Manufacturers

Rockwell Automation Reports Quarterly Drop in Sales, Earnings

MILWAUKEE, Wis. — Rockwell Automation, Inc. reported fiscal 2015 fourth quarter sales of $1,607.5 million, down 9.8 percent from $1,781.8 million in the fourth quarter of fiscal 2014. Organic sales decreased 2.3 percent, and currency translation reduced sales by 7.6 percent.

Fiscal 2015 fourth quarter Adjusted EPS was $1.57, down 16 percent compared to Adjusted EPS of $1.86 in the fourth quarter of fiscal 2014. Total segment operating earnings were $335.8 million in the fourth quarter of fiscal 2015, down 15 percent compared to $395.8 million in the same period last year. Results in the fourth quarter of fiscal 2015 included $12 million of restructuring charges. Total segment operating margin decreased to 20.9 percent from 22.2 percent a year ago, primarily due to lower operating margin in the Architecture & Software segment.

On a GAAP basis, fiscal 2015 fourth quarter net income was $201.3 million or $1.50 per share, compared to $248.7 million or $1.79 per share in the fourth quarter of fiscal 2014. Pre-tax margin decreased to 17.3 percent from 19.0 percent in the same period last year.

Full Fiscal Year 2015

Sales were $6,307.9 million in fiscal 2015, down 4.8 percent compared to $6,623.5 million in fiscal 2014. Organic sales increased 1.1 percent, and currency translation reduced sales by 6.0 percent.

Fiscal 2015 Adjusted EPS was $6.40, up 3.7 percent compared to Adjusted EPS of $6.17 in fiscal 2014. Total segment operating earnings increased to $1,360.5 million in fiscal 2015 compared to $1,352.0 million in fiscal 2014. Total segment operating margin increased to 21.6 percent from 20.4 percent a year ago, primarily due to higher organic sales and strong productivity.

On a GAAP basis, fiscal 2015 net income was $827.6 million or $6.09 per share, compared to $826.8 million or $5.91 per share in fiscal 2014. Pre-tax margin increased to 17.9 percent from 17.1 percent a year ago.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, “Both sales and earnings were below our expectations in the quarter. Sales softened through the quarter and September was especially weak, particularly in the U.S.

“For the full year, we overcame significant headwinds from heavy industry end markets and delivered organic growth of 1.1 percent. I am pleased that segment operating margin expanded 120 basis points. Strong productivity, particularly in the Control Products & Solutions segment, was a key contributor. I am also pleased that we were able to grow our earnings per share despite lower sales.

“We generated record free cash flow of about $1.1 billion and continued our track record of returning cash to shareowners. We returned over $950 million in fiscal 2015, a 19 percent increase compared to fiscal 2014. And today we are announcing a 12 percent dividend increase, the seventh consecutive double-digit percentage increase since the beginning of 2010. This increase reflects confidence in our sustainable cash generation.

“I would like to thank our employees, partners and suppliers for their continued commitment to serve our customers. Their dedication is key to our success.”

Outlook

Commenting on the outlook, Nosbusch added, “We are experiencing weak market conditions as we enter fiscal 2016. Heavy industry end markets including oil and gas have not yet stabilized, and we see continued softness in key emerging markets. In our largest market, the U.S., the strong dollar is adversely affecting producers and OEMs. As a result, our customers are being more cautious with capital expenditures and operating spending. We therefore expect a particularly weak start to the fiscal year and don’t believe we will see year-over-year growth until later in fiscal 2016.

“Based on these factors, we are projecting fiscal 2016 organic sales to be flat to down 4 percent year over year. Including the impact of currency, we are initiating fiscal 2016 sales guidance of approximately $6.0 billion and Adjusted EPS guidance of $5.90 to $6.40.

“We have a proven track record of managing costs while protecting our technology investments and domain expertise during challenging market conditions. We have already initiated restructuring actions and will continue to balance short-term financial performance with investments that will enable long-term growth and sustainable competitive differentiation.

