MILWAUKEE — Rockwell Automation, Inc. today reported fiscal 2020 fourth quarter and full-year results.
“Rockwell’s performance in the quarter and fiscal year demonstrates the increasing resiliency of our business model and the dedication of our employees under extraordinarily trying circumstances. Double-digit sequential orders growth reflects gradually improving business conditions and the expanding value we are providing to customers across diverse industries,” said Blake Moret, Chairman and CEO. “Flat operating margin in the quarter and strong free cash flow, despite lower year-over-year sales, are a testament to our ability to manage costs while continuing to make strategic investments.”
Fiscal 2020 Q4 Financial Results
Fiscal 2020 fourth quarter sales were $1,570.0 million, down 9.3 percent compared to $1,730.2 million in the fourth quarter of fiscal 2019. Organic sales decreased 12.1 percent, currency translation decreased sales by 0.3 percentage points, and acquisitions increased sales by 3.1 percentage points.
Fiscal 2020 fourth quarter net income attributable to Rockwell Automation was $262.7 million or $2.25 per share, compared to $8.1 million or $0.07 per share in the fourth quarter of fiscal 2019. The increases in net income attributable to Rockwell Automation and EPS were primarily due to fair-value adjustments recognized in the fourth quarter of fiscal 2020 and 2019 in connection with our investment in PTC (the “PTC adjustments”). Fiscal 2020 fourth quarter Adjusted EPS was $1.87, down 7 percent compared to $2.01 in the fourth quarter of fiscal 2019, primarily due to lower sales, partially offset by a combination of temporary and structural cost actions.
Pre-tax margin was 19.1 percent in the fourth quarter of fiscal 2020, compared to 3.3 percent in the same period last year. The increase in pre-tax margin was primarily due to the PTC adjustments.
Total segment operating margin was 20.2 percent in the fourth quarter, flat compared to a year ago. Total segment operating earnings were $317.9 million in the fourth quarter of fiscal 2020, down 9 percent from $349.0 million in the same period of fiscal 2019.
Cash flow provided by operating activities in the fourth quarter of fiscal 2020 was $325.8 million, compared to $475.0 million in the fourth quarter of fiscal 2019. Free cash flow was $303.8 million, including a discretionary pre-tax contribution of $50 million to the Company’s U.S. pension trust, compared to $450.9 million in the fourth quarter of fiscal 2019.
Fiscal 2020 Full Year Financial Results
Sales were $6,329.8 million in fiscal 2020, down 5.5 percent from $6,694.8 million in fiscal 2019. Organic sales decreased 7.8 percent, currency translation decreased sales by 1.2 percentage points, and acquisitions increased sales by 3.5 percent.
Fiscal 2020 net income attributable to Rockwell Automation was $1,023.4 million or $8.77 per share, compared to $695.8 million or $5.83 per share in fiscal 2019. The increases in net income attributable to Rockwell Automation and EPS were primarily due to the PTC Adjustments, partially offset by lower sales. Fiscal 2020 Adjusted EPS was $7.68, down 11 percent compared to $8.67 in fiscal 2019. The decrease in Adjusted EPS was primarily due to lower sales, partially offset by a combination of temporary and structural cost actions.
Pre-tax margin was 17.9 percent in fiscal 2020, compared to 13.5 percent last year. The increase in pre-tax margin was primarily due to the PTC Adjustments, partially offset by lower sales.
Total segment operating margin was 19.9 percent compared to 22.0 percent a year ago due to lower sales and the impact of acquisitions, partially offset by a combination of temporary and structural cost actions. Total segment operating earnings were $1,257.9 million in fiscal 2020, down 14.6 percent from $1,473.6 million in fiscal 2019.
Cash flow provided by operating activities in fiscal year 2020 was $1,120.5 million, compared to $1,182.0 million in fiscal 2019. Free cash flow was $1,006.6 million, including a discretionary pre-tax contribution of $50 million to the Company’s U.S. pension trust, compared to $1,049.2 million last year.
New Definition of Adjusted Income and Adjusted EPS
Beginning in fiscal 2021, Rockwell is changing its definition of Adjusted Income and Adjusted EPS to also exclude the impact of purchase accounting depreciation and amortization expense, including the related tax effects. Adjusted EPS guidance in the table below is presented using the new definition. Reconciliations of our non-GAAP measure for net income attributable to Rockwell Automation, diluted EPS and the effective tax rate to Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate, in the new definition for fiscal 2018 – 2020, are included in a separate 8-K filing.
