Exhibit 99
1201 S. Second Street
Milwaukee, WI 53204
USA
News Release
| Contact | Marci Pelzer Media Relations Rockwell Automation 414.382.5679 | Jessica Kourakos Investor Relations Rockwell Automation 414.382.8510 | ||||||||||||
Rockwell Automation Reports First Quarter 2022 Results
•Record quarterly orders of $2.5 billion, up over 40% year over year
•Reported sales up 18.7% year over year; organic sales up 16.8%
•Acquisitions contributed 2.6% to reported sales growth
•Total ARR up over 50% with recent Plex acquisition; Organic ARR up double digits
•Q1 Diluted EPS of $2.05 and Adjusted EPS of $2.14
•Reaffirms fiscal 2022 reported sales growth guidance of 16% - 19%; organic sales growth of 14% - 17%
•Updates fiscal 2022 Diluted EPS guidance from $9.91 - $10.51 to $10.01 - $10.61
•Reaffirms fiscal 2022 Adjusted EPS guidance of $10.50 - $11.10
MILWAUKEE (January 27, 2022) — Rockwell Automation, Inc. (NYSE: ROK) today reported first quarter fiscal 2022 results.
"Rockwell had an excellent start to fiscal 2022, with first quarter sales up 18.7% and orders up over 40% to a quarterly record of $2.5 billion. All three business segments delivered double-digit sales growth and continued exceptional execution in this challenging supply chain environment, " said Blake Moret, Chairman and CEO.
Fiscal 2022 Q1 Financial Results
Fiscal 2022 first quarter sales were $1,857 million, up 18.7% from $1,565 million in the first quarter of fiscal 2021. Organic sales increased 16.8%, currency translation decreased sales by 0.7%, and acquisitions increased sales by 2.6%.
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Fiscal 2022 first quarter net income attributable to Rockwell Automation was $242 million or $2.05 per share, compared to $593 million or $5.06 per share in the first quarter of fiscal 2021. The decreases in net income attributable to Rockwell Automation and Diluted EPS were primarily due to lower fair value gains in fiscal 2022 versus fiscal 2021 in connection with our investment in PTC (the "PTC adjustments"). Fiscal 2022 first quarter Adjusted EPS was $2.14, down 10.1% compared to $2.38 in the first quarter of fiscal 2021. First quarter of fiscal 2021 included a non-recurring legal settlement gain of $0.45. Adjusted EPS was up 11% year over year excluding the prior year non-recurring legal settlement gain.
Pre-tax margin was 15.2% in the first quarter of fiscal 2022 compared to 44.8% in the same period last year. The decrease in pre-tax margin was primarily due to the PTC adjustments.
Total segment operating earnings were $355 million in the first quarter of fiscal 2022, up 14.8% from $309 million in the same period of fiscal 2021. Total segment operating margin was 19.1% compared to 19.8% a year ago. The decrease in margin was primarily driven by higher planned spend and negative price/cost, partially offset by higher sales.
Cash flow generated by operating activities in the first quarter of fiscal 2022 was $(12) million, compared to $347 million in the first quarter of fiscal 2021. Free cash flow in the first quarter of fiscal 2022 was $(49) million, compared to $319 million in the same period last year. Decreases in cash flow from operating activities and free cash flow were due to the payout of the fiscal 2021 bonus in fiscal 2022, higher working capital and timing of income tax payments.
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Fiscal Year 2022 Outlook
The table below provides guidance for sales growth and earnings per share for fiscal 2022. Our guidance reflects strong demand as well as record backlog. Supply chain challenges remain dynamic, and our projections assume gradual improvement over the course of the year.
| Guidance | Prior Guidance | ||||||||||
| Reported sales growth | 16% - 19% | 16% - 19% | |||||||||
| Organic sales growth | 14% - 17% | 14% - 17% | |||||||||
| Inorganic sales growth | ~2% | ~2% | |||||||||
| Currency translation | ~0% | ~0% | |||||||||
Diluted EPS1 | $10.01 - $10.61 | $9.91 - $10.51 | |||||||||
| Adjusted EPS | $10.50 - $11.10 | $10.50 - $11.10 | |||||||||
1Updated to include changes in purchase accounting amortization and the Q1 impact of the change in fair value of our investments, primarily PTC.
