ROCKWELL AUTOMATION, INC [ROK] Filings

10-Q 1 rok-20240630.htm 10-Q rok-20240630

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 June 30, 2024


☐			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, former address and former fiscal year, 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 (§232.405 of this chapter) 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, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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 ☑

113,467,383 shares of registrant’s Common Stock were outstanding on June 30, 2024.

Table of Contents

INDEX


			Page No.
PART I. FINANCIAL INFORMATION

Item 1. 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			10

Report of Independent Registered Public Accounting Firm (PCAOB ID No. 34)			27

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations			28

Item 3. Quantitative and Qualitative Disclosures About Market Risk			43

Item 4. Controls and Procedures			43

PART II. OTHER INFORMATION

Item 1. Legal Proceedings			44

Item 1A. Risk Factors			44

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			44

Item 5. Other Information			45

Item 6. Exhibits			46

Signatures			47

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

ROCKWELL AUTOMATION, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(in millions, except per share amounts)


	June 30, 2024		September 30, 2023
ASSETS
Current assets
Cash and cash equivalents	$	406.7	$	1,071.8

Receivables	1,875.1		2,167.4
Inventories	1,356.4		1,404.9
Other current assets	284.6		266.7
Total current assets	3,922.8		4,910.8
Property, net of accumulated depreciation of $1,832.0 and $1,828.3, respectively	735.6		684.2
Operating lease right-of-use assets	406.0		349.4
Goodwill	3,953.7		3,529.2
Other intangible assets, net	1,100.4		852.4
Deferred income taxes	514.4		459.3
Long-term investments	168.3		157.1
Other assets	387.4		361.6
Total	$	11,188.6	$	11,304.0
LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities
Short-term debt	$	816.5	$	94.7
Current portion of long-term debt	308.0		8.6

Accounts payable	844.2		1,150.2
Compensation and benefits	213.6		499.9
Contract liabilities	608.8		592.5
Customer returns, rebates and incentives	378.8		452.0
Other current liabilities	619.5		567.4
Total current liabilities	3,789.4		3,365.3
Long-term debt	2,559.3		2,862.9
Retirement benefits	512.2		503.6
Operating lease liabilities	332.9		285.3
Other liabilities	491.4		543.5
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	2,164.7		2,102.5
Retained earnings	9,395.8		9,255.2
Accumulated other comprehensive loss	(793.5)		(790.1)
Common stock in treasury, at cost (shares held: 67.9 and 66.6, respectively)	(7,622.7)		(7,187.4)
Shareowners’ equity attributable to Rockwell Automation, Inc.	3,325.7		3,561.6
Noncontrolling interests	177.7		181.8
Total shareowners’ equity	3,503.4		3,743.4
Total	$	11,188.6	$	11,304.0

See Notes to Consolidated Financial Statements.

Table of Contents

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Sales
Products and solutions	$	1,809.9	$	2,031.8	$	5,534.3	$	5,891.4
Services	240.7		206.9		694.4		603.7
	2,050.6		2,238.7		6,228.7		6,495.1
Cost of sales
Products and solutions	(1,120.7)		(1,189.9)		(3,416.1)		(3,440.9)
Services	(135.1)		(133.4)		(389.8)		(392.7)
	(1,255.8)		(1,323.3)		(3,805.9)		(3,833.6)
Gross profit	794.8		915.4		2,422.8		2,661.5
Selling, general and administrative expenses	(500.6)		(501.4)		(1,515.7)		(1,472.1)
Change in fair value of investments	(5.0)		85.7		0.9		289.3
Other income (expense) (Note 11)	6.8		6.5		30.5		(83.3)
Interest expense	(41.0)		(34.4)		(113.5)		(104.3)
Income before income taxes	255.0		471.8		825.0		1,291.1
Income tax provision (Note 15)	(23.9)		(73.1)		(115.9)		(218.8)


Net income	231.1		398.7		709.1		1,072.3
Net loss attributable to noncontrolling interests	(0.9)		(1.5)		(4.3)		(12.2)
Net income attributable to Rockwell Automation, Inc.	$	232.0	$	400.2	$	713.4	$	1,084.5
Earnings per share:


Basic	$	2.03	$	3.47	$	6.22	$	9.41



Diluted	$	2.02	$	3.45	$	6.19	$	9.34

Weighted average outstanding shares:
Basic	113.7		114.8		114.2		114.8
Diluted	114.2		115.6		114.7		115.6

