Wall Street expects a year-over-year increase in earnings on higher revenues when Rockwell Automation (ROK) reports results for the quarter ended December 2023. While this widely-known consensus outlook is important in gauging the company's earnings picture, a powerful factor that could impact its near-term stock price is how the actual results compare to these estimates.The stock might move higher if these key numbers top expectations in the upcoming earnings report, which is expected to be released on Jan ...

Rockwell Automation (ROK) closed the most recent trading day at $295.38, moving -1.01% from the previous trading session. The stock trailed the S&P 500, which registered a daily loss of 0.56%. Meanwhile, the Dow lost 0.25%, and the Nasdaq, a tech-heavy index, lost 0.59%.The the stock of industrial equipment and software maker has fallen by 3.9% in the past month, lagging the Industrial Products sector's loss of 0.85% and the S&P 500's gain of 1.2%.Analysts and investors alike will be keeping a close eye on ...

MILWAUKEE--(BUSINESS WIRE)--Rockwell Automation, Inc. (NYSE: ROK) is scheduled to report its first quarter fiscal 2024 results on Wednesday, Jan. 31, before the market opens. The release will be posted on the Rockwell Investor Relations website at www.rockwellautomation.com/en-us/investors.html. A conference call to discuss the quarterly results will be held at 7:30 a.m. CST on Jan. 31. This call will be audio webcast and accessible on the Rockwell Automation Investor Relations website. Presentation materi ...

Early registration discounts are available as well as a reduced rate for young professionalsMADRID, Jan. 9, 2024 /PRNewswire/ -- Rockwell Automation, the world's largest company dedicated to industrial automation and digital transformation, today announced registration is now open for its flagship European event, ROKLive EMEA 2024, which will take place 26 to 29 February 2024 in Madrid.ROKLive EMEA brings together operations, maintenance and engineering professionals to explore how Rockwell Automation's int ...

PART I [Forward-Looking Statements](index=4&type=section&id=FORWARD-LOOKING%20STATEMENTS) This section outlines forward-looking statements, noting actual results may differ due to risks and no obligation to update - The report contains forward-looking statements, and **actual results may differ materially** due to various risks and uncertainties[11](index=11&type=chunk) - The company does not undertake to update or revise any forward-looking statement[12](index=12&type=chunk) [Item 1. Business](index=5&type=section&id=Item%201.%20Business) Rockwell Automation, a global leader in industrial automation, operates through three segments, facing strong competition and relying on global distributors - Rockwell Automation is the **world's largest company** dedicated to industrial automation and digital transformation, aiming to simplify complex production challenges for customers[14](index=14&type=chunk) - The company operates through three segments: **Intelligent Devices** (drives, motion, safety), **Software & Control** (control/visualization software, digital twin), and **Lifecycle Services** (digital consulting, professional services, recurring services, Sensia joint venture)[19](index=19&type=chunk) - The company conducts business in **over 100 countries**, with major sales outside the U.S. in China, Canada, Italy, Mexico, the UK, and Germany[21](index=21&type=chunk) - Competition is influenced by portfolio breadth, technology differentiation, industry expertise, installed base, partner ecosystem, global presence, and price[22](index=22&type=chunk) [Item 1A. Risk Factors](index=7&type=section&id=Item%201A.%20Risk%20Factors) The company manages strategic, operational, compliance, and financial risks through its ERM process, including macroeconomic, supply chain, and cybersecurity threats - The company's **Enterprise Risk Management (ERM) process** identifies, assesses, manages, and monitors significant risks, with Board oversight[32](index=32&type=chunk)[33](index=33&type=chunk) - Key industry and economic risks include **macroeconomic factors** (inflation, business conditions, currency exchange rates), natural disasters, pandemics, acts of war, and **intense competition**[35](index=35&type=chunk)[37](index=37&type=chunk)[40](index=40&type=chunk)[41](index=41&type=chunk) - Business and operational risks encompass **reliance on suppliers**, challenges in **attracting and retaining qualified employees**, complexities of global operations, potential failures or **security breaches of IT/OT systems**, and the need to adapt to changing customer preferences[43](index=43&type=chunk)[44](index=44&type=chunk)[45](index=45&type=chunk)[46](index=46&type=chunk)[50](index=50&type=chunk) - Legal, tax, and regulatory risks include **new legislative actions** (e.g., BEPS Pillar Two, ESG factors), **claims from taxing authorities**, and **potential liabilities from litigation** (including asbestos and environmental remediation)[58](index=58&type=chunk)[59](index=59&type=chunk)[61](index=61&type=chunk)[63](index=63&type=chunk)[64](index=64&type=chunk) [Item 1B. Unresolved Staff Comments](index=13&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) There are no unresolved staff comments - None[68](index=68&type=chunk) [Item 2. Properties](index=13&type=section&id=Item%202.%20Properties) Rockwell Automation's global headquarters is owned in Milwaukee, with approximately 50 leased manufacturing and distribution locations worldwide - Global headquarters is in **Milwaukee, Wisconsin (owned facility)**, encompassing product development, sales, manufacturing, and administrative functions[69](index=69&type=chunk) - The company has **approximately 50 manufacturing and distribution locations** globally, with most other facilities leased and shared across operating segments[69](index=69&type=chunk) [Item 3. Legal Proceedings](index=13&type=section&id=Item%203.%20Legal%20Proceedings) Information regarding legal proceedings is contained in Note 17 of the Consolidated Financial Statements - Information on legal proceedings is referenced to **Note 17** in the Consolidated Financial Statements[71](index=71&type=chunk) [Item 4. Mine Safety Disclosures](index=14&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[72](index=72&type=chunk) [Item 4A. Information about our Executive Officers](index=14&type=section&id=Item%204A.%20Information%20about%20our%20Executive%20Officers) This section lists the name, age, office, and principal occupations of the company's executive officers as of November 1, 2023 Executive Officers as of November 1, 2023 | Name | Office and Position | Age | | :--- | :--- | :--- | | Blake D. Moret | Chairman of the Board, President and Chief Executive Officer | 60 | | Robert L. Buttermore | Senior Vice President and Chief Supply Chain Officer | 50 | | Matthew W. Fordenwalt | Senior Vice President, Lifecycle Services | 47 | | Nicholas C. Gangestad | Senior Vice President and Chief Financial Officer | 59 | | Scott A. Genereux | Senior Vice President and Chief Revenue Officer | 60 | | Rebecca W. House | Senior Vice President, Chief People and Legal Officer and Secretary | 50 | | Frank C. Kulaszewicz | Senior Vice President | 59 | | Veena M. Lakkundi | Senior Vice President, Strategy and Corporate Development | 54 | | John M. Miller | Vice President and Chief Intellectual Property Counsel | 56 | | Tessa M. Myers | Senior Vice President Intelligent Devices | 47 | | Christopher Nardecchia | Senior Vice President and Chief Information Officer | 61 | | Cyril P. Perducat | Senior Vice President and Chief Technology Officer | 54 | | Terry L. Riesterer | Vice President and Controller | 55 | | Brian A. Shepherd | Senior Vice President Software and Control | 58 | | Isaac R. Woods | Vice President and Treasurer | 38 | PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities](index=15&type=section&id=Item%205.%20Market%20for%20Registrant's%20Common%20Equity,%20Related%20Stockholder%20Matters,%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Rockwell Automation's common stock (ROK) is listed on the NYSE, with share repurchases and cumulative total return performance detailed - Rockwell Automation's common stock (ROK) is listed on the New York Stock Exchange, with **11,960 shareowners of record** as of October 31, 2023[75](index=75&type=chunk) Company Share Purchases (Q3 Fiscal 2023) | Period | Total Number of Shares Purchased | Average Price Paid Per Share | Maximum Approx. Dollar Value of Shares that May Yet Be Purchased Under the Plans or Programs | | :--- | :--- | :--- | :--- | | July 1 – 31, 2023 | 56,822 | $336.07 | $975,955,429 | | August 1 – 31, 2023 | 82,698 | $298.05 | $951,307,019 | | September 1 – 30, 2023 | 37,732 | $291.47 | $940,309,320 | | **Total** | **177,252** | **$308.84** | | Cumulative Total Shareowner Return (2018-2023) | | 2018 | 2019 | 2020 | 2021 | 2022 | 2023 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Rockwell Automation | $100.00 | $89.94 | $122.91 | $166.43 | $123.89 | $167.41 | | S&P 500 Index | $100.00 | $104.25 | $120.02 | $156.01 | $131.85 | $160.31 | | S&P Selected GICS groups | $100.00 | $107.60 | $148.77 | $189.73 | $159.25 | $207.01 | | Cash dividends per common share | $3.51 | $3.88 | $4.08 | $4.28 | $4.48 | $4.72 | [Item 6. Reserved](index=17&type=section&id=Item%206.%20Reserved) This item is not required - Not required[81](index=81&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%207.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section analyzes Rockwell Automation's financial performance, condition, and operations, covering strategy, segment results, economic trends, and critical accounting estimates [Non-GAAP Measures](index=17&type=section&id=Non-GAAP%20Measures) This section defines and explains non-GAAP measures like organic sales, adjusted income, and free cash flow, with reconciliations provided - Non-GAAP measures used include **organic sales**, **total segment operating earnings and margin**, **adjusted income**, **adjusted EPS**, **adjusted effective tax rate**, and **free cash flow**[82](index=82&type=chunk) [Overview](index=17&type=section&id=Overview) Rockwell Automation's 'Connected Enterprise' strategy drives industrial automation and digital transformation, addressing customer needs and influenced by megatrends like AI and sustainability - Rockwell Automation's long-term strategy is to expand human possibility and create the future of industrial operations by bringing the '**Connected Enterprise**' to life[83](index=83&type=chunk) - Overall demand is driven by investments in manufacturing, customer needs for faster time to market, agility, operational productivity, asset management, business resilience, quality, safety, and sustainability[84](index=84&type=chunk) - The company's strategy is influenced by converging megatrends: **digitization and artificial intelligence**, **energy transition and sustainability**, **shifting demographics**, and an increased need for **resiliency**[83](index=83&type=chunk) [Long-term Strategy](index=17&type=section&id=Long-term%20Strategy) The long-term strategy focuses on accelerating secular growth, expanding market share through technology and new markets, and achieving **1% annual growth from acquisitions** - The long-term strategy includes achieving faster secular growth in traditional markets by addressing customer needs for **resiliency, agility, sustainability**, and mitigating labor shortages[85](index=85&type=chunk) - Key strategic pillars are growing market share through **technology differentiation, industry focus, go-to-market acceleration, expanded offerings**, and **new markets**[85](index=85&type=chunk) - The company aims to accelerate growth in **annual recurring revenue** and add **1% growth from acquisitions annually**[85](index=85&type=chunk) [Sustainability](index=18&type=section&id=Sustainability) Rockwell Automation's sustainability strategy focuses on enabling sustainable customers, operating as a sustainable company, and fostering sustainable communities - Sustainability priorities are focused on three outcomes: **Sustainable Customers, Sustainable Company**, and **Sustainable Communities**[86](index=86&type=chunk) - The company's technologies provide **data transparency** and enable partners to scale sustainable solutions across **energy, water, and waste management**[86](index=86&type=chunk) [Differentiation through Technology Innovation and Domain Expertise](index=18&type=section&id=Differentiation%20through%20Technology%20Innovation%20and%20Domain%20Expertise) Rockwell Automation differentiates through its industry-leading portfolio, integrated control architecture (Logix), open architecture, partner ecosystem, and deep domain expertise - The company offers an **industry-leading portfolio of hardware, software, and services** with flexible on-premises, edge, and cloud-native solutions[87](index=87&type=chunk) - A key differentiator is its **integrated control and information architecture**, with **Logix** at its core, supporting multiple production disciplines in a single hardware and software environment[88](index=88&type=chunk) - Differentiation is also achieved through an **open architecture, strong partner ecosystem**, and **deep domain expertise** in industry and application knowledge[89](index=89&type=chunk)[90](index=90&type=chunk) [Market Access and Expansion](index=18&type=section&id=Market%20Access%20and%20Expansion) The addressed market has expanded to over **$120 billion**, with **70% of global sales** through distributors, and emerging markets in Asia Pacific and EMEA showing fastest growth - The addressed market has expanded to over **$120 billion**, with expectations for continued growth[91](index=91&type=chunk) - Approximately **70% of global sales** are through independent distributors, with the two largest distributors contributing about **20% of total sales**[92](index=92&type=chunk) - Emerging markets in **Asia Pacific and EMEA** are projected to be the fastest-growing, driven by infrastructure investment and expanding consumer markets[94](index=94&type=chunk)[95](index=95&type=chunk) [Acquisitions and Investments](index=19&type=section&id=Acquisitions%20and%20Investments) The company's acquisition strategy focuses on hardware, software, and services to catalyze organic growth, prioritizing annual recurring revenue, market expansion, and differentiated technology - Acquisition and investment strategy focuses on **hardware and software products, solutions, and services** that catalyze organic growth[96](index=96&type=chunk) - Key priorities for inorganic investments include **annual recurring revenue, market expansion in Europe and Asia**, and **application-specific differentiated technology** in focus industries[101](index=101&type=chunk) - Venture investments enable access to **leading-edge technologies**, accelerate internal development, reduce time to market, and provide insights into disruptive technologies[96](index=96&type=chunk) [Attracting, Developing, and Retaining Highly Qualified Employees](index=19&type=section&id=Attracting,%20Developing,%20and%20Retaining%20Highly%20Qualified%20Employees) The company prioritizes attracting and retaining employees through safety, feedback, development (over **650,000 learning hours** in 2023), comprehensive benefits, and DEI initiatives - The company focuses on attracting, developing, and retaining highly engaged employees through **safety, feedback, growth opportunities**, and **comprehensive benefits**[98](index=98&type=chunk)[102](index=102&type=chunk) - In fiscal 2023, the company achieved **0.27 recordable cases per 100 employees** and an employee engagement index (EEI) of **76**, eight points higher than the industry norm[102](index=102&type=chunk) - In fiscal 2023, the majority of employees completed one or more training programs, representing over **650,000 learning hours**[102](index=102&type=chunk) Total Employees by Region (September 30, 2023) | Region | Employees | | :--- | :--- | | North America | 10,000 | | Europe, Middle East and Africa | 5,500 | | Asia Pacific | 7,500 | | Latin America | 6,000 | | **Total employees** | **29,000** | Global Gender Demographics (September 30, 2023) | | Women | Men | Undisclosed | | :--- | :--- | :--- | :--- | | All employees | 33% | 67% | —% | | Individual Contributors | 34% | 66% | —% | | People Managers | 27% | 73% | —% | | Technical Talent | 19% | 81% | —% | | Manufacturing Associates | 46% | 53% | 1% | [Continuous Improvement](index=21&type=section&id=Continuous%20Improvement) Continuous improvement programs focus on process, functional, material cost, and manufacturing productivity to enhance profitability, fund growth, and offset inflation - The company has programs for ongoing **process improvement, functional streamlining, material cost savings**, and **manufacturing productivity**[105](index=105&type=chunk) - These initiatives aim to **improve profitability, fund growth investments**, and **offset inflation**[105](index=105&type=chunk) [U.S. Economic Trends](index=22&type=section&id=U.S.%20Economic%20Trends) U.S. sales were over **half of total sales** in 2023, with mixed IP Index and soft Manufacturing PMI results, while PPI growth decelerated to low single digits - **U.S. sales accounted for over half of total sales in 2023**[107](index=107&type=chunk) U.S. Economic Indicators (Fiscal 2021-2023) | | IP Index | PMI | | :--- | :--- | :--- | | **Fiscal 2023 quarter ended:** | | | | September 2023 | 99.6 | 49.0 | | June 2023 | 99.6 | 46.0 | | March 2023 | 99.5 | 46.3 | | December 2022 | 99.6 | 48.4 | | **Fiscal 2022 quarter ended:** | | | | September 2022 | 102.4 | 50.9 | | June 2022 | 101.9 | 53.0 | | March 2022 | 101.1 | 57.1 | | December 2021 | 100.1 | 58.8 | | **Fiscal 2021 quarter ended:** | | | | September 2021 | 98.8 | 60.5 | | June 2021 | 97.9 | 60.9 | | March 2021 | 96.7 | 63.7 | | December 2020 | 96.1 | 60.5 | - Producer Price Index (PPI) growth decelerated to **low single digits** in the last three quarters of fiscal 2023, following **double-digit growth in 2022**[108](index=108&type=chunk) [Non-U.S. Economic Trends](index=22&type=section&id=Non-U.S.%20Economic%20Trends) Non-U.S. sales were less than **half of total sales** in 2023, with international demand driven by industrial economy strength and mixed industrial output in Q4 fiscal 2023 - Sales to customers outside the U.S. accounted for **less than half of total sales in 2023**[109](index=109&type=chunk) - International demand is driven by **industrial economy strength, infrastructure investments**, and **expanding consumer markets**, with mixed industrial output in Q4 fiscal 2023[109](index=109&type=chunk) [Supply Chain](index=23&type=section&id=Supply%20Chain) The global supply chain faces stress, leading to procurement challenges; the company manages this through extended visibility, long-term agreements, and diversification, reducing backlog from **$5,197.0 million** to **$4,108.9 million** - The global supply chain has been stressed, leading to **procurement difficulties, increased costs**, and **delivery delays**[110](index=110&type=chunk)[112](index=112&type=chunk) Total Order Backlog (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Intelligent Devices | $1,464.1 | $2,086.1 | | Software & Control | $897.5 | $1,456.8 | | Lifecycle Services | $1,747.3 | $1,654.1 | | **Total Company** | **$4,108.9** | **$5,197.0** | - Actions taken to manage the supply chain include **extending order visibility, securing long-term supply agreements, re-engineering products, capacity investments**, and **diversifying the supplier base**[111](index=111&type=chunk)[113](index=113&type=chunk) [Summary of Results of Operations](index=24&type=section&id=Summary%20of%20Results%20of%20Operations) Fiscal 2023 saw **16.7% total sales growth** to **$9,058.0 million** and **$1,387.4 million net income**, with **Adjusted EPS up 27.7%** to **$12.12**, and varied segment margin performance Sales and Operating Results (in millions, except per share amounts and percentages) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | **Sales** | | | | | Intelligent Devices | $4,098.2 | $3,544.6 | $3,311.9 | | Software & Control | $2,886.0 | $2,312.9 | $1,947.0 | | Lifecycle Services | $2,073.8 | $1,902.9 | $1,738.5 | | **Total sales** | **$9,058.0** | **$7,760.4** | **$6,997.4** | | **Total segment operating earnings** | **$1,929.8** | **$1,542.6** | **$1,391.3** | | Income before income taxes | $1,608.5 | $1,073.6 | $1,526.2 | | Net income attributable to Rockwell Automation | $1,387.4 | $932.2 | $1,358.1 | | Diluted EPS | $11.95 | $7.97 | $11.58 | | Adjusted EPS | $12.12 | $9.49 | $9.43 | | Pre-tax margin | 17.8 % | 13.8 % | 21.8 % | | Intelligent Devices segment operating margin | 20.2 % | 20.2 % | 21.2 % | | Software & Control segment operating margin | 33.0 % | 28.8 % | 27.3 % | | Lifecycle Services segment operating margin | 7.2 % | 8.3 % | 9.1 % | | **Total segment operating margin** | **21.3 %** | **19.9 %** | **19.9 %** | - Total sales in fiscal 2023 increased **16.7%** compared to 2022, with organic sales increasing **16.9%**[115](index=115&type=chunk) - Income before income taxes increased to **$1,608.5 million** in 2023 from **$1,073.6 million** in 2022, primarily due to higher sales and fair value adjustments in connection with the PTC investment, partially offset by a **$157.5 million goodwill impairment charge** for Sensia[119](index=119&type=chunk) - Adjusted EPS was **$12.12** in fiscal 2023, up **27.7%** from **$9.49** in fiscal 2022, driven by higher sales, partially offset by increased investment spend and incentive compensation[124](index=124&type=chunk) - Software & Control segment operating margin increased to **33.0%** in 2023 from **28.8%** in 2022, primarily due to higher sales[128](index=128&type=chunk) - Lifecycle Services segment operating margin decreased to **7.2%** in 2023 from **8.3%** in 2022, due to higher incentive compensation costs and one-time expenses[130](index=130&type=chunk) [Supplemental Segment Information](index=27&type=section&id=Supplemental%20Segment%20Information) This section details unallocated purchase accounting depreciation, amortization, impairment, and non-operating pension costs by segment for informational purposes Supplemental Segment Costs (in millions) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | **Purchase accounting depreciation and amortization, and impairment** | | | | | Intelligent Devices | $4.7 | $2.5 | $2.7 | | Software & Control | $68.5 | $69.0 | $19.2 | | Lifecycle Services | $190.2 | $31.4 | $32.1 | | **Non-operating pension and postretirement benefit cost (credit)** | | | | | Intelligent Devices | $21.2 | $(3.5) | $14.1 | | Software & Control | $21.2 | $(3.5) | $14.1 | | Lifecycle Services | $28.3 | $(4.8) | $18.8 | [Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation](index=28&type=section&id=Adjusted%20Income,%20Adjusted%20EPS,%20and%20Adjusted%20Effective%20Tax%20Rate%20Reconciliation) Adjusted Income, EPS, and Effective Tax Rate are non-GAAP measures excluding specific non-operating and non-recurring items, used for evaluating performance and incentive compensation - Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate are non-GAAP measures that exclude specific non-operating and non-recurring items to provide a clearer view of operating performance[134](index=134&type=chunk)[135](index=135&type=chunk) Adjusted Income, EPS, and Effective Tax Rate Reconciliation (in millions, except per share amounts and percentages) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | Net income attributable to Rockwell Automation | $1,387.4 | $932.2 | $1,358.1 | | Non-operating pension and postretirement benefit cost | 82.7 | 4.7 | 63.8 | | Tax effect of non-operating pension and postretirement benefit cost | (20.6) | (1.9) | (16.0) | | Purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | 178.3 | 91.9 | 43.2 | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | (9.4) | (22.3) | (10.5) | | Change in fair value of investments | (279.3) | 136.9 | (397.4) | | Tax effect of change in fair value of investments | 67.6 | (30.8) | 64.7 | | **Adjusted Income** | **$1,406.7** | **$1,110.7** | **$1,105.9** | | **Diluted EPS** | **$11.95** | **$7.97** | **$11.58** | | Non-operating pension and postretirement benefit cost | 0.72 | 0.04 | 0.55 | | Tax effect of non-operating pension and postretirement benefit cost | (0.18) | (0.02) | (0.14) | | Purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | 1.54 | 0.78 | 0.37 | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | (0.08) | (0.19) | (0.09) | | Change in fair value of investments | (2.42) | 1.17 | (3.39) | | Tax effect of change in fair value of investments | 0.59 | (0.26) | 0.55 | | **Adjusted EPS** | **$12.12** | **$9.49** | **$9.43** | | **Effective tax rate** | **20.5 %** | **14.4 %** | **11.9 %** | | Tax effect of non-operating pension and postretirement benefit cost | 0.3 % | 0.1 % | 0.5 % | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | (3.7)% | 0.6 % | 0.4 % | | Tax effect of change in fair value of investments | (0.7)% | 0.9 % | (1.2)% | | **Adjusted Effective Tax Rate** | **16.4 %** | **16.0 %** | **11.6 %** | [Annual Recurring Revenue (ARR)](index=29&type=section&id=Annual%20Recurring%20Revenue%20(ARR)) Organic ARR, a key non-GAAP metric, measures recurring revenue growth by excluding currency and acquisition effects, with total and organic ARR growing approximately **16%** in 2023 - Organic ARR is a key metric for measuring progress in growing the recurring revenue business, representing the annual contract value of all active recurring revenue contracts[137](index=137&type=chunk) - Organic ARR growth excludes the effects of acquisitions and changes in currency exchange rates, while Total ARR growth includes acquisitions[137](index=137&type=chunk)[138](index=138&type=chunk) - Total and organic annual recurring revenue grew approximately **16%** at September 30, 2023, compared to September 30, 2022[115](index=115&type=chunk) [Financial Condition](index=30&type=section&id=Financial%20Condition) Cash from operations increased to **$1,374.6 million** in 2023, with **$1,214.1 million free cash flow**, driven by PTC stock sale and managed debt, dividends, and share repurchases Cash Flows Summary (in millions) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | Cash provided by (used for) Operating activities | $1,374.6 | $823.1 | $1,261.0 | | Investing activities | 854.3 | (7.8) | (2,626.6) | | Financing activities | (1,675.6) | (934.2) | 1,297.8 | | Effect of exchange rate changes on cash | 19.2 | (52.6) | 16.8 | | Increase (decrease) in cash, cash equivalents, and restricted cash | $572.5 | $(171.5) | $(51.0) | Free Cash Flow (in millions) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | Cash provided by operating activities | $1,374.6 | $823.1 | $1,261.0 | | Capital expenditures | (160.5) | (141.1) | (120.3) | | **Free cash flow** | **$1,214.1** | **$682.0** | **$1,140.7** | - All remaining PTC Inc. common stock was sold in fiscal 2023, generating **$1,210.4 million** in gross inflow[142](index=142&type=chunk) - The company repurchased approximately **1.2 million shares** of common stock in 2023 at a cost of **$311.0 million**, with **$940.3 million** remaining under existing board authorizations[144](index=144&type=chunk) - Cash dividends declared were **$544.0 million** (**$4.72 per common share**) in 2023, an increase from **$520.8 million** (**$4.48 per common share**) in 2022[157](index=157&type=chunk) [Supplemental Sales Information](index=33&type=section&id=Supplemental%20Sales%20Information) Organic sales, a non-GAAP measure, exclude acquisitions and currency effects to provide a clearer view of regional and segment performance, with reconciliations provided - Organic sales, a non-GAAP measure, exclude the effects of acquisitions and changes in currency exchange rates to