"We expect very strong growth this year, with total sales up 17.5% at the midpoint of our guidance range despite significant supply chain constraints. I'm proud of how our teams are not only mitigating these challenges, but also taking our profitable growth to a whole new level," Moret continued.
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Following is a discussion of first quarter results for our business segments.
Intelligent Devices
Intelligent Devices first quarter fiscal 2022 sales were $900 million, an increase of 24.7% compared to $722 million in the same period last year. Organic sales increased 25.6% and currency translation decreased sales by 0.9%. Segment operating earnings were $213 million compared to $140 million in the same period last year. Segment operating margin increased to 23.7% from 19.4% a year ago, primarily due to higher sales, partially offset by negative price/cost.
Software & Control
Software & Control first quarter fiscal 2022 sales were $514 million, an increase of 16.5% compared to $441 million in the same period last year. Organic sales increased 8.4%, currency translation decreased sales by 0.7%, and acquisitions increased sales by 8.8%. Segment operating earnings were $118 million compared to $133 million in the same period last year. Segment operating margin decreased to 22.9% from 30.2% a year ago, driven by higher planned spend, the impact of acquisition integration costs, and negative price/cost, partially offset by higher sales.
Lifecycle Services
Lifecycle Services first quarter fiscal 2022 sales were $443 million, an increase of 10.1% compared to $403 million in the same period last year. Organic sales increased 10.3%, currency translation decreased sales by 0.6%, and an acquisition increased sales by 0.4%. Segment operating earnings were $24.5 million compared to $36.0 million in the same period last year. Segment operating margin decreased to 5.5% from 8.9% a year ago, primarily related to higher planned spend, unfavorable project mix, and higher input costs, partially offset by higher sales.
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Supplemental Information
Corporate and Other - Fiscal 2022 first quarter corporate and other expense was $29.4 million compared to $28.0 million in the first quarter of fiscal 2021.
Purchase Accounting Depreciation and Amortization - Fiscal 2022 first quarter purchase accounting depreciation and amortization expense was $26.1 million, up $14.4 million from the first quarter of fiscal 2021.
Tax - On a GAAP basis, the effective tax rate in the first quarter of fiscal 2022 was 15.4% compared to 15.8% in the first quarter of fiscal 2021. The Adjusted Effective Tax Rate for the first quarter of fiscal 2022 was 15.3% compared to 15.4% in the prior year.
Share Repurchases - During the first quarter of fiscal 2022, the Company repurchased approximately 0.2 million shares of its common stock at a cost of $49.4 million. At December 31, 2021, $503 million remained available under our existing share repurchase authorization.
ROIC - Return on invested capital was 20.6%.
Non-GAAP Measures - Organic sales, total segment operating earnings, total segment operating margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate, free cash flow, free cash flow conversion, and return on invested capital are non-GAAP measures that are reconciled to GAAP measures in the attachments to this release.
Organic ARR - Annual recurring revenue (ARR) is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The Probability of renewal is based on historical renewal experience of the individual revenue streams, or management best estimates if historical renewal experience is not available. Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency translation and acquisitions, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Organic ARR on a constant currency basis. When we acquire businesses, we exclude the effect of ARR in current period for which there was no comparable ARR in the prior period. Organic ARR growth is also used as a financial measure of performance for our annual incentive compensation. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog.
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Conference Call
A conference call to discuss the quarterly results will be held at 8:30 a.m. Eastern Time on January 27, 2022. The call will be an audio webcast and accessible on the Rockwell Automation website (https://ir.rockwellautomation.com/investors/). Presentation materials will also be available on the website prior to the call.
Interested parties can access the conference call by dialing the following numbers: (888) 330-2022 in the U.S. and Canada; (646) 960-0690 for other countries. Use the following passcode: 5499533. Please dial in 10 minutes prior to the start of the call.
Both the presentation materials and a replay of the call will be available on the Investor Relations section of the Rockwell Automation website through February 27, 2022.
