Rockwell Automation Earnings 2020-12-31

Balance Sheet	Income Statement	Cash Flow
Assets, Equity	Rev, G Profit, Net Income	Ops, Inv, Fin

rok-20201231

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

_________________________________________

FORM 10-Q

_________________________________________

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2020


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

Commission file number 1-12383

_________________________________________

Rockwell Automation, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________


Delaware		25-1797617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

1201 South Second Street
Milwaukee,	Wisconsin	53204
(Address of principal executive offices)		(Zip Code)

+1 (414) 382-2000

Registrant’s telephone number, including area code

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock ($1.00 par value)

ROK

New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☑ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☑ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer

☑

Accelerated Filer

☐

Non-accelerated Filer

☐

Smaller Reporting Company

☐

Emerging Growth Company

☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☑

116,155,081 shares of registrant’s Common Stock were outstanding on December 31, 2020.

Table of Contents

INDEX

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ROCKWELL AUTOMATION, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(in millions, except per share amounts)


	December 31, 2020		September 30, 2020
ASSETS
Current assets:
Cash and cash equivalents	$	730.4	$	704.6

Receivables	1,379.0		1,249.1
Inventories	640.6		584.0
Other current assets	182.1		148.1
Total current assets	2,932.1		2,685.8
Property, net of accumulated depreciation of $1,719.9 and $1,674.9, respectively	567.7		574.4
Operating lease right-of-use assets	341.4		342.9
Goodwill	1,902.2		1,650.3
Other intangible assets, net	540.3		479.3
Deferred income taxes	351.5		415.6
Long-term investments	1,345.9		953.5
Other assets	189.9		162.9
Total	$	8,171.0	$	7,264.7
LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities:
Short-term debt	$	150.5	$	24.6

Accounts payable	721.1		687.8
Compensation and benefits	211.0		197.0
Contract liabilities	383.6		325.3
Customer returns, rebates and incentives	212.0		199.6
Other current liabilities	510.4		376.5
Total current liabilities	2,188.6		1,810.8
Long-term debt	1,980.3		1,974.7
Retirement benefits	1,287.2		1,284.0
Operating lease liabilities	268.2		274.7
Other liabilities	572.9		573.7
Commitments and contingent liabilities (Note 13)
Shareowners’ equity:
Common stock ($1.00 par value, shares issued: 181.4)	181.4		181.4
Additional paid-in capital	1,856.3		1,830.7
Retained earnings	7,608.8		7,139.8
Accumulated other comprehensive loss	(1,527.3)		(1,614.2)
Common stock in treasury, at cost (shares held: 65.2 and 65.2, respectively)	(6,561.6)		(6,509.9)
Shareowners’ equity attributable to Rockwell Automation, Inc.	1,557.6		1,027.8
Noncontrolling interests	316.2		319.0
Total shareowners’ equity	1,873.8		1,346.8
Total	$	8,171.0	$	7,264.7

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)


	Three Months Ended December 31,
	2020		2019
Sales
Products and solutions	$	1,394.2	$	1,508.9
Services	171.1		175.6
	1,565.3		1,684.5
Cost of sales
Products and solutions	(806.5)		(866.0)
Services	(112.3)		(115.6)
	(918.8)		(981.6)
Gross profit	646.5		702.9
Selling, general and administrative expenses	(374.6)		(403.2)
Change in fair value of investments	390.4		71.0
Other income (expense) (Note 11)	61.0		(9.7)
Interest expense	(22.6)		(26.4)
Income before income taxes	700.7		334.6
Income tax provision (Note 14)	(110.3)		(19.2)


Net income	590.4		315.4
Net (loss) income attributable to noncontrolling interests	(2.9)		4.7
Net income attributable to Rockwell Automation, Inc.	$	593.3	$	310.7
Earnings per share:


Basic	$	5.11	$	2.68



Diluted	$	5.06	$	2.66

Weighted average outstanding shares:
Basic	116.1		115.7
Diluted	117.1		116.6

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)


