Rockwell Automation(ROK) - 2024 Q1 - Quarterly Report

Sales Performance - Total sales increased by 3.6% year-over-year to $2.052 billion in Q1 2024, driven by a 1.0$927.3 million, while Software & Control segment sales grew by 5.3% to $603.6 million, and Lifecycle Services segment sales increased by 10.5$521.2 million[116] - North America sales grew by 5.8% to $1.247 billion, while Asia Pacific sales declined by 7.0$275.6 million, primarily due to a high teens decrease in China[119] - Pricing contributed approximately 3 percentage points to total sales growth, while volume decreased sales by 2 percentage points[117] - Total company sales increased to $2,052.1 million in Q4 2023, up from$1,981.0 million in Q4 2022, representing a 3.6% year-over-year growth[40] - Software & Control sales grew 5.3% year-over-year in Q4 2023, with organic sales increasing 4.0% and currency translation contributing 1.3 percentage points[127] - Lifecycle Services sales increased 10.5% year-over-year in Q4 2023, driven by organic growth of 8.1%, currency translation of 1.0%, and acquisitions contributing 1.4%[129] - North America organic sales for Q4 2023 were $1,228.5 million, a 4.2$1,178.9 million in Q4 2022[153] - Europe, Middle East, and Africa organic sales for Q4 2023 were $364.6 million, a 2.2$372.8 million in Q4 2022[153] - Asia Pacific organic sales for Q4 2023 were $274.6 million, a 7.4$296.5 million in Q4 2022[153] - Latin America organic sales for Q4 2023 were $132.2 million, a 0.5$132.8 million in Q4 2022[153] - Total company organic sales for Q4 2023 were $1,999.9 million, a 1.0$1,981.0 million in Q4 2022[153] - Intelligent Devices segment organic sales for Q4 2023 were $894.3 million, a 4.5$936.2 million in Q4 2022[153] - Software & Control segment organic sales for Q4 2023 were $596.1 million, a 4.0$573.3 million in Q4 2022[153] - Lifecycle Services segment organic sales for Q4 2023 were $509.5 million, an 8.1$471.5 million in Q4 2022[153] Operating Earnings and Margins - Total segment operating earnings decreased by 11.3% to $355.5 million, with Intelligent Devices operating margin declining to 16.2$2.04, compared to $2.46 in the same period last year[116] - Corporate and other expenses increased to$40.0 million in Q4 2023, up from $27.3 million in Q4 2022, driven by acquisition costs and mark-to-market adjustments[120] - Income before income taxes decreased to$259.6 million in Q4 2023, down from $467.9 million in Q4 2022, primarily due to lower mark-to-market gains and segment operating earnings[121] - Total segment operating earnings decreased by 11.3$215.2 million in Q1 2024, down from $384.0 million in Q1 2023, with diluted EPS declining to$1.86 from $3.31[124] - Comprehensive income attributable to Rockwell Automation was$275.5 million in Q4 2023, down from $448.3 million in Q4 2022[16] - Net income attributable to Rockwell Automation, Inc. for Q4 2023 was$215.2 million, compared to $384.0 million in Q4 2022[25] - Basic earnings per share (EPS) for Q4 2023 was$1.87, down from $3.33 in Q4 2022[25] - Diluted EPS for Q4 2023 was$1.86, compared to $3.31 in Q4 2022[25] - Adjusted income for Q4 2023 was$236.0 million, compared to $285.3 million in Q4 2022, with adjusted EPS of$2.04 versus $2.46 in the prior year[135] Cash Flow and Liquidity - Cash used for investing activities in Q4 2023 was$817.4 million, primarily due to business acquisitions and capital expenditures[19] - Cash provided by operating activities in Q4 2023 was $32.6 million, down from$66.3 million in Q4 2022, impacted by changes in working capital[19] - Cash dividends declared were $1.25 per share in Q4 2023, up from$1.18 per share in Q4 2022[21] - Cash provided by operating activities decreased to $32.6 million in Q4 2023 from$66.3 million in Q4 2022, primarily due to higher incentive compensation payments, lower pre-tax income, and higher tax payments[137] - Free cash flow was a net outflow of $35.3 million in Q4 2023, compared to a net inflow of$42.1 million in Q4 2022[137] - Short-term debt as of December 31, 2023, includes commercial paper borrowings of $407.0 million with a weighted average interest rate of 5.41$439.5 million as of December 31, 2023, from $1,071.8 million as of September 30, 2023[11] - Total current assets decreased to$4,135.9 million as of December 31, 2023, from $4,910.8 million as of September 30, 2023[11] - The company had$501.4 million in short-term debt as of December 31, 2023, compared to $94.7 million as of September 30, 2023[11] - The company repurchased approximately 0.4 million shares of common stock in Q1 2024 at a total cost of$120.3 million, with $820.0 million remaining for share repurchases under the existing board authorization[139] Acquisitions and Investments - The company aims to add 1$608.5 million, including $43.0 million in contingent consideration[46] - Goodwill increased to$3,966.7 million as of December 31, 2023, from $3,529.2 million as of September 30, 2023, primarily due to the Clearpath acquisition[11] - The company acquired Verve Industrial Protection in November 2023 for a total purchase consideration of$183.2 million, with goodwill of $133.0 million assigned to the Lifecycle Services segment[50] - The company acquired