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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:
•the severity and duration of disruptions to our business due to pandemics, including the COVID-19 pandemic, natural disasters (including those as a result of climate change), acts of war, strikes, terrorism, social unrest or other causes, including the impacts of the COVID-19 pandemic and efforts to manage it on the global economy, liquidity and financial markets, demand for our hardware and software products, solutions and services, our supply chain, our work force, our liquidity, and the value of the assets we own;
•the availability and price of components and materials;
•macroeconomic factors, including inflation, global and regional business conditions (including adverse impacts in certain markets, such as Oil & Gas), commodity prices, the cyclical nature of our customers’ capital spending, sovereign debt concerns, and currency exchange rates;
•the availability and cost of capital;
•our ability to attract, develop, and retain qualified personnel;
•the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions;
•laws, regulations, and governmental policies affecting our activities in the countries where we do business, including those related to tariffs, taxation, trade controls, and climate change;
•the availability, effectiveness, and security of our information technology systems;
•our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our hardware and software products, solutions and services;
•the successful development of advanced technologies and demand for and market acceptance of new and existing hardware and software products;
•our ability to manage and mitigate the risks associated with our solutions and services businesses;
•the successful execution of our cost productivity initiatives;
•competitive hardware and software products, solutions and services and pricing pressures, and our ability to provide high quality products, solutions and services;
•disruptions to our distribution channels or the failure of distributors to develop and maintain capabilities to sell our products;
•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;
•the uncertainties of litigation, including liabilities related to the safety and security of the hardware and software products, solutions and services we sell;
•risks associated with our investment in common stock of PTC Inc., including the potential for volatility in our reported quarterly earnings associated with changes in the market value of such stock;
•our ability to manage costs related to employee retirement and health care benefits; and
•other risks and uncertainties, including but not limited to those detailed from time to time in our Securities and Exchange Commission (SEC) filings.
Rockwell Automation, Inc. (NYSE: ROK), is a global leader in industrial automation and digital transformation. We connect the imaginations of people with the potential of technology to expand what is humanly possible, making the world more productive and more sustainable. Headquartered in Milwaukee, Wisconsin, Rockwell Automation employs approximately 24,500 problem solvers dedicated to our customers in more than 100 countries. To learn more about how we are bringing The Connected Enterprise to life across industrial enterprises, visit www.rockwellautomation.com.
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ROCKWELL AUTOMATION, INC.
SALES AND EARNINGS INFORMATION
(in millions, except per share amounts and percentages)
| Three Months Ended December 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Sales | ||||||||||||||
| Intelligent Devices (a) | $ | 900.3 | $ | 721.7 | ||||||||||
| Software & Control (b) | 513.9 | 441.0 | ||||||||||||
| Lifecycle Services (c) | 443.1 | 402.6 | ||||||||||||
| Total sales (d) | $ | 1,857.3 | $ | 1,565.3 | ||||||||||
| Segment operating earnings | ||||||||||||||
| Intelligent Devices (e) | $ | 213.0 | $ | 140.2 | ||||||||||
| Software & Control (f) | 117.6 | 133.1 | ||||||||||||
| Lifecycle Services (g) | 24.5 | 36.0 | ||||||||||||
Total segment operating earnings1 (h) | 355.1 | 309.3 | ||||||||||||
| Purchase accounting depreciation and amortization | (26.1) | (11.7) | ||||||||||||
| Corporate and other | (29.4) | (28.0) | ||||||||||||
| Non-operating pension and postretirement benefit credit (cost) | 4.4 | (7.0) | ||||||||||||
| Change in fair value of investments | 7.6 | 390.4 | ||||||||||||
| Legal settlement | — | 70.0 | ||||||||||||
| Interest expense, net | (29.1) | (22.3) | ||||||||||||
| Income before income taxes (i) | 282.5 | 700.7 | ||||||||||||
| Income tax provision | (43.6) | (110.3) | ||||||||||||
| Net income | 238.9 | 590.4 | ||||||||||||
| Net loss attributable to noncontrolling interests | (2.6) | (2.9) | ||||||||||||
| Net income attributable to Rockwell Automation, Inc. | $ | 241.5 | $ | 593.3 | ||||||||||
| Diluted EPS | $ | 2.05 | $ | 5.06 | ||||||||||
Adjusted EPS2 | $ | 2.14 | $ | 2.38 | ||||||||||
| Average diluted shares for diluted EPS | 117.3 | 117.1 | ||||||||||||
| Segment operating margin | ||||||||||||||
| Intelligent Devices (e/a) | 23.7 | % | 19.4 | % | ||||||||||
| Software & Control (f/b) | 22.9 | % | 30.2 | % | ||||||||||
| Lifecycle Services (g/c) | 5.5 | % | 8.9 | % | ||||||||||
Total segment operating margin1 (h/d) | 19.1 | % | 19.8 | % | ||||||||||
| Pre-tax margin (i/d) | 15.2 | % | 44.8 | % | ||||||||||
1Total segment operating earnings and total segment operating margin are non-GAAP financial measures. We exclude purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement benefit credit (cost), change in fair value of investments, the $70 million legal settlement in fiscal 2021, interest expense, net, and income tax provision because we do not consider these costs to be directly related to the operating performance of our segments. We believe total segment operating earnings and total segment operating margin are useful to investors as measures of operating performance. We use these measures to monitor and evaluate the profitability of our operating segments. Our measures of total segment operating earnings and total segment operating margin may be different from measures used by other companies.