reflect regional and operating segment performance[158](index=158&type=chunk) Reconciliation of Reported Sales to Organic Sales by Geographic Region (in millions) | | Year Ended September 30, 2023 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2022 Reported Sales | | :--- | :--- | :--- | :--- | :--- | :--- | | North America | $5,224.0 | $15.6 | $(23.9) | $5,232.3 | $4,722.0 | | Europe, Middle East and Africa | $1,870.6 | $57.5 | $(26.3) | $1,839.4 | $1,437.6 | | Asia Pacific | $1,358.0 | $18.2 | $(80.5) | $1,420.3 | $1,088.0 | | Latin America | $605.4 | $0.1 | $22.8 | $582.5 | $512.8 | | **Total Company Sales** | **$9,058.0** | **$91.4** | **$(107.9)** | **$9,074.5** | **$7,760.4** | Reconciliation of Reported Sales to Organic Sales by Operating Segment (in millions) | | Year Ended September 30, 2023 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2022 Reported Sales | | :--- | :--- | :--- | :--- | :--- | :--- | | Intelligent Devices | $4,098.2 | $80.6 | $(46.4) | $4,064.0 | $3,544.6 | | Software & Control | $2,886.0 | $— | $(30.7) | $2,916.7 | $2,312.9 | | Lifecycle Services | $2,073.8 | $10.8 | $(30.8) | $2,093.8 | $1,902.9 | | **Total Company Sales** | **$9,058.0** | **$91.4** | **$(107.9)** | **$9,074.5** | **$7,760.4** | [Critical Accounting Estimates](index=35&type=section&id=Critical%20Accounting%20Estimates) Critical accounting estimates include goodwill impairment (Sensia's **$157.5 million charge**), pension costs, revenue recognition for customer incentives, and intangible asset valuation (Plex), all requiring significant judgment - A **$157.5 million goodwill impairment charge** was recorded for the Sensia reporting unit in Q4 fiscal 2023 due to downward revisions in growth and profitability projections, leaving **$160.3 million in goodwill**[165](index=165&type=chunk) - Critical assumptions for goodwill impairment include estimated future revenue growth rates, margins, discount rate, and market multiples, which are sensitive to industry and economic factors[166](index=166&type=chunk) - Pension costs and obligations are actuarially determined, with the U.S. discount rate increasing to **6.10% for 2024** from **5.65% in 2023**, inversely affecting net periodic benefit cost and projected benefit obligation[168](index=168&type=chunk)[169](index=169&type=chunk)[170](index=170&type=chunk) - Revenue recognition for customer incentives, such as cash rebates to distributors, relies on estimating accruals based on historical experience; a **10% change** in the time period for rebate processing could adjust the accrual by approximately **$24.9 million**[172](index=172&type=chunk)[173](index=173&type=chunk) - Valuation of Plex intangible assets involved critical judgments for customer attrition rate (**5%**), royalty rate (**25%**), and obsolescence factor (**10 years**), with sensitivity analyses showing potential changes of **$63 million** and **$47 million** for customer attrition and royalty rate, respectively[175](index=175&type=chunk)[176](index=176&type=chunk) [Recent Accounting Pronouncements](index=37&type=section&id=Recent%20Accounting%20Pronouncements) New accounting standards for CECL and contract assets/liabilities had no material impact, while a new supplier finance program standard will be adopted in Q1 2024 - Adopted new standards for **current expected credit losses (CECL)** and **contract assets/liabilities in business combinations**, with no material impact[246](index=246&type=chunk)[247](index=247&type=chunk) - A new standard on **supplier finance programs**, requiring expanded disclosures, will be adopted in **Q1 2024**[248](index=248&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=38&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company manages foreign currency and interest rate risks using derivatives; a **10% adverse currency change** could reduce pre-tax income by **$73.9 million**, while short-term interest rate risk is not significant - The company manages **foreign currency and interest rate risks** through operating activities and derivative financial instruments, primarily foreign currency forward exchange contracts[180](index=180&type=chunk) - A **10% adverse change** in underlying foreign currency exchange rates for unhedged assets and liabilities could reduce pre-tax income by approximately **$73.9 million**[183](index=183&type=chunk) - Short-term debt includes **$23.5 million** in loans from SLB to Sensia and **$70.0 million** borrowed against a **$75.0 million** line of credit at **6.29% interest** as of September 30, 2023[186](index=186&type=chunk) - A hypothetical **50 basis point increase** in average market interest rates related to short-term debt would not significantly impact results of operations or financial condition[186](index=186&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=39&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section presents Rockwell Automation's audited consolidated financial statements and extensive notes for fiscal years 2021-2023, along with the independent auditor's report affirming fairness and internal control effectiveness [Consolidated Balance Sheet](index=39&type=section&id=CONSOLIDATED%20BALANCE%20SHEET) The Consolidated Balance Sheet shows total assets increased to **$11,304.0 million** in 2023 from **$10,758.7 million** in 2022, with shareowners' equity also increasing significantly Consolidated Balance Sheet Summary (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | **ASSETS** | | | | Cash and cash equivalents | $1,071.8 | $490.7 | | Receivables | $2,167.4 | $1,736.7 | | Inventories | $1,404.9 | $1,054.2 | | Total current assets | $4,910.8 | $3,610.7 | | Goodwill | $3,529.2 | $3,524.0 | | Other intangible assets, net | $852.4 | $902.0 | | Long-term investments | $157.1 | $1,056.0 | | **Total Assets** | **$11,304.0** | **$10,758.7** | | **LIABILITIES AND SHAREOWNERS' EQUITY** | | | | Short-term debt | $94.7 | $359.3 | | Current portion of long-term debt | $8.6 | $609.1 | | Accounts payable | $1,150.2 | $1,028.0 | | Total current liabilities | $3,365.3 | $3,572.2 | | Long-term debt | $2,862.9 | $2,867.8 | | Retirement benefits | $503.6 | $471.2 | | **Total shareowners' equity** | **$3,743.4** | **$3,016.7** | | **Total Liabilities and Shareowners' Equity** | **$11,304.0** | **$10,758.7** | [Consolidated Statement of Operations](index=40&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20OPERATIONS) Total sales increased to **$9,058.0 million** in 2023 from **$7,760.4 million** in 2022, with net income attributable to Rockwell Automation rising to **$1,387.4 million** (**$11.95 diluted EPS**) Consolidated Statement of Operations Summary (in millions, except per share amounts) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | Sales | $9,058.0 | $7,760.4 | $6,997.4 | | Cost of sales | $(5,341.0) | $(4,658.4) | $(4,099.7) | | Gross profit | $3,717.0 | $3,102.0 | $2,897.7 | | Selling, general and administrative expenses | $(2,023.7) | $(1,766.7) | $(1,680.0) | | Change in fair value of investments | $279.3 | $(136.9) | $397.4 | | Goodwill impairment | $(157.5) | $— | $— | | Income before income taxes | $1,608.5 | $1,073.6 | $1,526.2 | | Income tax provision | $(330.5) | $(154.5) | $(181.9) | | Net income | $1,278.0 | $919.1 | $1,344.3 | | Net loss attributable to noncontrolling interests | $(109.4) | $(13.1) | $(13.8) | | **Net income attributable to Rockwell Automation, Inc.** | **$1,387.4** | **$932.2** | **$1,358.1** | | Diluted EPS | $11.95 | $7.97 | $11.58 | [Consolidated Statement of Comprehensive Income](index=41&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20COMPREHENSIVE%20INCOME) Comprehensive income attributable to Rockwell Automation increased to **$1,514.8 million** in 2023 from **$1,031.8 million** in 2022, driven by higher net income and positive currency adjustments Consolidated Statement of Comprehensive Income Summary (in millions) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | Net income | $1,278.0 | $919.1 | $1,344.3 | | Other comprehensive income (loss) | | | | | Pension and other postretirement benefit plan adjustments (net of tax) | 41.5 | 246.5 | 576.4 | | Currency translation adjustments | 99.4 | (185.4) | 31.4 | | Net change in cash flow hedges (net of tax) | (13.4) | 38.2 | (11.4) | | **Other comprehensive income** | **127.5** | **99.3** | **596.4** | | **Comprehensive income** | **1,405.5** | **1,018.4** | **1,940.7** | | Comprehensive loss attributable to noncontrolling interests | (109.3) | (13.4) | (14.5) | | **Comprehensive income attributable to Rockwell Automation, Inc.** | **$1,514.8** | **$1,031.8** | **$1,955.2** | [Consolidated Statement of Cash Flows](index=42&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20CASH%20FLOWS) Cash from operating activities increased to **$1,374.6 million** in 2023, with investing activities providing **$854.3 million** and financing activities using **$1,675.6 million** for debt, dividends, and repurchases Consolidated Statement of Cash Flows Summary (in millions) | | Year Ended September 30, 2023 | Year Ended September 30, 2022 | Year Ended September 30, 2021 | | :--- | :--- | :--- | :--- | | **Operating activities:** | | | | | Net income | $1,278.0 | $919.1 | $1,344.3 | | Cash provided by operating activities | $1,374.6 | $823.1 | $1,261.0 | | **Investing activities:** | | | | | Capital expenditures | $(160.5) | $(141.1) | $(120.3) | | Acquisition of businesses, net of cash acquired | $(168.4) | $(16.6) | $(2,488.5) | | Proceeds from sale of investments | $1,210.4 | $210.2 | $— | | Cash provided by (used for) investing activities | $854.3 | $(7.8) | $(2,626.6) | | **Financing activities:** | | | | | Repayment of long-term debt | $(599.8) | $— | $— | | Cash dividends | $(542.4) | $(519.4) | $(497.1) | | Purchases of treasury stock | $(311.5) | $(301.3) | $(299.7) | | Cash (used for) provided by financing activities | $(1,675.6) | $(934.2) | $1,297.8 | | **Increase (decrease) in cash, cash equivalents, and restricted cash** | **$572.5** | **$(171.5)** | **$(51.0)** | | Cash, cash equivalents, and restricted cash at end of year | $1,080.4 | $507.9 | $679.4 | [Consolidated Statement of Shareowners' Equity](index=43&type=section&id=CONSOLIDATED%20STATEMENT%20OF%20SHAREOWNERS'%20EQUITY) Total shareowners' equity increased to **$3,743.4 million** in 2023 from **$3,016.7 million** in 2022, driven by net income and common stock issuances, offset by dividends and repurchases Consolidated Statement of Shareowners' Equity Summary (in millions, except per share amounts) | | Balance at September 30, 2020 | Net income (loss) | Other comprehensive income (loss) | Common stock issued (including share-based compensation impact) | Share repurchases | Cash dividends declared | Change in noncontrolling interest | Balance at September 30, 2021 | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | **Total attributable to Rockwell Automation, Inc.** | **$1,027.8** | **$1,358.1** | **$597.1** | **$206.2** | **$(301.5)** | **$(497.5)** | **$(0.6)** | **$2,389.6** | | Noncontrolling interests | $319.0 | $(13.8) | $(0.7) | $— | $— | $— | $— | $304.5 | | **Total shareowners' equity** | **$1,346.8** | **$1,344.3** | **$596.4** | **$206.2** | **$(301.5)** | **$(497.5)** | **$(0.6)** | **$2,694.1** | | | Balance at September 30, 2021 | Net income (loss) | Other comprehensive income (loss) | Common stock issued (including share-based compensation impact) | Share repurchases | Cash dividends declared | | Balance at September 30, 2022 | | **Total attributable to Rockwell Automation, Inc.** | **$2,389.6** | **$932.2** | **$99.6** | **$126.1** | **$(301.1)** | **$(520.8)** | | **$2,725.6** | | Noncontrolling interests | $304.5 | $(13.1) | $(0.3) | $— | $— | $— | | $291.1 | | **Total shareowners' equity** | **$2,694.1** | **$919.1** | **$99.3** | **$126.1** | **$(301.1)** | **$(520.8)** | | **$3,016.7** | | | Balance at September 30, 2022 | Net income (loss) | Other comprehensive income (loss) | Common stock issued (including share-based compensation impact) | Share repurchases | Cash dividends declared | | Balance at September 30, 2023 | | **Total attributable to Rockwell Automation, Inc.** | **$2,725.6** | **$1,387.4** | **$127.4** | **$177.2** | **$(312.0)** | **$(544.0)** | | **$3,561.6** | | Noncontrolling interests | $291.1 | $(109.4) | $0.1 | $— | $— | $— | | $181.8 | | **Total shareowners' equity** | **$3,016.7** | **$1,278.0** | **$127.5** | **$177.2** | **$(312.0)** | **$(544.0)** | | **$3,743.4** | [Notes to Consolidated Financial Statements](index=44&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) These notes provide detailed information on accounting policies, revenue, goodwill, acquisitions, debt, investments, and other financial statement items, offering crucial context for understanding the company's financial position [Note 1. Basis of Presentation and Accounting Policies](index=44&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) This note outlines U.S. GAAP principles, consolidation policies, use of estimates, and specific accounting policies for revenue, goodwill, derivatives, R&D, and other financial areas - Consolidated financial statements are prepared in accordance with **U.S. GAAP**, consolidating wholly-owned and controlled majority-owned subsidiaries[204](index=204&type=chunk)[205](index=205&type=chunk) - Estimates are used for customer returns, rebates, incentives, doubtful accounts, inventory, share-based compensation, acquisitions, goodwill impairment, product warranty, internal-use software, retirement benefits, litigation, leases, and income taxes[206](index=206&type=chunk) - Goodwill impairment is evaluated annually in the **second quarter**, or more frequently if circumstances change, using qualitative and quantitative tests (income and market multiples approaches)[218](index=218&type=chunk)[219](index=219&type=chunk) - Derivative financial instruments (**foreign currency forward exchange contracts, treasury locks**) are used to manage foreign currency and interest rate risks, not for speculative purposes[223](index=223&type=chunk)[224](index=224&type=chunk) - R&D costs are expensed as incurred, totaling **$529.5 million** in 2023, **$440.9 million** in 2022, and **$422.5 million** in 2021[230](index=230&type=chunk) [Note 2. Revenue Recognition](index=50&type=section&id=Note%202.