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Net income	$	231.1	$	398.7	$	709.1	$	1,072.3
Other comprehensive income (loss)
Pension and other postretirement benefit plan adjustments (net of tax benefit (expense) of $0.0, $(12.8), $0.0, and $(22.6))	0.2		41.3		0.9		72.0
Currency translation adjustments	(31.6)		35.5		9.0		146.6
Net change in cash flow hedges (net of tax (expense) benefit of $(0.2), $2.1, $4.6, and $10.6)	0.1		(5.7)		(13.1)		(26.5)

Other comprehensive (loss) income	(31.3)		71.1		(3.2)		192.1
Comprehensive income	199.8		469.8		705.9		1,264.4
Comprehensive loss attributable to noncontrolling interests	(0.7)		(1.0)		(4.1)		(12.1)
Comprehensive income attributable to Rockwell Automation, Inc.	$	200.5	$	470.8	$	710.0	$	1,276.5

See Notes to Consolidated Financial Statements.

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CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)


	Nine Months Ended June 30,
	2024		2023

Operating activities:
Net income	$	709.1	$	1,072.3
Adjustments to arrive at cash provided by operating activities
Depreciation	120.8		95.2
Amortization of intangible assets	115.4		86.8
Change in fair value of investments	(0.9)		(289.3)
Share-based compensation expense	75.0		65.0
Retirement benefit expense	13.5		118.5
Net loss on disposition of property	0.6		0.8


Pension contributions	(18.7)		(18.5)
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments
Receivables	310.4		(415.2)
Inventories	68.2		(309.9)
Accounts payable	(292.5)		(74.6)
Contract liabilities	15.5		119.8
Compensation and benefits	(297.1)		74.9
Income taxes	(293.7)		(49.2)
Other assets and liabilities	(94.1)		58.5
Cash provided by operating activities	431.5		535.1
Investing activities:
Capital expenditures	(159.8)		(97.3)
Acquisition of businesses, net of cash acquired	(749.2)		(168.0)
Purchases of investments	(10.0)		(5.2)
Proceeds from sale of investments	—		355.2


Other investing activities	(1.0)		3.9
Cash (used for) provided by investing activities	(920.0)		88.6
Financing activities:
Net issuance (repayment) of short-term debt	702.6		(74.1)
Issuance of short-term debt, net of issuance costs	18.8		—
Repayment of short-term debt	—		(18.8)

Cash dividends	(429.3)		(406.9)
Purchases of treasury stock	(476.7)		(257.1)
Proceeds from the exercise of stock options	32.4		75.4
Other financing activities	(34.8)		(27.7)
Cash used for financing activities	(187.0)		(709.2)
Effect of exchange rate changes on cash	1.8		29.7
Decrease in cash, cash equivalents, and restricted cash	(673.7)		(55.8)
Cash, cash equivalents, and restricted cash at beginning of period	1,080.4		507.9
Cash, cash equivalents, and restricted cash at end of period	$	406.7	$	452.1
Components of cash, cash equivalents, and restricted cash
Cash and cash equivalents	$	406.7	$	443.5
Restricted cash, current (Other current assets)	—		8.6

Total cash, cash equivalents, and restricted cash	$	406.7	$	452.1

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 March 31, 2024	$	181.4	$	2,141.9	$	9,449.3	$	(762.0)	$	(7,467.0)	$	3,543.6	$	178.4	$	3,722.0
Net income (loss)	—		—		232.0		—		—		232.0		(0.9)		231.1
Other comprehensive (loss) income	—		—		—		(31.5)		—		(31.5)		0.2		(31.3)
Common stock issued (including share-based compensation impact)	—		22.8		—		—		7.0		29.8		—		29.8
Share repurchases	—		—		—		—		(162.7)		(162.7)		—		(162.7)
Cash dividends declared (1)	—		—		(285.5)		—		—		(285.5)		—		(285.5)


Balance at June 30, 2024	$	181.4	$	2,164.7	$	9,395.8	$	(793.5)	$	(7,622.7)	$	3,325.7	$	177.7	$	3,503.4


	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 March 31, 2023	$	181.4	$	2,049.0	$	8,824.2	$	(796.1)	$	(7,103.0)	$	3,155.5	$	280.0	$	3,435.5
Net income (loss)	—		—		400.2		—		—		400.2		(1.5)		398.7
Other comprehensive income	—		—		—		70.6		—		70.6		0.5		71.1
Common stock issued (including share-based compensation impact)	—		29.2		—		—		22.2		51.4		—		51.4
Share repurchases	—		—		—		—		(62.3)		(62.3)		—		(62.3)
Cash dividends declared (1)	—		—		(272.2)		—		—		(272.2)		—		(272.2)



Balance at June 30, 2023	$	181.4	$	2,078.2	$	8,952.2	$	(725.5)	$	(7,143.1)	$	3,343.2	$	279.0	$	3,622.2

(1) Cash dividends were $2.50 per share and $2.36 per share in the three months ended June 30, 2024 and 2023, respectively.