	Three Months Ended December 31,
	2020		2019
Net income	$	590.4	$	315.4
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefit plan adjustments (net of tax (expense) of ($8.2) and ($7.9))	27.6		27.4
Currency translation adjustments	69.2		22.1
Net change in unrealized gains and losses on cash flow hedges (net of tax benefit of $3.7 and $1.1)	(9.8)		(2.5)

Other comprehensive income	87.0		47.0
Comprehensive income	677.4		362.4
Comprehensive (loss) income attributable to noncontrolling interests	(2.8)		5.0
Comprehensive income attributable to Rockwell Automation, Inc.	$	680.2	$	357.4

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)


	Three Months Ended December 31,
	2020		2019

Operating activities:
Net income	$	590.4	$	315.4
Adjustments to arrive at cash provided by operating activities:
Depreciation	29.9		30.2
Amortization of intangible assets	14.1		11.7
Change in fair value of investments	(390.4)		(71.0)
Share-based compensation expense	11.5		11.5
Retirement benefit expense	30.0		31.8
Pension contributions	(8.8)		(7.1)
Net loss on disposition of property	0.1		—


Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
Receivables	(85.5)		(85.0)
Inventories	(40.3)		1.7
Accounts payable	20.9		(0.4)
Contract liabilities	51.4		37.3
Compensation and benefits	7.3		(38.6)
Income taxes	72.8		(17.3)
Other assets and liabilities	43.1		10.9
Cash provided by operating activities	346.5		231.1
Investing activities:
Capital expenditures	(27.1)		(37.0)
Acquisition of businesses, net of cash acquired	(283.1)		(238.5)
Purchases of investments	—		(1.0)
Proceeds from maturities of investments	—		5.4
Proceeds from sale of investments	—		37.9
Proceeds from sale of property	0.1		0.2

Cash used for investing activities	(310.1)		(233.0)
Financing activities:
Net issuance of short-term debt	125.9		23.5



Cash dividends	(124.3)		(117.9)
Purchases of treasury stock	(83.5)		(106.0)
Proceeds from the exercise of stock options	48.9		104.8

Other financing activities	(4.2)		—
Cash used for financing activities	(37.2)		(95.6)
Effect of exchange rate changes on cash	26.6		5.3
Increase (decrease) in cash, cash equivalents, and restricted cash	25.8		(92.2)
Cash, cash equivalents, and restricted cash at beginning of period	730.4		1,018.4
Cash, cash equivalents, and restricted cash at end of period	$	756.2	$	926.2
Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	730.4	$	926.2
Restricted cash, noncurrent (Other assets)	25.8		—
Total cash, cash equivalents, and restricted cash	$	756.2	$	926.2

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY

(Unaudited)

(in millions, except per share amounts)


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Common stock in treasury, at cost		Total attributable to Rockwell Automation, Inc.		Noncontrolling interests		Total shareowners' equity
Balance at September 30, 2020	$	181.4	$	1,830.7	$	7,139.8	$	(1,614.2)	$	(6,509.9)	$	1,027.8	$	319.0	$	1,346.8
Net income (loss)	—		—		593.3		—		—		593.3		(2.9)		590.4
Other comprehensive income (loss)	—		—		—		86.9		—		86.9		0.1		87.0
Common stock issued (including share-based compensation impact)	—		25.6		—		—		36.0		61.6		—		61.6
Share repurchases	—		—		—		—		(87.7)		(87.7)		—		(87.7)
Cash dividends declared (1)	—		—		(124.3)		—		—		(124.3)		—		(124.3)


Balance at December 31, 2020	$	181.4	$	1,856.3	$	7,608.8	$	(1,527.3)	$	(6,561.6)	$	1,557.6	$	316.2	$	1,873.8


	Common stock		Additional paid-in capital		Retained earnings		Accumulated other comprehensive loss		Common stock in treasury, at cost		Total attributable to Rockwell Automation, Inc.		Noncontrolling interests		Total shareowners' equity
Balance at September 30, 2019	$	181.4	$	1,709.1	$	6,440.2	$	(1,488.0)	$	(6,438.5)	$	404.2	$	—	$	404.2
Net income	—		—		310.7		—		—		310.7		4.7		315.4
Other comprehensive income (loss)	—		—		—		46.7		—		46.7		0.3		47.0
Common stock issued (including share-based compensation impact)	—		16.3		—		—		101.1		117.4		—		117.4
Share repurchases	—		—		—		—		(100.2)		(100.2)		—		(100.2)
Cash dividends declared (1)	—		—		(117.9)		—		—		(117.9)		—		(117.9)