2Adjusted EPS is a non-GAAP earnings measure that excludes non-operating pension and postretirement benefit credit (cost), purchase accounting depreciation and amortization, net loss attributable to noncontrolling interests, and change in fair value of investments, including their respective tax effects. See "Other Supplemental Information - Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate" section for more information regarding non-operating pension and postretirement benefit credit (cost) and a reconciliation to GAAP measures.
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ROCKWELL AUTOMATION, INC.
CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(in millions, except percentages)
| Three Months Ended December 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Sales (a) | $ | 1,857.3 | $ | 1,565.3 | ||||||||||
| Cost of sales | (1,108.2) | (918.8) | ||||||||||||
| Gross profit (b) | 749.1 | 646.5 | ||||||||||||
| Selling, general and administrative expenses (c) | (447.5) | (374.6) | ||||||||||||
Change in fair value of investments1 | 7.6 | 390.4 | ||||||||||||
| Other income | 2.9 | 61.0 | ||||||||||||
| Interest expense | (29.6) | (22.6) | ||||||||||||
| Income before income taxes | 282.5 | 700.7 | ||||||||||||
| Income tax provision | (43.6) | (110.3) | ||||||||||||
| Net income | 238.9 | 590.4 | ||||||||||||
| Net loss attributable to noncontrolling interests | (2.6) | (2.9) | ||||||||||||
| Net income attributable to Rockwell Automation, Inc. | $ | 241.5 | $ | 593.3 | ||||||||||
| Gross profit as percent of sales (b/a) | 40.3 | % | 41.3 | % | ||||||||||
| SG&A as percent of sales (c/a) | 24.1 | % | 23.9 | % | ||||||||||
1Primarily relates to the change in fair value of investment in PTC.
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ROCKWELL AUTOMATION, INC.
CONDENSED BALANCE SHEET INFORMATION
(in millions)
| December 31, 2021 | September 30, 2021 | |||||||||||||
| Assets | ||||||||||||||
| Cash and cash equivalents | $ | 540.0 | $ | 662.2 | ||||||||||
| Receivables | 1,487.4 | 1,424.5 | ||||||||||||
| Inventories | 868.9 | 798.1 | ||||||||||||
| Property, net | 584.1 | 581.9 | ||||||||||||
| Operating lease right-of-use assets | 370.7 | 377.7 | ||||||||||||
| Goodwill and intangibles | 4,616.4 | 4,647.7 | ||||||||||||
| Long-term investments | 1,369.8 | 1,363.5 | ||||||||||||
| Other assets | 906.0 | 846.0 | ||||||||||||
| Total | $ | 10,743.3 | $ | 10,701.6 | ||||||||||
| Liabilities and Shareowners’ Equity | ||||||||||||||
| Short-term debt | $ | 605.9 | $ | 509.7 | ||||||||||
| Accounts payable | 851.3 | 889.8 | ||||||||||||
| Long-term debt | 3,469.1 | 3,464.6 | ||||||||||||
| Operating lease liabilities | 306.7 | 313.6 | ||||||||||||
| Other liabilities | 2,703.5 | 2,829.8 | ||||||||||||
| Shareowners' equity attributable to Rockwell Automation, Inc. | 2,504.9 | 2,389.6 | ||||||||||||
| Noncontrolling interests | 301.9 | 304.5 | ||||||||||||
| Total | $ | 10,743.3 | $ | 10,701.6 | ||||||||||
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ROCKWELL AUTOMATION, INC.