%20Revenue%20Recognition) This note details revenue recognition under ASC 606 for products, solutions, and services, with **$1,100 million** expected from unfulfilled obligations, **$687 million** within 12 months - Revenue is recognized as promised products are transferred or services are performed, reflecting the consideration expected[250](index=250&type=chunk) - Offerings include **industrial automation and information products** (hardware, software), **solutions** (custom-engineered systems), and **services** (technical support, asset management, training)[251](index=251&type=chunk) - Revenue from **Intelligent Devices and Software & Control** is predominantly product sales (point-in-time), while **Lifecycle Services** revenue is primarily solutions and services (over time)[252](index=252&type=chunk) - As of September 30, 2023, approximately **$1,100 million** of revenue is expected from unfulfilled performance obligations, with **$687 million** recognized within the next 12 months[267](index=267&type=chunk) Revenue Disaggregation by Geographic Region and Segment (in millions) - 2023 | | Intelligent Devices | Software & Control | Lifecycle Services | Total | | :--- | :--- | :--- | :--- | :--- | | North America | $2,409.2 | $1,794.8 | $1,020.0 | $5,224.0 | | Europe, Middle East and Africa | $829.1 | $528.0 | $513.5 | $1,870.6 | | Asia Pacific | $568.6 | $393.7 | $395.7 | $1,358.0 | | Latin America | $291.3 | $169.5 | $144.6 | $605.4 | | **Total Company Sales** | **$4,098.2** | **$2,886.0** | **$2,073.8** | **$9,058.0** | [Note 3. Goodwill and Other Intangible Assets](index=53&type=section&id=Note%203.%20Goodwill%20and%20Other%20Intangible%20Assets) Goodwill increased to **$3,529.2 million** in 2023, offset by a **$157.5 million impairment charge** for Sensia; other intangible assets totaled **$852.4 million**, with **$116.2 million** amortization expected in 2024 Changes in Goodwill Carrying Amount (in millions) | | Intelligent Devices | Software & Control | Lifecycle Services | Total | | :--- | :--- | :--- | :--- | :--- | | Balance as of October 1, 2021 | $543.1 | $2,447.5 | $635.3 | $3,625.9 | | Acquisition of businesses | — | — | 12.1 | 12.1 | | Translation and other | (40.1) | (48.8) | (25.1) | (114.0) | | Balance as of September 30, 2022 | $503.0 | $2,398.7 | $622.3 | $3,524.0 | | Acquisition of businesses | 74.4 | — | 36.9 | 111.3 | | Impairment | — | — | (157.5) | (157.5) | | Translation and other | 18.4 | 21.4 | 11.6 | 51.4 | | **Balance as of September 30, 2023** | **$595.8** | **$2,420.1** | **$513.3** | **$3,529.2** | - A **$157.5 million goodwill impairment charge** was recorded for the Sensia reporting unit in Q4 fiscal 2023 due to revised growth and profitability projections, leaving **$160.3 million in goodwill**[281](index=281&type=chunk) Other Intangible Assets (in millions) - September 30, 2023 | | Carrying Amount | Accumulated Amortization | Net | | :--- | :--- | :--- | :--- | | Software products | $100.4 | $65.1 | $35.3 | | Customer relationships | $606.1 | $141.3 | $464.8 | | Technology | $424.1 | $173.1 | $251.0 | | Trademarks | $86.3 | $29.3 | $57.0 | | Other | $6.0 | $5.4 | $0.6 | | **Total amortized intangible assets** | **$1,222.9** | **$414.2** | **$808.7** | | Allen-Bradley® trademark not subject to amortization | $43.7 | $— | $43.7 | | **Other intangible assets** | **$1,266.6** | **$414.2** | **$852.4** | - Estimated total amortization expense for all amortized intangible assets is **$116.2 million** in 2024[282](index=282&type=chunk) [Note 4. Acquisitions](index=55&type=section&id=Note%204.%20Acquisitions) Fiscal 2023 acquisitions (CUBIC, Knowledge Lens) totaled **$186.2 million** with **$111.3 million** goodwill; 2021's Plex Systems acquisition was **$2,205.5 million**, adding **$1,730.0 million** goodwill - In fiscal 2023, Rockwell Automation acquired **CUBIC** (Intelligent Devices) and **Knowledge Lens** (Lifecycle Services), with a preliminary aggregate purchase price allocation of **$186.2 million**, including **$111.3 million in goodwill**[283](index=283&type=chunk)[284](index=284&type=chunk) - Total sales from 2023 acquisitions were **$88.3 million**, with an immaterial impact on earnings[286](index=286&type=chunk) - In August 2021, the company acquired **Plex Systems** for **$2,205.5 million**, assigning **$1,730.0 million in goodwill** and **$531.4 million in intangible assets** to the Software & Control segment[290](index=290&type=chunk)[291](index=291&type=chunk) - Other fiscal 2021 acquisitions (**Oylo and Fiix Inc.**) contributed **$224.8 million in goodwill**, primarily to the Software & Control segment[292](index=292&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) [Note 5. Inventories](index=57&type=section&id=Note%205.%20Inventories) Total inventories increased to **$1,404.9 million** in 2023 from **$1,054.2 million** in 2022, primarily due to increases in finished goods and work in process Inventories (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Finished goods | $545.9 | $325.0 | | Work in process | $395.7 | $317.3 | | Raw materials | $463.3 | $411.9 | | **Inventories** | **$1,404.9** | **$1,054.2** | [Note 6. Property, net](index=58&type=section&id=Note%206.%20Property,%20net) Total property, net, increased to **$684.2 million** in 2023 from **$586.5 million** in 2022, driven by machinery, internal-use software, and construction in progress Property, net (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Land | $4.6 | $4.6 | | Buildings and improvements | $434.1 | $399.0 | | Machinery and equipment | $1,312.7 | $1,201.6 | | Internal-use software | $569.4 | $540.7 | | Construction in progress | $191.7 | $142.9 | | **Total** | **$2,512.5** | **$2,288.8** | | Less: Accumulated depreciation | $(1,828.3) | $(1,702.3) | | **Property, net** | **$684.2** | **$586.5** | [Note 7. Long-term and Short-term Debt](index=58&type=section&id=Note%207.%20Long-term%20and%20Short-term%20Debt) Total debt decreased to **$2,871.5 million** in 2023 from **$3,476.9 million** in 2022 due to debt repayment, with a **$1.5 billion** undrawn credit facility and **$133.2 million** in interest payments Long-term Debt (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | 0.35% notes, payable in August 2023 | $— | $600.0 | | 2.875% notes, payable in March 2025 | $306.4 | $311.0 | | 6.70% debentures, payable in January 2028 | $250.0 | $250.0 | | 3.50% notes, payable in March 2029 | $425.0 | $425.0 | | 1.75% notes, payable in August 2031 | $450.0 | $450.0 | | 6.25% debentures, payable in December 2037 | $250.0 | $250.0 | | 4.20% notes, payable in March 2049 | $575.0 | $575.0 | | 2.80% notes, payable in August 2061 | $450.0 | $450.0 | | 5.20% debentures, payable in January 2098 | $200.0 | $200.0 | | Unamortized discount, capitalized lease obligations and other | $(34.9) | $(34.1) | | **Total debt** | **$2,871.5** | **$3,476.9** | | Less: Current portion | $(8.6) | $(609.1) | | **Long-term debt** | **$2,862.9** | **$2,867.8** | - Short-term debt at September 30, 2023, includes **$23.5 million** in loans to Sensia and **$70.0 million** borrowed against a **$75.0 million** line of credit at **6.29% interest**[300](index=300&type=chunk) - The company replaced its **$1.25 billion credit facility** with a new five-year **$1.5 billion unsecured revolving credit facility** in June 2022, which was undrawn in 2023 and 2022[305](index=305&type=chunk) - Interest payments were **$133.2 million** in 2023, **$120.4 million** in 2022, and **$91.8 million** in 2021[308](index=308&type=chunk) [Note 8. Other Current Liabilities](index=60&type=section&id=Note%208.%20Other%20Current%20Liabilities) Other current liabilities increased to **$567.4 million** in 2023 from **$403.0 million** in 2022, primarily due to higher income taxes payable and other accruals Other Current Liabilities (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Unrealized losses on foreign exchange contracts | $10.8 | $31.2 | | Product warranty obligations | $18.3 | $16.5 | | Taxes other than income taxes | $56.9 | $65.6 | | Accrued interest | $18.6 | $18.1 | | Income taxes payable | $248.6 | $81.1 | | Operating lease liabilities | $83.4 | $83.3 | | Other | $130.8 | $107.2 | | **Other current liabilities** | **$567.4** | **$403.0** | [Note 9. Product Warranty Obligations](index=60&type=section&id=Note%209.%20Product%20Warranty%20Obligations) Product warranty obligations, accrued at sale based on historical experience, increased to **$18.3 million** in 2023 from **$16.5 million** in 2022 - Product warranty obligations are accrued at the time of sale based on historical experience, with most products covered for **12 months**[311](index=311&type=chunk) Changes in Product Warranty Obligations (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Beginning balance | $16.5 | $18.0 | | Warranties recorded at time of sale | $14.8 | $14.5 | | Adjustments to pre-existing warranties | $2.9 | $(3.6) | | Settlements of warranty claims | $(15.9) | $(12.4) | | **Ending balance** | **$18.3** | **$16.5** | [Note 10. Investments](index=60&type=section&id=Note%2010.%20Investments) Investments decreased to **$157.7 million** in 2023 from **$1,068.6 million** in 2022 due to the sale of PTC Inc. stock, resulting in a **$279.3 million net gain** in 2023 Investments (in millions) | | September 30, 2023 | September 30, 2022 | | :--- | :--- | :--- | | Fixed income securities | $0.6 | $12.6 | | Equity securities (level 1) | $— | $928.8 | | Equity securities (other) | $96.0 | $76.4 | | Other | $61.1 | $50.8 | | **Total investments** | **$157.7** | **$1,068.6** | | Less: Short-term investments | $(0.6) | $(12.6) | | **Long-term investments** | **$157.1** | **$1,056.0** | - All **PTC Inc. common stock** (Level 1 equity securities) were sold as of September 30, 2023[313](index=313&type=chunk) Gains and Losses on Investments (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Net gain (loss) on equity securities (level 1) | $281.7 | $(136.4) | $392.3 | | Net (loss) gain on equity securities (other) | $(1.3) | $15.1 | $5.1 | | Equity method loss on Other investments | $(1.1) | $(15.6) | $— | | **Change in fair value of investments** | **$279.3** | **$(136.9)** | **$397.4** | [Note 11. Derivative Instruments](index=61&type=section&id=Note%2011.%20Derivative%20Instruments) The company uses derivatives to manage foreign currency and interest rate risks; cash flow hedges resulted in **$35.9 million** reclassified gains, while non-designated derivatives had a **$17.6 million** pre-tax loss in 2023 - Derivative instruments, including **foreign currency forward exchange contracts** and **treasury locks**, are used to manage foreign currency and interest rate risks, not for speculation[316](index=316&type=chunk)[318](index=318&type=chunk) - **Cash flow hedges** for forecasted transactions resulted in **$35.9 million** of pre-tax gains reclassified into the Consolidated Statement of Operations in 2023[320](index=320&type=chunk) - Approximately **$19.4 million** of pre-tax net unrealized gains on cash flow hedges are expected to be reclassified into earnings within the next twelve months[320](index=320&type=chunk) - Derivatives not designated as hedging instruments resulted in a pre-tax loss of **$17.6 million** in 2023[324](index=324&type=chunk) - The total U.S. dollar-equivalent gross notional amount of forward exchange contracts was **$2,254.0 million** at September 30, 2023[326](index=326&type=chunk) [Note 12. Shareowners' Equity](index=63&type=section&id=Note%2012.%20Shareowners'%20Equity) Outstanding common shares decreased to **114.8 million** in 2023, and accumulated other comprehensive loss improved to **$(790.1) million** from **$(917.5) million** in 2022, driven by currency and pension adjustments Changes in Outstanding Common Shares (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Beginning balance | 115.2 | 116.0 | 116.2 | | Treasury stock purchases | (1.2) | (1.3) | (1.1) | | Common stock issued (including share-based compensation impact) | 0.8 | 0.5 | 0.9 | | **Ending balance** | **114.8** | **115.2** | **116.0** | Changes in Accumulated Other Comprehensive Loss (in millions) | | Pension and other postretirement benefit plan adjustments, net of tax | Accumulated currency translation adjustments, net of tax | Net unrealized (losses) gains on cash flow hedges, net of tax | Total accumulated other comprehensive loss, net of tax | | :--- | :--- | :--- | :--- | :--- | | Balance as of September 30, 2020 | $(1,271.2) | $(311.5) | $(31.5) | $(1,614.2) | | Other comprehensive income (loss) | 577.1 | 31.4 | (11.4) | 597.1 | | **Balance as of September 30, 2021** | **$(694.1)** | **$(280.1)** | **$(42.9)** | **$(1,017.1)** | | Other comprehensive income (loss) | 246.3 | (184.9) | 38.2 | 99.6 | | **Balance as of September 30, 2022** | **$(447.8)** | **$(465.0)** | **$(4.7)** | **$(917.5)** | | Other comprehensive income (loss) | 40.7 | 100.1 | (13.4) | 127.4 | | **Balance as of September 30, 2023** | **$(407.1)** | **$(364.9)** | **$(18.1)** | **$(790.1)** | [Note 13. Share-Based Compensation](index=66&type=section&id=Note%2013.