Adoption of accounting standards	—		—		149.0		(146.8)		—		2.2		—		2.2
Change in noncontrolling interest	—		50.1		—		3.8		—		53.9		314.5		368.4
Balance at December 31, 2019	$	181.4	$	1,775.5	$	6,782.0	$	(1,584.3)	$	(6,437.6)	$	717.0	$	319.5	$	1,036.5

(1) Cash dividends were $1.07 per share and $1.02 per share in the periods ending December 31, 2020 and 2019, respectively.

See Notes to Consolidated Financial Statements.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Basis of Presentation and Accounting Policies

In the opinion of management of Rockwell Automation, Inc. ("Rockwell Automation" or "the Company"), the unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position, results of operations and cash flows for the periods presented and, except as otherwise indicated, such adjustments consist only of those of a normal, recurring nature. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2020. The results of operations for the three-month period ended December 31, 2020, are not necessarily indicative of the results for the full year. All date references to years and quarters herein refer to our fiscal year and fiscal quarter unless otherwise stated.

Receivables

We record an allowance for doubtful accounts based on customer-specific analysis and general matters such as current assessments of past due balances, historic writeoff experience, and economic conditions and expected changes in market conditions. Receivables are stated net of an allowance for doubtful accounts of $14.4 million at December 31, 2020, and $15.2 million at September 30, 2020. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $9.4 million at December 31, 2020, and $8.1 million at September 30, 2020. The changes to our allowance for doubtful accounts during the three months ended December 31, 2020, were not material and primarily consisted of current-period provisions, writeoffs charged against the allowance, recoveries collected, and foreign currency translation.

Earnings Per Share

The following table reconciles basic and diluted earnings per share (EPS) amounts (in millions, except per share amounts):


	Three Months Ended December 31,
	2020		2019
Net income attributable to Rockwell Automation	$	593.3	$	310.7
Less: Allocation to participating securities	(0.7)		(0.3)
Net income available to common shareowners	$	592.6	$	310.4
Basic weighted average outstanding shares	116.1		115.7
Effect of dilutive securities
Stock options	0.9		0.9
Performance shares	0.1		—
Diluted weighted average outstanding shares	117.1		116.6
Earnings per share:


Basic	$	5.11	$	2.68



Diluted	$	5.06	$	2.66

For the three months ended December 31, 2020, there were 0.2 million shares related to share-based compensation awards that were excluded from the diluted EPS calculation because they were antidilutive. For the three months ended December 31, 2019, 2.4 million shares related to share-based compensation awards were excluded from the diluted EPS calculation because they were antidilutive.

Non-Cash Investing and Financing Activities

Capital expenditures of $21.5 million and $10.9 million were accrued within accounts payable and other current liabilities at December 31, 2020 and 2019, respectively. At December 31, 2020 and 2019, there were $4.2 million and $3.5 million, respectively, of outstanding common stock share repurchases recorded in accounts payable that did not settle until the next fiscal quarter. These non-cash investing and financing activities have been excluded from cash used for capital expenditures and treasury stock purchases in the Consolidated Statement of Cash Flows.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Goodwill

We perform our annual evaluation of goodwill and indefinite life intangible assets for impairment as required under accounting principles generally accepted in the United States (U.S. GAAP) during the second quarter of each year, or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. Any excess in carrying value over the estimated fair value is charged to results of operations. For our annual evaluation of goodwill, we may perform a qualitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount in order to determine whether it is necessary to perform a quantitative goodwill impairment test. When performing the quantitative goodwill impairment test, we determine the fair value of each reporting unit under a combination of an income approach derived from discounted cash flows and a market multiples approach using selected comparable public companies. Significant assumptions used in the income approach include: management’s forecasted cash flows, including estimated future revenue growth rates and margins, discount rates, and terminal value. Forecasted future revenue growth rates and margins are based on management’s best estimate about current and future conditions. Discount rates are determined using a weighted average cost of capital adjusted for risk factors specific to the reporting unit, with comparison to market and industry data. The terminal value is estimated following common methodology of calculating the present value of estimated perpetual cash flow beyond the last projected period assuming constant discount and long-term growth rates. Significant assumptions used in the market multiples approach include selection of the comparable public companies and calculation of the appropriate market multiples.