Table of Contents

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, 2023	$	181.4	$	2,102.5	$	9,255.2	$	(790.1)	$	(7,187.4)	$	3,561.6	$	181.8	$	3,743.4
Net income (loss)	—		—		713.4		—		—		713.4		(4.3)		709.1
Other comprehensive (loss) income	—		—		—		(3.4)		—		(3.4)		0.2		(3.2)
Common stock issued (including share-based compensation impact)	—		62.2		—		—		45.2		107.4		—		107.4
Share repurchases	—		—		—		—		(480.5)		(480.5)		—		(480.5)
Cash dividends declared (1)	—		—		(572.8)		—		—		(572.8)		—		(572.8)


Balance at June 30, 2024	$	181.4	$	2,164.7	$	9,395.8	$	(793.5)	$	(7,622.7)	$	3,325.7	$	177.7	$	3,503.4


	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, 2022	$	181.4	$	2,007.1	$	8,411.8	$	(917.5)	$	(6,957.2)	$	2,725.6	$	291.1	$	3,016.7
Net income (loss)	—		—		1,084.5		—		—		1,084.5		(12.2)		1,072.3
Other comprehensive income	—		—		—		192.0		—		192.0		0.1		192.1
Common stock issued (including share-based compensation impact)	—		71.1		—		—		70.9		142.0		—		142.0
Share repurchases	—		—		—		—		(256.8)		(256.8)		—		(256.8)
Cash dividends declared (1)	—		—		(544.1)		—		—		(544.1)		—		(544.1)


Balance at June 30, 2023	$	181.4	$	2,078.2	$	8,952.2	$	(725.5)	$	(7,143.1)	$	3,343.2	$	279.0	$	3,622.2

(1) Cash dividends were $5.00 per share and $4.72 per share in the nine months ended June 30, 2024 and 2023, 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, 2023. The results of operations for the three and nine months ended June 30, 2024, 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 and economic conditions. Receivables are recorded net of an allowance for doubtful accounts of $22.2 million at June 30, 2024, and $16.8 million at September 30, 2023. The changes to our allowance for doubtful accounts during the three and nine months ended June 30, 2024 and 2023, were not material and primarily consisted of current-period provisions, write-offs 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 June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Net income attributable to Rockwell Automation, Inc.	$	232.0	$	400.2	$	713.4	$	1,084.5
Less: Allocation to participating securities	(1.1)		(1.7)		(3.2)		(4.6)
Net income available to common shareowners	$	230.9	$	398.5	$	710.2	$	1,079.9
Basic weighted average outstanding shares	113.7		114.8		114.2		114.8
Effect of dilutive securities
Stock options	0.5		0.7		0.5		0.7
Performance shares	—		0.1		—		0.1
Diluted weighted average outstanding shares	114.2		115.6		114.7		115.6
Earnings per share:


Basic	$	2.03	$	3.47	$	6.22	$	9.41



Diluted	$	2.02	$	3.45	$	6.19	$	9.34

For the three and nine months ended June 30, 2024, there were 0.5 million shares related to share-based compensation awards that were excluded from the diluted EPS calculation because they were antidilutive. For the three and nine months ended June 30, 2023, there were 0.4 million and 0.5 million shares, respectively, related to share-based compensation awards that were excluded from the diluted EPS calculation because they were antidilutive.

Non-Cash Investing and Financing Activities

Capital expenditures of $29.5 million and $42.5 million were accrued within Accounts payable and Other current liabilities at June 30, 2024 and 2023, respectively. At June 30, 2024 and 2023, respectively, there were $0.6 million and $0.8 million of outstanding common stock share repurchases recorded in Accounts payable that did not settle until the next 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)

Leases

Supplemental cash flow information related to leases consists of (in millions):


	Nine Months Ended June 30,
	2024		2023
Right-of-use assets obtained in exchange for lease obligations
Operating leases	$	118.9	$	38.5
Finance leases	5.2		—

In the nine months ended June 30, 2024 and 2023, we realized changes in our right-of-use assets and lease liabilities, both as a result of new leases and existing leases for which we are reasonably certain to exercise future renewal options.