%20Share-Based%20Compensation) Share-based compensation expense was **$88.3 million** in 2023, with **$106.5 million** unrecognized; the 2020 plan authorizes **13.0 million shares**, and performance share awards had a **92% payout** for 2023 - Pre-tax share-based compensation expense was **$88.3 million** in 2023, with **$106.5 million** in unrecognized costs expected to be recognized over approximately **1.7 years**[333](index=333&type=chunk) - The **2020 Long-Term Incentives Plan** authorizes up to **13.0 million shares** for stock options, performance shares, restricted stock units, or restricted stock[334](index=334&type=chunk) - The weighted average fair value of stock options granted in 2023 was **$77.62**, with an intrinsic value of **$69.8 million** for exercised options[336](index=336&type=chunk) - Performance share awards for the period ending September 30, 2023, will have a **92% payout** of target shares[340](index=340&type=chunk) - The weighted average fair value of restricted stock and restricted stock unit awards granted in 2023 was **$263.67**[343](index=343&type=chunk) [Note 14. Retirement Benefits](index=69&type=section&id=Note%2014.%20Retirement%20Benefits) Net periodic pension benefit cost was **$122.0 million** in 2023, with pension plans having a **$293.4 million deficit** and postretirement plans a **$46.4 million deficit**; **$26.6 million** is expected for pension contributions in 2024 - Net periodic benefit cost for pension plans was **$122.0 million** in 2023, up from **$74.4 million** in 2022, primarily due to settlement and curtailment charges[350](index=350&type=chunk) - The U.S. pension plan's discount rate for 2024 will increase to **6.10%** from **5.65%** in 2023[357](index=357&type=chunk) Funded Status of Plans (in millions) | | Pension Benefits 2023 | Pension Benefits 2022 | Other Postretirement Benefits 2023 | Other Postretirement Benefits 2022 | | :--- | :--- | :--- | :--- | :--- | | Benefit obligation at end of year | $2,750.8 | $3,165.6 | $46.4 | $44.2 | | Plan assets at end of year | $2,457.4 | $2,903.9 | $— | $— | | **Funded status of plans** | **$(293.4)** | **$(261.7)** | **$(46.4)** | **$(44.2)** | - The company expects to contribute **$26.6 million** to global pension plans and **$7.3 million** to postretirement benefit plans in 2024[358](index=358&type=chunk) Global Weighted Average Targeted and Actual Asset Allocations (September 30) | Asset Category | Target Allocations | 2023 | 2022 | | :--- | :--- | :--- | :--- | | Equity securities | 38% | 50% | 53% | | Debt securities | 52% | 43% | 41% | | Other | 10% | 7% | 6% | [Note 15. Other (Expense) Income](index=76&type=section&id=Note%2015.%20Other%20(Expense)%20Income) Net other expense increased to **$71.3 million** in 2023 from **$1.6 million** in 2022, driven by higher non-operating pension costs and legacy charges, partially offset by interest and royalty income Components of Other (Expense) Income (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Interest income | $9.7 | $4.4 | $1.6 | | Royalty income | $13.2 | $10.9 | $10.2 | | Legacy product liability and environmental charges | $(18.1) | $(15.6) | $(10.6) | | Non-operating pension and postretirement benefit cost | $(82.7) | $(4.7) | $(63.8) | | Legal settlement | $— | $— | $70.0 | | Other | $6.6 | $3.4 | $(1.7) | | **Other (expense) income** | **$(71.3)** | **$(1.6)** | **$5.7** | [Note 16. Income Taxes](index=77&type=section&id=Note%2016.%20Income%20Taxes) Income tax provision increased to **$330.5 million** in 2023, with the effective tax rate rising to **20.5%** due to a valuation allowance on Sensia's deferred tax assets and goodwill impairment Components of Income before Income Taxes (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | United States | $794.2 | $371.3 | $885.1 | | Non-United States | $814.3 | $702.3 | $641.1 | | **Total** | **$1,608.5** | **$1,073.6** | **$1,526.2** | Components of Income Tax Provision (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Current | $430.6 | $188.1 | $366.0 | | Deferred | $(100.1) | $(33.6) | $(184.1) | | **Income tax provision** | **$330.5** | **$154.5** | **$181.9** | Effective Tax Rate Reconciliation | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | Statutory tax rate | 21.0 % | 21.0 % | 21.0 % | | State and local income taxes | 1.5 | 0.5 | 1.4 | | Non-United States taxes | (4.7) | (5.4) | (3.8) | | Repatriation of foreign earnings | 0.9 | 1.1 | 0.9 | | Foreign-derived intangible income | (0.6) | (0.5) | (2.8) | | Settlements with taxing authorities | 0.3 | — | (1.0) | | Change in valuation allowance | 4.1 | (0.5) | (1.7) | | Share-based compensation | (0.6) | (1.0) | (1.1) | | Research and development tax credit | (1.3) | (1.0) | (0.6) | | Other | (0.1) | 0.2 | (0.4) | | **Effective income tax rate** | **20.5 %** | **14.4 %** | **11.9 %** | - The effective tax rate increased by **4.1%** in 2023 due to a valuation allowance on certain deferred tax assets of the Sensia joint venture and related goodwill impairment[377](index=377&type=chunk) - Unrecognized tax benefits totaled **$9.8 million** at September 30, 2023, with a potential reduction of up to **$2.3 million** in the next 12 months[382](index=382&type=chunk)[384](index=384&type=chunk) [Note 17. Commitments and Contingent Liabilities](index=80&type=section&id=Note%2017.%20Commitments%20and%20Contingent%20Liabilities) Environmental remediation liabilities were **$44.5 million** and conditional asset retirement obligations **$38.8 million** in 2023; the company faces asbestos lawsuits but expects no material adverse effect - Environmental remediation cost liabilities, net of expected recoveries, were **$44.5 million** at September 30, 2023[389](index=389&type=chunk) - Conditional asset retirement obligations, including asbestos abatement and soil contamination, were **$38.8 million** at September 30, 2023[390](index=390&type=chunk) - The company is a defendant in **asbestos lawsuits** but believes it has meritorious defenses and substantial insurance coverage, expecting no material effect on its financial condition[392](index=392&type=chunk)[393](index=393&type=chunk) - A legal settlement of **$70 million** for a trademark infringement and false advertising matter was received in fiscal 2021[396](index=396&type=chunk) [Note 18. Leases](index=81&type=section&id=Note%2018.%20Leases) Total lease expense was **$124.5 million** in 2023; operating leases have a **5.8-year** weighted average term, with **$399.2 million** in undiscounted payments, and **$52.1 million** in new leases commencing in 2024 - Total lease expense was **$124.5 million** in 2023, including **$100.2 million** for operating leases and **$5.5 million** for finance leases (amortization and interest)[399](index=399&type=chunk) Weighted Average Lease Terms and Discount Rates | | 2023 | 2022 | | :--- | :--- | :--- | | **Weighted average remaining lease term** | | | | Operating leases | 5.8 years | 6.3 years | | Finance leases | 1.6 years | 3.0 years | | **Weighted average discount rate** | | | | Operating leases | 3.03 % | 2.07 % | | Finance leases | 3.27 % | 2.04 % | Undiscounted Maturities of Lease Liabilities (in millions) - September 30, 2023 | | Finance Leases | Operating Leases | | :--- | :--- | :--- | | 2024 | $7.0 | $93.5 | | 2025 | $3.4 | $82.9 | | 2026 | $— | $64.4 | | 2027 | $— | $49.1 | | 2028 | $— | $35.4 | | Thereafter | $— | $73.9 | | **Total undiscounted lease payments** | **$10.4** | **$399.2** | - Additional operating leases for facilities, with undiscounted obligations of approximately **$52.1 million**, will commence in fiscal 2024[400](index=400&type=chunk) [Note 19. Business Segment Information](index=82&type=section&id=Note%2019.%20Business%20Segment%20Information) This note details financial performance for Intelligent Devices (**$4,098.2 million** sales), Software & Control (**$2,886.0 million** sales), and Lifecycle Services (**$2,073.8 million** sales), with North America as the largest region - The three operating segments are **Intelligent Devices** (smart products), **Software & Control** (production automation and operations platforms), and **Lifecycle Services** (professional and recurring services, including Sensia joint venture)[402](index=402&type=chunk)[403](index=403&type=chunk)[404](index=404&type=chunk)[405](index=405&type=chunk)[406](index=406&type=chunk)[407](index=407&type=chunk) Sales and Operating Results by Segment (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | **Sales** | | | | | Intelligent Devices | $4,098.2 | $3,544.6 | $3,311.9 | | Software & Control | $2,886.0 | $2,312.9 | $1,947.0 | | Lifecycle Services | $2,073.8 | $1,902.9 | $1,738.5 | | **Total** | **$9,058.0** | **$7,760.4** | **$6,997.4** | | **Segment operating earnings** | | | | | Intelligent Devices | $828.2 | $717.6 | $702.1 | | Software & Control | $953.2 | $666.7 | $531.0 | | Lifecycle Services | $148.4 | $158.3 | $158.2 | | **Total** | **$1,929.8** | **$1,542.6** | **$1,391.3** | Sales by Geographic Region (in millions) | | 2023 | 2022 | 2021 | | :--- | :--- | :--- | :--- | | North America | $5,224.0 | $4,722.0 | $4,132.8 | | Europe, Middle East and Africa | $1,870.6 | $1,437.6 | $1,405.7 | | Asia Pacific | $1,358.0 | $1,088.0 | $1,012.2 | | Latin America | $605.4 | $512.8 | $446.7 | | **Total** | **$9,058.0** | **$7,760.4** | **$6,997.4** | - Sales to the two largest distributors in 2023, 2022, and 2021 were approximately **20% of total sales**[412](

FY23 Performance Highlights - Total sales exceeded $9 billion, surpassing the 2019 strategic framework growth rate expectations[92] - Reported sales increased by 167% year-over-year, with organic sales up by 169%[92] - Adjusted EPS reached $1212, a 28% increase year-over-year[92] - Free Cash Flow amounted to $12 billion, representing an 86% conversion rate[92] Q4 FY23 Results - Reported sales increased by 205% year-over-year, with organic sales up by 177%[88] - Acquisitions contributed 14% to sales growth, while currency translation added 14%[88] - Adjusted EPS stood at $364, a 20% increase year-over-year[85] - The company ended FY23 with a backlog exceeding $41 billion, significantly above pre-pandemic levels[88] FY24 Outlook - The company anticipates total sales growth in the range of 05% to 65%, with organic growth between (20)% and 40%[4] - The company expects a segment margin of approximately 215%[4] - Adjusted EPS is projected to be in the range of $1200 to $1350, representing a 5% year-over-year increase at the midpoint[4] - The company anticipates a Free Cash Flow conversion rate of approximately 100%[4]

Financial Data and Key Metrics Changes - Total sales increased by 20.5% year-over-year, with organic sales growing almost 18% [8] - Adjusted EPS reached a record $3.64, reflecting a nearly 20% year-over-year growth [9] - Segment margin was 22.3%, consistent with expectations, but down from 23.3% a year ago due to higher incentive compensation and investment spending [14][43] Business Line Data and Key Metrics Changes - Intelligent Devices segment saw organic sales increase by 18%, with Independent Cart Technology achieving over 50% growth [2] - Life Sciences sales grew mid-single digits, showcasing the value of integrated software and hardware solutions [10] - Information Solutions and Connected Services grew 9% year-over-year, with total ARR increasing by 16% [11] - Process industry sales grew over 25%, driven by strong performance in oil and gas [36] Market Data and Key Metrics Changes - North America organic sales rose over 12%, while Latin America and EMEA saw over 20% growth [21] - Asia Pacific sales increased by over 31%, although there were high order deferrals and cancellations in China [21] - Discrete sales grew over 15%, with automotive sales up 30%, particularly in electric vehicles [19] Company Strategy and Development Direction - The company is focused on integrating Clearpath Robotics to enhance its autonomous mobile robot offerings, which is expected to contribute to growth [3][38] - Continued investments in talent and technology are emphasized to navigate a dynamic environment and drive future growth [49] - The company aims to maintain a strong backlog and improve customer service as a top priority [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence that Q4 was the trough for orders, with expectations for low single-digit growth in fiscal year '24 [28] - The company anticipates a slight increase in segment margin for fiscal '24, despite headwinds from acquisitions [46] - There is optimism regarding the impact of recent stimulus projects on future orders and growth [158] Other Important Information - The company repurchased approximately 200,000 shares at a cost of $55 million during the quarter [25] - Free cash flow reached a record $1.2 billion for the year, with a conversion rate of 86% [37] - The adjusted effective tax rate for Q4 was around 17%, slightly below the prior year [159] Q&A Session Summary Question: Confidence in order growth for FY '24 - Management noted that orders increased from the beginning to the end of Q4, supporting the view that Q4 was the trough [60] - Distributors are seeing higher incoming orders than they are placing, indicating a potential ramp-up in orders as inventory levels normalize [61] Question: Impact of mega projects on orders - Management expects mega projects to contribute positively but not significantly to order lumpiness, as many projects are still in early stages [66] Question: Margin expectations for segments in FY '24 - Lifecycle Services is expected to see significant margin expansion, while software and control may experience lower margins due to reduced growth [67] Question: Clarification on order normalization and cancellations - Cancellations were not a major contributor to the decrease in orders; the primary factor was distributors adjusting their inventory levels [110] Question: Price rollover contribution for FY '24 - Price growth is expected to be slightly over 1% year-over-year, with input costs anticipated to be neutral [127]

▶ Currency reduced sales 0.7% ▶ Segment margin of 21.1%, up 30 bps YOY Q3 FY23 Organic Industry Segment Performance % of Q3 FY23 Sales Q3 FY23 vs. Q3 FY22 Q3 FY23 vs. Q3 FY22 Automotive up mid teens Semiconductor up high teens ~25% Up ~10% e-Commerce & Warehouse Automation down high teens ~ 45% Up ~15% Tire up ~35% Oil & Gas up mid teens Mining up ~30% Chemicals up low single digits ▶ Currency to reduce sales ~(1.0) pt ▶ Acquisitions to contribute ~1.0 pt of growth ▶ Expect orders of ~$8.5B - $9B and to exi ...

