Results of Operations
Forward-Looking Statements
This Quarterly Report contains statements (including certain projections,
guidance and business trends) that are "forward-looking statements" as defined
in the Private Securities Litigation Reform Act of 1995. Words such as
"believe", "estimate", "project", "plan", "expect", "anticipate", "will",
"intend" and other similar expressions may identify forward-looking statements.
Actual results may differ materially from those projected as a result of certain
risks and uncertainties, many of which are beyond our control, including but not
limited to:
•the severity and duration of disruptions to our business due to pandemics,
including the COVID-19 pandemic, natural disasters, acts of war, strikes,
terrorism, social unrest or other causes, including the impacts of the COVID-19
pandemic and efforts to manage it on the global economy, liquidity and financial
markets, demand for our hardware and software products, solutions and services,
our supply chain, our work force, our liquidity and the value of the assets we
own;
•the availability and price of components and materials;
•macroeconomic factors, including global and regional business conditions
(including adverse impacts in certain markets, such as Oil & Gas), the
availability and cost of capital, commodity prices, the cyclical nature of our
customers' capital spending, sovereign debt concerns and currency exchange
rates;
•the successful completion, integration, and management of strategic
transactions and achievement of the expected benefits of these transactions;
•laws, regulations and governmental policies affecting our activities in the
countries where we do business, including those related to tariffs, taxation,
and trade controls;
•the availability, effectiveness and security of our information technology
systems;
•our ability to manage and mitigate the risk related to security vulnerabilities
and breaches of our hardware and software products, solutions and services;
•the successful development of advanced technologies and demand for and market
acceptance of new and existing hardware and software products;
•our ability to manage and mitigate the risks associated with our solutions and
services businesses;
•the successful execution of our cost productivity initiatives;
•competitive hardware and software products, solutions and services and pricing
pressures, and our ability to provide high quality products, solutions and
services;
•our ability to attract, develop, and retain qualified personnel;
•disruptions to our distribution channels or the failure of distributors to
develop and maintain capabilities to sell our products;
•intellectual property infringement claims by others and the ability to protect
our intellectual property;
•the uncertainty of claims by taxing authorities in the various jurisdictions
where we do business;
•the uncertainties of litigation, including liabilities related to the safety
and security of the hardware and software products, solutions and services we
sell;
•risks associated with our investment in common stock of PTC Inc., including the
potential for volatility in our reported quarterly earnings associated with
changes in the market value of such stock;
•our ability to manage costs related to employee retirement and health care
benefits; and
•other risks and uncertainties, including but not limited to those detailed from
time to time in our Securities and Exchange Commission (SEC) filings.
These forward-looking statements reflect our beliefs as of the date of filing
this report. We undertake no obligation to update or revise any forward-looking
statement, whether as a result of new information, future events or otherwise.
See Item 1A, Risk Factors, of our Annual Report on Form 10-K for the fiscal year
ended September 30, 2020, for more information.
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Non-GAAP Measures
The following discussion includes organic sales, total segment operating
earnings and margin, Adjusted Income, Adjusted EPS, Adjusted Effective Tax Rate
and free cash flow, which are non-GAAP measures. See Supplemental Sales
Information for a reconciliation of reported sales to organic sales and a
discussion of why we believe this non-GAAP measure is useful to investors. See
Results of Operations for a reconciliation of income before income taxes to
total segment operating earnings and margin and a discussion of why we believe
these non-GAAP measures are useful to investors. See Results of Operations for a
reconciliation of net income attributable to Rockwell Automation, diluted EPS
and effective tax rate to Adjusted Income, Adjusted EPS and Adjusted Effective
Tax Rate, respectively, and a discussion of why we believe these non-GAAP
measures are useful to investors. See Financial Condition for a reconciliation
of cash flows from operating activities to free cash flow and a discussion of
why we believe this non-GAAP measure is useful to investors.
Overview
Rockwell Automation, Inc. is a global leader in industrial automation and
digital transformation. We connect the imaginations of people with the potential
of technology to expand what is humanly possible, making the world more
productive and more sustainable. Overall demand for our hardware and software
products, solutions and services is driven by:
•investments in manufacturing, including upgrades, modifications and expansions
of existing facilities or production lines and new facilities or production
lines;
•investments in basic materials production capacity, which may be related to
commodity pricing levels;
•our customers' needs for faster time to market, operational productivity, asset
management and reliability, and enterprise risk management;
•our customers' needs to continuously improve quality, safety and
sustainability;
•industry factors that include our customers' new product introductions, demand
for our customers' products or services and the regulatory and competitive
environments in which our customers operate;
•levels of global industrial production and capacity utilization;
•regional factors that include local political, social, regulatory and economic
circumstances; and
•the spending patterns of our customers due to their annual budgeting processes
and their working schedules.
Long-term Strategy
Our strategy is to bring The Connected Enterprise to life by integrating control
and information across the enterprise. We deliver customer outcomes by combining
advanced industrial automation with the latest information technology. Our
strategy seeks to:
•achieve organic sales growth in excess of the automation market by expanding
our served market and strengthening our competitive differentiation;
•grow market share of our core platforms;
•drive double digit growth in information solutions and connected services;
•drive double digit growth in annual recurring revenue;
•acquire companies that serve as catalysts to organic growth by increasing our
information solutions and high-value services offerings and capabilities,
expanding our global presence, or enhancing our process expertise;
•enhance our market access by building our channel capability and partner
network;
•deploy human and financial resources to strengthen our technology leadership
and our intellectual capital business model;
•continuously improve quality and customer experience; and
•drive annual cost productivity.
By implementing the above strategy, we seek to achieve our long-term financial
goals, including above-market organic sales growth, increasing the portion of
our total revenue that is recurring in nature, EPS growth above sales growth,
return on invested capital in excess of 20 percent and free cash flow equal to
about 100 percent of Adjusted Income. We expect acquisitions to add a percentage
point or more per year to long-term sales growth.
Our customers face the challenge of remaining globally cost competitive and
automation can help them achieve their productivity and sustainability
objectives. Our value proposition is to help our customers reduce time to
market, lower total cost of ownership, improve asset utilization and manage
enterprise risks.
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U.S. Industrial Economic Trends
In the third quarter of fiscal 2021, sales in the U.S. accounted for over half
of our total sales. The various indicators we use to gauge the direction and
momentum of our served U.S. markets include:
•The Industrial Production (IP) Index, published by the Federal Reserve, which
measures the real output of manufacturing, mining and electric and gas
utilities. The IP Index is expressed as a percentage of real output in a base
year, currently 2017. Historically, there has been a meaningful correlation
between the changes in the IP Index and the level of automation investment made
by our U.S. customers in their manufacturing base.
•The Manufacturing Purchasing Managers' Index (PMI), published by the Institute
for Supply Management (ISM), which indicates the current and near-term state of
manufacturing activity in the U.S. According to the ISM, a PMI measure above 50
indicates that the U.S. manufacturing economy is generally expanding while a
measure below 50 indicates that it is generally contracting.
The table below depicts trends in these indicators since the quarter ended
September 2019. These figures are as of July 27, 2021, and are subject to
revision by the issuing organizations. In the third quarter of fiscal 2021,
Manufacturing PMI softened compared to the prior quarter but remained well above
50. The June PMI represents the thirteenth consecutive month of expansion in the
overall economy. The IP index continued to improve during the quarter and
compared to the prior year, although it is still slightly below the pre-pandemic
level.
                               IP Index       PMI
Fiscal 2021 quarter ended:
June 2021                            99.6      60.6
March 2021                           98.2      64.7
     December 2020                   97.4      60.5
Fiscal 2020 quarter ended:
September 2020                       95.5      55.7
June 2020                            87.1      52.2
March 2020                          100.0      49.7
December 2019                       101.7      47.8
Fiscal 2019 quarter ended:
September 2019                      102.4      48.2