Supplier Financing Arrangements

The Company maintains agreements with third-party financial institutions that offer voluntary supply chain financing (SCF) programs to suppliers. The SCF programs enable suppliers, at their sole discretion, to sell their receivables to third-party financial institutions in order to receive payment on receivables earlier than the negotiated commercial terms between suppliers and the Company. Supplier sale of receivables to third-party financial institutions is on terms negotiated between the supplier and the respective third-party financial institution. The Company agrees on commercial terms for the goods and services procured from suppliers, including prices, quantities, and payment terms, regardless of whether the supplier elects to participate in the SCF programs. A supplier’s voluntary participation in the SCF programs has no bearing on the Company's payment terms and the Company has no economic interest in a supplier’s decision to participate in the SCF programs. The Company agrees to pay participating third-party financial institutions the stated amount of confirmed invoices from suppliers on the original maturity dates of the invoices. Amounts outstanding related to SCF programs are included in Accounts payable in the Consolidated Balance Sheet and in changes in Accounts payable on the Consolidated Statement of Cash Flows. Accounts payable included approximately $77.2 million and $126.7 million related to these agreements as of June 30, 2024, and September 30, 2023, respectively. The impact of these programs is not material to the Company's overall liquidity.

Recently Adopted Accounting Pronouncements

In September 2022, the Financial Accounting Standards Board (FASB) issued a new standard that requires companies to apply Accounting Standards Codification (ASC) 405-50 to disclose supplier finance program obligations. We adopted the new standard as of October 1, 2023. The adoption of this standard did not have a material impact on our Consolidated Financial Statements.

Recently Issued Accounting Pronouncements

In November 2023, the FASB issued Accounting Standards Update (ASU) 2023-07, which requires expanded interim and annual disclosures of segment information regularly provided to the chief operating decision maker (CODM), the title and position of the CODM, an explanation of how the CODM uses the information in assessing segment performance and deciding how to allocate resources, and an amount for other segment items by reportable segment and a description of its composition. We will expand our disclosures in our 2025 Annual Report on Form 10-K when the standard becomes effective for us.

In December 2023, the FASB issued ASU 2023-09, which requires expanded annual disclosures to the income tax rate reconciliation and the amount of income taxes paid. We will expand our disclosures in our 2026 Annual Report on Form 10-K when the standard becomes effective for us.

We do not expect any other recently issued accounting pronouncements to have a material impact on our Consolidated Financial Statements and related disclosures.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

2. Revenue Recognition

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, the Software & Control segment, and the Lifecycle Services segment. Revenue from the Intelligent Devices segment is predominantly comprised of product sales, which are recognized at a point in time. Revenue from the Software & Control segment is comprised of product sales, which are recognized at a point in time, and 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.

In most countries, we sell primarily through independent distributors in conjunction with our direct sales force. We sell large systems and service offerings principally through our direct sales force, though opportunities are sometimes identified through distributors.

Unfulfilled Performance Obligations

As of June 30, 2024, we expect to recognize approximately $1,035 million of revenue in future periods from unfulfilled performance obligations from existing contracts with customers. We expect to recognize revenue of approximately $625 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 June 30, 2024.

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ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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.


	Three Months Ended June 30, 2024								Three Months Ended June 30, 2023
	Intelligent Devices		Software & Control		Lifecycle Services		Total		Intelligent Devices		Software & Control		Lifecycle Services		Total
North America	$	636.7	$	335.6	$	296.1	$	1,268.4	$	548.5	$	460.9	$	251.5	$	1,260.9
Europe, Middle East, and Africa	144.0		75.9		135.4		355.3		220.4		137.3		136.7		494.4
Asia Pacific	98.6		58.5		103.8		260.9		133.7		113.6		96.2		343.5
Latin America	78.0		42.1		45.9		166.0		65.5		38.8		35.6		139.9
Total Company Sales	$	957.3	$	512.1	$	581.2	$	2,050.6	$	968.1	$	750.6	$	520.0	$	2,238.7


