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Rockwell Automation Reports Third Quarter 2017 Results

MILWAUKEE--(BUSINESS WIRE)--Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2017 third quarter sales of $1,599.2 million, up 8.5 percent from $1,474.0 million in the third quarter of fiscal 2016. Organic sales grew 8.2 percent. Currency translation reduced sales by 0.9 percentage points, and acquisitions contributed 1.2 percentage points to sales growth.

"Our Connected Enterprise strategy is working. The pilots are delivering tangible results across industries."

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Fiscal 2017 third quarter net income was $216.9 million or $1.67 per share, compared to $191.0 million or $1.46 per share in the third quarter of fiscal 2016. Fiscal 2017 third quarter Adjusted EPS was $1.76, up 14 percent compared to $1.55 in the third quarter of fiscal 2016.

Pre-tax margin was 17.3 percent in the third quarter of fiscal 2017 compared to 17.1 percent in the same period last year. Total segment operating margin was 21.1 percent, unchanged from a year ago. Total segment operating earnings were $337.0 million in the third quarter of fiscal 2017, up 8 percent from $311.0 million in the same period of fiscal 2016.

The increases in EPS, Adjusted EPS, pre-tax income, and total segment operating earnings were primarily due to higher sales, partially offset by higher incentive compensation.

Commenting on the results, Blake D. Moret, president and chief executive officer, said, “We had another quarter of strong sales and earnings performance. Organic sales grew 8 percent, in line with our expectations. EPS was up double digits for the third consecutive quarter, and free cash flow remained strong.

“I am pleased to see broad-based sales growth across regions and industries. Growth was led by double-digit increases in Asia Pacific and Latin America. The U.S., our largest market, was up 10 percent, including the contribution from acquisitions. Transportation, food and beverage, and semiconductor were strong."

Outlook

The following table provides updated guidance as it relates to sales growth and earnings per share for fiscal 2017:

Sales Growth Guidance EPS Guidance
Reported sales growth ~ 7% Diluted EPS $6.21 - $6.41
Organic sales growth ~ 6% Adjusted EPS $6.60 - $6.80
Currency translation ~ (0.5)%
Acquisitions ~ 1.5%

Commenting on the outlook, Moret added, "The macro environment remains solid. Our expectation for fiscal 2017 organic growth remains unchanged at approximately 6 percent. Taking into account a smaller headwind from currency, we now project our full-year sales to be about $6.3 billion. Based on our third quarter earnings performance we are increasing the Adjusted EPS guidance range to $6.60 to $6.80.”

Moret continued, “Our Connected Enterprise strategy is working and positions us well for the future. The pilots continue to deliver tangible results across multiple industries."

Following is a discussion of fiscal 2017 third quarter results for both segments.

Architecture & Software

Architecture & Software quarterly sales were $731.9 million, an increase of 9.8 percent compared to $666.4 million in the same period last year. Organic sales increased 10.5 percent, currency translation reduced sales by 1.0 percentage points, and acquisitions contributed 0.3 percentage points to sales growth. Segment operating earnings were $204.3 million compared to $184.2 million in the same period last year. Segment operating margin increased to 27.9 percent from 27.6 percent a year ago.

Control Products & Solutions

Control Products & Solutions quarterly sales were $867.3 million, an increase of 7.4 percent compared to $807.6 million in the same period last year. Organic sales increased 6.3 percent, currency translation reduced sales by 0.8 percentage points, and acquisitions contributed 1.9 percentage points to sales growth. Segment operating earnings were $132.7 million compared to $126.8 million in the same period last year. Segment operating margin decreased to 15.3 percent from 15.7 percent a year ago.

Other Information

In the third quarter of fiscal 2017 cash flow provided by operating activities was $315.3 million and free cash flow was $285.2 million. Return on invested capital was 38.8 percent.

Fiscal 2017 third quarter general corporate-net expense was $16.5 million compared to $17.0 million in the third quarter of fiscal 2016.

On a GAAP basis, the effective tax rate in the third quarter of fiscal 2017 was 21.4 percent compared to 24.3 percent in the third quarter of fiscal 2016. The Adjusted Effective Tax Rate for the third quarter of fiscal 2017 was 22.4 percent compared to 25.1 percent a year ago. The lower tax rates were primarily due to favorable discrete items. For fiscal 2017, the Company now expects an effective tax rate of approximately 20 percent and an Adjusted Effective Tax Rate of approximately 21 percent.

During the third quarter of fiscal 2017, the Company repurchased 740 thousand shares of its common stock at a cost of $116.1 million. At June 30, 2017, $643.0 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 Wednesday, July 26, 2017. 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;
  • our ability to manage and mitigate the risk related to security vulnerabilities and breaches of our products, solutions and services;
  • 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;
  • the availability and price of components and materials;
  • the successful integration and management of acquired businesses;
  • the successful execution of our cost productivity 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...


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