Leases

We have operating leases primarily for real estate, vehicles, and equipment. We determine if a contract is, or contains, a lease at contract inception. A right-of-use (ROU) asset and a corresponding lease liability are recognized at commencement for contracts that are, or contain, a lease with an original term greater than 12 months. ROU assets represent our right to use an underlying asset during the lease term, including periods for which renewal options are reasonably certain to be exercised, and lease liabilities represent our obligation to make lease payments arising from the lease. Lease expense is recognized on a straight-line basis over the lease term for operating leases with an original term of 12 months or less.

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. A portion of our real estate leases is generally subject to annual changes based upon an index. The changes based upon the index are treated as variable lease payments. The variable portion of lease payments is not included in our ROU assets or lease liabilities and is expensed when incurred. We elected to not separate lease and nonlease components of contracts for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

Lease liabilities are recognized at the contract commencement date based on the present value of remaining lease payments over the lease term. To calculate the lease liabilities we use our incremental borrowing rate. We determine our incremental borrowing rate at the commencement date using our unsecured borrowing rate, adjusted for collateralization and lease term. For leases denominated in a currency other than the U.S. dollar, the collateralized borrowing rate in the foreign currency is determined using the U.S. dollar and foreign currency swap spread. Long-term lease liabilities are presented as operating lease liabilities and current lease liabilities are included in other current liabilities in the Consolidated Balance Sheet.

ROU assets are recognized at the contract commencement date at the value of the related lease liability, adjusted for any prepayments, lease incentives received and initial direct costs incurred. Operating lease ROU assets are presented as operating lease right-of-use assets in the Consolidated Balance Sheet.

Lease expenses for operating leases are recognized on a straight-line basis over the lease term and recorded in cost of sales and selling, general and administrative expenses in the Consolidated Statement of Operations.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Recently Adopted Accounting Pronouncements

In February 2016, the Financial Accounting Standards Board (FASB) issued a new standard on accounting for leases that requires lessees to recognize right-of-use assets and lease liabilities for most leases, among other changes to existing lease accounting guidance. The new standard also requires additional qualitative and quantitative disclosures about leasing activities. We adopted the new standard using the modified retrospective transition method, which resulted in an immaterial cumulative-effect adjustment to the opening balance of retained earnings as of October 1, 2019, our adoption date. The amounts of lease right-of-use assets and corresponding lease liabilities recorded in the Consolidated Balance Sheet upon adoption were $316 million and $329 million, respectively. We have implemented necessary changes to accounting policies, processes, controls and systems to enable compliance with this new standard.

In February 2018, the FASB issued a new standard regarding the reporting of comprehensive loss, which gives entities the option to reclassify tax effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) stranded in accumulated other comprehensive loss into retained earnings. We adopted the new standard as of October 1, 2019, and elected to reclassify tax effects of $147 million from accumulated other comprehensive loss into retained earnings.

In June 2016, the FASB issued a new standard that requires companies to utilize a current expected credit losses impairment (CECL) model for certain financial assets, including trade and other receivables. The CECL model requires that estimated expected credit losses, including allowance for doubtful accounts, consider a broader range of information such as economic conditions and expected changes in market conditions. We adopted the new standard as of October 1, 2020. The adoption of this standard did not have a material impact on our Consolidated financial statements.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

2. Revenue Recognition

Nature of Products and Services

Substantially all of our revenue is from contracts with customers. We recognize revenue as promised products are transferred to, or services are performed for, customers in an amount that reflects the consideration to which we expect to be entitled in exchange for those products and services. Our offerings consist of industrial automation and information products, solutions and services.

Our products include hardware, software, and configured-to-order products. Our solutions include custom-engineered systems and software. Our services include customer technical support and repair, asset management and optimization consulting, and training. Also included in our services is a portion of revenue related to spare parts that are managed within our services offering.