Note: Economic indicators are subject to revision by the issuing organizations.



Non-U.S. Economic Trends
In the third quarter of fiscal 2021, sales to customers outside the U.S.
accounted for less than half of our total sales. These customers include both
indigenous companies and multinational companies with a global presence. In
addition to the global factors previously mentioned in the "Overview" section,
international demand, particularly in emerging markets, has historically been
driven by the strength of the industrial economy in each region, investments in
infrastructure and expanding consumer markets. We use changes in key countries'
gross domestic product and IP as indicators of the growth opportunities in each
region where we do business.
Industrial output outside the U.S. was mixed in the third quarter of fiscal
2021. Manufacturing PMI readings were mixed as well. The industrial output
projection for the fourth quarter of fiscal 2021 is generally positive, with
most regions projected to grow sequentially.

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Outlook
We are actively monitoring the impacts of the COVID-19 pandemic on all aspects
of our business and geographies. While the duration and severity of those
impacts are highly uncertain, they have had, and could continue to have, an
adverse effect on our business, financial condition and results of operations.
The supply chain is stressed by increased demand, along with pandemic-related
and other global events that have put additional pressures on manufacturing
output and freight lanes. This has resulted in and could continue to result in:
•disruptions in our supply chain;
•difficulty in procuring or inability to procure components and materials
necessary for our hardware and software products, solutions and services;
•increased costs for commodities, components, and freight services; and
•delays in delivering, or an inability to deliver, our hardware and software
products, solutions, and services.
We are closely managing our end-to-end supply chain, from sourcing to production
to customer delivery, with a particular focus on all critical and at-risk
suppliers and supplier locations globally.
We are updating our guidance considering our performance through the first three
quarters of the year, our expectation of continued orders strength, and
anticipation of continued supply chain constraints. The following table provides
guidance for projected sales growth and earnings per share for fiscal 2021:
             Sales Growth Guidance                                EPS Guidance
Reported sales growth                    ~12%      Diluted EPS               $12.85 - $13.05
Organic sales growth1                     ~8%      Adjusted EPS1              $9.10 - $9.30
   Inorganic sales growth                ~1.5%
   Currency translation                  ~2.5%


1Organic sales growth and Adjusted EPS are non-GAAP measures. See Supplemental
Sales Information and Adjusted Income, Adjusted EPS and Adjusted Effective Tax
Rate Reconciliation for more information on these non-GAAP measures.
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Summary of Results of Operations
The following table reflects our sales and operating results (in millions,
except per share amounts and percentages). Information for the three and nine
months ended June 30, 2020, has been recast to reflect our new operating
segments. See Note 15 in the Consolidated Financial Statements for further
information on our change in operating segments:
                                                              Three Months Ended                     Nine Months Ended
                                                                   June 30,                              June 30,
                                                            2021               2020               2021               2020
Sales
Intelligent Devices (a)                                 $   882.9          $   659.9          $ 2,454.8          $ 2,221.5
Software & Control (b)                                      509.6              364.7            1,452.9            1,265.4
Lifecycle Services (c)                                      455.7              369.4            1,281.9            1,272.9
Total sales (d)                                         $ 1,848.2          $ 1,394.0          $ 5,189.6          $ 4,759.8
Segment operating earnings(1)
Intelligent Devices (e)                                 $   193.6          $   111.6          $   535.8          $   452.9
Software & Control (f)                                      128.3               82.1              411.2              359.3
Lifecycle Services (g)                                       46.8               35.7              121.1              127.8
Total segment operating earnings(2) (h)                     368.7              229.4            1,068.1              940.0
Purchase accounting depreciation and amortization           (12.9)             (10.6)             (37.7)             (30.1)
Corporate and other                                         (29.2)             (26.4)             (87.6)             (76.9)

Non-operating pension and postretirement benefit cost (34.3)


