# Rockwell Automation, Inc: Form 10-K for the period ended Sep 30, 2024 - Company: [Rockwell Automation, Inc](/companies/rok.md) (CIK 1024478) - Form: 10-K - Filed: 2024-11-12 - Accepted by EDGAR: Nov 12, 2024, 20:34 ET - Period: 2024-09-30 - Accession: 0001024478-24-000107 - Inline XBRL: yes - Main document: https://www.sec.gov/Archives/edgar/data/1024478/000102447824000107/rok-20240930.htm - All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1024478/000102447824000107/ ## Figures reported in this filing Standardized XBRL line items for the period ended 2024-09-30. | Line item | Period | Value | XBRL concept | | --- | --- | ---: | --- | | Revenue | 12 months, 2023-10-01 to 2024-09-30 | $8.26bn | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax | | Cost of revenue | 12 months, 2023-10-01 to 2024-09-30 | $5.07bn | us-gaap:CostOfGoodsAndServicesSold | | Gross profit | 12 months, 2023-10-01 to 2024-09-30 | $3.19bn | us-gaap:GrossProfit | | Research and development | 12 months, 2023-10-01 to 2024-09-30 | $477.3m | us-gaap:ResearchAndDevelopmentExpense | | Selling, general and administrative | 12 months, 2023-10-01 to 2024-09-30 | $2.00bn | us-gaap:SellingGeneralAndAdministrativeExpense | | Interest expense | 12 months, 2023-10-01 to 2024-09-30 | $154.6m | us-gaap:InterestExpenseNonoperating | | Income tax | 12 months, 2023-10-01 to 2024-09-30 | $151.8m | us-gaap:IncomeTaxExpenseBenefit | | Net income | 12 months, 2023-10-01 to 2024-09-30 | $952.5m | us-gaap:NetIncomeLoss | | Diluted EPS | 12 months, 2023-10-01 to 2024-09-30 | $8.28 | us-gaap:EarningsPerShareDiluted | | Basic EPS | 12 months, 2023-10-01 to 2024-09-30 | $8.32 | us-gaap:EarningsPerShareBasic | | Diluted shares (weighted) | 12 months, 2023-10-01 to 2024-09-30 | 114,500,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding | | Operating cash flow | 12 months, 2023-10-01 to 2024-09-30 | $863.8m | us-gaap:NetCashProvidedByUsedInOperatingActivities | | Capital expenditure | 12 months, 2023-10-01 to 2024-09-30 | $224.7m | us-gaap:PaymentsToAcquireProductiveAssets | | Dividends paid | 12 months, 2023-10-01 to 2024-09-30 | $571.0m | us-gaap:PaymentsOfDividends | | Share repurchases | 12 months, 2023-10-01 to 2024-09-30 | $594.9m | us-gaap:PaymentsForRepurchaseOfCommonStock | | Cash and equivalents | at 2024-09-30 | $471.0m | us-gaap:CashAndCashEquivalentsAtCarryingValue | | Current assets | at 2024-09-30 | $3.88bn | us-gaap:AssetsCurrent | | Total assets | at 2024-09-30 | $11.23bn | us-gaap:Assets | | Current liabilities | at 2024-09-30 | $3.60bn | us-gaap:LiabilitiesCurrent | | Current portion of debt | at 2024-09-30 | $307.4m | us-gaap:LongTermDebtCurrent | | Short-term borrowings | at 2024-09-30 | $770.8m | us-gaap:ShortTermBorrowings | | Shareholders' equity | at 2024-09-30 | $3.50bn | us-gaap:StockholdersEquity | ## Business As filed, 8,293 characters. ### General Rockwell Automation, Inc. (Rockwell Automation or the Company) is the world’s largest company dedicated to industrial automation and digital transformation. We understand and simplify our customers’ complex production challenges and deliver the most valued solutions that combine technology and industry expertise. As a result, we make our customers more resilient, agile, and sustainable, creating more ways to win. See Item 7. ***Management’s Discussion and Analysis of Financial Condition and Results of Operations*** (MD&A) for additional information on our business and long-term strategy. The Company continues the business founded as the Allen-Bradley Company in 1903. The privately-owned Allen-Bradley Company was a leading North American manufacturer of industrial automation equipment when the former Rockwell International Corporation (RIC) purchased it in 1985. The Company was incorporated in Delaware in connection with a tax-free reorganization completed on December 6, 1996, pursuant to which we divested our former aerospace and defense businesses (the A&D Business) to The Boeing Company (Boeing). In the reorganization, RIC contributed all of its businesses, other than the A&D Business, to the Company and distributed all capital stock of the Company to RIC’s shareowners. Boeing then acquired RIC. As used herein, the terms “we”, “us”, “our”, “Rockwell Automation”, or the “Company” include wholly-owned and controlled majority-owned subsidiaries and predecessors unless the context indicates otherwise. Information included in this Annual Report on Form 10-K refers to our continuing businesses unless otherwise indicated. Whenever an Item of this Annual Report on Form 10-K refers to information in our Proxy Statement for our Annual Meeting of Shareowners to be held on February 4, 2025 (the Proxy Statement), or to information under specific captions in Item 7. ***MD&A***, or in Item 8. ***Financial Statements and Supplementary Data*** (the Consolidated Financial Statements), the information is incorporated in that Item by reference. All date references to years and quarters refer to our fiscal year and quarters, unless otherwise stated. ### Operating Segments We have three operating segments: Intelligent Devices, Software & Control, and Lifecycle Services. The Intelligent Devices segment includes drives, motion, advanced material handling, safety, sensing, industrial components, and configured-to-order products. The Software & Control segment includes control and visualization software and hardware, digital twin, simulation and information software, and network and security infrastructure. The Lifecycle Services segment includes digital consulting, professional services including engineered-to-order solutions, recurring services including cybersecurity, safety, remote monitoring, and asset management, and the Sensia joint venture. Our operating segments share common sales, supply chain, and functional support organizations and conduct business globally. Major markets served by all segments consist of discrete end markets (e.g., Automotive including Electric Vehicle and Battery, Semiconductor, and e-Commerce & Warehouse Automation), hybrid end markets (e.g., Food & Beverage, Life Sciences, and Tire), and process end markets (e.g., Energy, Mining, and Chemicals). See Note 20 in the Consolidated Financial Statements for additional information on our operating segments. ### Geographic Information We do business in more than 100 countries around the world. The largest sales outside the United States on a country of destination basis are in Canada, China, Mexico, Italy, and the United Kingdom. See Item 1A. ***Risk Factors*** for a discussion of risks associated with our global operations. ### Competition Our competitors range from large, diversified corporations that may also have business interests outside of industrial automation to smaller companies that offer a limited portfolio of industrial automation products, solutions, and services. Factors that influence our competitive position include the breadth and performance of our product, solution and services portfolio, technology differentiation, industry and application expertise, installed base, partner ecosystem, global presence and price. Major competitors include Siemens AG, ABB Ltd, Schneider Electric SA, Emerson Electric Co., Mitsubishi Electric Corp., Honeywell International Inc., AVEVA Group plc, Dassault Systemes, and Aspen Technology, Inc. ### Distribution See Item 7. ***MD&A*** for information on our market access strategy, including distributor concentrations. ### Employees See Item 7. ***MD&A*** for information on our employees, including information related to attracting, developing, and retaining highly qualified employees. ### Raw Materials We purchase a wide range of equipment, components, finished products, and materials used in our business. The raw materials essential to the manufacture of our products generally are available at competitive prices. We have a broad base of suppliers and subcontractors. We depend upon the ability of our suppliers and subcontractors to meet performance and quality specifications and delivery schedules. See Item 1A. ***Risk Factors*** for a discussion of risks associated with our reliance on third-party suppliers. ### Backlog See Item 7. ***MD&A*** for information on our order backlog. ### Environmental Protection Requirements Information about the effect of compliance with environmental protection requirements and resolution of environmental claims is contained in Note 17 in the Consolidated Financial Statements. See Item 1A. ***Risk Factors*** for a discussion of risks associated with liabilities and costs related to environmental remediation. ### Patents, Licenses, and Trademarks We own or license numerous patents and patent applications related to our hardware and software products, solutions, and services. While in the aggregate our patents and licenses are important in the operation of our business, we do not believe that loss or termination of any one of them would materially affect our business or financial condition. We have received various claims of patent infringement and requests for patent indemnification. We believe that none of these claims or requests will have a material adverse effect on our financial condition. See Item 1A. ***Risk Factors*** for a discussion of risks associated with our intellectual property. The Company’s name and its registered trademark “Rockwell Automation®” and other trademarks such as “Allen-Bradley®”, “A-B®”, “PlantPAx® Process Automation System™”, and “Connected Enterprise®” are important to all of our business segments. In addition, we own other important trademarks that we use, such as “ControlLogix®” and “CompactLogix®” for our control systems, “PowerFlex®” for our AC drives, “FactoryTalk®”, “Plex Systems®”, and “Fiix®” for our software and cloud offerings, “Clearpath®” and “Otto®” for our mobile robots, and “Verve®” for our asset inventory system and vulnerability management solution. ### Seasonality Our business segments are not subject to significant seasonality. However, the calendarization of our results can vary and may be affected by the seasonal spending patterns of our customers due to their annual budgeting processes and their working schedules. ### Available Information We maintain a website at https://www.rockwellautomation.com. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and any amendments to such reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934 (the Exchange Act), as well as our annual reports to shareowners and Section 16 reports on Forms 3, 4 and 5, are available free of charge on this site through the “Investors” link as soon as reasonably practicable after we file or furnish these reports with the SEC. All reports we file with the SEC are also available free of charge via EDGAR through the SEC’s website at https://www.sec.gov. Our Guidelines on Corporate Governance and charters for our Board committees are also available on our website. The information contained on and linked from our website is not incorporated by reference into this Annual Report on Form 10-K. ## Risk factors As filed, 31,259 characters. In the ordinary course of our business, we face various strategic, operating, compliance, cybersecurity, and financial risks. These risks could have an impact on our business, financial condition, operating results, and cash flows. Our most significant risks are set forth below and elsewhere in this Annual Report on Form 10-K. Our Enterprise Risk Management (ERM) process seeks to identify and address significant risks. Our ERM process assesses, manages, and monitors risks consistent with the integrated risk framework in the *Enterprise Risk Management - Integrated Framework (2017)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). We believe that risk-taking is an inherent aspect of the pursuit of our strategy. Our goal is to manage risks prudently rather than avoid risks. We can mitigate risks and their impact on the Company only to a limited extent. A team of senior executives prioritizes identified risks and assigns an executive to address each major identified risk area and lead action plans to manage risks. Our Board of Directors provides oversight of the ERM process and reviews significant identified risks. The Audit Committee of the Board of Directors also reviews significant financial risk exposures, and the steps management has taken to monitor and manage them. Our other Board committees also play a role in risk management, as set forth in their respective charters. Our goal is to proactively manage risks using a structured approach in conjunction with strategic planning, with the intent to preserve and enhance shareowner value. However, the risks set forth below and elsewhere in this Annual Report on Form 10-K and other risks and uncertainties could adversely affect us and cause our results to vary materially from recent results or from our anticipated future results. ### Industry and Economic Risks ***Adverse changes in macroeconomic or industry conditions may result in decreases in our sales and profitability.*** We are subject to macroeconomic cycles and when recessions occur, we may experience reduced, canceled or delayed orders, payment delays or defaults, supply chain disruptions, or other adverse events as a result of the economic challenges faced by our customers, prospective customers, and suppliers. As our distributor partners and customers work to manage working capital and inventory levels, we may experience volatility in orders. Demand for our hardware and software products, solutions, and services is sensitive to changes in levels of production and the financial performance of major industries that we serve. As economic activity slows, credit markets tighten, or sovereign debt concerns arise, companies tend to reduce their levels of capital spending, which could result in decreased demand for our hardware and software products, solutions, and services. As a global company operating in over 100 countries, we face risks related to foreign currency markets. A strengthening U.S. Dollar (USD) may adversely impact our sales and profitability related to business we do outside the U.S. Economic, political, regulatory, and compliance risks, particularly in emerging markets, can restrict our ability to exchange, transact, or pay dividends with foreign currencies we hold. Oil & Gas is a major industry that we serve, including through our Sensia joint venture. When adverse Oil & Gas industry events arise, companies may reduce their levels of spending, which could result in decreased demand for our hardware and software products, solutions, and services. Demand for our hardware and software products, solutions, and services is sensitive to industry volatility and risks including those related to commodity prices, supply and demand dynamics, production costs, geological and political activities, and environmental regulations including those intended to reduce the impact of climate change. ***We face the potential harms of natural disasters, including those as a result of climate change, pandemics, acts of war, terrorism, international conflicts, or other disruptions to our operations, the duration and severity of which are highly uncertain and difficult to predict.*** Our business depends on the movement of people and goods around the world. Natural disasters (including but not limited to those as a result of climate change), pandemics, acts or threats of war or terrorism, international conflicts, power outages, fires, explosions, equipment failures, sabotage, political instability, and the actions taken by governments could cause damage to or disrupt our business operations, our distribution network, our suppliers or our customers, and could create economic instability. Disruptions to our information technology (IT) infrastructure from system failures, shutdowns, power outages, telecommunication or utility failures, and other events, including disruptions at third-party IT and other service providers, could also interfere with or disrupt our operations. Although it is not possible to predict such events or their consequences, these events could decrease demand for our hardware and software products, solutions, or services, increase our costs, or make it difficult or impossible for us to deliver products, solutions, or services. ### Our industry is highly competitive. We face strong competition in all of our market segments in several significant respects. We compete based on breadth and scope of our hardware and software product portfolio and solution and service offerings, technology differentiation, the domain expertise of our employees and partners, product performance, quality of our hardware and software products, solutions, and services, knowledge of integrated systems and applications that address our customers’ business challenges, pricing, delivery, and customer service. The relative importance of these factors differs across the geographic markets and product areas that we serve and across our market segments. We seek to maintain competitive pricing levels across and within geographic markets by continually developing advanced technologies for new hardware and software products and product enhancements and offering complete solutions for our customers’ business problems. If we fail to achieve our objectives, to keep pace with technological changes including the development of artificial intelligence and machine learning, or to provide high quality hardware and software products, solutions, and services, we may lose business or experience price erosion and correspondingly lower sales and margins. We expect the level of competition to remain high in the future, which could limit our ability to maintain or increase our market share or profitability. ***Volatility and disruption of the capital and credit markets may result in increased costs to maintain our capital structure.*** Our ability to access the credit markets and the costs of borrowing are affected by the strength of our credit rating and current market conditions. If our access to credit, including the commercial paper market, is adversely affected by a change in market conditions or otherwise, our cost of borrowings may increase or our ability to fund operations may be reduced. ### Business and Operational Risks ### We rely on suppliers to provide equipment, components, and services. Our business requires that we buy equipment, components, and services including finished products, electronic components, and commodities. Our reliance on suppliers involves certain risks, including: - shortages of components, commodities, or other materials, which could adversely affect our manufacturing efficiencies and ability to make timely delivery of our products, solutions, and services; - changes in the cost of these purchases due to inflation, exchange rate fluctuations, taxes, tariffs, commodity market volatility, or other factors that affect our suppliers; - poor quality or an insecure supply chain, which could adversely affect the reliability and reputation of our hardware and software products, solutions, and services; - embargoes, sanctions, and other trade restrictions that may affect our ability to purchase from various suppliers; and - intellectual property risks such as challenges to ownership of rights or alleged infringement by suppliers. Any of these uncertainties could adversely affect our profitability and ability to compete. We also maintain several single-source supplier relationships because either alternative sources are not available, or the relationship is advantageous due to performance, quality, support, delivery, capacity, or price considerations. Unavailability of, or delivery delays for, single-source components or products could adversely affect our ability to ship the related products in a timely manner. The effect of unavailability or delivery delays would be more severe if associated with our higher volume and more profitable products. Even where substitute sources of supply are available, qualifying alternative suppliers and establishing reliable supplies could cost more or result in delays and a loss of sales. ***Failures or security breaches of our commercial product offerings (which includes hardware, software, services, and solutions), manufacturing environment, supply chain, or information and operational technology systems could have an adverse effect on our business.