Our operations are comprised of the Intelligent Devices segment, Software & Control segment, and Lifecycle Services segment. Revenue from the Intelligent Devices and Software & Control segments is predominantly comprised of product sales which are recognized at a point in time. The Software & Control segment also contains revenue from software products which may be recognized over time if certain criteria are met. Revenue from the Lifecycle Services segment is predominantly comprised of solutions and services which are primarily recognized over time. See Note 16 for more information.

Unfulfilled Performance Obligations

As of December 31, 2020, we expect to recognize approximately $580 million of revenue in future periods from unfulfilled performance obligations from existing contracts with customers. We expect to recognize revenue of approximately $340 million from our remaining performance obligations over the next 12 months with the remaining balance recognized thereafter.

We have applied the practical expedient to exclude the value of remaining performance obligations for (i) contracts with an original term of one year or less and (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed. The amounts above also do not include the impact of contract renewal options that are unexercised as of December 31, 2020.

Disaggregation of Revenue

The following tables present our revenue disaggregation by geographic region for our three operating segments (in millions). We attribute sales to the geographic regions based on the country of destination. Information for the three months ended December 31, 2019, has been recast to reflect our new operating segments. See Note 15 for further information on our change in operating segments.


	Three Months Ended December 31, 2020
	Intelligent Devices		Software & Control		Lifecycle Services		Total
North America	$	449.3	$	266.4	$	196.6	$	912.3
Europe, Middle East and Africa (EMEA)	130.3		84.8		105.6		320.7
Asia Pacific	91.8		62.6		67.5		221.9
Latin America	50.3		27.2		32.9		110.4
Total Company Sales	$	721.7	$	441.0	$	402.6	$	1,565.3


	Three Months Ended December 31, 2019
	Intelligent Devices		Software & Control		Lifecycle Services		Total
North America	$	486.7	$	279.8	$	240.4	$	1,006.9
Europe, Middle East and Africa (EMEA)	127.8		74.1		108.2		310.1
Asia Pacific	97.4		67.0		65.2		229.6
Latin America	64.7		31.6		41.6		137.9
Total Company Sales	$	776.6	$	452.5	$	455.4	$	1,684.5

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Contract Balances

Contract liabilities primarily relate to consideration received in advance of performance under the contract. We do not have significant contract assets as of December 31, 2020.

Below is a summary of our contract liabilities balance:


	December 31, 2020		December 31, 2019
Balance as of beginning of fiscal year	$	325.3	$	275.6
Balance as of end of period	383.6		319.2

The most significant changes in our contract liabilities balance during the three months ended December 31, 2020, were due to amounts billed, partially offset by revenue recognized that was included in the contract liabilities balance at the beginning of the period.

In the three months ended December 31, 2020, we recognized revenue of approximately $113.4 million that was included in the contract liabilities balance at September 30, 2020. We did not have a material amount of revenue recognized in the three months ended December 31, 2020, from performance obligations satisfied or partially satisfied in previous periods.

3. Share-Based Compensation

We recognized $11.5 million of pre-tax share-based compensation expense during each of the three months ended December 31, 2020, and 2019, respectively. Our annual grant of share-based compensation takes place during the first quarter of each fiscal year. The number of shares granted to employees and non-employee directors and the weighted average fair value per share during the periods presented were (in thousands, except per share amounts):


	Three Months Ended December 31,
	2020			2019
	Grants	Wtd. Avg. Share Fair Value		Grants	Wtd. Avg. Share Fair Value
Stock options	195	$	55.47	953	$	35.86
Performance shares	44	298.10		37	265.04
Restricted stock and restricted stock units	126	245.07		45	193.70
Unrestricted stock	4	221.90		5	162.29

4. Inventories

Inventories consist of (in millions):


	December 31, 2020		September 30, 2020
Finished goods	$	276.8	$	243.0
Work in process	165.4		159.1
Raw materials	198.4		181.9
Inventories	$	640.6	$	584.0

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

5. Acquisitions

In October 2020, we acquired Oylo, a privately-held industrial cybersecurity services provider based in Barcelona, Spain. We assigned the full amount of goodwill related to this acquisition to our Lifecycle Services segment.