	Nine Months Ended June 30, 2024								Nine Months Ended June 30, 2023
	Intelligent Devices		Software & Control		Lifecycle Services		Total		Intelligent Devices		Software & Control		Lifecycle Services		Total
North America	$	1,877.6	$	1,084.9	$	846.6	$	3,809.1	$	1,714.6	$	1,297.0	$	738.8	$	3,750.4
Europe, Middle East, and Africa	468.7		271.8		402.0		1,142.5		608.2		371.7		373.8		1,353.7
Asia Pacific	296.8		207.3		302.3		806.4		401.7		281.6		290.9		974.2
Latin America	215.0		121.7		134.0		470.7		203.0		114.7		99.1		416.8
Total Company Sales	$	2,858.1	$	1,685.7	$	1,684.9	$	6,228.7	$	2,927.5	$	2,065.0	$	1,502.6	$	6,495.1

Contract Liabilities

Contract liabilities primarily relate to consideration received in advance of performance under the contract.

Below is a summary of our Contract liabilities balance, the portion not expected to be recognized within twelve months is included within Other liabilities in the Consolidated Balance Sheet (in millions):


	June 30, 2024		June 30, 2023
Balance as of beginning of year	$	653.6	$	541.3
Balance as of end of period	669.2		672.5

The most significant changes in our Contract liabilities balance during both the nine months ended June 30, 2024 and 2023, were due to amounts billed during the period, partially offset by revenue recognized on amounts billed during the period and revenue recognized that was included in the Contract liabilities balance at the beginning of the period.

In the nine months ended June 30, 2024, we recognized revenue of approximately $487.3 million that was included in the Contract liabilities balance at September 30, 2023. In the nine months ended June 30, 2023, we recognized revenue of approximately $362.7 million that was included in the Contract liabilities balance at September 30, 2022. We did not have a material amount of revenue recognized in the nine months ended June 30, 2024 and 2023, from performance obligations satisfied or partially satisfied in previous periods.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

3. Share-Based Compensation

We recognized $24.0 million and $75.0 million of pre-tax share-based compensation expense during the three and nine months ended June 30, 2024, respectively. We recognized $23.4 million and $65.0 million of pre-tax share-based compensation expense during the three and nine months ended June 30, 2023, respectively. Our annual grant of share-based compensation takes place during the first quarter of each 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):


	Nine Months Ended June 30,
	2024			2023
	Grants	Wtd. Avg. Share Fair Value		Grants	Wtd. Avg. Share Fair Value
Stock options	217	$	85.91	233	$	77.62
Performance shares	79	295.06		66	340.77
Restricted stock units	251	276.75		236	262.24
Unrestricted stock	6	278.35		7	261.72

4. Inventories

Inventories consist of (in millions):


	June 30, 2024		September 30, 2023
Finished goods	$	509.8	$	545.9
Work in process	338.8		395.7
Raw materials	507.8		463.3
Inventories	$	1,356.4	$	1,404.9

5. Acquisitions

2024 Acquisitions

In October 2023, we acquired Clearpath Robotics, Inc., including its industrial division OTTO Motors (Clearpath), a company that specializes in autonomous robotics for industrial applications, headquartered in Ontario, Canada. We recorded assets acquired and liabilities assumed in connection with this acquisition based on their estimated fair values as of the acquisition date of October 2, 2023. The preliminary aggregate purchase price allocation is as follows (in millions):


	Purchase Price Allocation
Receivables	$	8.1
Inventory	22.0
Goodwill	282.8
Intangible assets	313.4
All other assets	10.2
Total assets acquired	636.5
Less: Deferred tax liability	(8.9)
Less: Liabilities assumed	(18.6)
Net assets acquired	$	609.0

	Purchase Consideration
Cash consideration, net of cash acquired	$	566.0
Contingent consideration	43.0
Total purchase consideration, net of cash acquired	$	609.0

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(Unaudited)

Intangible assets identified include $269.9 million of technology, $41.6 million of trademarks, and $1.9 million of customer relationships. We assigned the full amount of goodwill and all other assets acquired to our Intelligent Devices segment. The goodwill recorded represents intangible assets that do not qualify for separate recognition. This goodwill arises because the purchase price for Clearpath reflects a number of factors including the future earnings and cash flow potential for the business and resulting synergies from the business portfolio and industry expertise. We do not expect the goodwill to be deductible for tax purposes. The intangible assets were valued using an income approach, specifically the relief from royalty method and multi-period excess earnings method. The relief from royalty method calculates value based on hypothetical payments that would be saved by owning an asset rather than licensing it. The multi-period excess earnings method is the isolation of cash flows from a single intangible asset and measures fair value by discounting them to present value. These values are considered level 3 measurements under the U.S. GAAP fair value hierarchy. Refer to Note 9 for further information regarding levels in the fair value hierarchy. The key assumption requiring the use of judgement in the valuation of the technology asset was the obsolescence factor, where we estimated a phase out over 12 years; other assumptions included forecasted revenue growth rates and margin and the discount rate. The key assumption requiring the use of judgement in the valuation of the trademarks asset was the weighted average royalty rate of 2.05 percent; other assumptions included forecasted revenue growth rates and the discount rate.