*** We rely heavily on technology in our commercial product offerings for use in our customers’ manufacturing environment, and in our enterprise infrastructure. Despite the implementation of security measures, our systems are vulnerable to unauthorized access by nation states, hackers, cyber-criminals, malicious insiders, and other actors who may engage in fraud, theft of confidential or proprietary information, or sabotage. Our systems could be compromised by malware (including ransomware), cyber-attacks, and other events, ranging from widespread, non-targeted, global cyber threats to targeted advanced persistent threats. Given our commercial product offerings can be used in critical infrastructure and critical manufacturing, these threats could indicate increased risk for our commercial product offerings, manufacturing, and IT infrastructure. The current cyber threat environment indicates increased risk for all companies, including those in industrial automation and information technology. Like other global companies, we have experienced cyber threats and incidents, although none have been material or had a material adverse effect on our business or financial condition. Our information security efforts include programs designed to address security governance, compliance, risk management, secure development and engineering, data protection, insider risk, third-party risk, security awareness, access management, incident response, and security operations in support of enterprise security and product security. We believe these measures reduce, but cannot eliminate, the risk of a cybersecurity incident internally or externally. Any significant security incidents could have an adverse impact on sales, harm our reputation, and cause us to incur legal liability and increased costs to address such events and related security concerns. #### Product and Services Security Our hardware and software products, services and solutions are used by our direct and indirect customers in applications that may be subject to information theft, tampering, sabotage, or cyber-attacks. Careless or malicious actors could cause a customer’s process to be disrupted or could cause equipment to operate in an improper manner, resulting in harm to people or property. To a significant extent, the security of our customers’ systems depends on how those systems are designed, installed, protected, configured, updated, and monitored, and much of this is typically outside our control. In addition, both software and hardware supply chains can introduce security vulnerabilities into many technologies across the industry. Past global cyber-attacks have also been perpetuated by compromising software updates in widely used software products, posing the risk that vulnerabilities or malicious content could be inserted into our products. In some cases, it is possible that malware attacks could spread throughout the supply chain, moving from one company to the next via authorized network connections. We have designed a Secure Development Lifecycle Program that incorporates appropriate security activities into the necessary development and support practices for our commercial product offerings. The Secure Development Lifecycle Program is audited annually by third-party firms. Our Third-Party Risk Program manages risk posed by our suppliers used in the development of our commercial product offerings. While we continue to improve the security attributes of our commercial product offerings, we can reduce risk, but not eliminate it. #### Enterprise Security Our business uses technology resources across a dispersed, global basis for a variety of functions including development, engineering, manufacturing, sales, accounting and financial reporting, and human resources. Our vendors, partners, employees, and customers have access to, and share, information across multiple locations via various digital technologies. In addition, we rely on partners and vendors, including cloud providers, for a wide range of products and outsourced activities as part of our internal IT infrastructure and our commercial product offerings. Secure connectivity is important to these ongoing operations. Also, our partners and vendors frequently have access to our confidential information as well as confidential information about our customers, employees, and others. We design our security architecture to reduce the risk that a compromise of our partners’ infrastructure, for example a cloud platform, could lead to a compromise of our internal systems or customer networks. In addition, our Third-Party Risk Program manages risk posed by our suppliers that have access to our confidential information, systems, or network, but this risk cannot be eliminated and vulnerabilities at third parties could result in unknown risk exposure to our business and information. In addition, cybersecurity threats may pose a significant risk to our third-party partners and could have a material adverse impact on their businesses, operations, products, and services that we use in our day-to-day operations. ***An inability to successfully execute cost productivity and margin expansion initiatives.*** Financial results depend on the successful execution of our business operating plans, including current and future cost productivity and margin expansion initiatives. We continuously pursue alignment of costs with business and economic conditions. Productivity projects include savings in the areas of product cost, indirect cost, administrative costs, purchased services, logistics, manufacturing workflows, make or buy decisions in manufacturing, product portfolio and price optimization. Our ongoing productivity initiatives target both cost reduction and improved asset utilization. Charges for workforce reduction and facility rationalization may be required in order to efficiently execute our productivity programs. There is a risk that these initiatives will not result in the projected savings that we anticipate and could negatively impact our business and financial results. ***Our business success depends on attracting, developing, and retaining highly qualified employees.*** Our success depends on the efforts and abilities of our leadership team and employees across the Company. The skills, experience, and industry knowledge of our employees significantly benefit our operations and performance. The market for employees and leaders with certain skills and experiences is very competitive, and difficulty attracting, developing, and retaining members of our leadership team and key employees could have a negative effect on our business, operating results, and financial condition. Maintaining a positive and inclusive culture and work environment, offering attractive compensation, benefits, and development opportunities, and effectively implementing processes and technology that enable our employees to work effectively and efficiently are important to our ability to attract and retain employees. ***We sell to customers around the world and are subject to the risks of doing business in many countries.*** We do business in more than 100 countries around the world. In addition, our manufacturing operations, suppliers, and employees are located in many places around the world. The future success of our business depends on growth in our sales in all global markets. Our global operations are subject to numerous financial, legal, and operating risks, such as political and economic instability; prevalence of corruption in certain countries; enforcement of contract and intellectual property rights; and compliance with existing and future laws, regulations, and policies, including those related to exports, imports, tariffs, embargoes and other trade restrictions, investments, taxation, product content and performance, employment, and repatriation of earnings. In addition, we are affected by changes in foreign currency exchange rates, inflation rates, and interest rates. The occurrence or consequences of these risks may make it more difficult to operate our business and may increase our costs, which could decrease our profitability and have an adverse effect on our financial condition. ***An inability to respond to changes in customer preferences could result in decreased demand for our products.*** Our success depends in part on our ability to anticipate and offer hardware and software products and services that appeal to the changing needs and preferences of our customers in the various markets we serve. Developing new hardware and software products and service offerings requires high levels of innovation, and the development process is often lengthy and costly. If we are not able to anticipate, identify, develop, and market products that respond to changes in customer preferences and emerging technological and broader industry trends, including the development of artificial intelligence and machine learning, demand for our products could decline. ### There are inherent risks in our solutions and services businesses. Risks inherent in the sale of solutions and services include assuming greater responsibility for successfully delivering projects that meet a particular customer specification, including defining and controlling contract scope, efficiently executing projects, and managing the performance and quality of our subcontractors and suppliers. If we are unable to manage and mitigate these risks, we could incur cost overruns, liabilities, and other losses that would adversely affect our results of operations. ### We rely on our distribution channel for a substantial portion of our sales. In North America, a large percentage of our sales are through distributors. In certain other countries, the majority of our sales are also through a limited number of distributors. We depend on the capabilities and competencies of our distributors to sell our hardware and software products, solutions, and services and deliver value to our customers. Disruptions to our existing distribution channel or the failure of distributors to maintain and develop the appropriate capabilities to sell our hardware and software products, solutions, and services could adversely affect our sales. A disruption could result from the sale of a distributor to a competitor, financial instability of a distributor, or other events. ***Intellectual property infringement claims of others and the inability to protect our intellectual property rights could harm our business and our customers.*** Others may assert intellectual property infringement claims against us or our customers. We frequently provide a limited intellectual property indemnity in connection with our terms and conditions of sale to our customers and in other types of contracts with third parties. Indemnification payments and legal expenses to defend claims could be costly. In addition, we own the rights to many patents, trademarks, brand names, and trade names that are important to our business. The inability to secure or enforce our intellectual property rights may have an adverse effect on our results of operations. Unauthorized resellers and counterfeiters of Company-branded products of inferior quality or that may otherwise be materially different from genuine goods sold by the Company and its authorized distributors may harm the goodwill and reputation of the Company and could adversely affect our results of operations. ***Increasing employee benefit costs and funding requirements could have a negative effect on our operating results and financial condition.