Rockwell Automation Reports Second Quarter 2014 Results

Sales up 5 percent; organic sales up 7 percent / Adjusted EPS of $1.35; diluted EPS of $1.28 / Company reaffirms fiscal 2014 guidance for sales and Adjusted EPS

MILWAUKEE, (PresseBox) - Rockwell Automation, Inc. (NYSE: ROK) today reported fiscal 2014 second quarter sales of $1,600.5 million, up 5 percent from $1,522.8 million in the second quarter of fiscal 2013. Organic sales increased 7 percent, and currency translation reduced sales by 2 percentage points.

Fiscal 2014 second quarter Adjusted EPS was $1.35, up 2 percent compared to Adjusted EPS of $1.33 in the second quarter of fiscal 2013. The year-over-year Adjusted EPS comparison was adversely impacted by a higher tax rate, primarily due to the year-over-year decrease in tax benefits related to the U.S. research and development tax credit. The year-over-year change in the tax rate reduced Adjusted EPS by $0.08. Total segment operating earnings were $302.1 million in the second quarter of fiscal 2014, up 6 percent from $285.2 million in the same period of fiscal 2013. Total segment operating margin increased to 18.9 percent from 18.7 percent a year ago, primarily due to higher sales, largely offset by increased spending and variable compensation expense.

On a GAAP basis, fiscal 2014 second quarter net income was $180.3 million or $1.28 per share, compared to $175.9 million or $1.24 per share in the second quarter of fiscal 2013. Pre-tax margin increased to 15.5 percent in the second quarter of fiscal 2014 from 14.9 percent in the same period last year.

Commenting on the results, Keith D. Nosbusch, chairman and chief executive officer, said, "Sales were strong in the quarter with 7 percent organic growth. I was particularly pleased to see growth in all regions for the first time in over a year. Adjusted Earnings per Share in the first half of the fiscal year grew a healthy 10 percent in spite of a significant headwind from a higher tax rate."

Outlook

Commenting on the outlook, Nosbusch added, "Given our performance in the first half and our expectation for continued stable market conditions, we are reaffirming fiscal 2014 sales guidance of approximately $6.6 billion and Adjusted EPS guidance of $6.00 to $6.35."

Following is a discussion of second quarter results for both segments.

Architecture & Software

Architecture & Software fiscal 2014 second quarter sales were $686.8 million, an increase of 7 percent from $639.2 million in the same period last year. Organic sales increased 9 percent, and currency translation reduced sales by 2 percentage points. Segment operating earnings were $190.2 million in the second quarter of fiscal 2014 compared to $169.9 million in the second quarter of fiscal 2013. Segment operating margin increased to 27.7 percent in the second quarter of fiscal 2014 from 26.6 percent a year ago, primarily due to higher sales.

Control Products & Solutions

Control Products & Solutions fiscal 2014 second quarter sales were $913.7 million, an increase of 3 percent from $883.6 million in the same period last year. Organic sales increased 5 percent. The net effect of acquisitions and currency translation reduced sales by 2 percentage points. Segment operating earnings were $111.9 million in the second quarter of fiscal 2014 compared to $115.3 million in the second quarter of fiscal 2013. Segment operating margin was 12.2 percent in the second quarter of fiscal 2014 compared to 13.0 percent a year ago, primarily due to higher sales, more than offset by increased spending, increased variable compensation expense and unfavorable currency effects.

Other Information

Free cash flow was $188.0 million in the second quarter of fiscal 2014. Cash flow provided by operating activities was $202.8 million in the second quarter of fiscal 2014. Return on invested capital was 30.6 percent.

Fiscal 2014 second quarter general corporate-net expense was $18.9 million compared to $18.1 million in the second quarter of fiscal 2013.

The effective tax rate in the second quarter of fiscal 2014 was 27.4 percent compared to 22.5 percent in the second quarter of fiscal 2013. The Adjusted Effective Tax Rate for the second quarter of fiscal 2014 was 27.9 percent compared to 23.6 percent a year ago. The increases in the effective tax rate and the Adjusted Effective Tax Rate were primarily due to the year-over-year decrease in tax benefits related to the U.S. research and development tax credit. The Company now expects the full-year Adjusted Effective Tax Rate for fiscal 2014 to be approximately 27 percent.

During the second quarter of fiscal 2014, the Company repurchased 0.9 million shares of its common stock at a cost of $110.7 million. At March 31, 2014, $313.7 million remained available under the $1.0 billion 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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