In December 2020, we acquired Fiix Inc., a privately-held, artificial intelligence enabled computerized maintenance management system (CMMS) company based in Toronto, Ontario, Canada. We assigned the full amount of goodwill related to this acquisition to our Software & Control segment.

We recorded assets acquired and liabilities assumed in connection with these acquisitions based on their estimated fair values as of the respective acquisition dates. The preliminary aggregate purchase price allocation for these acquisitions is as follows (in millions):


	Purchase Price Allocation

Accounts receivable	$	6.2


All other assets	1.7
Goodwill	221.8
Intangible assets	72.1
Total assets acquired	301.8
Less: Liabilities assumed	(10.5)
Less: Deferred income taxes	(4.1)
Net assets acquired	$	287.2

	Purchase Consideration
Total purchase consideration, net of cash acquired	$	287.2

Intangible assets identified include $72.1 million of customer relationships, technology, and trade names (approximately 11-year weighted average useful life). We assigned $12.4 million of goodwill to our Lifecycle Services segment and $209.4 million of goodwill to our Software & Control segment, which represents intangible assets that are not separable such as synergy effects. We do not expect the goodwill to be deductible for tax purposes.

The allocation of the purchase price to identifiable assets for these acquisitions are based on the preliminary valuations performed to determine the fair value of the net assets as of their respective acquisition dates. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined.

Total sales from these acquisitions included in our consolidated results for the three months ended December 31, 2020, and their impact on proforma sales and earnings for the three months ended December 31, 2019, were not material. Acquisition-related costs recorded as expenses for these acquisitions in the three months ended December 31, 2020, were not material.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

6. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended December 31, 2020, are (in millions):


	Architecture & Software		Control Products & Solutions		Intelligent Devices		Software & Control		Lifecycle Services		Total
Balance as of September 30, 2020	$	609.4	$	1,040.9	$	—	$	—	$	—	$	1,650.3
Reallocation due to change in Segments	(609.4)		(1,040.9)		535.1		497.3		617.9		—
Acquisition of businesses	—		—		—		209.4		12.4		221.8
Translation	—		—		10.5		9.3		10.3		30.1
Balance as of December 31, 2020	$	—	$	—	$	545.6	$	716.0	$	640.6	$	1,902.2

During the first quarter of fiscal 2021, we changed our organizational structure resulting in three operating segments: Intelligent Devices, Software & Control, and Lifecycle Services. This change also resulted in the identification of new reporting units. We reassigned our goodwill balances to reflect this new structure using the relative fair value allocation approach required under U.S. GAAP. Under this approach, the fair values of each of our new reporting units were compared to the total fair value of their prior respective reporting units immediately prior to the reorganization to arrive at the reassigned goodwill balances. We determined the reporting unit fair values using the same approach for quantitative goodwill impairment tests described in Note 1 to the Consolidated Financial Statements. We also tested goodwill at the affected reporting units for impairment prior to and subsequent to the reassignment of goodwill and concluded that goodwill was not impaired.

We perform our annual evaluation of goodwill and indefinite life intangible assets for impairment during the second quarter of each year, or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. We assessed the changes in events and circumstances subsequent to our annual test and concluded that no triggering events which would require interim quantitative testing occurred except as described above.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Other intangible assets consist of (in millions):


	December 31, 2020
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Computer software products	$	192.7	$	141.6	$	51.1
Customer relationships	369.4		102.0		267.4
Technology	223.5		89.3		134.2
Trademarks	76.7		33.8		42.9
Other	15.5		14.5		1.0
Total amortized intangible assets	877.8		381.2		496.6
Allen-Bradley® trademark not subject to amortization	43.7		—		43.7
Total	$	921.5	$	381.2	$	540.3


	September 30, 2020
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Computer software products	$	192.7	$	139.0	$	53.7
Customer relationships	351.3		92.5		258.8
Technology	165.8		84.0		81.8
Trademarks	71.7		31.3		40.4
Other	14.4		13.5		0.9
Total amortized intangible assets	795.9		360.3		435.6
Allen-Bradley® trademark not subject to amortization	43.7		—		43.7
Total	$	839.6	$	360.3	$	479.3

Estimated amortization expense is $59.5 million in 2021, $57.9 million in 2022, $56.6 million in 2023, $53.6 million in 2024, and $51.4 million in 2025.