    (8.6)             (48.3)             (25.9)
Gain on investments                                          43.3              175.5              624.6              101.7
Legal settlement                                                -                  -               70.0                  -
Interest (expense) income, net                              (22.1)             (24.8)             (67.2)             (72.3)
Income before income taxes (i)                              313.5              334.5            1,521.9              836.5
Income tax provision                                        (44.5)             (20.3)            (252.2)             (77.0)
Net income                                                  269.0              314.2            1,269.7              759.5
Net loss attributable to noncontrolling interests            (2.3)              (3.6)              (9.9)              (1.2)
Net income attributable to Rockwell Automation          $   271.3          $   317.8          $ 1,279.6          $   760.7

Diluted EPS                                             $    2.32          $    2.73          $   10.91          $    6.52

Adjusted EPS(3)                                         $    2.31          $    1.32          $    7.10          $    5.95

Diluted weighted average outstanding shares                 117.0              116.4              117.1              116.5

Total segment operating margin(2) (h/d)                      19.9  %            16.5  %            20.6  %            19.7  %

Pre-tax margin (i/d)                                         17.0  %            24.0  %            29.3  %            17.6  %

Intelligent Devices segment operating margin (e/a)           21.9  %            16.9  %            21.8  %            20.4  %
Software & Control segment operating margin (f/b)            25.2  %            22.5  %            28.3  %            28.4  %
Lifecycle Services segment operating margin (g/c)            10.3  %             9.7  %             9.4  %            10.0  %


(1)See Note 15 in the Consolidated Financial Statements for the definition of
segment operating earnings.
(2)Total segment operating earnings and total segment operating margin are
non-GAAP financial measures. We exclude purchase accounting depreciation and
amortization, corporate and other, non-operating pension and postretirement
benefit cost, gains and losses on investments, the $70 million legal settlement
in fiscal 2021, certain corporate initiatives, interest (expense) income - net
and income tax provision because we do not consider these costs to be directly
related to the operating performance of our segments. We believe total segment
operating earnings and total segment operating margin are useful to investors as
measures of operating performance. We use these measures to monitor and evaluate
the profitability of our operating segments. Our measures of total segment
operating earnings and total segment operating margin may be different from
measures used by other companies.
(3)Adjusted EPS is a non-GAAP earnings measure that excludes net income (loss)
attributable to noncontrolling interests, purchase accounting depreciation and
amortization expense attributable to Rockwell Automation, non-operating pension
and postretirement benefit cost, and gains and losses on investments, including
their respective tax effects. See Adjusted Income, Adjusted EPS and Adjusted
Effective Tax Rate Reconciliation for more information on this non-GAAP measure.
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Three and Nine Months Ended June 30, 2021, Compared to Three and Nine Months
Ended June 30, 2020
Sales
Sales increased 32.6 percent and 9.0 percent year over year in the three and
nine months ended June 30, 2021, respectively. Organic sales increased 26.4
percent and 4.7 percent in the three and nine months ended June 30, 2021,
respectively. Currency translation increased sales by 5.1 percentage points and
2.7 percentage points in the three and nine months ended June 30, 2021,
respectively. Acquisitions increased sales by 1.1 percentage points and 1.6
percentage points in the three and nine months ended June 30, 2021,
respectively.
Pricing contributed approximately one percentage point to sales growth in the
three months ended June 30, 2021, and did not have a significant impact on sales
growth in the nine months ended June 30, 2021.
The table below presents our sales, attributed to the geographic regions based
upon country of destination, and the percentage change from the same period a
year ago (in millions, except percentages):
                                                                                                   Change in Organic
                                                                           Change vs.                 Sales(1) vs.
                                            Three Months Ended         Three Months Ended          Three Months Ended
                                               June 30, 2021             June 30, 2020               June 30, 2020
North America                               $        1,086.7                       31.6  %                      29.2  %
EMEA                                                   377.3                       34.6  %                      21.0  %
Asia Pacific                                           274.8                       32.8  %                      23.0  %
Latin America                                          109.4                       35.6  %                      25.5  %
Total Sales                                 $        1,848.2                       32.6  %                      26.4  %


                                                                                                   Change in Organic
                                                                           Change vs.                 Sales(1) vs.
                                             Nine Months Ended         Nine Months Ended         Nine Months Ended June
                                               June 30, 2021             June 30, 2020                  30, 2020
North America                               $        3,064.7                        7.3  %                       5.5  %
EMEA                                                 1,052.8                       13.9  %                       1.2  %
Asia Pacific                                           743.6                       16.7  %                       9.8  %
Latin America                                          328.5                       (4.3) %                      (1.6) %
Total Sales                                 $        5,189.6                        9.0  %                       4.7  %


