MILWAUKEE, Wisc. — Rockwell Automation, Inc. reported fiscal 2016 third quarter sales of $1,474.0 million, down 6.4 percent from $1,575.2 million in the third quarter of fiscal 2015. Organic sales declined 4.8 percent, and currency translation reduced sales by 1.8 percent.
On a GAAP basis, fiscal 2016 third quarter net income was $191.0 million or $1.46 per share, compared to$206.1 million or $1.52 per share in the third quarter of fiscal 2015. Pre-tax margin decreased to 17.1 percent in the third quarter of fiscal 2016 from 18.1 percent in the same period last year.
Fiscal 2016 third quarter Adjusted EPS was $1.55, down 3 percent compared to $1.59 in the third quarter of fiscal 2015. Total segment operating earnings were $311.0 million in the third quarter of fiscal 2016, down 10 percent from $343.7 million in the same period of fiscal 2015. Total segment operating margin was 21.1 percent compared to 21.8 percent a year ago, primarily due to lower sales.
Commenting on the results, Blake D. Moret, president and chief executive officer, said, “Sales and earnings trends were broadly in line with our expectations. Sales were down about a point more than we anticipated, as our U.S. and Canada solutions and services businesses experienced some delays in larger projects, particularly in heavy industry end markets.
“For the quarter, I am pleased with our segment operating margin performance and strong free cash flow conversion.”
Commenting on the outlook, Moret added, “In mixed market conditions, we expect continued improvement in our product sales. However, the weaker-than-expected orders and sales performance in our solutions and services businesses in the third quarter has caused us to reduce our sales outlook for the balance of the year. We still believe we will see sequential sales improvement in the second half of the fiscal year, but not as much as we anticipated in April.”
The following table provides updated guidance as it relates to sales growth and earnings per share for fiscal 2016:
|Sales Growth Guidance||EPS Guidance|
|Reported sales growth||~ (7)%||Diluted EPS||$5.43 – $5.63|
|Organic sales growth||~ (4)%||Adjusted EPS||$5.80 – $6.00|
|Foreign currency impact||~ (3)%|
Moret continued, “I am confident in our long-term growth prospects. We will protect our key investments in innovation, domain expertise, and commercial resources to ensure we continue to deliver superior value for our customers and our share owners.”
Following is a discussion of fiscal 2016 third quarter results for both segments.
Architecture & Software
Architecture & Software quarterly sales were $666.4 million, a decrease of 2.5 percent compared to $683.5 million in the same period last year. Organic sales decreased 1.3 percent, and currency translation reduced sales by 1.6 percent. Segment operating earnings were $184.2 million compared to $199.9 million in the same period last year. Segment operating margin decreased to 27.6 percent from 29.2 percent a year ago, primarily due to lower sales and unfavorable mix and currency effects.
Control Products & Solutions
Control Products & Solutions quarterly sales were $807.6 million, a decrease of 9.4 percent compared to$891.7 million in the same period last year. Organic sales decreased 7.5 percent, and currency translation reduced sales by 1.9 percent. Segment operating earnings were $126.8 million compared to $143.8 million in the same period last year. Segment operating margin decreased to 15.7 percent from 16.1 percent a year ago, primarily due to lower sales, partially offset by productivity.
In the third quarter of fiscal 2016 cash flow provided by operating activities was $276.0 million and free cash flow was $250.4 million. Return on invested capital was 32.6 percent.
Fiscal 2016 third quarter general corporate-net expense was $17.0 million compared to $21.9 million in the third quarter of fiscal 2015.
On a GAAP basis, the effective tax rate in the third quarter of fiscal 2016 was 24.3 percent compared to 27.6 percent in the third quarter of fiscal 2015. The Adjusted Effective Tax Rate for the third quarter of fiscal 2016 was 25.1 percent compared to 27.9 percent a year ago. The decreases in the effective tax rate and the Adjusted Effective Tax Rate were primarily due to a favorable discrete tax item in the current quarter, and the benefit of the U.S. research and development tax credit. The Company now expects a full-year 2016 effective tax rate of approximately 23.5 percent, and an Adjusted Effective Tax Rate of approximately 24.5 percent.
During the third quarter of fiscal 2016, the Company repurchased 1.1 million shares of its common stock at a cost of $121.7 million. At June 30, 2016, $1,075.2 million remained available under previous share repurchase authorizations.
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 (full release).
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