CONDENSED CASH FLOW INFORMATION
(in millions)
| Three Months Ended December 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| Operating activities: | ||||||||||||||
| Net income | $ | 238.9 | $ | 590.4 | ||||||||||
| Depreciation and amortization | 58.9 | 44.0 | ||||||||||||
Change in fair value of investments1 | (7.6) | (390.4) | ||||||||||||
| Retirement benefits expense | 16.2 | 30.0 | ||||||||||||
| Pension contributions | (7.5) | (8.8) | ||||||||||||
| Receivables/inventories/payables | (185.7) | (104.9) | ||||||||||||
| Contract liabilities | 27.1 | 51.4 | ||||||||||||
| Compensation and benefits | (135.3) | 7.3 | ||||||||||||
| Income taxes | (37.6) | 72.8 | ||||||||||||
| Other | 20.6 | 54.7 | ||||||||||||
| Cash (used for) provided by operating activities | (12.0) | 346.5 | ||||||||||||
| Investing activities: | ||||||||||||||
| Capital expenditures | (37.1) | (27.1) | ||||||||||||
| Acquisition of businesses, net of cash acquired | (10.5) | (283.1) | ||||||||||||
| Purchases of investments | (1.5) | — | ||||||||||||
| Proceeds from sale of property | 0.4 | 0.1 | ||||||||||||
| Cash used for investing activities | (48.7) | (310.1) | ||||||||||||
| Financing activities: | ||||||||||||||
| Net issuance of short-term debt | 99.0 | 125.9 | ||||||||||||
| Cash dividends | (130.1) | (124.3) | ||||||||||||
| Purchases of treasury stock | (49.8) | (83.5) | ||||||||||||
| Proceeds from the exercise of stock options | 31.8 | 48.9 | ||||||||||||
| Other financing activities | (2.9) | (4.2) | ||||||||||||
| Cash used for financing activities | (52.0) | (37.2) | ||||||||||||
| Effect of exchange rate changes on cash | (9.5) | 26.6 | ||||||||||||
(Decrease) increase in cash, cash equivalents, and restricted cash2 | $ | (122.2) | $ | 25.8 | ||||||||||
1Primarily relates to the change in fair value of investment in PTC.
2Cash, cash equivalents, and restricted cash at December 31, 2021, includes restricted cash of $8.6 million recorded in Other current assets and $8.6 million in Other assets in the Condensed balance sheet. Cash, cash equivalents, and restricted cash at December 31, 2020, includes $25.8 million of restricted cash recorded in Other assets, in the Condensed balance sheet.
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except percentages)
Organic Sales
We translate sales of subsidiaries operating outside of the United States using exchange rates effective during the respective period. Therefore, changes in currency exchange rates affect our reported sales. Sales by acquired businesses also affect our reported sales. We believe that organic sales, defined as sales excluding the effects of acquisitions and changes in currency exchange rates, which is a non-GAAP financial measure, provides useful information to investors because it reflects regional and operating segment performance from the activities of our businesses without the effect of acquisitions and changes in currency exchange rates. We use organic sales as one measure to monitor and evaluate our regional and operating segment performance. When we acquire businesses, we exclude sales in the current period for which there are no comparable sales in the prior period. We determine the effect of changes in currency exchange rates by translating the respective period’s sales using the same currency exchange rates that were in effect during the prior year. When we divest a business, we exclude sales in the prior period for which there are no comparable sales in the current period. Organic sales growth is calculated by comparing organic sales to reported sales in the prior year, excluding divestitures. We attribute sales to the geographic regions based on the country of destination.