(1) Organic sales and organic sales growth exclude the effect of acquisitions,
changes in currency exchange rates, and divestitures. See Supplemental Sales
Information for information on these non-GAAP measures.
•The increase in North America reported and organic sales in the three months
ended June 30, 2021, compared to the prior period was due to strong growth
across discrete, process, and hybrid industries. North America sales in the nine
months ended June 30, 2021, increased in discrete and hybrid industries,
partially offset by weakness in process industries, particularly Oil & Gas.
•EMEA reported sales and organic sales increased year over year in the three and
nine months ended June 30, 2021, primarily due to strength in Food & Beverage
and Tire. Reported sales also increased due to currency translation and sales
from acquisitions.
•Reported and organic sales in Asia Pacific increased in the three and nine
months ended June 30, 2021, primarily due to strength in Semiconductor, Life
Sciences, and Tire. Reported sales also increased due to favorable currency
translation.
•Latin America reported and organic sales increased in the three months ended
June 30, 2021, led by Food & Beverage and Automotive. Latin America reported and
organic sales decreased in the nine months ended June 30, 2021, due to weakness
in Oil & Gas. Currency translation contributed to the increase in reported sales
in the three months ended June 30, 2021, and to the decrease in reported sales
in the nine months ended June 30, 2021.
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Three and Nine Months Ended June 30, 2021, Compared to Three and Nine Months
Ended June 30, 2020
Corporate and Other
Corporate and other expense was $29.2 million and $26.4 million in the three
months ended June 30, 2021, and 2020, respectively. Corporate and other expense
was $87.6 million and $76.9 million in the nine months ended June 30, 2021, and
2020, respectively. The increase in the nine months ended June 30, 2021, was
primarily due to mark-to-market adjustments related to our deferred and
non-qualified compensation plans.
Income before Income Taxes
Income before income taxes decreased to $313.5 million in the three months ended
June 30, 2021, from $334.5 million in the three months ended June 30, 2020, due
to lower fair-value gains recognized in fiscal 2021 versus fiscal 2020 in
connection with our investment in PTC (the "PTC adjustments"). Total segment
operating earnings increased 60.7 percent in the three months ended June 30,
2021, primarily due to higher sales.
Income before income taxes increased to $1,521.9 million in the nine months
ended June 30, 2021, from $836.5 million in the nine months ended June 30, 2020.
The increase in income before income taxes in the nine months ended June 30,
2021, was primarily due to the PTC adjustments, higher operating earnings, and a
$70 million pre-tax favorable legal settlement in the first quarter of fiscal
2021. Total segment operating earnings increased 13.6 percent in the nine months
ended June 30, 2021, primarily due to higher sales.
Income Taxes
The effective tax rate for the three months ended June 30, 2021, was 14.2
percent compared to 6.1 percent for the three months ended June 30, 2020. The
increase in the effective tax rate was primarily due to the tax effects of the
fair-value adjustments recognized in fiscal 2021 and fiscal 2020 in connection
with our investment in PTC, partially offset by other discrete items. Our
Adjusted Effective Tax Rate for the three months ended June 30, 2021, was 14.6
percent compared to 14.1 percent for the three months ended June 30, 2020.
The effective tax rate for the nine months ended June 30, 2021, was 16.6 percent
compared to 9.2 percent for the nine months ended June 30, 2020. Our Adjusted
Effective Tax Rate for the nine months ended June 30, 2021, was 15.6 percent
compared to 11.4 percent for the nine months ended June 30, 2020. The increases
in the effective tax rate and the Adjusted Effective Tax Rate were primarily due
to tax benefits recognized upon the formation of the Sensia joint venture in
fiscal 2020 and other discrete items.
Diluted EPS and Adjusted EPS
Fiscal 2021 third quarter net income attributable to Rockwell Automation was
$271.3 million or $2.32 per share, compared to $317.8 million or $2.73 per share
in the third quarter of fiscal 2020. The decreases in net income attributable to
Rockwell Automation and diluted EPS were primarily due to the PTC adjustments.
Fiscal 2021 third quarter Adjusted EPS was $2.31 in the third quarter of fiscal
2021, up 75 percent compared to $1.32 in the third quarter of fiscal 2020,
primarily due to higher sales.
Net income attributable to Rockwell Automation was $1,279.6 million or $10.91
per share in the nine months ended June 30, 2021, compared to $760.7 million or
$6.52 per share in the nine months ended June 30, 2020. The increases in net
income attributable to Rockwell Automation and diluted EPS were primarily due to
the PTC adjustments. Adjusted EPS was $7.10 in the nine months ended June 30,
2021, up 19 percent compared to $5.95 in the nine months ended June 30, 2020,
primarily due to higher sales.
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Three and Nine Months Ended June 30, 2021, Compared to Three and Nine Months
Ended June 30, 2020
Intelligent Devices
Sales
Intelligent Devices sales increased 33.8 percent and 10.5 percent year over year
in the three and nine months ended June 30, 2021, respectively. Intelligent
Devices organic sales increased 28.8 percent and increased 7.8 percent in the
three and nine months ended June 30, 2021, respectively. Currency translation
increased sales by 5.0 percentage points and 2.7 percentage points in the three
and nine months ended June 30, 2021, respectively. The growth in reported and
organic sales in the three and nine months ended June 30, 2021, was broad-based
across the regions.
Segment Operating Margin
Intelligent Devices segment operating earnings increased 73.5 percent and 18.3
percent year over year in the three and nine months ended June 30, 2021,
respectively. Segment operating margin increased to 21.9 percent and increased
to 21.8 percent in the three and nine months ended June 30, 2021, respectively,
from 16.9 percent and 20.4 percent, respectively, in the same periods a year
ago. The increases in segment operating margin were primarily due to higher
sales.
Software & Control
Sales
Software & Control sales increased 39.7 percent and 14.8 percent year over year
in the three and nine months ended June 30, 2021, respectively. Software &
Control organic sales increased 31.5 percent and 8.9 percent in the three and
nine months ended June 30, 2021, respectively. Currency translation increased
sales by 5.5 percentage points and 2.8 percentage points in the three and nine
months ended June 30, 2021, respectively. Acquisitions increased sales by 2.7
percentage points and 3.1 percentage points in the three and nine months ended
June 30, 2021, respectively. The growth in reported and organic sales in the
three and nine months ended June 30, 2021, was broad-based across the regions.
Segment Operating Margin
Software & Control segment operating earnings increased 56.3 percent and 14.4
percent year over year in the three and nine months ended June 30, 2021,
respectively. Segment operating margin increased to 25.2 percent in the three
months ended June 30, 2021, from 22.5 percent in the same period a year ago,
driven by higher sales, partially offset by higher investment spend. Segment
operating margin was 28.3 percent in the nine months ended June 30, 2021,
compared to 28.4 percent in the same period a year ago.
Lifecycle Services
Sales
Lifecycle Services sales increased 23.4 percent and 0.7 percent year over year
in the three and nine months ended June 30, 2021, respectively. Lifecycle
Services organic sales increased 17.2 percent and decreased 4.7 percent in the
three and nine months ended June 30, 2021, respectively. Currency translation
increased sales by 4.6 percentage points and 2.4 percentage points in the three
and nine months ended June 30, 2021, respectively. Acquisitions increased sales
by 1.6 percentage points and 3.0 percentage points in the three and nine months
ended June 30, 2021, respectively. Both reported and organic sales increased in
all regions in both periods except for declines in Latin America in the three
and nine months ended June 30, 2021, and declines in North America reported and
organic sales and EMEA organic sales in the nine months ended June 30, 2021.
Segment Operating Margin
Lifecycle Services segment operating earnings increased 31.1 percent and
decreased 5.2 percent year over year in the three and nine months ended June 30,
2021, respectively. Segment operating margin increased to 10.3 percent in the
three months ended June 30, 2021, compared to 9.7 percent in the same period a
year ago, primarily due to higher sales, partially offset by the reinstatement
of incentive compensation. Segment operating margin decreased to 9.4 percent in
the nine months ended June 30, 2021, compared to 10.0 percent in the same period
a year ago primarily due to the reinstatement of incentive compensation,
partially offset by favorable project mix, cost savings actions taken in the
prior year, and improved utilization.
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Supplemental Segment Information
Purchase accounting depreciation and amortization and non-operating pension and
postretirement benefit cost are not allocated to our operating segments because
these costs are excluded from our measurement of each segment's operating
performance for internal purposes. If we were to allocate these costs, we would
attribute them to each of our segments as follows (in millions):
                                                              Three Months Ended                   Nine Months Ended
                                                                   June 30,                            June 30,
                                                            2021               2020              2021              2020
Purchase accounting depreciation and amortization
Intelligent Devices                                     $      0.7          $   0.7          $     2.1          $   2.1
Software & Control                                             4.0              2.0               10.7              4.4
Lifecycle Services                                             8.1              7.7               24.2             22.8
Non-operating pension and postretirement benefit cost
Intelligent Devices                                            8.4              1.6               10.7              4.9
Software & Control                                             8.4              1.6               10.7              4.9
Lifecycle Services                                            11.2              2.2               14.3              6.6