Financial Data and Key Metrics Changes - The adjusted effective tax rate for Q3 was 14.1%, consistent with the prior year [1] - Free cash flow was $240 million, down $87 million from the previous year due to increased working capital and income tax payments [1] - Adjusted EPS for Q3 was $3.01, reflecting a 13% year-over-year growth [88] Business Line Data and Key Metrics Changes - Organic sales growth was led by Software & Control, which grew 24% year-over-year, while Intelligent Devices saw an 8% increase [67][76] - Lifecycle Services organic sales increased by 8% year-over-year, with a book-to-bill ratio of 1.08 [58] - The Intelligent Devices segment's margin decreased by 290 basis points year-over-year due to higher investment spend and unfavorable mix [67] Market Data and Key Metrics Changes - North America organic sales grew about 2% year-over-year, while EMEA sales increased by 34% and Asia-Pacific by over 44% [64] - Semiconductor sales grew in the high teens, while e-commerce and warehouse automation sales declined by high teens due to delays and cancellations [62][64] - The backlog is expected to remain high between $4.5 billion and $5 billion, with 80% shippable in fiscal year 2024 [18] Company Strategy and Development Direction - The company is increasing the midpoint of its reported sales guidance from 14.5% to 15% for fiscal 2023, expecting organic sales growth of 14% to 16% [3] - The focus remains on automation and technology to address workforce shortages and improve business resiliency [119] - Lifecycle services are expected to be a significant contributor to margin expansion in the coming years [34] Management's Comments on Operating Environment and Future Outlook - Management noted strong underlying demand but acknowledged a moderation in orders due to improving lead times [90] - The company expects to achieve 80% free cash flow conversion for fiscal 2023, reflecting higher working capital [85] - Management expressed confidence in the long-term growth outlook driven by investments in sectors like semiconductors and electric vehicles [150] Other Important Information - The company repurchased approximately 220,000 shares at a cost of $62 million during the quarter [1] - The adjusted effective tax rate for the full year is expected to be around 17.5% [69] Q&A Session Summary Question: Impact of U.S. distribution changes on sales and earnings - Management indicated that the change in U.S. distribution had a significant impact on sales and earnings in Q3, with expectations of margin recovery moving forward [8][9] Question: Future margin expectations for segments - Management expects margins to expand in Q4, with strong performance anticipated in Software and Control, and lifecycle services expected to exceed 10% [9][34] Question: Order trends and normalization - Management noted that backlog is expected to normalize as lead times improve, with a strong front log remaining [17][127] Question: Demand environment and project push-outs - Management confirmed that demand remains strong despite some project delays, particularly in North America [152]

PART I. FINANCIAL INFORMATION This section presents the company's unaudited consolidated financial statements and management's discussion and analysis [Item 1. Financial Statements](index=4&type=section&id=Item%201.%20Financial%20Statements) This section provides Rockwell Automation's unaudited consolidated financial statements and related notes for recent periods [Consolidated Balance Sheet](index=4&type=section&id=Consolidated%20Balance%20Sheet) This statement details the company's assets, liabilities, and equity at specific points in time | ASSETS (in millions) | June 30, 2023 | September 30, 2022 | | :------------------- | :------------ | :----------------- | | Cash and cash equivalents | $443.5 | $490.7 | | Receivables | $2,245.0 | $1,736.7 | | Inventories | $1,435.2 | $1,054.2 | | Total current assets | $4,401.1 | $3,610.7 | | Goodwill | $3,700.9 | $3,524.0 | | Total Assets | $11,743.3 | $10,758.7 | | LIABILITIES AND SHAREOWNERS' EQUITY (in millions) | June 30, 2023 | September 30, 2022 | | :------------------------------------------------ | :------------ | :----------------- | | Short-term debt | $278.5 | $359.3 | | Accounts payable | $1,009.1 | $1,028.0 | | Contract liabilities | $621.2 | $507.0 | | Total current liabilities | $3,922.1 | $3,572.2 | | Long-term debt | $2,866.9 | $2,867.8 | | Total shareowners' equity | $3,622.2 | $3,016.7 | | Total Liabilities and Shareowners' Equity | $11,743.3 | $10,758.7 | [Consolidated Statement of Operations](index=5&type=section&id=Consolidated%20Statement%20of%20Operations) This statement reports the company's revenues, expenses, and net income over specific periods | (in millions, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Sales | $2,238.7 | $1,968.7 | $6,495.1 | $5,634.1 | | Gross profit | $915.4 | $802.4 | $2,661.5 | $2,215.6 | | Income before income taxes | $471.8 | $344.2 | $1,291.1 | $667.8 | | Net income attributable to Rockwell Automation, Inc. | $400.2 | $297.9 | $1,084.5 | $593.3 | | Diluted EPS | $3.45 | $2.55 | $9.34 | $5.06 | [Consolidated Statement of Comprehensive Income](index=6&type=section&id=Consolidated%20Statement%20of%20Comprehensive%20Income) This statement presents net income and other comprehensive income components for the period | (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income | $398.7 | $294.8 | $1,072.3 | $583.1 | | Other comprehensive income (loss) | $71.1 | $(124.6) | $192.1 | $59.7 | | Comprehensive income attributable to Rockwell Automation, Inc. | $470.8 | $173.5 | $1,276.5 | $652.9 | [Consolidated Statement of Cash Flows](index=7&type=section&id=Consolidated%20Statement%20of%20Cash%20Flows) This statement summarizes cash inflows and outflows from operating, investing, and financing activities | (in millions) | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------ | :------------------------------ | :------------------------------ | | Net income | $1,072.3 | $583.1 | | Cash provided by operating activities | $535.1 | $423.7 | | Cash provided by (used for) investing activities | $88.6 | $(99.2) | | Cash used for financing activities | $(709.2) | $(478.5) | | Decrease in cash, cash equivalents, and restricted cash | $(55.8) | $(179.3) | | Cash, cash equivalents, and restricted cash at end of period | $452.1 | $500.1 | [Consolidated Statement of Shareowners' Equity](index=8&type=section&id=Consolidated%20Statement%20of%20Shareowners'%20Equity) This statement details changes in equity components, including net income, dividends, and share repurchases | (in millions) | Balance at March 31, 2023 | Net income (loss) | Other comprehensive income | Common stock issued | Share repurchases | Cash dividends declared | Balance at June 30, 2023 | | :------------ | :------------------------ | :---------------- | :------------------------- | :------------------ | :---------------- | :---------------------- | :----------------------- | | Total shareowners' equity | $3,435.5 | $398.7 | $71.1 | $51.4 | $(62.3) | $(272.2) | $3,622.2 | | (in millions) | Balance at September 30, 2022 | Net income (loss) | Other comprehensive income | Common stock issued | Share repurchases | Cash dividends declared | Balance at June 30, 2023 | | :------------ | :---------------------------- | :---------------- | :------------------------- | :------------------ | :---------------- | :---------------------- | :----------------------- | | Total shareowners' equity | $3,016.7 | $1,072.3 | $192.1 | $142.0 | $(256.8) | $(544.1) | $3,622.2 | [Notes to Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) These notes provide detailed explanations of the accounting policies and specific financial statement line items [Note 1. Basis of Presentation and Accounting Policies](index=10&type=section&id=Note%201.%20Basis%20of%20Presentation%20and%20Accounting%20Policies) This note details the basis of presentation, key accounting policies, and the adoption of new FASB standards - The allowance for doubtful accounts increased to **$17.4 million** at June 30, 2023, from **$13.1 million** at September 30, 2022[28](index=28&type=chunk) | Earnings Per Share (in millions, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income available to common shareowners | $398.5 | $296.9 | $1,079.9 | $591.4 | | Basic EPS | $3.47 | $2.56 | $9.41 | $5.10 | | Diluted EPS | $3.45 | $2.55 | $9.34 | $5.06 | - The company retroactively adopted a new FASB standard (ASC 606) for contract assets and liabilities as of October 1, 2021, with **no material impact** on financial statements. A new standard on supplier finance programs will be adopted in Q1 2024, expanding disclosures[32](index=32&type=chunk)[33](index=33&type=chunk)[34](index=34&type=chunk) [Note 2. Revenue Recognition](index=11&type=section&id=Note%202.%20Revenue%20Recognition) This note explains revenue recognition policies for products and services, detailing unfulfilled performance obligations - As of June 30, 2023, Rockwell Automation expects to recognize approximately **$1,126 million** of revenue from unfulfilled performance obligations, with **$716 million** anticipated within the next 12 months[38](index=38&type=chunk) | Revenue Disaggregation by Geographic Region (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :---------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | North America | $1,260.9 | $1,239.9 | $3,750.4 | $3,412.2 | | Europe, Middle East and Africa | $494.4 | $352.6 | $1,353.7 | $1,056.2 | | Asia Pacific | $343.5 | $246.8 | $974.2 | $791.9 | | Latin America | $139.9 | $129.4 | $416.8 | $373.8 | | Total Company Sales | $2,238.7 | $1,968.7 | $6,495.1 | $5,634.1 | | Contract Liabilities (in millions) | June 30, 2023 | June 30, 2022 | | :----------------- | :------------ | :------------ | | Balance as of beginning of year | $541.3 | $462.5 | | Balance as of end of period | $672.5 | $549.5 | | Revenue recognized from beginning balance (9 months) | $362.7 | $296.8 | [Note 3. Share-Based Compensation](index=13&type=section&id=Note%203.%20Share-Based%20Compensation) This note details the significant increase in pre-tax share-based compensation expense and grants year-over-year | Share-Based Compensation Expense (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Pre-tax share-based compensation expense | $23.4 | $17.6 | $65.0 | $48.8 | | Share-Based Compensation Grants (in thousands) | Nine Months Ended June 30, 2023 (Grants) | Nine Months Ended June 30, 2022 (Grants) | | :--------------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Stock options | 233 | 164 | | Performance shares | 66 | 37 | | Restricted stock and restricted stock units | 236 | 214 | [Note 4. Inventories](index=13&type=section&id=Note%204.%20Inventories) This note reports a substantial increase in total inventories across all categories from September 2022 to June 2023 | Inventories (in millions) | June 30, 2023 | September 30, 2022 | | :------------------------ | :------------ | :----------------- | | Finished goods | $507.5 | $325.0 | | Work in process | $373.8 | $317.3 | | Raw materials | $553.9 | $411.9 | | Total Inventories | $1,435.2 | $1,054.2 | [Note 5. Acquisitions](index=13&type=section&id=Note%205.%20Acquisitions) This note details the fiscal 2023 acquisitions of CUBIC and Knowledge Lens, and their sales contributions - In October 2022, Rockwell Automation acquired CUBIC for **$133.8 million** (net of cash acquired), assigning **$66.3 million** to goodwill in the Intelligent Devices segment[49](index=49&type=chunk) - In February 2023, Rockwell Automation acquired Knowledge Lens for **$52.0 million** (net of cash acquired), assigning **$35.2 million** to goodwill in the Lifecycle Services segment[51](index=51&type=chunk) - Total sales from 2023 acquisitions were **$23.8 million** for the three months and **$59.4 million** for the nine months ended June 30, 2023[56](index=56&type=chunk) [Note 6. Goodwill and Other Intangible Assets](index=15&type=section&id=Note%206.%20Goodwill%20and%20Other%20Intangible%20Assets) This note reports an increase in goodwill due to acquisitions and confirms no impairment after Q2 2023 evaluation | Goodwill (in millions) | Intelligent Devices | Software & Control | Lifecycle Services | Total | | :--------------------- | :------------------ | :----------------- | :----------------- | :---- | | Balance as of September 30, 2022 | $503.0 | $2,398.7 | $622.3 | $3,524.0 | | Acquisition of businesses | $66.3 | — | $35.2 | $101.5 | | Translation and other | $26.9 | $31.6 | $16.9 | $75.4 | | Balance as of June 30, 2023 | $596.2 | $2,430.3 | $674.4 | $3,700.9 | - The company performed its annual goodwill impairment evaluation in Q2 2023, concluding **no impairment** for Intelligent Devices, Software & Control, and Lifecycle Services (excluding Sensia) through qualitative tests, and for Sensia through a quantitative test where fair value exceeded carrying value by approximately **10%**[59](index=59&type=chunk)[165](index=165&type=chunk) | Other Intangible Assets (in millions) | June 30, 2023 (Net) | September 30, 2022 (Net) | | :------------------------------------ | :------------------ | :----------------------- | | Software products | $35.4 | $39.7 | | Customer relationships | $477.5 | $475.5 | | Technology | $265.8 | $291.5 | | Trademarks | $60.1 | $51.0 | | Allen-Bradley trademark (not amortized) | $43.7 | $43.7 | | Total Other Intangible Assets | $883.1 | $902.0 | [Note 7. Short-Term and Long-Term Debt](index=16&type=section&id=Note%207.%20Short-Term%20and%20Long-Term%20Debt) This note details a decrease in short-term debt and stable long-term debt, with fair values below carrying values - Short-term debt at June 30, 2023, included **$183.0 million** in commercial paper (**5.10% interest**, 9-day maturity) and **$65.0 million** borrowed against Sensia's $75.0 million line of credit (**6.14% interest**)[62](index=62&type=chunk) | Long-term Debt (in millions) | June 30, 2023 (Carrying Value) | June 30, 2023 (Fair Value) | September 30, 2022 (Carrying Value) | September 30, 2022 (Fair Value) | | :--------------------------- | :----------------------------- | :------------------------- | :---------------------------------- | :-------------------------------- | | Current portion of long-term debt | $608.3 | $605.0 | $609.1 | $589.1 | | Long-term debt | $2,866.9 | $2,585.8 | $2,867.8 | $2,485.4 | [Note 8. Other Current Liabilities](index=16&type=section&id=Note%208.