The following is a reconciliation of reported sales to organic sales for the three months ended December 31, 2021, compared to sales for the three months ended December 31, 2020:
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Sales | Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Sales | ||||||||||||||||||||||||||||
| North America | $ | 1,100.7 | $ | (40.4) | $ | (3.2) | $ | 1,057.1 | $ | 912.3 | ||||||||||||||||||||||
| EMEA | 354.7 | — | 13.5 | 368.2 | 320.7 | |||||||||||||||||||||||||||
| Asia Pacific | 278.9 | — | (1.9) | 277.0 | 221.9 | |||||||||||||||||||||||||||
| Latin America | 123.0 | — | 3.2 | 126.2 | 110.4 | |||||||||||||||||||||||||||
| Total | $ | 1,857.3 | $ | (40.4) | $ | 11.6 | $ | 1,828.5 | $ | 1,565.3 | ||||||||||||||||||||||
The following is a reconciliation of reported sales to organic sales for our operating segments for the three months ended December 31, 2021, compared to sales for the three months ended December 31, 2020:
| Three Months Ended December 31, | ||||||||||||||||||||||||||||||||
| 2021 | 2020 | |||||||||||||||||||||||||||||||
| Sales | Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Sales | ||||||||||||||||||||||||||||
| Intelligent Devices | $ | 900.3 | $ | — | $ | 6.0 | $ | 906.3 | $ | 721.7 | ||||||||||||||||||||||
| Software & Control | 513.9 | (38.9) | 3.1 | 478.1 | 441.0 | |||||||||||||||||||||||||||
| Lifecycle Services | 443.1 | (1.5) | 2.5 | 444.1 | 402.6 | |||||||||||||||||||||||||||
| Total | $ | 1,857.3 | $ | (40.4) | $ | 11.6 | $ | 1,828.5 | $ | 1,565.3 | ||||||||||||||||||||||
The following is a reconciliation of reported sales growth to organic sales growth for the three months ended December 31, 2021, compared to sales for the three months ended December 31, 2020:
| Three Months Ended December 31, 2021 | ||||||||||||||||||||||||||
| Reported Sales Growth | Effect of Acquisitions | Effect of Changes in Currency | Organic Sales Growth | |||||||||||||||||||||||
| North America | 20.7 | % | 4.4 | % | 0.4 | % | 15.9 | % | ||||||||||||||||||
| EMEA | 10.6 | % | — | % | (4.2) | % | 14.8 | % | ||||||||||||||||||
| Asia Pacific | 25.7 | % | — | % | 0.9 | % | 24.8 | % | ||||||||||||||||||
| Latin America | 11.4 | % | — | % | (2.9) | % | 14.3 | % | ||||||||||||||||||
| Total | 18.7 | % | 2.6 | % | (0.7) | % | 16.8 | % | ||||||||||||||||||
The following is a reconciliation of reported sales growth to organic sales growth for our operating segments for the three months ended December 31, 2021, compared to sales for the three months ended December 31, 2020:
| Three Months Ended December 31, 2021 | ||||||||||||||||||||||||||
| Reported Sales Growth | Effect of Acquisitions | Effect of Changes in Currency | Organic Sales Growth | |||||||||||||||||||||||
| Intelligent Devices | 24.7 | % | — | % | (0.9) | % | 25.6 | % | ||||||||||||||||||
| Software & Control | 16.5 | % | 8.8 | % | (0.7) | % | 8.4 | % | ||||||||||||||||||
| Lifecycle Services | 10.1 | % | 0.4 | % | (0.6) | % | 10.3 | % | ||||||||||||||||||
| Total | 18.7 | % | 2.6 | % | (0.7) | % | 16.8 | % | ||||||||||||||||||
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except per share amounts and percentages)
Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate
Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate are non-GAAP earnings measures that exclude non-operating pension and postretirement benefit (credit) cost, change in fair value of investments, purchase accounting depreciation and amortization attributable to Rockwell Automation, and net income (loss) attributable to noncontrolling interests, including their respective tax effects.
We believe that Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate provide useful information to our investors about our operating performance and allow management and investors to compare our operating performance period over period. Adjusted EPS is also used as a financial measure of performance for our annual incentive compensation. Our measures of Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate may be different from measures used by other companies. These non-GAAP measures should not be considered a substitute for Net income attributable to Rockwell Automation, diluted EPS, and effective tax rate.
The following are the components of operating and non-operating pension and postretirement benefit (credit) cost (in millions):
| Three Months Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Service cost | $ | 20.6 | $ | 23.0 | |||||||
| Operating pension and postretirement benefit cost | 20.6 | 23.0 | |||||||||
| Interest cost | 32.7 | 31.6 | |||||||||
| Expected return on plan assets | (59.4) | (60.4) | |||||||||
| Amortization of prior service credit | (0.2) | (1.0) | |||||||||
| Amortization of net actuarial loss | 22.5 | 37.0 | |||||||||
| Settlements | — | (0.2) | |||||||||
| Non-operating pension and postretirement benefit (credit) cost | (4.4) | 7.0 | |||||||||
| Net periodic pension and postretirement benefit cost | $ | 16.2 | $ | 30.0 | |||||||
The components of net periodic pension and postretirement benefit cost other than the service cost component are included in the line "Other income" in the Statement of Operations.