*** One important aspect of attracting and retaining qualified personnel is continuing to offer competitive employee retirement and health care benefits. The expenses we record for our pension and other postretirement benefit plans depend on factors such as changes in market interest rates, the value and investment performance of plan assets, mortality assumptions, and healthcare trend rates. Significant unfavorable changes in these factors would increase our expenses and funding requirements. Expenses and funding requirements related to employer-funded healthcare benefits depend on laws and regulations, which could change, as well as healthcare cost inflation. An inability to control costs and funding requirements related to employee and retiree benefits could negatively impact our operating results and financial condition. ### Strategic Transactions and Investments Risks ***Failure to identify, manage, complete, and integrate strategic transactions may adversely affect our business or we may not achieve the expected benefits of these transactions.*** As part of our strategy, we pursue strategic transactions, including acquisitions, joint ventures, investments, and other business opportunities and purchases of technology from third parties. In order to be successful, we must identify attractive transaction opportunities, effectively complete the transaction, and manage post-closing matters, such as integration of the acquired business or technology (including related personnel) and cooperation with our joint venture and other strategic partners. We may not be able to identify, or complete beneficial transaction opportunities given the intense competition for them. Completing these transactions requires favorable environments and we may encounter difficulties in obtaining the necessary regulatory approvals in both domestic and foreign jurisdictions. Even if we successfully identify and complete such transactions, we may not achieve the expected benefits of such transactions and we may not be able to successfully address risks and uncertainties inherent in such transactions, including: - difficulties in integrating the purchased or new operations, technologies, products or services, retaining customers, and achieving the expected benefits of the transaction, such as sales increases, access to technologies, cost savings, and increases in geographic or product presence, in the desired time frames; - loss of key employees or difficulties integrating personnel; - legal and compliance issues; - unknown or undisclosed and unmitigated cybersecurity risks to purchased systems, products, and services; - difficulties implementing and maintaining consistent standards, financial systems, internal and other controls, procedures, policies, and information systems; - difficulties maintaining relationships with our joint venture and other strategic partners (including as a result of such joint venture and other strategic partners having differing business objectives) and managing disputes with such joint venture and other strategic partners that may arise in connection with our relationships with them; and - difficulties in yielding the desired strategic or financial benefit from venture capital investments, including as a result of being a minority investor or macroeconomic conditions. Strategic transactions and technology investments could result in debt, dilution, liabilities, increased interest expense, restructuring charges, and impairment and amortization expenses related to goodwill and identifiable intangible assets. ### Legal, Tax, and Regulatory Risks ### New legislative and regulatory actions could adversely affect our business. Legislative and regulatory action, including those related to corporate income taxes, the environment, materials, products, certification, and labeling, privacy, cybersecurity, or climate change, may be taken in the jurisdictions where we operate that may affect our business activities or may otherwise increase our costs to do business. In October 2021, the Organization for Economic Cooperation and Development (OECD) and G20 Finance Ministers reached an agreement, known as Base Erosion and Profit Shifting (BEPS) Pillar Two, that, among other things, ensures that income earned in each jurisdiction that qualifying multinational enterprises operate in is subject to a minimum corporate income tax rate of at least 15%. Discussions related to the formal implementation and enactment of this agreement, including within the tax law of each member jurisdiction including the United States, are ongoing. Certain countries have enacted the Pillar Two framework, including Singapore, which is expected to result in the greatest impact to the Company. Enactment of this regulation in its current form would generally apply to the Company beginning in fiscal year 2026, resulting in an increase in our effective tax rate as well as in the amount of global corporate income tax paid. We are increasingly required to comply with various environmental and other material, product, certification, and labeling laws and regulations (including the emerging European Union Eco-design for Sustainable Products Regulation). Our customers may also be required to comply with such legislative and regulatory requirements. These requirements could increase our costs and could potentially have an adverse effect on our ability to do business in certain jurisdictions. Changes in these requirements could impact demand for our hardware and software products, solutions, and services. The growing focus on environmental, social, and governance (ESG) factors by investors and other stakeholders and evolving compliance requirements by regulators may impact our business. Failure to comply with ESG reporting requirements, including inaccurate or incomplete disclosures, may lead to regulatory penalties, litigation, and reputational damage. While the Company has adopted certain voluntary targets, environmental laws, regulations, or standards may be changed, accelerated, or adopted and impose significant operational restrictions and compliance requirements upon the Company, its products, or customers, which could negatively impact the Company’s business, capital expenditures, results of operations, and financial condition. Compliance with privacy and cybersecurity laws and regulations (including the emerging European Union Cyber Resiliency Act) could increase our operating costs in managing product compliance and as part of our efforts to protect and safeguard our sensitive data, personal information, and IT infrastructure. These requirements could potentially have an adverse effect on our ability to do business in certain jurisdictions. Changes in these requirements could impact demand for our hardware and software products, solutions, and services. Failure to maintain information privacy and security could result in legal liability or reputational harm. ***Claims from taxing authorities could have an adverse effect on our income tax expense and financial condition.*** We conduct business in many countries, which requires us to interpret and comply with the income tax laws and rulings in each of those taxing jurisdictions. Due to the ambiguity of tax laws among those jurisdictions as well as the uncertainty of how underlying facts may be construed, our estimates of income tax liabilities may differ from actual payments or assessments. We must successfully defend any claims from taxing authorities to avoid an adverse effect on our operating results and financial condition. ***Potential liabilities and costs from litigation (including asbestos claims and environmental remediation) could reduce our profitability.*** Various lawsuits, claims, and proceedings have been or may be asserted against us relating to the conduct of our business or of our divested businesses, including those pertaining to the safety and security of the hardware and software products, solutions, and services we sell, employment, contract matters, and environmental remediation. We have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain of our products many years ago. We estimate the future asbestos litigation-related costs that we expect to incur over the next several years. This process is not exact because it relies on a variety of assumptions and specific factors that could potentially change over time and therefore increase or decrease our future projected asbestos liabilities. Our products may also be used in hazardous industrial activities, which could result in product liability claims. The uncertainties of litigation (including asbestos claims) and the uncertainties related to the collection of insurance proceeds make it difficult to predict the ultimate resolution of these lawsuits. Our operations are subject to various environmental regulations concerning human health, the limitation and control of emissions and discharges into the air, ground, and water, the quality of air and bodies of water, and the handling, use, and disposal of specified substances. Our financial responsibility to clean up contaminated property or for natural resource damages may extend to previously owned or used properties, waterways and properties owned by unrelated companies or individuals, as well as properties that we currently own and use, regardless of whether the contamination is attributable to prior owners. We have been named as a potentially responsible party at cleanup sites and may be so named in the future, and the costs associated with these current and future sites may be significant. We have, from time to time, divested certain businesses. In connection with these divestitures, certain lawsuits, claims, and proceedings may be instituted or asserted against us related to the period that we owned the businesses, either because we agreed to retain certain liabilities related to these periods or because such liabilities fall upon us by operation of law. In some instances, the divested business has assumed the liabilities; however, it is possible that we might be responsible for satisfying those liabilities if the divested business is unable to do so. ## Cybersecurity As filed, 4,828 characters. #### Risk Management and Strategy The Company has a cybersecurity risk management program that is designed to assess, identify, manage, and govern risks from cybersecurity threats. Our cybersecurity risk management program is a key component of our overall enterprise risk management strategy. The Company’s cybersecurity risk management program focuses on risk and threat identification, protection, detection, response, and recovery, designed to protect the confidentiality, integrity, and availability of critical systems and data. The Company’s cybersecurity incident response and crisis management plans are components of the cybersecurity risk management program, focusing on effective response to cybersecurity incidents