The purchase price included up to $50 million in contingent consideration that can be earned by sellers if Clearpath achieves revenue targets that it had established prior to the acquisition in two performance periods ending February 29, 2024, and February 28, 2025. We developed various risk-based scenarios and a probability outcome model to measure the fair value of the contingent consideration, which is considered a level 3 measurement under the U.S. GAAP fair value hierarchy. We determined the fair value to be $43 million as of the acquisition date and as of December 31, 2023. We updated the fair value measures during the second quarter to reflect actual contingent consideration earned during the first performance period. In the third quarter of 2024, we assessed the probability outcome model for the second performance period and determined that there are no changes from the second quarter of 2024.

The following table presents the fair value of the contingent consideration in the Consolidated Balance Sheet (in millions):


	Period ended February 29, 2024		Period ended February 28, 2025		Total
Contingent consideration as of December 31, 2023	$	17.5	$	25.5	$	43.0
Adjustment for earnout achieved for first performance period	(7.7)		—		(7.7)
Adjustment to fair value	—		0.7		0.7
Payment of earnout achieved for first performance period	(9.8)		—		(9.8)
Contingent consideration as of June 30, 2024	$	—	$	26.2	$	26.2

The consideration for the amount earned for the first performance period was paid during the third quarter of 2024. The contingent consideration for the second performance period is included in Other current liabilities at June 30, 2024. Any amount earned for the second performance period will be paid during the third quarter of 2025. The $7.0 million net reduction in the fair value of total contingent consideration is reported in Other income (expense) in the Consolidated Statement of Operations for the nine months ended June 30, 2024.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

In November 2023, we acquired Verve Industrial Protection (Verve), a cybersecurity software and services company that focuses specifically on industrial environments. We recorded assets acquired and liabilities assumed in connection with this acquisition based on their estimated fair values as of the acquisition date of November 1, 2023. The preliminary aggregate purchase price allocation is as follows (in millions):


	Purchase Price Allocation
Receivables	$	8.0
Goodwill	133.5
Intangible assets	47.2
All other assets	0.7
Total assets acquired	189.4
Less: Liabilities assumed	(6.2)
Net assets acquired	$	183.2

	Purchase Consideration


Total purchase consideration, net of cash acquired	$	183.2

We assigned the full amount of goodwill to our Lifecycle Services segment. We expect the goodwill to be deductible for tax purposes. The goodwill recorded represents intangible assets that do not qualify for separate recognition.

The allocations of the purchase prices to identifiable assets above are based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. 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 date 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.

Pro forma consolidated sales for the three and nine months ended June 30, 2024, were $2.1 billion and $6.2 billion, respectively, and the impact on earnings was not material. Pro forma consolidated sales for the three and nine months ended June 30, 2023, were $2.3 billion and $6.6 billion, respectively, and the impact on earnings was not material. The preceding pro forma consolidated financial results of operations are as if the preceding 2024 acquisitions occurred on October 1, 2022. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the transaction occurred as of that time.

Total sales from all of the above 2024 acquisitions in the three and nine months ended June 30, 2024, were $13.6 million and $60.4 million, respectively. Total acquisition-related costs from all of the above 2024 acquisitions in the three and nine months ended June 30, 2024 were not material. Net losses from all of the above 2024 acquisitions in the three and nine months ended June 30, 2024, were $9.0 million and $43.0 million, respectively.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

2023 Acquisitions

In October 2022, we acquired CUBIC, a company that specializes in modular systems for the construction of electrical panels, headquartered in Bronderslev, Denmark. We assigned the full amount of goodwill related to this acquisition to our Intelligent Devices segment.

In February 2023, we acquired Knowledge Lens, a services and solutions provider headquartered in Bengaluru, India. We assigned the full amount of goodwill related to this acquisition to our Lifecycle Services segment.