7. Short-term Debt

Our short-term debt as of December 31, 2020, primarily consisted of $125.0 million of commercial paper borrowings and $23.5 million of interest-bearing loans from Schlumberger to Sensia which were originally due September 30, 2020, and are now due September 30, 2021. The weighted average interest rate of the commercial paper outstanding at December 31, 2020 was 0.22 percent. There were no commercial paper borrowings outstanding at September 30, 2020. The short-term loans from Schlumberger were entered into following formation of Sensia in fiscal 2020.

8. Other Current Liabilities

Other current liabilities consist of (in millions):


	December 31, 2020		September 30, 2020
Unrealized losses on foreign exchange contracts	$	60.0	$	24.3
Product warranty obligations	19.7		20.8
Taxes other than income taxes	93.9		58.5
Accrued interest	29.8		14.9

Income taxes payable	111.4		79.8
Operating lease liabilities	94.0		89.7
Other	101.6		88.5
Other current liabilities	$	510.4	$	376.5

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

9. Investments

Our investments consist of (in millions):


	December 31, 2020		September 30, 2020
Fixed income securities	$	0.7	$	0.6
Equity securities	1,265.7		875.3
Other	80.2		78.2
Total investments	1,346.6		954.1
Less: Short-term investments(1)	(0.7)		(0.6)
Long-term investments	$	1,345.9	$	953.5

(1) Short-term investments are included in other current assets in the Consolidated Balance Sheet.

Equity Securities

On July 19, 2018, we purchased 10,582,010 shares of PTC Inc. ("PTC") common stock (the "PTC Shares") in a private placement at a purchase price of $94.50 per share for an aggregate purchase price of approximately $1.0 billion (the "Purchase"). The PTC Shares are considered equity securities. For a period of approximately 3 years after the Purchase, we are subject to entity-specific transfer restrictions subject to certain exceptions. Since the first anniversary of the Purchase, the Company has had the ability to transfer, in the aggregate in any 90-day period, a number of PTC Shares equal to up to 1.0 percent of PTC's total outstanding shares of common stock as of the first day in such 90-day period, but no more than 2.0 percent of PTC's total outstanding shares of common stock in each of the second year and the third year after the Purchase.

Fair Value of Investments

U.S. GAAP defines fair value as the price that would be received for an asset or paid to transfer a liability (exit price) in an orderly transaction between market participants in the principal or most advantageous market for the asset or liability. U.S. GAAP also classifies the inputs used to measure fair value into the following hierarchy:


Level 1:						Quoted prices in active markets for identical assets or liabilities.


Level 2:						Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.


Level 3:						Unobservable inputs for the asset or liability.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while we believe our valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. We did not have any transfers between levels of fair value measurements during the period presented.

The PTC Shares are classified as level 1 in the fair value hierarchy and recognized at fair value in the Consolidated Balance Sheet using the most recent closing price of PTC common stock quoted on Nasdaq. At December 31, 2020, the fair value of the PTC Shares was $1,265.7 million, which was recorded in long-term investments in the Consolidated Balance Sheet. For the three months ended December 31, 2020, and 2019, we recorded gains of $390.4 million and $71.0 million related to the PTC Shares, respectively.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

10. Retirement Benefits

The components of net periodic benefit cost are (in millions):


	Pension Benefits
	Three Months Ended December 31,
	2020		2019
Service cost	$	22.7	$	22.8
Interest cost	31.3		34.2
Expected return on plan assets	(60.4)		(61.2)
Amortization:
Prior service cost	0.4

Price	162.42	EPS	6
Shares	119	P/E	28
MCap	19,377	P/FCF	16
Net Debt	1,238	EBIT	999
TEV	20,615	TEV/EBIT	21
TTM 2019-09-30, in MM, except price, ratios