Outlook
The COVID-19 pandemic and global efforts to respond to it continue to evolve. Our projections assume that a gradual recovery continues, with no increase in pandemic-related facility closures or disruptions to the supply chain. Based on the information available to us at the time of this release, the following table provides guidance as it relates to sales growth and earnings per share for fiscal 2021:
“As markets recover and industrial companies invest in their resilience and agility, Rockwell is well-positioned to grow in fiscal 2021,” Moret continued. “New software, hardware, and services offerings across our portfolio are adding significant value as we focus on creating more ways to win.”
Following is a discussion of fourth quarter and full year results for both segments.
Architecture & Software
Architecture & Software fiscal 2020 fourth quarter sales were $702.8 million, a decrease of 10.0 percent compared to $781.2 million in the same period last year. Organic sales decreased 11.3 percent and an acquisition increased sales by 1.3 percentage points. Segment operating earnings were $190.9 million in the fourth quarter of fiscal 2020 compared to $205.0 million in the same period last year. Segment operating margin increased to 27.2 percent in the fourth quarter of fiscal 2020 from 26.2 percent a year ago.
Architecture & Software fiscal 2020 sales were $2,832.9 million, a decrease of 6.3 percent from $3,021.9 million last year. Organic sales decreased 5.7 percent, currency translation decreased sales by 1.2 percentage points, and an acquisition increased sales by 0.6 percentage points. Segment operating earnings were $795.2 million in fiscal 2020 compared to $874.8 million in fiscal 2019. Segment operating margin decreased to 28.1 percent in fiscal 2020 from 28.9 percent a year ago, primarily due to lower sales, partially offset by a combination of temporary and structural cost actions.
Control Products & Solutions
Control Products & Solutions fiscal 2020 fourth quarter sales were $867.2 million, a decrease of 8.6 percent compared to $949.0 million in the same period last year. Organic sales decreased 12.7 percent, currency translation decreased sales by 0.5 percentage points, and inorganic investments increased sales by 4.6 percent. Segment operating earnings were $127.0 million in the fourth quarter of fiscal 2020 compared to $144.0 million in the same period last year. Segment operating margin decreased to 14.6 percent in the fourth quarter of fiscal 2020 from 15.2 percent a year ago.
Control Products & Solutions fiscal 2020 sales were $3,496.9 million, a decrease of 4.8 percent from $3,672.9 million last year. Organic sales decreased 9.5 percent, currency translation decreased sales by 1.2 percentage points, and inorganic investments increased sales by 5.9 percent. Segment operating earnings were $462.7 million in fiscal 2020 compared to $598.8 million in fiscal 2019. Segment operating margin decreased to 13.2 percent in fiscal 2020 from 16.3 percent a year ago, primarily due to lower sales and the impact of acquisitions, partially offset by a combination of temporary and structural cost actions.
Supplemental Information
General Corporate-Net – Fiscal 2020 fourth quarter general corporate net expense was $22.0 million compared to $36.4 million in the fourth quarter of 2019. General corporate net expense was $98.9 million for the full fiscal year 2020 compared to $108.8 million in fiscal 2019.
Purchase Accounting Depreciation and Amortization – Fiscal 2020 fourth quarter purchase accounting depreciation and amortization expense was $11.3 million, up $7.2 million from the fourth quarter of fiscal 2019, resulting in a year-over-year decrease in Adjusted EPS of $0.03. Full year fiscal 2020 purchase accounting depreciation and amortization expense was $41.4 million, up $24.8 million from fiscal 2019, resulting in a year-over-year decrease in Adjusted EPS of $0.08.
Tax – On a GAAP basis, the effective tax rate in the fourth quarter of fiscal 2020 was 12.0 percent compared to 85.6 percent in the fourth quarter of 2019. The decrease is primarily due to the PTC adjustments. The effective tax rate for the full fiscal year 2020 was 9.9 percent compared to 22.8 percent in fiscal 2019. The decrease is primarily due to the PTC adjustments, a tax benefit related to Sensia, and other discrete items.
The Adjusted Effective Tax Rate for the fourth quarter of fiscal 2020 was 15.0 percent compared to 17.0 percent in the fourth quarter of 2019. The Adjusted Effective Tax Rate for the full fiscal year 2020 was 12.0 percent compared to 17.9 percent in fiscal 2019.
Share Repurchases – The Company did not repurchase shares of its common stock during the fourth quarter of fiscal 2020. For the full fiscal year 2020, the Company repurchased 1.4 million shares of its common stock at a cost of $254.7 million. At September 30, 2020, $853.7 million remained available under our existing share repurchase authorizations.
ROIC – Return on invested capital was 35.7 percent.
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