MILWAUKEE — Rockwell Automation, Inc. today reported fiscal 2018 first quarter sales of $1,586.6 million, up 6.5 percent from $1,490.3 million in the first quarter of fiscal 2017. Organic sales grew 5.3 percent. Currency translation increased sales by 2.5 percentage points, and the prior year divestiture reduced sales by 1.3 percentage points.
Fiscal 2018 first quarter net loss was $(236.4) million or $(1.84) per share, compared to net income of $214.7 million or $1.65 per share in the first quarter of fiscal 2017. The decrease in EPS was due to charges associated with the Tax Act, totaling $(479.7) million or $(3.68) per share. Fiscal 2018 first quarter Adjusted EPS was $1.96, up 12 percent compared to $1.75 in the first quarter of fiscal 2017. The increase in Adjusted EPS was primarily due to higher sales, partially offset by higher investment spending.
Pre-tax margin was 18.8 percent in the first quarter of fiscal 2018 compared to 17.3 percent in the same period last year. Total segment operating margin was 22.4 percent compared to 21.2 percent a year ago. The increases in pre-tax margin and total segment operating margin were primarily due to higher sales, partially offset by higher investment spending. Total segment operating earnings were $355.5 million in the first quarter of fiscal 2018, up 12 percent from $316.6 million in the same period of fiscal 2017.
Commenting on the results, Blake D. Moret, chairman and chief executive officer, said, “We had a good start to the fiscal year, with more than five percent organic sales growth in the first quarter. Growth continued to be broad-based across geographies. Heavy industry verticals performed well, supported by recovery in oil and gas. I am very pleased with our twelve percent Adjusted EPS growth in the quarter.”
Outlook
Commenting on the outlook, Moret added, “Global macroeconomic conditions continue to provide a solid backdrop for customer demand. Given our unique offering and deep customer relationships, we are well-positioned to execute on our Connected Enterprise strategy and take advantage of the attractive opportunities in the industrial automation and information market. While we are optimistic that the impact of U.S. tax reform on our customers’ investment decisions could provide an additional tailwind to our future performance, it is too early to quantify the benefits.”
Moret continued, “As a result of our strong first quarter and a lower tax rate for the year, we are increasing our full year Adjusted EPS guidance. We are also increasing investments in fiscal 2018 in order to accelerate profitable growth and other long-term objectives. These include accelerated software development, investments to help our employees be more engaged and productive, and importantly, spending to enable customer innovation and complement our existing workforce development initiatives. We are also actively engaged in the evaluation of inorganic opportunities to accelerate our Connected Enterprise strategy.
“I would like to thank our employees, partners, and suppliers for their contributions to another successful quarter.”
Following is a discussion of fiscal 2018 first quarter results for both segments.
Architecture & Software
Architecture & Software quarterly sales were $746.9 million, an increase of 7.3 percent compared to $696.4 million in the same period last year. Organic sales increased 4.6 percent, and currency translation increased sales by 2.7 percentage points. Segment operating earnings were $224.6 million compared to $208.6 million in the same period last year. Segment operating margin increased to 30.1 percent from 30.0 percent a year ago, primarily due to higher sales, partially offset by higher investment spending.
Control Products & Solutions
Control Products & Solutions quarterly sales were $839.7 million, an increase of 5.8 percent compared to $793.9 million in the same period last year. Organic sales increased 5.9 percent, currency translation increased sales by 2.3 percentage points, and the prior year divestiture reduced sales by 2.4 percentage points. Segment operating earnings were $130.9 million compared to $108.0 million in the same period last year. Segment operating margin increased to 15.6 percent from 13.6 percent a year ago, primarily due to higher sales.
Other Information
In the first quarter of fiscal 2018, cash flow provided by operating activities was $212.7 million and free cash flow was $178.6 million. Return on invested capital was 40.8 percent.
Fiscal 2018 first quarter general corporate-net expense was $16.2 million compared to $14.9 million in the first quarter of fiscal 2017.
On a GAAP basis, the effective tax rate in the first quarter of fiscal 2018 was 179.4 percent compared to 16.7 percent in the first quarter of fiscal 2017. The higher effective tax rate was due to provisional charges related to the tax effect of deemed repatriation of foreign earnings ($385.5 million or 129.5 percentage points) and the revaluation of net deferred tax assets ($94.2 million or 31.6 percentage points) associated with the Tax Act. The Adjusted Effective Tax Rate for the first quarter of fiscal 2018 was 18.9 percent compared to 18.1 percent a year ago. The increase in the Adjusted Effective Tax Rate was primarily due to lower favorable discrete tax items in the current quarter compared to the prior year, partially offset by the lower tax rate under the Tax Act. For fiscal 2018, the Company now expects an effective tax rate of approximately 59 percent and an Adjusted Effective Tax Rate of approximately 21 percent.
During the first quarter of fiscal 2018, the Company repurchased 1.1 million shares of its common stock at a cost of $208.6 million. At December 31, 2017, $399.8 million remained available under the April 6, 2016share repurchase authorization. On January 15, 2018, the Board of Directors authorized the Company to expend up to an additional $1.0 billion to repurchase shares of its common stock.
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.
The entire press release, with financials, can be viewed here.
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