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(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 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; 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; the successful integration and management of strategic transactions and achievement of the expected benefits of these transactions; 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. Table of Contents 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. Table of Contents U.S. Industrial Economic Trends In the second 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 2012. 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 April 28, 2021, and are subject to revision by the issuing organizations. In the second quarter of fiscal 2021, Manufacturing PMI improved compared to the prior quarter. The March PMI represents the tenth consecutive month of expansion in the overall economy. The IP index also improved during the quarter and was at the highest level since the COVID-19 pandemic began, although it is still below the pre-pandemic level. Continued sequential growth is projected for the IP Index in the third quarter of fiscal 2021. IP Index PMI Fiscal 2021 quarter ended: March 2021 105.5 64.7 December 2020 104.9 60.5 Fiscal 2020 quarter ended: September 2020 102.5 55.7 June 2020 93.7 52.2 March 2020 107.7 49.7 December 2019 109.6 47.8 Fiscal 2019 quarter ended: September 2019 109.5 48.2

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

Non-U.S. Economic Trends

Table of Contents

                                Sales Growth Guidance                                                          EPS Guidance
        Reported sales growth                                 9.0% - 12.0%           Diluted EPS                                  $12.53 - $12.93
        Organic sales growth1                                  5.5% - 8.5%           Adjusted EPS1                                 $8.95 - $9.35
           Inorganic sales growth                                 ~1.5%
           Currency translation                                   ~2.0%

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.

        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 six
        months ended March 31, 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                     Six Months Ended
                                                                           March 31,                             March 31,
                                                                    2021               2020               2021               2020
        Intelligent Devices (a)                                 $   850.2          $   785.0          $ 1,571.9          $ 1,561.6
        Software & Control (b)                                      502.3              448.2              943.3              900.7
        Lifecycle Services (c)                                      423.6              448.1              826.2              903.5
        Total sales (d)                                         $ 1,776.1          $ 1,681.3          $ 3,341.4          $ 3,365.8
        Segment operating earnings(1)
        Intelligent Devices (e)                                 $   202.0          $   180.7          $   342.2          $   341.3
        Software & Control (f)                                      149.8              136.8              282.9              277.2
        Lifecycle Services (g)                                       38.3               54.0               74.3               92.1
        Total segment operating earnings(2) (h)                     390.1              371.5              699.4              710.6
        Purchase accounting depreciation and amortization           (13.1)              (9.5)             (24.8)             (19.5)
        Corporate and other                                         (30.4)             (17.7)             (58.4)             (50.5)
        Non-operating pension and postretirement benefit cost        (7.0)              (8.6)             (14.0)             (17.3)
        Gain (loss) on investments                                  190.9             (144.8)             581.3              (73.8)
        Legal settlement                                                -                  -               70.0                  -
        Interest (expense) income, net                              (22.8)             (23.5)             (45.1)             (47.5)
        Income before income taxes (i)                              507.7              167.4            1,208.4              502.0
        Income tax provision                                        (97.4)             (37.5)            (207.7)             (56.7)
        Net income                                                  410.3              129.9            1,000.7              445.3
        Net (loss) income attributable to noncontrolling
        interests                                                    (4.7)              (2.3)              (7.6)               2.4
        Net income attributable to Rockwell Automation          $   415.0          $   132.2          $ 1,008.3          $   442.9
        Diluted EPS                                             $    3.54          $    1.13          $    8.59          $    3.80
        Adjusted EPS(3)                                         $    2.41          $    2.47          $    4.79          $    4.62
        Diluted weighted average outstanding shares                 117.1              116.6              117.1              116.6
        Total segment operating margin(2) (h/d)                      22.0  %            22.1  %            20.9  %            21.1  %
        Pre-tax margin (i/d)                                         28.6  %            10.0  %            36.2  %            14.9  %
        Intelligent Devices segment operating margin (e/a)           23.8  %            23.0  %            21.8  %            21.9  %
        Software & Control segment operating margin (f/b)            29.8  %            30.5  %            30.0  %            30.8  %
        Lifecycle Services segment operating margin (g/c)             9.0  %            12.1  %             9.0  %            10.2  %

(1)See Note 15 in the Consolidated Financial Statements for the definition of segment operating earnings.

                                                                                                            Change in Organic
                                                                                   Change vs.                  Sales(1) vs.
                                                    Three Months Ended         Three Months Ended           Three Months Ended
                                                      March 31, 2021             March 31, 2020               March 31, 2020
        North America                               $        1,065.7                         4.3  %                       2.3  %
        EMEA                                                   354.8                         6.4  %                      (7.1) %
        Asia Pacific                                           246.9                        23.0  %                      15.6  %
        Latin America                                          108.7                       (12.9) %                      (8.2) %
        Total Sales                                 $        1,776.1                         5.6  %                       1.3  %
                                                                                                            Change in Organic
                                                                                   Change vs.                  Sales(1) vs.
                                                     Six Months Ended           Six Months Ended          Six Months Ended March
                                                      March 31, 2021             March 31, 2020                  31, 2020
        North America                               $        1,978.0                        (2.5) %                      (4.1) %
        EMEA                                                   675.5                         4.9  %                      (7.5) %
        Asia Pacific                                           468.8                         8.9  %                       3.5  %
        Latin America                                          219.1                       (16.6) %                      (9.9) %
        Total Sales                                 $        3,341.4                        (0.7) %                      (4.2) %

(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.

Apr 28, 2021


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