or attacks. We monitor our internal technology for cybersecurity threats, and we use various security capabilities to mitigate the risk of these threats. Additionally, the Company provides annual cybersecurity and information security awareness training for all employees and contractors. The Company maintains a robust, risk-based approach to identifying and overseeing cybersecurity risks presented by third parties, including vendors, service providers, and other external users of the Company’s systems, as well as the systems of third parties that could adversely impact our business in the event of a cybersecurity incident affecting those third-party systems. #### Governance The Company’s cybersecurity program is led by the Chief Information Security Officer (CISO). Our CISO has more than 30 years of technology and cybersecurity leadership experience and is a Certified Information System Security Professional (CISSP), and a Certified Information Systems Auditor (CISA). The CISO reports to the Chief Information Officer (CIO). The CISO leads a team that is responsible for executing cybersecurity strategy, to support risk management, and protection of Company systems, products, and employee and customer information. As the foundation of the cybersecurity program, the Company maintains cybersecurity policies and procedures that are informed by recognized security frameworks and applicable regulations, laws, and standards. We use various frameworks, standards, guidelines, and best practices as a guide to help us identify, assess, and manage cybersecurity risks relevant to our business. The Company engages third parties to assess our cybersecurity posture and program maturity. We also consider cybersecurity, along with other top risks for the Company, within our ERM framework. The ERM framework includes internal reporting at the business and enterprise levels, with consideration of key risk indicators, trends, and countermeasures for cybersecurity and other types of significant risks. During the year ended September 30, 2024, the Company has not identified risks from cybersecurity threats, including as a result of prior cybersecurity incidents, that have materially affected or are reasonably likely to materially affect the Company, including its business strategy, results of operations, or financial condition. Nevertheless, the Company recognizes cybersecurity threats are ongoing and evolving, and we continue to remain vigilant. For more information on the Company’s cybersecurity-related risks, see Item 1A. ***Risk Factors.*** The Company’s Disclosure Committee is a part of the cybersecurity risk program as it meets quarterly to review cyber incidents that have occurred during the quarter, and additionally, as needed, to discuss any potentially material cybersecurity incidents. The Disclosure Committee, which includes senior leaders from finance and accounting, legal, investor relations, and corporate communications, is responsible for determining if risks from cybersecurity threats have materially affected or are reasonably likely to materially affect, the organization such that public disclosure is necessary. Additional management governance is provided by an Enterprise Security Council, comprised of key senior business leadership with diverse experiences and responsibilities. The Enterprise Security Council oversees key cybersecurity and product security matters and initiatives, including policy, standards, strategy, program metrics, and cybersecurity risk escalation. Cybersecurity oversight by the Board of Directors is shared between the full Board and the Audit Committee. The full Board of Directors receives periodic updates on the cybersecurity threat landscape, recent cybersecurity events, our cybersecurity strategy, and cybersecurity program priorities. The Audit Committee receives updates on information security, including internal controls and external reporting processes. The Audit Committee also receives updates from the Disclosure Committee with respect to cybersecurity incidents reviewed by the Disclosure Committee. ## Properties As filed, 1,046 characters. Our global headquarters in Milwaukee, Wisconsin, an owned facility, includes product development, sales, marketing, manufacturing, supply chain operations, finance, and other administrative and executive office functions. Most of our other facilities are leased and shared across our three operating segments. At September 30, 2024, the Company had two principal distribution locations, one in the U.S. and one in the Netherlands, and approximately ten principal manufacturing facilities worldwide, with the most significant of these located in the U.S., Mexico, Canada, and Singapore. We also have sales and administrative office space at over 200 locations in over 50 countries. There are no major encumbrances (other than financing arrangements, which in the aggregate are not significant) on any of our properties or equipment. Our properties and equipment are in good operating condition and are adequate for our present needs. We do not anticipate difficulty in renewing existing leases as they expire or in finding alternative facilities. ## Legal proceedings As filed, 153 characters. The information required by this Item 3 is contained in Note 17 in the Consolidated Financial Statements within the section entitled ***Other Matters.*** ## Management's discussion and analysis As filed, 66,127 characters. ### Results of Operations ### 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 ***Summary of 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 ***Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation*** 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 provided by 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 the world’s largest company dedicated to industrial automation and digital transformation. Overall demand for our hardware and software products, solutions, and services is driven by: - investments in manufacturing, including new facilities or production lines, upgrades, modifications and expansions of existing 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, agility to address evolving consumer preferences, operational productivity, asset management and reliability, and business resilience, including security 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 As the world’s largest company dedicated to industrial automation and digital transformation, our strategy is to bring the Connected Enterprise® to life. We understand and simplify our customers’ complex production challenges and deliver the most valued solutions that combine technology and industry expertise. As a result, we make our customers more resilient, agile, and sustainable, creating more ways to win. We deliver value by helping our customers optimize production, build resilience, empower people, become more sustainable, and accelerate transformation. Rockwell Automation stands at the intersection of the technological and societal trends that are shaping the future of industrial operations. We see converging megatrends including digitization and artificial intelligence, energy transition and sustainability, shifting demographics, and an increased need for resiliency. Our long-term profitable growth framework outlines how we will deliver accelerated growth while we continue to transform our company to meet stakeholder expectations over the longer term: - achieve faster secular growth in traditional markets due to customer needs for resiliency (including cybersecurity), agility, sustainability, and mitigating impacts of labor shortages; - grow share and create new ways to win through technology differentiation, industry focus, go to market acceleration, expanded offerings and new markets; - continue double-digit growth in annual recurring revenue; - add 1% average annual growth from acquisitions; and - deliver profitable growth within a disciplined financial framework. #### Sustainability Our 2023 Sustainability Report highlights our sustainability strategy and outcomes. Our sustainability priorities are focused on three outcomes: - Sustainable Customers - enable our customers to achieve their own sustainability goals, making a positive impact on the world; - Sustainable Company - create innovative, sustainable products and solutions and foster a culture that empowers employees to operate safely, sustainably, and responsibly; and - Sustainable Communities - support the communities in which we live and work, having an impact that extends beyond our own organization. We will meet our customers where they are on their sustainability journey. Whether they are just starting or leading the way, we help them translate insights into impacts across energy, water, and waste. Our technologies provide data transparency across value chains and enable our partners to scale innovative and often industry-first sustainable solutions. - Energy - contemporary industrial energy management software solutions that put energy data in context to production data, to reduce energy use across the value chain. - Water - smart water solutions leverage modern software and analytics to improve operations visibility, system reliability, and worker productivity while supporting security needs and meeting regulatory obligations. - Waste - enabling the circular economy for managing automation assets. Focus on developing solutions to automate industry-specific processes. #### Differentiation through Technology Innovation and Domain Expertise We have an industry leading portfolio of hardware, software, and services to give customers the flexibility to choose on-premises, edge, and cloud-native solutions. Our integrated control and information architecture, with Logix at its core, is an important differentiator. We are the only automation provider that can support many production disciplines, including discrete, process, batch, safety, security, motion, robotics, and power control, in a single hardware and software environment, helping customers increase the speed of deployment and reduce their total cost of ownership. Our open architecture and strong partner ecosystem allow customers to work with best-in-class partners across the technology stack and leverage existing infrastructure with new solutions. Complementing our strong technology differentiation is our own domain expertise. Domain expertise refers to the industry and application knowledge required to deliver solutions and services that support customers through the entire lifecycle of their automation investment. The combination of industry-specific domain expertise of our people with our innovative technologies enables us to help our customers automate and transform their