The following are reconciliations of net income attributable to Rockwell Automation, diluted EPS, and effective tax rate to Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate, respectively:
| Three Months Ended December 31, | |||||||||||
| 2021 | 2020 | ||||||||||
| Net Income attributable to Rockwell Automation | $ | 241.5 | $ | 593.3 | |||||||
| Non-operating pension and postretirement benefit (credit) cost | (4.4) | 7.0 | |||||||||
| Tax effect of non-operating pension and postretirement benefit (credit) cost | 0.8 | (2.0) | |||||||||
Change in fair value of investments (1) | (7.6) | (390.4) | |||||||||
Tax effect of change in fair value of investments (1) | 3.5 | 64.2 | |||||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 23.1 | 8.7 | |||||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (5.6) | (2.1) | |||||||||
| Adjusted Income | $ | 251.3 | $ | 278.7 | |||||||
| Diluted EPS | $ | 2.05 | $ | 5.06 | |||||||
| Non-operating pension and postretirement benefit (credit) cost | (0.04) | 0.06 | |||||||||
| Tax effect of non-operating pension and postretirement benefit (credit) cost | 0.01 | (0.02) | |||||||||
Change in fair value of investments (1) | (0.06) | (3.33) | |||||||||
Tax effect of change in fair value of investments (1) | 0.03 | 0.55 | |||||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 0.20 | 0.08 | |||||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (0.05) | (0.02) | |||||||||
| Adjusted EPS | $ | 2.14 | $ | 2.38 | |||||||
| Effective tax rate | 15.4 | % | 15.8 | % | |||||||
| Tax effect of non-operating pension and postretirement benefit (credit) cost | — | % | 0.1 | % | |||||||
Tax effect of change in fair value of investments (1) | (0.9) | % | (0.7) | % | |||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | 0.8 | % | 0.2 | % | |||||||
| Adjusted Effective Tax Rate | 15.3 | % | 15.4 | % | |||||||
1Primarily relates to the change in fair value of investment in PTC.
| Fiscal 2022 Guidance | ||||||||
Diluted EPS1 | $10.01 - $10.61 | |||||||
| Non-operating pension and postretirement benefit credit | (0.08) | |||||||
| Tax effect of non-operating pension and postretirement benefit credit | 0.01 | |||||||
Change in fair value of investments2 | (0.06) | |||||||
Tax effect of change in fair value of investments2 | 0.03 | |||||||
| Purchase accounting depreciation and amortization attributable to Rockwell Automation | 0.78 | |||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | (0.19) | |||||||
| Adjusted EPS | $10.50 - $11.10 | |||||||
| Effective tax rate | ~ 16.5% | |||||||
| Tax effect of non-operating pension and postretirement benefit credit | ~ —% | |||||||
Tax effect of change in fair value of investments2 | ~ —% | |||||||
| Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation | ~ 0.5% | |||||||
| Adjusted Effective Tax Rate | ~ 17.0% | |||||||
1Fiscal 2022 guidance based on Adjusted Income attributable to Rockwell, which includes an adjustment for Schlumberger's non-controlling interest in Sensia.
2The actual year-to-date adjustments, which are based on PTC's share price at December 31, 2021, are used for guidance, as estimates of these adjustments on a forward-looking basis are not available due to variability, complexity and limited visibility of these items.
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ROCKWELL AUTOMATION, INC.
OTHER SUPPLEMENTAL INFORMATION
(in millions, except percentages)
Free Cash Flow
Our definition of free cash flow, which is a non-GAAP financial measure, takes into consideration capital investments required to maintain the operations of our businesses and execute our strategy. In our opinion, free cash flow provides useful information to investors regarding our ability to generate cash from business operations that is available for acquisitions and other investments, service of debt principal, dividends, and share repurchases. We use free cash flow, as defined, as one measure to monitor and evaluate our performance, including as a financial measure for our annual incentive compensation. Our definition of free cash flow may be different from definitions used by other companies.