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Table of Contents Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate Reconciliation



Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate are non-GAAP
earnings measures that exclude net income (loss) attributable to noncontrolling
interests, purchase accounting depreciation and amortization expense
attributable to Rockwell Automation, non-operating pension and postretirement
benefit cost, and gains and losses on investments, including their respective
tax effects. Non-operating pension and postretirement benefit cost is defined as
all components of our net periodic pension and postretirement benefit cost
except for service cost. See Note 10 in the Consolidated Financial Statements
for more information on our net periodic pension and postretirement benefit
cost.
We believe that Adjusted Income, Adjusted EPS and Adjusted Effective Tax Rate
provide useful information to our investors about our operating performance and
allow management and investors to compare our operating performance period over
period. Adjusted EPS is also used as a financial measure of performance for our
annual incentive compensation. Our measures of Adjusted Income, Adjusted EPS and
Adjusted Effective Tax Rate may be different from measures used by other
companies. These non-GAAP measures should not be considered a substitute for net
income attributable to Rockwell Automation, diluted EPS and effective tax rate.
The following are reconciliations of net income attributable to Rockwell
Automation, diluted EPS, and effective tax rate to Adjusted Income, Adjusted EPS
and Adjusted Effective Tax Rate, respectively (in millions, except per share
amounts and percentages):
                                                        Three Months Ended                   Nine Months Ended
                                                             June 30,                            June 30,
                                                       2021              2020              2021              2020
Net income attributable to Rockwell Automation     $   271.3          $ 317.8          $ 1,279.6          $ 760.7
Non-operating pension and postretirement benefit
cost                                                    34.3              8.6               48.3             25.9
Tax effect of non-operating pension and
postretirement benefit cost                             (8.2)            (2.4)             (12.2)            (7.2)

Change in fair value of investments1                   (43.3)          (175.5)            (624.6)          (101.7)
Tax effect of the change in fair value of
investments1                                             9.2                -              119.5                -
Purchase accounting depreciation and amortization
attributable to Rockwell Automation                     10.0              7.6               28.8             21.1

Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation (2.4)


(1.8)              (7.0)            (5.0)
Adjusted Income                                    $   270.9          $ 154.3          $   832.4          $ 693.8

Diluted EPS                                        $    2.32          $  2.73          $   10.91          $  6.52
Non-operating pension and postretirement benefit
cost                                                    0.29             0.07               0.41             0.22
Tax effect of non-operating pension and
postretirement benefit cost                            (0.07)           (0.02)             (0.10)           (0.06)

Change in fair value of investments1                   (0.37)           (1.51)             (5.33)           (0.87)
Tax effect of the change in fair value of
investments1                                            0.07                -               1.02                -
Purchase accounting depreciation and amortization
attributable to Rockwell Automation                     0.09             0.07               0.25             0.18
Tax effect of purchase accounting depreciation and
amortization attributable to Rockwell Automation       (0.02)           (0.02)             (0.06)           (0.04)
Adjusted EPS                                       $    2.31          $  1.32          $    7.10          $  5.95

Effective tax rate                                      14.2  %           6.1  %            16.6  %           9.2  %
Tax effect of non-operating pension and
postretirement benefit cost                              0.9  %           0.5  %             0.2  %           0.5  %
Tax effect of the change in fair value of
investments1                                            (0.8) %           7.0  %            (1.5) %           1.3  %

Tax effect of purchase accounting depreciation and
amortization attributable to Rockwell Automation         0.3  %           0.5  %             0.3  %           0.4  %
Adjusted Effective Tax Rate                             14.6  %          14.1  %            15.6  %          11.4  %

1Primarily relates to the change in value of our investment in PTC.