manufacturing processes and solve their business challenges. Our digital services business has a deep understanding of customers’ biggest digital transformation challenges and opportunities for further productivity and growth. #### Market Access and Expansion Over the past decade, our investments in technology and globalization have enabled us to expand our addressed market to approximately $130 billion. With our focus on innovation and growth, we expect to continue to expand our addressed market over our long-term planning horizon. All of our markets are expected to grow over our long-term planning horizon. Our domestic market projections reflect the opportunity to localize our customers’ supply chain and production operations. Our international market projections reflect higher levels of infrastructure investment and the growing middle-class population. We believe that increased demand for consumer products in our addressed markets will lead to manufacturing investment and provide us with additional growth opportunities in the future. We have developed a powerful partner ecosystem that acts as an amplifier to our internal capabilities and enables us to serve our customers’ evolving needs around the world. In most countries, our direct sales force works with Original Equipment Manufacturers (OEMs) or machine builders, system integrators, technology partners, and end users in conjunction with independent distributors. Approximately 65 percent of our global sales are transacted through independent distributors. Sales to our two largest distributors in 2024, 2023, and 2022, which are attributable to all three segments, were approximately 20 percent of our total sales. Machine builders continue to represent an important growth opportunity. To remain competitive, machine builders need to find the optimal balance of machine cost and performance while reducing their time to market. Our scalable technology, leading design productivity tools, and recent acquisitions support machine builders in addressing these business needs. #### Acquisitions and Investments Our acquisition and investment strategy focuses on hardware and software products, solutions, and services that will be catalytic to the organic growth of our core offerings. Our key priorities for inorganic investments include: - annual recurring revenue; - market expansion in Europe and Asia; and - application-specific technology in focus industries. In addition, we make venture investments that enable access to leading-edge and complementary technologies aligned with our strategic priorities, accelerate internal development efforts, reduce time to market, and provide insights into disruptive technologies. We believe these acquisitions and venture investments will help our served market and deliver value to our customers. See Note 4 in the Consolidated Financial Statements for additional information on our recent acquisitions. #### Attracting, Developing, and Retaining Highly Qualified Employees Our talent management practices are focused on ensuring we can attract, develop, and retain the talent we need to deliver our business strategy. We work to deliver a cohesive and consistent experience throughout the employee lifecycle that aligns with our four culture principles: - Strengthen our commitment to integrity, diversity and inclusion; - Be willing to compare ourselves to the best alternatives; - Increase the speed of decision making; - Have a steady stream of fresh ideas. Our programs and processes are designed to enable and inspire great employees to do their best work and to make Rockwell Automation a place where the best want to be. There are several ways in which we attract, develop, and retain highly qualified employees, including: - We make the safety and health of our employees a top priority. We strive for zero workplace injuries and illnesses and operate in a manner that recognizes safety as fundamental to Rockwell Automation being a great place to work. In fiscal 2024, we achieved 0.27 recordable cases per 100 employees. - We capture and act upon employee feedback through our annual employee engagement survey. It measures several engagement indicators and drivers and provides an overall employee engagement index (EEI) with external benchmark comparison. The latest survey, conducted in February 2024, showed an EEI of 76, which was eight points higher than the industry norm of 68 for this index. Our global inclusion index score was 79, five points higher than the industry norm of 74. - We invest in growth and development of our employees. As the pace of change increases, it is important we provide re-skilling and upskilling opportunities for our technical talent, along with soft skills and leadership development for all. We offer a portfolio of all employee, managerial, and leader training that spans on-demand, virtual, and live instructor-led formats. Our programs focus on basic as well as transformational skills. We take pride in our culture and in fiscal 2021 created an opportunity for our employees to participate in team-based culture workshops that have evolved into a standard during new employee onboarding. In fiscal 2024, the majority of our employees completed one or more of our training programs representing over 1.1 million learning hours. - We offer employee assistance and work life benefits to all global employees. Our comprehensive benefits include healthcare benefits, disability and life insurance benefits, paid time off, and leave programs. Rockwell offers plans and resources to help employees meet future savings goals through defined benefit and retirement savings plans. We believe that face to face interaction is critical for our culture, innovation, people development, and engagement, and that flexible, virtual work arrangements help employees be more productive and engaged. During fiscal 2024, we updated our Hybrid Workplace Program, which combines the values of both physical workspaces and virtual work options, both of which are important for attracting, retaining, and developing employees and facilitating innovation, engagement, and productivity. We offer flextime, remote work, and part-time arrangements whenever business conditions permit. We monitor employee retention and attrition rates by demographic factors including by gender, ethnicity, generation, years of service, career role, region, business, and function. We generally experienced flat attrition rates in fiscal 2024 as compared to fiscal 2023. We believe this is consistent with market trends experienced broadly across labor markets in fiscal 2024. We use attrition rate information to identify and address unfavorable trends to mitigate risk to our business. See Item 1A. ***Risk Factors*** for a discussion of risks relating to our inability to attract, develop, and retain highly qualified employees. At September 30, 2024, our employees, including those employed by consolidated subsidiaries, by region were approximately: | | | | --- | ---: | | North America | 9,500 | | Europe, Middle East and Africa | 5,500 | | Asia Pacific | 7,000 | | Latin America | 5,000 | | Total employees | 27,000 | Our employees had the following global gender demographics based on voluntary disclosure: | | September 30, 2024 Women | Men | Undisclosed | | --- | ---: | ---: | ---: | | All employees | 32% | 68% | —% | | Individual Contributors | 33% | 67% | —% | | People Managers | 27% | 73% | —% | | Technical Talent | 19% | 81% | —% | | Manufacturing Associates | 45% | 55% | —% | 20 Our U.S. employees had the following race and ethnicity demographics based on voluntary disclosure: | | September 30, 2024 Black / African American | Asian | Hispanic / Latinx | White | Multiracial, Native American and Pacific Islander | Undisclosed | | --- | ---: | ---: | ---: | ---: | ---: | ---: | | All U.S. Employees | 7% | 10% | 6% | 70% | 2% | 5% | | Individual Contributors | 8% | 11% | 5% | 69% | 2% | 5% | | People Managers | 6% | 8% | 6% | 74% | 1% | 5% | | Technical Talent | 5% | 13% | 6% | 69% | 2% | 5% | | Manufacturing Associates | 14% | 16% | 4% | 55% | 2% | 9% | 21 ### U.S. Economic Trends In 2024, 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 Manufacturing IP Index is expressed as a percentage of real output in a base year, currently 2017. - 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 the trends in these indicators from fiscal 2022 to 2024. These figures are as of November 12, 2024, and are subject to revision by the issuing organizations. The IP Index declined in the fourth quarter of fiscal 2024 versus the third quarter of fiscal 2024. Manufacturing PMI results continued to soften in the fourth quarter of 2024. The Manufacturing PMI reading in the month of September was the highest of the quarter, however it still remains below 50. | Fiscal 2024 quarter ended: | Manufacturing IP Index | PMI | | --- | ---: | ---: | | September 2024 | 99.1 | 47.2 | | June 2024 | 99.5 | 48.5 | | March 2024 | 99.5 | 50.3 | | December 2023 | 99.2 | 47.1 | | **Fiscal 2023 quarter ended:** | | | | September 2023 | 99.6 | 49.0 | | June 2023 | 99.2 | 46.0 | | March 2023 | 99.2 | 46.3 | | December 2022 | 98.1 | 48.4 | | **Fiscal 2022 quarter ended:** | | | | September 2022 | 100.6 | 50.9 | | June 2022 | 100.0 | 53.0 | | March 2022 | 100.6 | 57.1 | | December 2021 | 100.1 | 58.8 | Inflation in the U.S. has also had an impact on our input costs and pricing. We used the Producer Price Index (PPI), published by the Bureau of Labor Statistics, which measures the average change over time in the selling prices received by domestic producers for their output. After observing double-digit PPI growth through most of 2022, we have now observed PPI growth in the low single digits for the last four quarters. Producer prices remain elevated, however, year over year increases continued to decelerate following the last two years' surges in prices. ### Non-U.S. Economic Trends In 2024, 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 (GDP), IP, and PMI as indicators of the growth opportunities in each region where we do business. Industrial output outside the U.S. was mixed in the fourth quarter of fiscal 2024. Manufacturing PMI readings outside the U.S were also mixed with results reported above and below 50 and readings improving in some countries during the quarter and softening in others. ### Backlog Our total order backlog consists of (in millions): | | September 30, 2024 | 2023 | | --- | ---: | ---: | | Intelligent Devices | $736.8 | $1,464.1 | | Software & Control | 652.8 | 897.5 | | Lifecycle Services | 1,701.0 | 1,747.3 | | Total Company | $3,090.6 | $4,108.9 | See Note 2 in the Consolidated Financial Statements for additional information on the nature of our