CUBIC in October 2022 and Knowledge Lens in February 2023, with total net assets acquired of$186.2 million and goodwill of $111.3 million assigned to the Intelligent Devices and Lifecycle Services segments respectively[55][56] - Goodwill increased by$400.0 million in Q4 2023, primarily due to acquisitions, with a total balance of $3,966.7 million as of December 31, 2023[60] - Other intangible assets totaled$1,190.4 million as of December 31, 2023, with estimated amortization expenses of $153.5 million in 2024[61] - Total investments increased from$157.7 million as of September 30, 2023, to $162.5 million as of December 31, 2023, driven by growth in equity securities and other investments[66] Long-Term Strategy and Market Conditions - The company's long-term strategy focuses on digitization, artificial intelligence, energy transition, sustainability, and addressing labor shortages through technology differentiation[107] - U.S. Industrial Production (IP) Index declined to 99.0 in Q1 2024 from 99.6 in Q4 2023, while Manufacturing PMI remained below 50 at 47.4, indicating contraction[111] - The company is managing supply chain challenges by extending order visibility, securing long-term supply agreements, and investing in capacity to normalize product lead times[115] Tax and Other Financial Metrics - The effective tax rate decreased to 18.1$673.9 million at the end of Q4 2023, up from $653.6 million at the beginning of the year[41] - Unrecognized tax benefits stood at$10.8 million at December 31, 2023, with accrued interest and penalties of $1.0 million[92] - The company expects to recognize approximately$1,121 million of revenue from unfulfilled performance obligations as of December 31, 2023[37] - Of the $1,121 million in unfulfilled performance obligations,$716 million is expected to be recognized within the next 12 months[37] - Accounts payable included approximately $117.5 million related to supplier financing arrangements as of December 31, 2023[28] - Capital expenditures accrued within Accounts payable and Other current liabilities were$20.5 million at December 31, 2023[26] - The allowance for doubtful accounts was $19.3 million at December 31, 2023, up from$16.8 million at September 30, 2023[24] - Total shareowners' equity increased to $3,787.1 million at December 31, 2023, from$3,743.4 million at September 30, 2023[21] - Long-term debt carrying value was $2,863.0 million as of December 31, 2023, with a fair value of$2,623.1 million[64] - Other current liabilities increased to $608.6 million as of December 31, 2023, primarily due to higher unrealized losses on foreign exchange contracts and accrued interest[65] - Net gain on equity securities was$2.5 million in Q4 2023, compared to $107.1 million in Q4 2022[69] - Net periodic pension benefit cost was$3.4 million in Q4 2023, compared to a credit of $2.5 million in Q4 2022[74] - Other income decreased to$8.9 million in Q4 2023 from $17.3 million in Q4 2022, primarily due to lower non-operating pension and postretirement benefit credits[75] - Accumulated other comprehensive loss decreased from$790.1 million as of September 30, 2023, to $729.8 million as of December 31, 2023, primarily due to currency translation adjustments and net unrealized losses on cash flow hedges[77] - The company reclassified$8.5 million in pre-tax net gains related to cash flow hedges from Accumulated other comprehensive loss into the Consolidated Statement of Operations for the three months ended December 31, 2023[149] - The company expects to reclassify approximately $11.1 million of pre-tax net unrealized losses on cash flow hedges into earnings during the next 12 months[149] Credit and Risk Management - The company replaced its former$1.25 billion unsecured revolving credit facility with a new five-year $1.5 billion unsecured revolving credit facility in June 2022, expiring in June 2027[142] - The company has access to separate short-term unsecured credit facilities of approximately$227.6 million at December 31, 2023, for non-U.S. subsidiaries[144] - The company's credit ratings as of December 31, 2023, include A-1 (short-term) and A (long-term) from Standard & Poor's, P-2 (short-term) and A3 (long-term) from Moody's, and F1 (short-term) and A (long-term) from Fitch Ratings[145] - The majority of the company's cash and cash equivalents were held by non-U.S. subsidiaries as of December 31, 2023[141] - The company uses foreign currency forward exchange contracts to manage foreign currency risks, with no open net investment hedges for the three months ended December 31, 2023[148] - The company maintains insurance coverage for asbestos claims, which is expected to provide substantial coverage for future defense and indemnity costs[84] Intangible Assets and Valuation - The obsolescence factor assumption for the $269.6 million technology asset valuation was 12 years, with a 2-year change potentially impacting intangible assets by$82 million[156] - The weighted average royalty rate assumption for the $41.6 million trademark intangible asset was 2.05$20 million[156] Share-Based Compensation and Equity - Share-based compensation expense increased to $24.2 million in Q4 2023 from$18.4 million in Q4 2022[44]