We recorded assets acquired and liabilities assumed in connection with these acquisitions based on their estimated fair values as of the acquisition dates of October 31, 2022, and February 28, 2023, respectively. The aggregate purchase price allocation is as follows (in millions):


	Purchase Price Allocation

Receivables	$	23.8
Inventories	17.7
Property	27.5
Goodwill	111.3
Other intangible assets	54.1
All other assets	21.0
Total assets acquired	255.4
Less: Liabilities assumed	(12.6)
Less: Deferred income taxes	(56.6)

Net assets acquired, excluding cash	$	186.2

	Purchase Consideration
Total purchase consideration, net of cash acquired	$	186.2

Pro forma consolidated sales for the three and nine months ended June 30, 2023, were $2.2 billion and $6.5 billion, respectively, and the impact on earnings was not material. The preceding pro forma consolidated financial results of operations are as if the preceding 2023 acquisitions occurred on October 1, 2022. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the transaction occurred as of that time.

Total sales from all of the above 2023 acquisitions in the three and nine months ended June 30, 2023, were $23.8 million and $59.4 million, respectively. Total acquisition-related costs from all of the above 2023 acquisitions in the three and nine months ended June 30, 2023, were not material.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

6. Goodwill and Other Intangible Assets

Changes in the carrying amount of Goodwill for the nine months ended June 30, 2024, were (in millions):


	Intelligent Devices		Software & Control		Lifecycle Services		Total
Balance as of September 30, 2023	$	595.8	$	2,420.1	$	513.3	$	3,529.2
Acquisition of businesses	282.8		—		133.5		416.3
Translation	3.7		2.9		1.6		8.2
Balance as of June 30, 2024	$	882.3	$	2,423.0	$	648.4	$	3,953.7

Gross carrying value of goodwill	$	882.3	$	2,423.0	$	805.9	$	4,111.2
Accumulated impairment losses	—		—		(157.5)		(157.5)
Goodwill	$	882.3	$	2,423.0	$	648.4	$	3,953.7

We performed our annual evaluation of goodwill and indefinite life intangible assets for impairment as of the beginning of the second quarter of fiscal 2024 and concluded that these assets are not impaired. For our annual evaluation, we performed qualitative tests for our Intelligent Devices, Software & Control, and Lifecycle Services (excluding Sensia) reporting units and a quantitative test for our Sensia reporting unit. We also 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.

Other intangible assets consist of (in millions):


	June 30, 2024
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets
Software products	$	103.4	$	72.2	$	31.2
Customer relationships	616.6		174.1		442.5
Technology	726.8		235.2		491.6
Trademarks	130.9		40.0		90.9
Other	5.7		5.2		0.5
Total amortized intangible assets	1,583.4		526.7		1,056.7
Allen-Bradley® trademark not subject to amortization	43.7		—		43.7
Other intangible assets	$	1,627.1	$	526.7	$	1,100.4


	September 30, 2023
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets
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 $153.3 million in 2024, $149.8 million in 2025, $148.5 million in 2026, $140.4 million in 2027, and $127.8 million in 2028.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

7. Short-Term and Long-Term Debt

Our Short-term debt as of June 30, 2024, includes commercial paper borrowings of $704.0 million, with a weighted average interest rate of 5.38 percent, and a weighted average maturity period of 22 days. We had no commercial paper borrowings as of September 30, 2023. In December 2022, Sensia entered into an unsecured $75.0 million line of credit. As of June 30, 2024, and September 30, 2023, included in Short-term debt was $70.0 million borrowed against the line of credit with an interest rate of 6.17 percent and 6.29 percent, respectively. Also included in Short-term debt as of June 30, 2024, and September 30, 2023, was $23.5 million of interest-bearing loans from Schlumberger (SLB) to Sensia, extended to April 2025. In April 2024, $18.8 million of new interest-bearing loans from SLB to Sensia were entered into and are due August 2024.

The following table presents the carrying amounts and estimated fair values of Long-term debt in the Consolidated Balance Sheet (in millions):


	June 30, 2024				September 30, 2023
	Carrying Value		Fair Value		Carrying Value		Fair Value
Current portion of long-term debt	$	308.0	$	302.6	$	8.6	$	8.6
Long-term debt	2,559.3		2,223.6		2,862.9		2,442.6

We base the fair value of Long-term debt upon quoted market prices for the same or similar issues and therefore consider this a level 2 fair value measurement. The fair value of Long-term debt considers the terms of the debt excluding the impact of derivative and hedging activity. Refer to Note 9 for further information regarding levels in the fair value hierarchy. The carrying value of our Short-term debt approximates fair value.

