Manufacturers

Rockwell’s Earnings Decline, Reduces 2016 Outlook

MILWAUKEE, Wisc. — Rockwell Automation, Inc.  reported fiscal 2016 first quarter sales of $1,426.6 million, down 9.4 percent from $1,574.4 million in the first quarter of fiscal 2015. Organic sales declined 3.3 percent, and currency translation reduced sales by 6.1 percent.

Fiscal 2016 first quarter Adjusted EPS was $1.49, down 9 percent compared to $1.64 in the first quarter of fiscal 2015. Total segment operating earnings were $295.9 million in the first quarter of fiscal 2016, down 15 percent from $346.8 million in the same period of fiscal 2015. Total segment operating margin was 20.7 percent compared to 22.0 percent a year ago, primarily due to lower sales and unfavorable currency effects.

On a GAAP basis, fiscal 2016 first quarter net income was $185.5 million or $1.40 per share, compared to $214.2 million or $1.56 per share in the first quarter of fiscal 2015. Pre-tax margin decreased to 16.6 percent in the first quarter of fiscal 2016 from 18.3 percent in the same period last year.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, “As expected, we had a weak start to the fiscal year with organic sales down 3 percent due to challenging market conditions in the U.S. and Asia Pacific. Heavy industry end markets continued to soften globally, particularly oil and gas in the U.S. I am pleased with the continued solid growth we are seeing in EMEA and Latin America.

“We were able to hold segment operating margin near 21 percent despite 9 percent lower sales. This demonstrates our ability to execute well in challenging market conditions.”

Outlook

Commenting on the outlook, Nosbusch added, “Since providing guidance in November, oil and commodity prices have further deteriorated, and projections for economic growth including industrial production have softened. As a result, we are lowering the mid-point of our organic growth guidance by one point. Taking into account an additional headwind from currency, we are now expecting fiscal 2016 sales of approximately $5.9 billion and are updating our Adjusted EPS guidance range to $5.70 to $6.20.

“We have a proven track record of navigating through challenging market conditions, balancing short-term financial performance with our long-term priorities. We will protect our key investments in innovation, domain expertise and commercial resources, and will continue to expand our served market and gain share. I am very optimistic on our long-term growth prospects, and would like to thank our employees, partners and suppliers for their continued dedication in serving our customers.”

Following is a discussion of fiscal 2016 first quarter results for both segments.

Architecture & Software

Architecture & Software quarterly sales were $642.9 million, a decrease of 9.2 percent compared to $707.8 million in the same period last year. Organic sales decreased 2.7 percent, and currency translation reduced sales by 6.5 percent. Segment operating earnings were$176.2 million compared to $221.4 million in the same period last year. Segment operating margin decreased to 27.4 percent from 31.3 percent a year ago, primarily due to lower sales and unfavorable currency effects.

Control Products & Solutions

Control Products & Solutions quarterly sales were $783.7 million, a decrease of 9.6 percent compared to $866.6 million in the same period last year. Organic sales decreased 3.8 percent, and currency translation reduced sales by 5.8 percent. Segment operating earnings were $119.7 million compared to $125.4 million in the same period last year. Segment operating margin increased to 15.3 percent from 14.5 percent a year ago despite lower sales, primarily due to productivity.

Other Information

In the first quarter of fiscal 2016 free cash flow was $145.3 million and cash flow provided by operating activities was $184.8 million. Return on invested capital was 32.6 percent.

Fiscal 2016 first quarter general corporate-net expense was $18.0 million compared to $22.8 million in the first quarter of fiscal 2015.

The Adjusted Effective Tax Rate for the first quarter of fiscal 2016 was 22.8 percent compared to 26.0 percent in the first quarter of fiscal 2015. On a GAAP basis, the effective tax rate in the first quarter of fiscal 2016 was 21.7 percent compared to 25.5 percent a year ago. The Company now expects a full-year Adjusted Effective Tax Rate for fiscal 2016 of approximately 25 percent. Both the quarter and full year rates reflect the benefit of recent tax legislation related to the U.S. research and development credit.

During the first quarter of fiscal 2016, the Company repurchased 1.2 million shares of its common stock at a cost of $121.8 million. At December 31, 2015, $323.4 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.

 

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