%20Other%20Current%20Liabilities) This note reports an increase in other current liabilities, primarily due to higher dividends and income taxes payable | Other Current Liabilities (in millions) | June 30, 2023 | September 30, 2022 | | :------------------------------------ | :------------ | :----------------- | | Unrealized losses on foreign exchange contracts | $22.0 | $31.2 | | Dividends payable | $137.0 | $0.6 | | Income taxes payable | $130.0 | $81.1 | | Total Other current liabilities | $577.1 | $403.0 | [Note 9. Investments](index=16&type=section&id=Note%209.%20Investments) This note details a decrease in total investments, primarily PTC Inc. stock, with significant net gains in 2023 | Investments (in millions) | June 30, 2023 | September 30, 2022 | | :------------------------ | :------------ | :----------------- | | Equity securities (level 1) | $863.9 | $928.8 | | Equity securities (other) | $81.4 | $76.4 | | Total investments | $1,002.6 | $1,068.6 | - Equity securities (level 1) primarily consist of PTC Inc. common stock, with **6,070,905 shares** held at June 30, 2023, down from **8,879,717 shares** at September 30, 2022[67](index=67&type=chunk) | Change in Fair Value of Investments (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------------------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net gain (loss) on equity securities (level 1) | $86.4 | $(8.4) | $290.4 | $(136.0) | | Change in fair value of investments | $85.7 | $(5.2) | $289.3 | $(138.3) | [Note 10. Retirement Benefits](index=18&type=section&id=Note%2010.%20Retirement%20Benefits) This note reports a significant increase in net periodic pension benefit cost due to U.S. plan remeasurements | Net Periodic Pension Benefit Cost (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :---------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Service cost | $9.4 | $15.4 | $30.6 | $56.1 | | Settlement and curtailment charges (benefit) | $2.2 | $(0.7) | $120.1 | $24.2 | | Net periodic pension benefit cost | $3.2 | $3.2 | $116.0 | $60.3 | - The U.S. pension plan assets and liabilities were remeasured in March and June 2023, resulting in settlement expense of **$2.2 million** and **$120.1 million** for the three and nine months ended June 30, 2023, respectively. The discount rate used for remeasurement was **5.45%** at June 30, 2023[73](index=73&type=chunk) [Note 11. Other Income (Expense)](index=18&type=section&id=Note%2011.%20Other%20Income%20(Expense)) This note details a shift to net other expense, driven by higher non-operating pension and product liability costs | Other Income (Expense) (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Non-operating pension and postretirement credit (cost) | $5.5 | $11.9 | $(87.5) | $(5.0) | | Legacy product liability and environmental (charges) benefit | $(4.8) | $0.8 | $(10.7) | $(6.6) | | Other income (expense) | $6.5 | $19.8 | $(83.3) | $(1.0) | [Note 12. Accumulated Other Comprehensive Loss](index=19&type=section&id=Note%2012.%20Accumulated%20Other%20Comprehensive%20Loss) This note reports an improvement in accumulated other comprehensive loss due to currency and pension adjustments | Accumulated Other Comprehensive Loss (in millions) | Balance as of September 30, 2022 | Other comprehensive income (loss) | Amounts reclassified | Balance as of June 30, 2023 | | :------------------------------------------------- | :------------------------------- | :-------------------------------- | :------------------- | :-------------------------- | | Pension and other postretirement benefit plan adjustments, net of tax | $(447.8) | $(18.8) | $90.1 | $(376.5) | | Accumulated currency translation adjustments, net of tax | $(465.0) | $147.2 | — | $(317.8) | | Net unrealized losses on cash flow hedges, net of tax | $(4.7) | $(6.3) | $(20.2) | $(31.2) | | Total accumulated other comprehensive loss, net of tax | $(917.5) | $122.1 | $69.9 | $(725.5) | - Reclassifications out of Accumulated other comprehensive loss into the Consolidated Statement of Operations for the nine months ended June 30, 2023, included **$90.1 million** from pension and other postretirement benefit plan adjustments and **$(20.2) million** from net unrealized gains/losses on cash flow hedges[78](index=78&type=chunk) [Note 13. Commitments and Contingent Liabilities](index=21&type=section&id=Note%2013.%20Commitments%20and%20Contingent%20Liabilities) This note discusses various lawsuits and claims, with management expecting no material impact on financial condition - Rockwell Automation is a defendant in asbestos lawsuits but believes it has **meritorious defenses** and **substantial insurance coverage**, expecting **no material effect** on its financial condition[81](index=81&type=chunk)[82](index=82&type=chunk) - The company provides limited intellectual property indemnity and was **not aware of any material indemnification claims** as of June 30, 2023[84](index=84&type=chunk) [Note 14. Income Taxes](index=22&type=section&id=Note%2014.%20Income%20Taxes) This note reports an increased effective tax rate due to lower discrete benefits and PTC adjustments, and a U.S. transition tax liability | Effective Tax Rate | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Effective tax rate | 15.5% | 14.4% | 16.9% | 12.7% | - The effective tax rate was lower than the U.S. statutory rate of **21%** due to non-U.S. tax rates and other discrete benefits[88](index=88&type=chunk) - An income tax liability of **$175.3 million** related to the U.S. transition tax under the Tax Cuts and Jobs Act of 2017 is recorded in Other liabilities[89](index=89&type=chunk) [Note 15. Business Segment Information](index=23&type=section&id=Note%2015.%20Business%20Segment%20Information) This note details sales and operating earnings performance across all three business segments for the period | Sales by Segment (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Intelligent Devices | $968.1 | $878.3 | $2,927.5 | $2,587.2 | | Software & Control | $750.6 | $606.9 | $2,065.0 | $1,655.7 | | Lifecycle Services | $520.0 | $483.5 | $1,502.6 | $1,391.2 | | Total Sales | $2,238.7 | $1,968.7 | $6,495.1 | $5,634.1 | | Segment Operating Earnings (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Intelligent Devices | $163.1 | $173.2 | $579.4 | $504.4 | | Software & Control | $261.5 | $190.6 | $678.1 | $439.7 | | Lifecycle Services | $48.4 | $45.4 | $100.6 | $103.6 | | Total Segment Operating Earnings | $473.0 | $409.2 | $1,358.1 | $1,047.7 | [Report of Independent Registered Public Accounting Firm](index=24&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm%20(PCAOB%20ID%20No.%2034)) Deloitte & Touche LLP reviewed interim financial information, finding no material modifications needed for U.S. GAAP conformity - The independent registered public accounting firm, Deloitte & Touche LLP, concluded that **no material modifications** are needed for the interim financial information to conform with U.S. GAAP[97](index=97&type=chunk) - The firm expressed an **unqualified opinion** on the consolidated financial statements as of September 30, 2022, and confirmed the fair statement of the accompanying consolidated balance sheet as of that date[98](index=98&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=25&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, condition, and outlook, including sales trends, economic factors, and strategic initiatives [Forward-Looking Statements](index=25&type=section&id=Forward-Looking%20Statements) This section highlights forward-looking statements, subject to various risks including supply chain, macroeconomic, and cybersecurity factors - Forward-looking statements are subject to risks including component availability, macroeconomic factors (inflation, currency rates), supply chain disruptions, ability to attract talent, IT system security, integration of acquisitions, regulatory policies, technology development, competitive pressures, and litigation[102](index=102&type=chunk) [Non-GAAP Measures](index=26&type=section&id=Non-GAAP%20Measures) This section defines and explains the use of non-GAAP financial measures for enhanced insight into operating performance - Non-GAAP measures used include organic sales, total segment operating earnings and margin, adjusted income, adjusted EPS, adjusted effective tax rate, and free cash flow, with reconciliations provided for investor utility[104](index=104&type=chunk) [Overview](index=26&type=section&id=Overview) Rockwell Automation's strategy focuses on above-market organic sales growth, increasing recurring revenue, and strategic acquisitions - Rockwell Automation's long-term strategy aims for **above-market organic sales growth**, increasing recurring revenue, **EPS growth above sales growth**, return on invested capital **over 20%**, and free cash flow equal to about **100% of adjusted income**, with acquisitions adding **1% or more** to sales growth annually[106](index=106&type=chunk) - Key drivers for demand include investments in manufacturing, basic materials production, customer needs for faster time to market, operational productivity, asset management, quality, safety, and sustainability, as well as global industrial production levels and regional economic factors[105](index=105&type=chunk) [U.S. Economic Trends](index=27&type=section&id=U.S.%20Economic%20Trends) U.S. economic indicators show mixed trends, with a soft Manufacturing PMI and decelerating but elevated PPI increases | U.S. Economic Indicators | June 2023 | March 2023 | December 2022 | | :----------------------- | :-------- | :--------- | :------------ | | IP Index | 99.9 | 99.5 | 99.6 | | PMI | 46.0 | 46.3 | 48.4 | - The Manufacturing PMI was **below 50** for the **eighth consecutive month** in June 2023, indicating contraction in the U.S. manufacturing economy[108](index=108&type=chunk)[109](index=109&type=chunk) - Producer Price Index (PPI) year-over-year increases decelerated to **0.1%** in June 2023, from **2.7%** in March 2023 and **8.5%** in September 2022, though prices remain elevated[109](index=109&type=chunk) [Non-U.S. Economic Trends](index=27&type=section&id=Non-U.S.%20Economic%20Trends) Non-U.S. industrial output was mixed, with many PMI readings indicating economic contraction - Industrial output outside the U.S. was mixed in Q3 2023, and PMI readings were mostly lower, with many countries ending the quarter **below 50**, indicating contraction[111](index=111&type=chunk) [Supply Chain](index=28&type=section&id=Supply%20Chain) Supply chain challenges persist, prompting the company to implement mitigation strategies like long-term agreements and capacity investments - Supply chain challenges persist, potentially leading to difficulties in procuring components, increased costs, and delivery delays, despite gradual improvements[112](index=112&type=chunk) - Actions to mitigate supply chain issues include extending order visibility, securing long-term supply agreements, re-engineering products for component resiliency, capacity investments, and diversifying the supplier base[116](index=116&type=chunk) - A change in the U.S. distribution center in Q3 2023 impacted shipment timing but is expected to provide future flexibility and scale[113](index=113&type=chunk) [Outlook](index=28&type=section&id=Outlook) The company provides updated fiscal year 2023 guidance, projecting sales growth and diluted EPS ranges | Fiscal 2023 Guidance (as of August 1, 2023) | Range | | :-------------------------- | :------------ | | Reported sales growth | 14.0% - 16.0% | | Organic sales growth | 14.0% - 16.0% | | Diluted EPS | $12.46 - $12.86 | | Adjusted EPS | $11.70 - $12.10 | [Summary of Results of Operations](index=29&type=section&id=Summary%20of%20Results%20of%20Operations) The company reported strong sales, operating earnings, net income, and diluted EPS growth for the periods ended June 30, 2023 | Financial Highlights (in millions, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Total sales | $2,238.7 | $1,968.7 | $6,495.1 | $5,634.1 | | Total segment operating earnings | $473.0 | $409.2 | $1,358.1 | $1,047.7 | | Net income attributable to Rockwell Automation | $400.2 | $297.9 | $1,084.5 | $593.3 | | Diluted EPS | $3.45 | $2.55 | $9.34 | $5.06 | | Total segment operating margin | 21.1% | 20.8% | 20.9% | 18.6% | [Three and Nine Months Ended June 30, 2023, Compared to Three and Nine Months Ended June 30, 2022](index=30&type=section&id=Three%20and%20Nine%20Months%20Ended%20June%2030,%202023,%20Compared%20to%20Three%20and%20Nine%20Months%20Ended%20June%2030,%202022) This section provides a detailed year-over-year performance comparison, including sales, operating expenses, income, and EPS by segment [Sales](index=30&type=section&id=Sales) Total sales and organic sales grew significantly, with pricing contributing positively and currency having a negative impact - Total sales increased **13.7%** (3 months) and **15.3%** (9 months) year-over-year. Organic sales increased **13.2%** (3 months) and **16.6%** (9 months)[118](index=118&type=chunk) - Currency translation decreased sales by **0.7 percentage points** (3 months) and **2.4 percentage points** (9 months). Acquisitions increased sales by **1.2 percentage points** (3 months) and **1.1 percentage points** (9 months)[118](index=118&type=chunk) | Change in Organic Sales vs. Prior Year | Three Months Ended June 30, 2023 | Nine Months Ended June 30, 2023 | | :------------------------------------- | :------------------------------- | :------------------------------ | | North America | 1.7% | 10.3% | | Europe, Middle East and Africa | 33.9% | 29.6% | | Asia Pacific | 44.4% | 30.2% | | Latin America | 6.7% | 9.7% | | Total Company Sales | 13.2% | 16.6% | [Corporate and Other](index=30&type=section&id=Corporate%20and%20Other) Corporate and other expenses increased due to mark-to-market adjustments for compensation plans - Corporate and other expenses increased to **$32.3 million** (3 months) and **$88.8 million** (9 months) in 2023, up from **$15.6 million** and **$69.6 million** in 2022, mainly due to mark-to-market adjustments for compensation plans[121](index=121&type=chunk) [Income before Income Taxes](index=30&type=section&id=Income%20before%20Income%20Taxes) Income before income taxes significantly increased, driven by higher sales and PTC investment gains, partially offset by pension expense - Income before income taxes increased to **$471.8 million** (3 months) and **$1,291.1 