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                                                                                     Fiscal 2021 Guidance
Diluted EPS1                                                                           $12.85 - $13.05
Non-operating pension and postretirement benefit cost2                                       0.43

Tax effect of non-operating pension and postretirement benefit cost2

                 (0.11)

Change in fair value of investments3                                                        (5.34)
Tax effect of change in fair value of investments3                                           1.02

Purchase accounting depreciation and amortization attributable to Rockwell Automation

                                                                                   0.33

Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation


                (0.08)
Adjusted EPS1                                                                           $9.10 - $9.30

Effective tax rate                                                                         ~ 15.2%

Tax effect of non-operating pension and postretirement benefit cost2

                 ~ 0.3%
Tax effect of change in fair value of investments3                                         ~ (1.8)%

Tax effect of purchase accounting depreciation and amortization attributable to Rockwell Automation


                ~ 0.3%
Adjusted Effective Tax Rate                                                                ~ 14.0%


1Fiscal 2021 guidance based on Adjusted Income attributable to Rockwell, which
includes an adjustment for Schlumberger's non-controlling interest in Sensia.
2The settlement expense within the expected non-operating pension and
postretirement benefit costs uses actual year-to-date adjustments for guidance,
as estimates of settlement expenses on a forward-looking basis are not available
due to variability, complexity and limited visibility of these items.
3The actual year-to-date adjustments, which are based on PTC's share price at
June 30, 2021, are used for guidance, as estimates of these adjustments on a
forward-looking basis are not available due to variability, complexity and
limited visibility of these items.
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Financial Condition
The following is a summary of our cash flows from operating, investing and
financing activities, as reflected in the Consolidated Statement of Cash Flows
(in millions):
                                                                                Nine Months Ended
                                                                                     June 30,
                                                                              2021              2020
Cash provided by (used for):
Operating activities                                                      $ 1,056.9          $  794.7
Investing activities                                                         (372.2)           (591.1)
Financing activities                                                         (502.8)           (308.3)
Effect of exchange rate changes on cash                                        27.3              (3.9)

Increase (decrease) in cash, cash equivalents, and restricted cash $

209.2 $ (108.6)




The following table summarizes free cash flow (in millions), which is a non-GAAP
financial measure:
                                                         Nine Months Ended
                                                             June 30,
                                                         2021          2020
             Cash provided by operating activities   $  1,056.9      $ 794.7
             Capital expenditures                         (76.6)       (91.9)
             Free cash flow                          $    980.3      $ 702.8


Our definition of free cash flow takes into consideration capital investments
required to maintain our businesses' operations and execute our strategy. Cash
provided by operating activities adds back non-cash depreciation expense to
earnings but does not reflect a charge for necessary capital expenditures. Our
definition of free cash flow excludes the operating cash flows and capital
expenditures related to our discontinued operations, if any. Operating,
investing and financing cash flows of our discontinued operations, if any, are
presented separately in our Consolidated Statement of Cash Flows. In our
opinion, free cash flow provides useful information to investors regarding our
ability to generate cash from business operations that is available for
acquisitions and other investments, service of debt principal, dividends and
share repurchases. We use free cash flow, as defined, as one measure to monitor
and evaluate our performance, including as a financial measure for our annual
incentive compensation. Our definition of free cash flow may differ from
definitions used by other companies.
Cash provided by operating activities was $1,056.9 million for the nine months
ended June 30, 2021, compared to $794.7 million for the nine months ended
June 30, 2020. Free cash flow was $980.3 million for the nine months ended
June 30, 2021, compared to $702.8 million for the nine months ended June 30,
2020. The year over year increases in cash provided by operating activities and
free cash flow were primarily due to higher pre-tax income, including the $70
million favorable legal settlement in the first quarter of fiscal 2021, and a
decrease in incentive compensation payments, partially offset by higher income
tax payments in the first nine months of fiscal 2021 compared to the first nine
months of fiscal 2020.
We repurchased approximately 0.9 million shares of our common stock under our
share repurchase program in the first nine months of fiscal 2021. The total cost
of these shares was $240.2 million, of which $1.8 million was recorded in
accounts payable at June 30, 2021, related to shares that did not settle until
July 2021. At September 30, 2020, there were no outstanding common stock share
repurchases recorded in accounts payable. We repurchased approximately 1.4
million shares of our common stock in the first nine months of fiscal 2020. The
total cost of these shares was $254.7 million, none of which was recorded in
accounts payable at June 30, 2020. Our decision to repurchase shares in the
remainder of 2021 will depend on business conditions, free cash flow generation,
other cash requirements (including acquisitions) and stock price. On July 24,
2019, the Board of Directors authorized us to expend an additional $1.0 billion
to repurchase shares of our common stock. At June 30, 2021, we had approximately
$613.5 million remaining for share repurchases under our existing board
authorizations. See Part II, Item 2, Unregistered Sales of Equity Securities and
Use of Proceeds, for additional information regarding share repurchases.
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We expect future uses of cash to include working capital requirements, capital
expenditures, additional contributions to our retirement plans, acquisitions of
businesses and other inorganic investments, dividends to shareowners,
repurchases of common stock, and repayments of debt. We expect to fund future
uses of cash with a combination of existing cash balances, cash generated by
operating activities, commercial paper borrowings or a new issuance of debt or
other securities. In addition, we have access to unsecured credit facilities
with various banks.
On June 25, 2021, we announced that we entered into an agreement to acquire Plex
Systems for $2.22 billion in cash. The transaction is expected to close in the
fourth quarter of fiscal 2021, subject to customary closing conditions and
completion of regulatory review. The acquisition is expected to be financed with
a combination of cash and short-term and long-term debt.
At June 30, 2021, and September 30, 2020, our total current borrowing capacity
under our unsecured revolving credit facility expiring in November 2023 was
$1.25 billion. We can increase the aggregate amount of this credit facility by
up to $750.0 million, subject to the consent of the banks in the credit
facility. We did not borrow against this credit facility during the periods
ended June 30, 2021, or September 30, 2020. Borrowings under this credit
facility bear interest based on short-term money market rates in effect during
the period the borrowings are outstanding. The terms of this credit facility
contain covenants under which we agree to maintain an EBITDA-to-interest ratio
of at least 3.0 to 1.0. The EBITDA-to-interest ratio is defined in the credit
facility as the ratio of consolidated EBITDA (as defined in the facility) for
the preceding four quarters to consolidated interest expense for the same
period.
LIBOR is the primary basis for determining interest payments on borrowings under
our $1.25 billion credit facility. Banks currently reporting information used to
set U.S dollar LIBOR are currently expected to stop doing so during 2023.
Various parties, including government agencies, are seeking to identify an
alternative rate to replace LIBOR. We are monitoring their efforts, and we will
likely seek to amend contracts to accommodate any replacement rate where one is
not already provided.
Among other uses, we can draw on our credit facility as a standby liquidity
facility to repay our outstanding commercial paper as it matures. This access to
funds to repay maturing commercial paper is an important factor in maintaining
the short-term credit ratings set forth in the table below. Under our current
policy with respect to these ratings, we expect to limit our other borrowings
under our credit facility, if any, to amounts that would leave enough credit
available under the facility so that we could borrow, if needed, to repay all of
our then outstanding commercial paper as it matures.
Separate short-term unsecured credit facilities of approximately $232.1 million
at June 30, 2021, were available to non-U.S. subsidiaries. Borrowings under our
non-U.S. credit facilities at June 30, 2021 and 2020 were not significant. We
were in compliance with all covenants under our credit facilities at June 30,
2021 and 2020. There are no significant commitment fees or compensating balance
requirements under our credit facilities.
Our short-term debt as of June 30, 2021, primarily consisted of $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. There were no commercial
paper borrowings outstanding at June 30, 2021, and September 30, 2020.
We expect to finance the Plex Systems acquisition with a combination of cash and
short-term and long-term debt in the fourth quarter of fiscal 2021. The debt
issuance may impact our credit ratings which are currently under review by the
ratings agencies. The following is a summary of our credit ratings as of
June 30, 2021:

Credit Rating Agency         Short-Term Rating            Long-Term Rating           Outlook
Standard & Poor's                     A-1                           A                    *
Moody's                               P-2                          A3                 Stable
Fitch Ratings                          F1                           A                 Stable


*Our ratings at Standard & Poor's are listed as CreditWatch Negative with no
outlook published due to the Plex Systems acquisition announcement.
Our ability to access the commercial paper market, and the related costs of
these borrowings, is affected by the strength of our credit ratings and market
conditions. Conditions in the commercial paper market have improved since the
COVID-19 pandemic negatively affected this market in March and April 2020, and
we have not experienced any difficulty in accessing the commercial paper market.
If our access to the commercial paper market is adversely affected due to a
change in market conditions or otherwise, we would expect to rely on a
combination of available cash and our unsecured committed credit facility to
provide short-term funding. In such event, the cost of borrowings under our
unsecured committed credit facility could be higher than the cost of commercial
paper borrowings.
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At June 30, 2021, the majority of our cash and cash equivalents were held by
non-U.S. subsidiaries. As a result of the broad changes to the U.S.
international tax system under the Tax Act, in fiscal year 2018 the Company
began to account for substantially all of its non-U.S. subsidiaries as being
immediately subject to tax, while still concluding that earnings are
indefinitely reinvested for a limited number of subsidiaries.
We regularly monitor the third-party depository institutions that hold our cash
and cash equivalents and short-term investments. We diversify our cash and cash
equivalents among counterparties to minimize exposure to any one of these
entities.
We use foreign currency forward exchange contracts to manage certain foreign
currency risks. We enter into these contracts to hedge our exposure to foreign
currency exchange rate variability in the expected future cash flows associated
with certain third-party and intercompany transactions denominated in foreign
currencies forecasted to occur within the next two years. We also use these
contracts to hedge portions of our net investments in certain non-U.S.
subsidiaries against the effect of exchange rate fluctuations on the translation
of foreign currency balances to the U.S. dollar. In addition, we use foreign
currency forward exchange contracts that are not designated as hedges to offset
transaction gains or losses associated with some of our assets and liabilities
resulting from intercompany loans or other transactions with third parties that
are denominated in currencies other than our entities' functional currencies.
Our foreign currency forward exchange contracts are usually denominated in
currencies of major industrial countries. We diversify our foreign currency
forward exchange contracts among counterparties to minimize exposure to any one
of these entities.
Net gains and losses related to derivative forward exchange contracts designated
as cash flow hedges offset the related gains and losses on the hedged items
during the periods in which the hedged items are recognized in earnings. During
the three and nine months ended June 30, 2021, we reclassified $8.6 million and
$21.5 million, respectively, in pre-tax net losses related to cash flow hedges
from accumulated other comprehensive loss into the Consolidated Statement of
Operations. During the three and nine months ended June 30, 2020, we
reclassified $5.3 million and $15.8 million, respectively, in pre-tax net gains
related to cash flow hedges from accumulated other comprehensive loss into the
Consolidated Statement of Operations. We expect that approximately $9.4 million
of pre-tax net unrealized losses on cash flow hedges as of June 30, 2021, will
be reclassified into earnings during the next 12 months.
Information with respect to our contractual cash obligations is contained in
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations, of our Annual Report on Form 10-K for the fiscal year ended
September 30, 2020. We believe that at June 30, 2021, there has been no material
change to this information except for the following. On June 25, 2021, we
announced that we entered into an agreement to acquire Plex Systems for
$2.22 billion in cash. The transaction is expected to close in the fourth
quarter of fiscal 2021, subject to customary closing conditions and completion
of regulatory review. The acquisition is expected to be financed with a
combination of cash and short-term and long-term debt.
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Supplemental Sales Information
We translate sales of subsidiaries operating outside of the United States using
exchange rates effective during the respective period. Therefore, changes in
currency exchange rates affect our reported sales. Sales by acquired businesses
also affect our reported sales. We believe that organic sales, defined as sales
excluding the effects of acquisitions and changes in currency exchange rates,
which is a non-GAAP financial measure, provides useful information to investors
because it reflects regional and operating segment performance from the
activities of our businesses without the effect of acquisitions and changes in
currency exchange rates. We use organic sales as one measure to monitor and
evaluate our regional and operating segment performance. When we acquire
businesses, we exclude sales in the current period for which there are no
comparable sales in the prior period. We determine the effect of changes in
currency exchange rates by translating the respective period's sales using the
same currency exchange rates that were in effect during the prior year. When we
divest a business, we exclude sales in the prior period for which there are no
comparable sales in the current period. Organic sales growth is calculated by
comparing organic sales to reported sales in the prior year, excluding
divestitures. We attribute sales to the geographic regions based on the country
of destination.
The following is a reconciliation of our reported sales by geographic region to
organic sales (in millions):
                                                                                                            Three
                                                                                                            Months
                                                                                                            Ended
                                                                                                           June 30,
                                                     Three Months Ended June 30, 2021                        2020
                                                                                     Effect of
                                                               Effect of             Changes in
                                          Sales               Acquisitions            Currency                              Organic Sales            Sales
North America                       $      1,086.7          $        (8.1)         $     (11.5)                           $      1,067.1          $   826.0
EMEA                                         377.3                   (7.3)               (30.6)                                    339.4              280.4
Asia Pacific                                 274.8                   (0.3)               (20.0)                                    254.5              206.9
Latin America                                109.4                   (0.2)                (7.9)                                    101.3               80.7
Total Company Sales                 $      1,848.2          $       (15.9)         $     (70.0)                           $      1,762.3          $ 1,394.0