10-Q	2020-12-31	Filed 2021-01-26
10-K	2020-09-30	Filed 2020-11-10
10-Q	2020-06-30	Filed 2020-07-28
10-Q	2020-03-31	Filed 2020-04-28
10-Q	2019-12-31	Filed 2020-01-29
10-K	2019-09-30	Filed 2019-11-12
10-Q	2019-06-30	Filed 2019-07-25
10-Q	2019-03-31	Filed 2019-04-25
10-Q	2018-12-31	Filed 2019-01-31
10-K	2018-09-30	Filed 2018-11-09
10-Q	2018-06-30	Filed 2018-07-27
10-Q	2018-03-31	Filed 2018-05-02
10-Q	2017-12-31	Filed 2018-01-31
10-K	2017-09-30	Filed 2017-11-15
10-Q	2017-06-30	Filed 2017-08-02
10-Q	2017-03-31	Filed 2017-05-05
10-Q	2016-12-31	Filed 2017-02-02
10-K	2016-09-30	Filed 2016-11-15
10-Q	2016-06-30	Filed 2016-08-03
10-Q	2016-03-31	Filed 2016-05-04
10-Q	2015-12-31	Filed 2016-02-03
10-K	2015-09-30	Filed 2015-11-17
10-Q	2015-06-30	Filed 2015-08-04
10-Q	2015-03-31	Filed 2015-05-06
10-Q	2014-12-31	Filed 2015-02-05
10-K	2014-09-30	Filed 2014-11-18
10-Q	2014-06-30	Filed 2014-08-05
10-Q	2014-03-31	Filed 2014-05-05
10-Q	2013-12-31	Filed 2014-02-06
10-K	2013-09-30	Filed 2013-11-18
10-Q	2013-06-30	Filed 2013-08-07
10-Q	2013-03-31	Filed 2013-05-02
10-K	2012-09-30	Filed 2012-11-19
10-Q	2012-06-30	Filed 2012-08-02
10-Q	2012-03-31	Filed 2012-05-03
10-K	2011-09-30	Filed 2011-11-14
10-Q	2011-06-30	Filed 2011-08-04
10-Q	2011-03-31	Filed 2011-05-05
10-Q	2010-06-30	Filed 2010-08-05
10-Q	2010-03-31	Filed 2010-05-05
10-Q	2009-12-31	Filed 2010-02-08

8-K	2020-11-10
8-K	2020-11-10
8-K	2020-11-04
8-K	2020-10-13
8-K	2020-09-01
8-K	2020-07-28
8-K	2020-04-28
8-K	2020-04-20
8-K	2020-04-08
8-K	2020-02-21
8-K	2020-02-07
8-K	2020-01-29
8-K	2019-11-12
8-K	2019-09-30
8-K	2019-09-03
8-K	2019-07-25
8-K	2019-06-05
8-K	2019-05-29
8-K	2019-04-25
8-K	2019-02-27
8-K	2019-02-20
8-K	2019-02-08
8-K	2019-01-29
8-K	2018-11-13
8-K	2018-11-07
8-K	2018-11-01
8-K	2018-10-10
8-K	2018-07-25
8-K	2018-07-19
8-K	2018-06-11
8-K	2018-06-06
8-K	2018-04-25
8-K	2018-02-19
8-K	2018-02-06
8-K	2018-01-24

EX-10.1	q1fy21rokex101.htm
EX-10.2	q1fy21rokex102.htm
EX-10.3	q1fy21rokex103.htm
EX-15	q1fy21rokex15.htm
EX-31.1	q1fy21rokex311.htm
EX-31.2	q1fy21rokex312.htm
EX-32.1	q1fy21rokex321.htm
EX-32.2	q1fy21rokex322.htm


			Page No.
PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements:

Consolidated Balance Sheet			4

Consolidated Statement of Operations			5

Consolidated Statement of Comprehensive Income			6

Consolidated Statement of Cash Flows			7

Consolidated Statement of Shareowners' Equity			8

Notes to Consolidated Financial Statements			9

Report of Independent Registered Public Accounting Firm			25

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			26

Item 3. Quantitative and Qualitative Disclosures About Market Risk			41

Item 4. Controls and Procedures			41

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			42

Item 1A. Risk Factors			42

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			43

Item 6. Exhibits			44

Signatures			45

ROK 10Q Quarterly Report

Rockwell Automation Earnings 2020-12-31