8. Other Current Liabilities

Other current liabilities consist of (in millions):


	June 30, 2024		September 30, 2023
Unrealized losses on foreign exchange contracts	$	6.1	$	10.8
Product warranty obligations	21.7		18.3
Taxes other than income taxes	53.4		56.9
Accrued interest	38.4		18.6
Dividends payable	144.3		1.5
Income taxes payable	138.2		248.6
Operating lease liabilities	90.3		83.4
Other	127.1		129.3
Other current liabilities	$	619.5	$	567.4

9. Investments

Our investments consist of (in millions):


	June 30, 2024		September 30, 2023
Fixed income securities	$	0.3	$	0.6

Equity securities (other)	105.8		96.0
Other	62.5		61.1
Total investments	168.6		157.7
Less: Short-term investments (1)	(0.3)		(0.6)
Long-term investments	$	168.3	$	157.1

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

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Equity Securities

Equity securities (other) consist of various securities that do not have a readily determinable fair value, which we account for using the measurement alternative under U.S. GAAP. These securities are recorded at the investment cost, less impairment, plus or minus observable price changes (in orderly transactions) of an identical or similar investment of the same issuer in the Consolidated Balance Sheet. Observable price changes are classified as level 2 in the fair value hierarchy, as described below. The carrying values at June 30, 2024, and September 30, 2023, include cumulative upward adjustments from observed price changes of $22.5 million and $17.5 million, respectively. The carrying values at June 30, 2024, and September 30, 2023, include cumulative downward adjustments from impairments of $6.5 million and $1.5 million, respectively.

We record gains and losses on investments within the Change in fair value of investments line in the Consolidated Statement of Operations. The gains and losses on investments we recorded for the following periods were (in millions):


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Net gain on equity securities (level 1)	$	—	$	86.4	$	—	$	290.4
Net loss on equity securities (other)	(5.0)		—		—		—
Equity method (loss) gain on Other investments	—		(0.7)		0.9		(1.1)
Change in fair value of investments	(5.0)		85.7		0.9		289.3

Total net realized gain on equity securities	—		36.9		—		89.8
Total net unrealized (loss) gain on equity securities	$	(5.0)	$	49.5	$	—	$	200.6

Net loss on equity securities (other) in the third quarter of 2024 was an impairment of an equity security. Net gain on equity securities (level 1) in the prior year consisted of the change in fair value and gain on sale of shares of PTC Inc. (PTC) common stock (PTC Shares). As of September 30, 2023, all PTC Shares have been sold.

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.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

10. Retirement Benefits

The components of net periodic pension and postretirement benefit cost were (in millions):


	Pension Benefits
	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Service cost	$	9.3	$	9.4	$	27.8	$	30.6
Interest cost	36.6		35.3		109.9		114.0
Expected return on plan assets	(42.2)		(44.0)		(126.9)		(147.0)
Amortization of prior service cost	—		0.1		—		0.1
Amortization of net actuarial (gain) loss	(0.3)		0.2		(0.8)		(1.8)
Settlement charge	—		2.2		—		120.1
Net periodic pension benefit cost	$	3.4	$	3.2	$	10.0	$	116.0


	Other Postretirement Benefits
	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Service cost	$	0.1	$	0.2	$	0.4	$	0.4
Interest cost	0.6		0.6		1.9		1.7

Amortization of net actuarial loss	0.4		0.1		1.2		0.4
Net periodic postretirement benefit cost	$	1.1	$	0.9	$	3.5	$	2.5

The service cost component is included in Cost of sales and Selling, general and administrative expenses in the Consolidated Statement of Operations. All other components are included in Other income (expense) in the Consolidated Statement of Operations.

11. Other Income (Expense)

The components of Other income (expense) were (in millions):


	Three Months Ended June 30,				Nine Months Ended June 30,
	2024		2023		2024		2023
Interest income	$	3.1	$	1.5	$	11.6	$	4.1
Royalty income	2.8		3.4		9.0		9.3
Legacy product liability and environmental charges	(3.4)		(4.8)		(11.1)		(10.7)
Non-operating pension and postretirement benefit credit (cost)	4.9		5.5		14.7		(87.5)

Other	(0.6)		0.9		6.3		1.5
Other income (expense)	$	6.8	$	6.5	$	30.5