The following table summarizes free cash flow by quarter:
| Quarter Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||
| Mar. 31, 2020 | Jun. 30, 2020 | Sep. 30, 20201 | Dec. 31, 20202 | Mar. 31, 2021 | Jun. 30, 2021 | Sep. 30, 20213 | Dec. 31, 2021 | |||||||||||||||||||||||||||||||||||||||||||
| Cash provided by (used for) operating activities | $ | 217.4 | $ | 346.2 | $ | 325.8 | $ | 346.5 | $ | 248.9 | $ | 461.5 | $ | 204.1 | $ | (12.0) | ||||||||||||||||||||||||||||||||||
| Capital expenditures | (19.6) | (35.3) | (22.0) | (27.1) | (25.0) | (24.5) | (43.7) | (37.1) | ||||||||||||||||||||||||||||||||||||||||||
| Free cash flow | $ | 197.8 | $ | 310.9 | $ | 303.8 | $ | 319.4 | $ | 223.9 | $ | 437.0 | $ | 160.4 | $ | (49.1) | ||||||||||||||||||||||||||||||||||
1Includes a discretionary pre-tax contribution of $50.0 million to the Company's U.S. pension trust.
2Includes $70.0 million pre-tax legal settlement gain.
3Includes a payment of $28 million pre-tax to settle hedges executed in connection with our issuance of $1.5 billion of long-term notes in the fourth quarter of fiscal 2021.
The table below provides the calculation of free cash flow as a percentage of Adjusted Income ("free cash flow conversion") for the three months ended December 31, 2020, and 2021:
| Quarter Ended | |||||||||||
Dec. 31, 20202 | Dec. 31, 2021 | ||||||||||
| Free cash flow (a) | $ | 319.4 | $ | (49.1) | |||||||
| Adjusted income (b) | 278.7 | 251.3 | |||||||||
| Free cash flow conversion (a) / (b) | 115 | % | (20) | % | |||||||
Return On Invested Capital
Our press release contains information regarding Return On Invested Capital (ROIC), which is a non-GAAP financial measure. We believe that ROIC is useful to investors as a measure of performance and of the effectiveness of the use of capital in our operations. We use ROIC as one measure to monitor and evaluate our performance. Our measure of ROIC may be different from that used by other companies. We define ROIC as the percentage resulting from the following calculation:
(a) Net Income, before interest expense, income tax provision, and purchase accounting depreciation and amortization, divided by;
(b) average invested capital for the year, calculated as a five quarter rolling average using the sum of short-term debt, long-term debt, shareowners’ equity, and accumulated amortization of goodwill and other intangible assets, minus cash and cash equivalents, and short-term and long-term investments (fixed income securities), multiplied by;
(c) one minus the effective tax rate for the period.
ROIC is calculated as follows (in millions, except percentages):
| Twelve Months Ended | ||||||||||||||
| December 31, | ||||||||||||||
| 2021 | 2020 | |||||||||||||
| (a) Return | ||||||||||||||
| Net income | $ | 992.8 | $ | 1,298.2 | ||||||||||
| Interest expense | 101.6 | 99.7 | ||||||||||||
| Income tax provision | 115.2 | 204.0 | ||||||||||||
| Purchase accounting depreciation and amortization | 69.5 | 43.1 | ||||||||||||
| Return | 1,279.1 | 1,645.0 | ||||||||||||
| (b) Average invested capital | ||||||||||||||
| Short-term debt | 263.3 | 200.8 | ||||||||||||
| Long-term debt | 2,573.9 | 1,970.5 | ||||||||||||
| Shareowners’ equity | 2,416.3 | 1,256.8 | ||||||||||||
| Accumulated amortization of goodwill and intangibles | 1,007.8 | 936.2 | ||||||||||||
| Cash and cash equivalents | (697.7) | (782.6) | ||||||||||||
| Short-term and long-term investments | (0.6) | (0.6) | ||||||||||||
| Average invested capital | 5,563.0 | 3,581.1 | ||||||||||||
| (c) Effective tax rate | ||||||||||||||
| Income tax provision | 115.2 | 204.0 | ||||||||||||
| Income before income taxes | $ | 1,108.0 | $ | 1,502.2 | ||||||||||
| Effective tax rate | 10.4 | % | 13.6 | % | ||||||||||
| (a) / (b) * (1-c) Return On Invested Capital | 20.6 | % | 39.7 | % | ||||||||||
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