products and services and revenue recognition. ### Summary of Results of Operations The following table reflects our sales and operating results (in millions, except per share amounts and percentages): | Sales | Year Ended September 30, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Intelligent Devices (a) | $3,804.1 | $4,098.2 | $3,544.6 | | Software & Control (b) | 2,187.4 | 2,886.0 | 2,312.9 | | Lifecycle Services (c) | 2,272.7 | 2,073.8 | 1,902.9 | | Total sales (d) | $8,264.2 | $9,058.0 | $7,760.4 | | Segment operating earnings (1) | | | | | Intelligent Devices (e) | $700.0 | $828.2 | $717.6 | | Software & Control (f) | 529.7 | 953.2 | 666.7 | | Lifecycle Services (g) | 365.6 | 148.4 | 158.3 | | Total segment operating earnings (2) (h) | 1,595.3 | 1,929.8 | 1,542.6 | | Purchase accounting depreciation and amortization, and impairment | (143.9) | (264.4) | (103.9) | | Corporate and other | (135.8) | (127.9) | (104.7) | | Non-operating pension and postretirement benefit credit (cost) | 19.8 | (82.7) | (4.7) | | Change in fair value of investments | 0.1 | 279.3 | (136.9) | | Restructuring charges | (97.4) | — | — | | Interest expense, net | (139.0) | (125.6) | (118.8) | | Income before income taxes (i) | 1,099.1 | 1,608.5 | 1,073.6 | | Income tax provision | (151.8) | (330.5) | (154.5) | | Net income | 947.3 | 1,278.0 | 919.1 | | Net loss attributable to noncontrolling interests | (5.2) | (109.4) | (13.1) | | Net income attributable to Rockwell Automation | $952.5 | $1,387.4 | $932.2 | | Diluted EPS | $8.28 | $11.95 | $7.97 | | Adjusted EPS (3) | $9.71 | $12.12 | $9.49 | | Diluted weighted average outstanding shares | 114.5 | 115.6 | 116.7 | | Pre-tax margin (i/d) | 13.3% | 17.8% | 13.8% | | Intelligent Devices segment operating margin (e/a) | 18.4% | 20.2% | 20.2% | | Software & Control segment operating margin (f/b) | 24.2% | 33.0% | 28.8% | | Lifecycle Services segment operating margin (g/c) | 16.1% | 7.2% | 8.3% | | Total segment operating margin (2) (h/d) | 19.3% | 21.3% | 19.9% | (1) See Note 20 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, impairment, corporate and other, non-operating pension and postretirement benefit credit (cost), change in fair value of investments, restructuring charges aligned with enterprise-wide strategic initiatives, interest expense, net, and income tax provision because we do not consider these items 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. See ***Adjusted Income, Adjusted EPS, and Adjusted Effective Tax Rate Reconciliation*** for more information on this non-GAAP measure. ### 2024 Compared to 2023 #### Sales Sales in fiscal 2024 decreased 9 percent compared to 2023. Organic sales decreased 10 percent. Acquisitions increased sales by 1 percentage point. Total annual recurring revenue at September 30, 2024, grew approximately 16 percent compared to September 30, 2023. Organic annual recurring revenue at September 30, 2024 grew approximately 14 percent compared to September 30, 2023. See ***Annual Recurring Revenue (ARR)*** for information on this measure. Pricing increased total company sales by approximately 2 percentage points, realized in the Intelligent Devices and Software & Control segments. Volume decreased total company sales by approximately 12 percentage points year over year driven by the Software & Control and Intelligent Devices segments, partially offset by the Lifecycle Services segment. The table below presents our sales for the year ended September 30, 2024, attributed to the geographic regions based upon country of destination, and the percentage change from the same period in 2023 (in millions, except percentages). | | Year Ended September 30, 2024 | Change vs. Year Ended September 30, 2023 | Change in Organic Sales (1) vs. Year Ended September 30, 2023 | | --- | ---: | ---: | ---: | | North America | $5,052.8 | (3)% | (5)% | | Europe, Middle East and Africa | 1,504.5 | (20)% | (21)% | | Asia Pacific | 1,072.8 | (21)% | (20)% | | Latin America | 634.1 | 5% | 4% | | Total Company Sales | $8,264.2 | (9)% | (10)% | (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. #### Corporate and Other Corporate and other expenses were $135.8 million in fiscal 2024 compared to $127.9 million in fiscal 2023. #### Restructuring Charges Restructuring charges were $97.4 million in fiscal 2024, which relate to actions in conjunction with an enterprise-wide comprehensive program to optimize cost structure and expand margins. See Note 18 in the Consolidated Financial Statements for more information on our restructuring charges. #### Income before Income Taxes Income before income taxes decreased to $1,099.1 million in 2024 from $1,608.5 million in 2023. The decrease was primarily due to lower segment operating earnings in the Software & Control and Intelligent Devices operating segments and the fair value adjustments recognized in the prior year in connection with our previous investment in PTC, Inc. (PTC), partially offset by a $157.5 million accounting charge in 2023 for impairment of goodwill for our Sensia joint venture (goodwill impairment). Total segment operating earnings decreased to $1,595.3 million from $1,929.8 million in 2023, primarily due to lower sales volume and unfavorable mix, partially offset by lower incentive compensation and the positive impact of price realization exceeding input costs. #### Income Taxes The effective tax rate in 2024 was 13.8 percent compared to 20.5 percent in 2023. The decrease in the effective tax rate was primarily due to a valuation allowance established in 2023 on certain deferred tax assets of our Sensia joint venture and tax effects of the related goodwill impairment totaling $33.1 million, and higher discrete tax benefits in 2024 compared to 2023. The adjusted effective tax rate in 2024 was 15.1 percent compared to 16.4 percent in 2023. The decrease in the adjusted effective tax rate was primarily due to higher discrete tax benefits in 2024 compared to 2023. See Note 16 in the Consolidated Financial Statements for a complete reconciliation of the United States statutory tax rate to the effective tax rate and additional information on tax events in 2024 and 2023 affecting each year’s respective tax rates. In October 2021, the Organization for Economic Cooperation and Development (OECD) and G20 Finance Ministers reached an agreement, known as Base Erosion and Profit Shifting (BEPS) Pillar Two, that, among other things, ensures that income earned in each jurisdiction that qualifying multinational enterprises operate in is subject to a minimum corporate income tax rate of at least 15%. Discussions related to the formal implementation and enactment of this agreement, including within the tax law of each member jurisdiction including the United States, are ongoing. Certain countries have enacted the Pillar Two framework, including Singapore, which is expected to result in the greatest impact to the Company. Enactment of this regulation in its current form would generally apply to the Company beginning in fiscal year 2026, resulting in an increase in our effective tax rate as well as in the amount of global corporate income tax paid. #### Net Loss Attributable to Noncontrolling Interests Net loss attributable to noncontrolling interests was $5.2 million in 2024 compared to $109.4 million in 2023. The decrease was driven by the prior year $93.3 million goodwill impairment and related tax effects including tax asset valuation allowances that are attributable to noncontrolling interests. #### Diluted EPS and Adjusted EPS Fiscal 2024 Net income attributable to Rockwell Automation was $952.5 million or $8.28 per share, compared to $1,387.4 million or $11.95 per share in fiscal 2023. The decreases in Net income attributable to Rockwell Automation and diluted EPS were primarily due to lower sales and lower pre-tax margin. Pre-tax margin was 13.3% compared to 17.8% in fiscal 2023. The decrease in pre-tax margin was primarily due to lower sales volume, fair value adjustments recognized in the prior year in connection with our previous investment in PTC, and restructuring charges, partially offset by lower incentive compensation, the prior year goodwill impairment, and the benefits from cost reduction actions. Adjusted EPS was $9.71 in fiscal 2024, down 20 percent compared to $12.12 in fiscal 2023, primarily due to lower sales and lower segment operating margin. Total segment operating margin was 19.3% compared to 21.3% in fiscal 2023. The decrease in total segment operating margin was primarily due to lower sales volume and unfavorable mix, partially offset by lower incentive compensation and the benefits from cost reduction actions. ### Intelligent Devices #### Sales Intelligent Devices sales decreased 7 percent in 2024 compared to 2023. Organic sales decreased 9 percent. Acquisitions increased sales by 2 percentage points. All regions except North America experienced reported and organic sales decreases. #### Segment Operating Margin Intelligent Devices segment operating earnings decreased 15 percent year over year. Segment operating margins decreased to 18.4 percent in 2024 from 20.2 percent in 2023, primarily due to lower sales volume, partially offset by lower incentive compensation, the positive impact of price realization exceeding input costs, and an adjustment to an earnout accrual tied to achievement of the seller’s revenue target on our Clearpath Robotics, Inc. acquisition including its industrial division OTTO Motors (Clearpath). ### Software & Control #### Sales Software & Control reported and organic sales decreased 24 percent in 2024 compared to 2023. All regions experienced reported and organic sales decreases. #### Segment Operating Margin Software & Control segment operating earnings decreased 44 percent year over year. Segment operating margin decreased to 24.2 percent in 2024 from 33.0 percent in 2023, primarily due to lower sales volume, partially offset by lower incentive compensation and the positive impact of price realization exceeding input costs. ### Lifecycle Services #### Sales Lifecycle Services sales increased 10 percent in 2024 compared to 2023. Organic sales increased 8 percent. Acquisitions increased sales by 2 percentage points. All regions experienced reported sales increases. All regions except Asia Pacific experienced organic sales increases. #### Segment Operating Margin Lifecycle Services segment operating earnings increased 146 percent year over year. Segment operating margin increased to 16.1 percent in 2024 from 7.2 percent in 2023, primarily due to lower incentive compensation, higher sales volume, strong project execution, higher margins in Sensia, and ongoing savings from the prior year structural actions. ### 