                                                                                                                 Nine
                                                                                                                Months
                                                                                                                Ended
                                                                                                               June 30,
                                                          Nine Months Ended June 30, 2021                        2020
                                                                                         Effect of
                                                                   Effect of             Changes in
                                              Sales               Acquisitions            Currency                              Organic Sales            Sales
North America                            $     3,064.7          $       (32.6)         $     (19.2)                           $      3,012.9          $ 2,855.0
Europe, Middle East and Africa                 1,052.8                  (44.5)               (73.2)                                    935.1              924.1
Asia-Pacific                                     743.6                   (0.6)               (43.2)                                    699.8              637.3
Latin America                                    328.5                   (0.3)                 9.8                                     338.0              343.4
Total Company Sales                      $     5,189.6          $       (78.0)         $    (125.8)                           $      4,985.8          $ 4,759.8



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The following is a reconciliation of our reported sales by operating segment to
organic sales (in millions):
                                                                                                               Three
                                                                                                               Months
                                                                                                               Ended
                                                                                                              June 30,
                                                        Three Months Ended June 30, 2021                        2020
                                                                                        Effect of
                                                                  Effect of             Changes in
                                             Sales               Acquisitions            Currency                              Organic Sales            Sales
Intelligent Devices                    $        882.9          $           -          $     (33.1)                           $        849.8          $   659.9
Software & Control                              509.6                  (10.0)               (19.9)                                    479.7              364.7
Lifecycle Services                              455.7                   (5.9)               (17.0)                                    432.8              369.4
Total Company Sales                    $      1,848.2          $       (15.9)         $     (70.0)                           $      1,762.3          $ 1,394.0


                                                                                                               Nine
                                                                                                              Months
                                                                                                              Ended
                                                                                                             June 30,
                                                        Nine Months Ended June 30, 2021                        2020
                                                                                       Effect of
                                                                 Effect of             Changes in
                                            Sales               Acquisitions            Currency                              Organic Sales            Sales
Intelligent Devices                    $     2,454.8          $           -          $     (59.5)                           $      2,395.3          $ 2,221.5
Software & Control                           1,452.9                  (39.3)               (36.1)                                  1,377.5            1,265.4
Lifecycle Services                           1,281.9                  (38.7)               (30.2)                                  1,213.0            1,272.9
Total Company Sales                    $     5,189.6          $       (78.0)         $    (125.8)                           $      4,985.8          $ 4,759.8


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Critical Accounting Estimates
We have prepared the Consolidated Financial Statements in accordance with
accounting principles generally accepted in the United States, which require us
to make estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the consolidated financial statements and revenues
and expenses during the periods reported. These estimates are based on our best
judgment about current and future conditions, but actual results could differ
from those estimates. Information with respect to accounting estimates that are
the most critical to the understanding of our financial statements as they could
have the most significant effect on our reported results and require subjective
or complex judgments by management is contained in Item 7, Management's
Discussion and Analysis of Financial Condition and Results of Operations, of our
Annual Report on Form 10-K for the fiscal year ended September 30, 2020. We
believe that at June 30, 2021, there has been no material change to this
information except as noted below.
Retirement Benefits - Pension
In June 2021, we remeasured our U.S. pension plan assets and liabilities in
accordance with U.S GAAP settlement accounting rules. The discount rate used in
the remeasurement was 3.05 percent compared to 2.90 percent at our September 30,
2020, annual measurement date. The 3.05 percent discount rate was set as of a
June 30, 2021, measurement date and was determined by modeling a portfolio of
bonds that match the expected cash flow of our benefit plans. See Note 10 in the
Consolidated Financial Statements for additional information regarding the
settlement accounting.
Environmental Matters
Information with respect to the effect of compliance with environmental
protection requirements and resolution of environmental claims on us and our
manufacturing operations is contained in Note 17 in the Consolidated Financial
Statements in Item 8, Financial Statements and Supplementary Data, of our Annual
Report on Form 10-K for the fiscal year ended September 30, 2020. We believe
that at June 30, 2021, there has been no material change to this information.
Recent Accounting Pronouncements
See Note 1 in the Consolidated Financial Statements regarding recent accounting
pronouncements.

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