million** (9 months) in 2023, up from **$344.2 million** and **$667.8 million** in 2022, primarily due to higher sales and PTC investment fair value adjustments[122](index=122&type=chunk) - Higher non-operating pension expense partially offset the increase in income before income taxes for the nine months ended June 30, 2023[122](index=122&type=chunk) [Total segment operating earnings](index=30&type=section&id=Total%20segment%20operating%20earnings) Total segment operating earnings increased due to higher sales and pricing, partially offset by increased costs and investments - Total segment operating earnings increased **15.6%** (3 months) and **29.6%** (9 months) year-over-year, driven by higher sales volume and pricing[123](index=123&type=chunk) - Increases were partially offset by higher investment spend, incentive compensation, input costs, and unfavorable currency impact (for the nine-month period)[123](index=123&type=chunk) [Income Taxes](index=31&type=section&id=Income%20Taxes) The effective tax rate increased due to lower discrete benefits and PTC adjustments, impacting both reported and adjusted rates | Effective Tax Rate | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Effective tax rate | 15.5% | 14.4% | 16.9% | 12.7% | | Adjusted effective tax rate | 14.1% | 14.5% | 16.2% | 15.2% | - The increase in the effective tax rate was primarily due to lower discrete benefits and PTC adjustments in the current year[124](index=124&type=chunk)[125](index=125&type=chunk) [Diluted EPS and Adjusted EPS](index=31&type=section&id=Diluted%20EPS%20and%20Adjusted%20EPS) Diluted and Adjusted EPS significantly increased, driven by higher sales, improved pre-tax margin, and PTC adjustments | Earnings Per Share | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Diluted EPS | $3.45 | $2.55 | $9.34 | $5.06 | | Adjusted EPS | $3.01 | $2.66 | $8.48 | $6.45 | - The increase in diluted EPS was primarily due to higher sales and pre-tax margin (**21.1%** in Q3 2023 vs. **17.5%** in Q3 2022), influenced by PTC adjustments[126](index=126&type=chunk) - Adjusted EPS increased **13.2%** (3 months) and **31.5%** (9 months) year-over-year, driven by higher sales and improved segment operating margin[126](index=126&type=chunk)[127](index=127&type=chunk) [Intelligent Devices](index=32&type=section&id=Intelligent%20Devices) Intelligent Devices segment reported sales growth, but operating margin saw mixed trends due to investments and mix - Intelligent Devices sales increased **10.2%** (3 months) and **13.2%** (9 months) year-over-year. Organic sales increased **8.2%** (3 months) and **13.5%** (9 months)[129](index=129&type=chunk) - Segment operating margin decreased to **16.8%** (3 months) from **19.7%** due to higher investment, unfavorable mix, and incentive compensation. For the nine months, it increased to **19.8%** from **19.5%** due to higher sales volume and pricing, partially offset by increased costs[130](index=130&type=chunk)[131](index=131&type=chunk) [Software & Control](index=32&type=section&id=Software%20%26%20Control) Software & Control segment achieved significant sales growth and substantial operating margin improvement due to volume and pricing - Software & Control sales increased **23.7%** (3 months) and **24.7%** (9 months) year-over-year. Organic sales increased **24.4%** (3 months) and **27.2%** (9 months)[132](index=132&type=chunk) - Segment operating margin increased to **34.8%** (3 months) from **31.4%** and to **32.8%** (9 months) from **26.6%**, primarily driven by higher sales volume and pricing, partially offset by higher investment spend[133](index=133&type=chunk) [Lifecycle Services](index=32&type=section&id=Lifecycle%20Services) Lifecycle Services segment reported sales growth, but operating margin slightly decreased due to compensation and expansion costs - Lifecycle Services sales increased **7.5%** (3 months) and **8.0%** (9 months) year-over-year. Organic sales increased **8.0%** (3 months) and **10.0%** (9 months)[134](index=134&type=chunk) - Segment operating margin decreased to **9.3%** (3 months) from **9.4%** and to **6.7%** (9 months) from **7.4%**, as higher sales were offset by higher incentive compensation costs and one-time items to expand future profitability[135](index=135&type=chunk) [Supplemental Segment Information](index=33&type=section&id=Supplemental%20Segment%20Information) This section provides a breakdown of purchase accounting depreciation, amortization, and non-operating pension costs by segment | (in millions) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :------------ | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Purchase accounting depreciation and amortization: | | | | | | Intelligent Devices | $1.3 | $0.5 | $3.5 | $1.9 | | Software & Control | $17.1 | $17.3 | $51.2 | $51.8 | | Lifecycle Services | $8.5 | $7.9 | $24.3 | $23.7 | | Non-operating pension and postretirement benefit (credit) cost: | | | | | | Intelligent Devices | $(1.9) | $(4.7) | $23.0 | $(1.9) | | Software & Control | $(1.9) | $(4.7) | $23.0 | $(1.9) | | Lifecycle Services | $(2.7) | $(6.3) | $30.6 | $(2.6) | [Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation](index=34&type=section&id=Adjusted%20Income,%20Adjusted%20EPS,%20and%20Adjusted%20Ef%20ective%20Tax%20Rate%20Reconciliation) This section reconciles GAAP to non-GAAP adjusted income, EPS, and effective tax rate, excluding specific non-operating items | Reconciliation (in millions, except per share) | Three Months Ended June 30, 2023 | Three Months Ended June 30, 2022 | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :--------------------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Net income attributable to Rockwell Automation | $400.2 | $297.9 | $1,084.5 | $593.3 | | Adjusted income | $349.1 | $311.1 | $984.5 | $756.9 | | Diluted EPS | $3.45 | $2.55 | $9.34 | $5.06 | | Adjusted EPS | $3.01 | $2.66 | $8.48 | $6.45 | | Effective tax rate | 15.5% | 14.4% | 16.9% | 12.7% | | Adjusted effective tax rate | 14.1% | 14.5% | 16.2% | 15.2% | - Adjusted income, adjusted EPS, and adjusted effective tax rate exclude non-operating pension and postretirement benefit cost, purchase accounting depreciation and amortization, and change in fair value of investments, along with their tax effects[137](index=137&type=chunk) | Fiscal 2023 Guidance (as of August 1, 2023) | Amount | | :------------------------------------------ | :----- | | Diluted EPS | $12.46 - $12.86 | | Adjusted EPS | $11.70 - $12.10 | | Effective tax rate | ~17.5% | | Adjusted effective tax rate | ~17.5% | [Financial Condition](index=36&type=section&id=Financial%20Condition) The company's financial condition improved with increased cash flow, reduced debt, share repurchases, and strong credit ratings | Cash Flows (in millions) | Nine Months Ended June 30, 2023 | Nine Months Ended June 30, 2022 | | :----------------------- | :------------------------------ | :------------------------------ | | Operating activities | $535.1 | $423.7 | | Investing activities | $88.6 | $(99.2) | | Financing activities | $(709.2) | $(478.5) | | Free cash flow | $437.8 | $323.4 | - The company generated **$355.2 million** from sales of PTC Shares in the first nine months of 2023, compared to **$66.0 million** in the prior year, supporting future cash uses[143](index=143&type=chunk) - Short-term debt decreased, with commercial paper borrowings at **$183.0 million** (**5.10% interest**) and **$65.0 million** drawn on Sensia's line of credit (**6.14% interest**) as of June 30, 2023[144](index=144&type=chunk) - Approximately **1.0 million shares** were repurchased for **$256.2 million** in the first nine months of 2023, with **$995.1 million** remaining under board authorization[145](index=145&type=chunk) - Rockwell Automation maintains **strong credit ratings** (S&P: A-1/A Negative, Moody's: P-2/A3 Stable, Fitch: F1/A Stable) and access to a **$1.5 billion** unsecured revolving credit facility, expiring in June 2027[148](index=148&type=chunk)[152](index=152&type=chunk) [Supplemental Sales Information](index=39&type=section&id=Supplemental%20Sales%20Information) This section reconciles reported sales to organic sales, providing a clearer view of underlying business performance by segment and region | Reconciliation of Reported to Organic Sales by Geographic Region (in millions) | Three Months Ended June 30, 2023 (Reported) | Three Months Ended June 30, 2023 (Organic) | Nine Months Ended June 30, 2023 (Reported) | Nine Months Ended June 30, 2023 (Organic) | | :--------------------------------------------------------------------------- | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | :---------------------------------------- | | North America | $1,260.9 | $1,261.5 | $3,750.4 | $3,762.4 | | Europe, Middle East and Africa | $494.4 | $472.3 | $1,353.7 | $1,368.7 | | Asia Pacific | $343.5 | $356.4 | $974.2 | $1,030.8 | | Latin America | $139.9 | $138.1 | $416.8 | $410.0 | | Total Company Sales | $2,238.7 | $2,228.3 | $6,495.1 | $6,571.9 | | Reconciliation of Reported to Organic Sales by Operating Segment (in millions) | Three Months Ended June 30, 2023 (Reported) | Three Months Ended June 30, 2023 (Organic) | Nine Months Ended June 30, 2023 (Reported) | Nine Months Ended June 30, 2023 (Organic) | | :--------------------------------------------------------------------------- | :------------------------------------------ | :----------------------------------------- | :----------------------------------------- | :---------------------------------------- | | Intelligent Devices | $968.1 | $950.7 | $2,927.5 | $2,936.2 | | Software & Control | $750.6 | $755.2 | $2,065.0 | $2,106.0 | | Lifecycle Services | $520.0 | $522.4 | $1,502.6 | $1,529.7 | | Total Company Sales | $2,238.7 | $2,228.3 | $6,495.1 | $6,571.9 | [Critical Accounting Estimates](index=41&type=section&id=Critical%20Accounting%20Estimates) This section outlines critical accounting estimates, including goodwill impairment testing and retirement benefit discount rates - A quantitative goodwill impairment test for the Sensia reporting unit in Q2 2023 showed its fair value exceeded carrying value by approximately **10%**, based on estimated future revenue growth, margins, and a discount rate of **5.45%**[163](index=163&type=chunk)[164](index=164&type=chunk)[165](index=165&type=chunk)[166](index=166&type=chunk) - The discount rate for the U.S. pension plan assets and liabilities was remeasured at **5.45%** as of June 30, 2023, following settlement accounting rules[166](index=166&type=chunk) [Recent Accounting Pronouncements](index=41&type=section&id=Recent%20Accounting%20Pronouncements) This section refers to Note 1 for details on recently adopted and issued accounting pronouncements - Refer to Note 1 for information on recently adopted and issued accounting pronouncements[168](index=168&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section refers to the Annual Report for market risk disclosures, noting no material changes as of June 30, 2023 - No material change to information regarding foreign currency risk and interest rate risk from the Annual Report on Form 10-K for the year ended September 30, 2022[169](index=169&type=chunk) [Item 4. Controls and Procedures](index=42&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective, with no material changes to internal control over financial reporting - Disclosure controls and procedures were evaluated and deemed **effective** as of June 30, 2023[170](index=170&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter[171](index=171&type=chunk) PART II. OTHER INFORMATION This section provides additional information not covered in the financial statements, including legal and equity matters [Item 1. Legal Proceedings](index=43&type=section&id=Item%201.%20Legal%20Proceedings) This section refers to the Annual Report for legal proceedings, noting no material changes as of June 30, 2023 - No material change to information regarding legal proceedings from the Annual Report on Form 10-K for the year ended September 30, 2022[173](index=173&type=chunk) [Item 1A. Risk Factors](index=43&type=section&id=Item%201A.%20Risk%20Factors) This section refers to the Annual Report for risk factors, noting no material changes as of June 30, 2023 - No material change to information regarding risk factors from the Annual Report on Form 10-K for the year ended September 30, 2022[174](index=174&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=43&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company repurchased 222,127 shares of common stock, with $995.1 million remaining authorized for future repurchases | Share Repurchases (Three Months Ended June 30, 2023) | Total Number of Shares Purchased | Average Price Paid Per Share | | :--------------------------------------------------- | :------------------------------- | :--------------------------- | | April 1 - 30, 2023 | 82,169 | $277.42 | | May 1 - 31, 2023 | 112,790 | $272.69 | | June 1 - 30, 2023 | 27,168 | $309.06 | | Total | 222,127 | $278.88 | - As of June 30, 2023, approximately **$995.1 million** remained authorized for share repurchases under the existing board authorization[175](index=175&type=chunk) [Item 5. Other Information](index=44&type=section&id=Item%205.%20Other%20Information) Several officers adopted Rule 10b5-1 trading arrangements to cover taxes on upcoming restricted stock unit and performance share vests - Matthew Fordenwalt, Nicholas Gangestad, Veena Lakkundi, John Miller, and Brian Shepherd adopted Rule 10b5-1 trading arrangements in May 2023[177](index=177&type=chunk) - These arrangements primarily cover the sale of shares to cover taxes on upcoming restricted stock unit and performance share vests[177](index=177&type=chunk) [Item 6. Exhibits](index=45&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including certifications and interactive data files - Exhibits include certifications from the Chief Executive Officer and Chief Financial Officer (31.1, 31.2, 32.1, 32.2), a letter from Deloitte & Touche LLP (15), and Interactive Data Files (101, 104)[180](index=180&type=chunk) [Signatures](index=46&type=section&id=Signatures) The report was signed by the Senior Vice President and Chief Financial Officer and the Vice President and Controller - The report was signed by Nicholas C. Gangestad (Senior Vice President and Chief Financial Officer) and Terry L. Riesterer (Vice President and Controller) on August 1, 2023[183](index=183&type=chunk)