“The long-term prospects for Rockwell Automation are very attractive. The secular drivers for industrial automation and information remain intact, and we will continue to expand the value we provide our customers and gain market share.”

Following is a discussion of fourth quarter and full year results for both segments.

Architecture & Software

Architecture & Software fiscal 2015 fourth quarter sales were $683.9 million, a decrease of 8.5 percent from $747.4 million in the same period last year. Organic sales decreased 0.4 percent, and currency translation reduced sales by 8.1 percent. Segment operating earnings were $186.5 million in the fourth quarter of fiscal 2015 compared to $232.7 million in the fourth quarter of fiscal 2014. Segment operating margin decreased to 27.3 percent in the fourth quarter of fiscal 2015 from 31.1 percent a year ago, primarily due to unfavorable currency effects and increased research and development project spending.

Architecture & Software fiscal 2015 sales were $2,749.5 million, a decrease of 3.4 percent from $2,845.3 million last year. Fiscal 2015 organic sales were up 3.1 percent, and currency translation reduced sales by 6.6 percent. Segment operating earnings were $808.6 million in fiscal 2015 compared to $839.6 million in fiscal 2014. Segment operating margin was 29.4 percent in fiscal 2015 compared to 29.5 percent in fiscal 2014.

Control Products & Solutions

Control Products & Solutions fiscal 2015 fourth quarter sales were $923.6 million, a decrease of 10.7 percent from $1,034.4 million in the same period last year. Organic sales decreased 3.6 percent, and currency translation reduced sales by 7.2 percent. Segment operating earnings decreased 8.5 percent to $149.3 million in the fourth quarter of fiscal 2015 compared to $163.1 million in the fourth quarter of fiscal 2014. Segment operating margin was 16.2 percent in the fourth quarter of fiscal 2015, compared to 15.8 percent a year ago.

Control Products & Solutions fiscal 2015 sales were $3,558.4 million, a decrease of 5.8 percent from $3,778.2 million last year. Organic sales decreased 0.4 percent, and currency translation reduced sales by 5.6 percent. Segment operating earnings increased to $551.9 million in fiscal 2015 compared to $512.4 million in fiscal 2014. Despite lower sales, segment operating margin was 15.5 percent in fiscal 2015 compared to 13.6 percent a year ago, primarily due to very strong productivity.

Other Information

Free cash flow was $308.5 million in the fourth quarter of fiscal 2015. Cash flow provided by operating activities was $348.0 million in the fourth quarter of fiscal 2015. Full fiscal year 2015 free cash flow was $1,077.2 million, 124 percent of Adjusted Income. Cash flow provided by operating activities for the full fiscal year 2015 was $1,187.7 million. Return on invested capital was 32.6 percent.

Fiscal 2015 fourth quarter general corporate net expense was $19.5 million compared to $22.3 million in the fourth quarter of 2014. General corporate net expense was $85.6 million for the full fiscal year 2015 compared to $81.0 million in fiscal 2014.

The Adjusted Effective Tax Rate for the fourth quarter of fiscal 2015 was 28.2 percent compared to 27.0 percent in the fourth quarter of 2014. The Adjusted Effective Tax Rate for the full fiscal year 2015 was 27.0 percent compared to 27.5 percent in fiscal 2014.

The effective tax rate for the fourth quarter of fiscal 2015 was 27.8 percent compared to 26.6 percent in the fourth quarter of 2014. The effective tax rate for the full fiscal year 2015 was 26.6 percent compared to 27.1 percent in fiscal 2014.

During the fourth quarter of fiscal 2015, the Company repurchased 1.8 million shares of its common stock at a cost of $196.5 million. During fiscal year 2015, the Company repurchased 5.4 million shares of its common stock at a cost of $606.2 million. As of September 30, 2015, $445.2 million remained available under the existing share repurchase authorization.

Today the Board of Directors declared a quarterly dividend of 72.5 cents per share on the Company’s common stock, payable onDecember 10, 2015 to shareowners of record at the close of business on November 23, 2015.

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.

 

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