodity prices, 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 business due to natural disasters, pandemics, acts of war, strikes, terrorism, social unrest or other causes;

intellectual property infringement claims by others and the ability to protect our intellectual property;

the uncertainty of 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.

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