2023 Compared to 2022 For a discussion of the Company’s fiscal 2023 results compared to fiscal 2022, see the Company’s Annual Report on Form 10-K for the year ended September 30, 2023, filed on November 8, 2023. ### Supplemental Segment Information Purchase accounting depreciation and amortization, and impairment, non-operating pension and postretirement benefit (credit) cost, and restructuring charges 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): | Purchase accounting depreciation and amortization, and impairment | Year Ended September 30, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Intelligent Devices | $37.9 | $4.7 | $2.5 | | Software & Control | 67.4 | 68.5 | 69.0 | | Lifecycle Services | 37.6 | 190.2 | 31.4 | | Non-operating pension and postretirement benefit (credit) cost | | | | | Intelligent Devices | $(7.2) | $21.2 | $(3.5) | | Software & Control | (7.2) | 21.2 | (3.5) | | Lifecycle Services | (9.5) | 28.3 | (4.8) | | Restructuring Charges | | | | | Intelligent Devices | $44.4 | $— | $— | | Software & Control | 32.6 | — | — | | Lifecycle Services | 19.4 | — | — | 28 ### 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 non-operating pension and postretirement benefit (credit) cost, purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation, change in fair value of investments, restructuring charges aligned with enterprise-wide strategic initiatives, and Net loss attributable to noncontrolling interests, including their respective tax effects. In 2024, we updated the definition of our non-GAAP earnings measures to exclude significant restructuring charges aligned with enterprise-wide strategic initiatives. In the year ended September 30, 2024, we recognized these restructuring charges in conjunction with an enterprise-wide comprehensive program to optimize cost structure and expand margins. We believe the change to our definition provides a more useful presentation of our operating performance to investors as these restructuring charges are significant and enterprise-wide severance actions and not reflective of our ongoing operations. We did not revise prior years because there were no similar restructuring actions with significant costs. See Note 18 in the Consolidated Financial Statements for more information on our restructuring charges. Purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation includes an accounting charge related to goodwill impairment for our Sensia joint venture in the year ended September 30, 2023. The tax effect of the purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation includes the tax effects on the Sensia joint venture goodwill impairment and related Sensia tax asset valuation allowances. Non-operating pension and postretirement benefit (credit) cost is defined as all components of our net periodic pension and postretirement benefit cost except for service cost. See Note 14 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): | | Year Ended September 30, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Net income attributable to Rockwell Automation | $952.5 | $1,387.4 | $932.2 | | Non-operating pension and postretirement benefit (credit) cost | (19.8) | 82.7 | 4.7 | | Tax effect of non-operating pension and postretirement benefit (credit) cost | 4.0 | (20.6) | (1.9) | | Purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation (1) | 132.8 | 178.3 | 91.9 | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation (1) | (24.6) | (9.4) | (22.3) | | Change in fair value of investments (2) | (0.1) | (279.3) | 136.9 | | Tax effect of change in fair value of investments (2) | (0.7) | 67.6 | (30.8) | | Restructuring charges (3) | 97.4 | — | — | | Tax effect of restructuring charges (3) | (24.3) | — | — | | Adjusted Income | $1,117.2 | $1,406.7 | $1,110.7 | | Diluted EPS | $8.28 | $11.95 | $7.97 | | Non-operating pension and postretirement benefit (credit) cost | (0.17) | 0.72 | 0.04 | | Tax effect of non-operating pension and postretirement benefit (credit) cost | 0.03 | (0.18) | (0.02) | | Purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | 1.16 | 1.54 | 0.78 | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | (0.22) | (0.08) | (0.19) | | Change in fair value of investments (2) | — | (2.42) | 1.17 | | Tax effect of change in fair value of investments (2) | (0.01) | 0.59 | (0.26) | | Restructuring charges | 0.85 | — | — | | Tax effect of restructuring charges | (0.21) | — | — | | Adjusted EPS | $9.71 | $12.12 | $9.49 | | Effective tax rate | 13.8% | 20.5% | 14.4% | | Tax effect of non-operating pension and postretirement benefit (credit) cost | (0.1)% | 0.3% | 0.1% | | Tax effect of purchase accounting depreciation and amortization, and impairment attributable to Rockwell Automation | 0.4% | (3.7)% | 0.6% | | Tax effect of change in fair value of investments (2) | 0.1% | (0.7)% | 0.9% | | Tax effect of restructuring charges | 0.9% | —% | —% | | Adjusted Effective Tax Rate | 15.1% | 16.4% | 16.0% | (1) 2023 includes $97.3 million net expense from $157.5 million goodwill impairment charge included in Income before income taxes, $33.1 tax effect from goodwill impairment and related valuation allowances recorded in Income tax provision, and ($93.3) million Net loss attributable to noncontrolling interests. (2) Primarily relates to the change in fair value of our previous investment in PTC. (3) Restructuring charges include $92.3 million for severance benefits and $5.1 million for strategic advisory services related to the enterprise-wide severance actions. ### Annual Recurring Revenue (ARR) Total ARR is a key metric that enables measurement of progress in growing our recurring revenue business. It represents the annual contract value of all active recurring revenue contracts at any point in time. Recurring revenue is defined as a revenue stream that is contractual, typically for a period of 12 months or more, and has a high probability of renewal. The probability of renewal is based on historical renewal experience of the individual revenue streams, or management's best estimates if historical renewal experience is not available. Total ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Total ARR on a constant currency basis. Total ARR includes acquisitions even if there was no comparable ARR in the prior period. We believe that Total ARR provides useful information to investors because it reflects our recurring revenue performance period over period including the effect of acquisitions. Our measure of ARR may be different from measures used by other companies. Because ARR is based on annual contract value, it does not represent revenue recognized during a particular reporting period or revenue to be recognized in future reporting periods and is not intended to be a substitute for revenue, contract liabilities, or backlog. Organic ARR growth is calculated as the dollar change in ARR, adjusted to exclude the effects of currency translation and acquisitions, divided by ARR as of the prior period. The effects of currency translation are excluded by calculating Organic ARR on a constant currency basis. When we acquire businesses, we exclude the effect of ARR in the current period for which there was no comparable ARR in the prior period. We believe that Organic ARR provides useful information to investors because it reflects our recurring revenue performance period over period without the effect of acquisitions and changes in currency exchange rates. Organic ARR growth is also used as a financial measure of performance for our annual incentive compensation. ### 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): | Cash provided by (used for) | Year Ended September 30, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Operating activities | $863.8 | $1,374.6 | $823.1 | | Investing activities | (982.5) | 854.3 | (7.8) | | Financing activities | (502.8) | (1,675.6) | (934.2) | | Effect of exchange rate changes on cash | 12.1 | 19.2 | (52.6) | | (Decrease) increase in cash, cash equivalents, and restricted cash | $(609.4) | $572.5 | $(171.5) | The following table summarizes free cash flow, which is a non-GAAP financial measure (in millions): | | Year Ended September 30, 2024 | 2023 | 2022 | | --- | ---: | ---: | ---: | | Cash provided by operating activities | $863.8 | $1,374.6 | $823.1 | | Capital expenditures | (224.7) | (160.5) | (141.1) | | Free cash flow | $639.1 | $1,214.1 | $682.0 | Our definition of free cash flow takes into consideration capital investments required to maintain the operations of our businesses 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 be different from definitions used by other companies. Cash provided by operating activities was $863.8 million for the year ended September 30, 2024, compared to $1,374.6 million for the year ended September 30, 2023. Free cash flow was $639.1 million for the year ended September 30, 2024, compared to $1,214.1 million for the year ended September 30, 2023. The year-over-year decreases in cash provided by operating activities and free cash flow were primarily due to lower pre-tax income, higher incentive compensation payments in 2024 related to fiscal 2023 performance, and higher tax payments, partially offset by decreases in working capital. Free cash flow for the year ended September 30, 2024, also includes $64.2 million of higher capital expenditures. Taxes paid in the year ended September 30, 2024, include $58.4 million of U.S. transition tax under the Tax Cuts and Jobs Act of 2017 (the Tax Act) and $67.4 million for capital gains from the sale of shares of PTC common stock. Our Short-term debt as of September 30, 2024, includes commercial paper borrowings of $657.0 million with a weighted average interest rate of 5.14 percent and a weighted average maturity period of 24 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 September 30, 2024 and 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 September 30, 2024 and September 30, 2023 was $23.5 million of interest-bearing loans from Schlumberger (SLB) to Sensia, due April 2025. In April 2024, $18.8 million of new interest-bearing loans from SLB to Sensia were entered into and were due August 2024, extended to April 2025. We repurchased approximately 2.2 million shares of our common stock under our share repurchase program in 2024 at a total cost of $594.2 million and an average cost of $272.97 per share. In 2023, we repurchased approximately 1.2 million shares of our common stock under our share repurchase program at a total cost of $311.0 million and an average cost of $265.48 per share. At September 30, 2024, there were $0.4 million of outstanding common stock share repurchases recorded in Accounts payable that do not settle until 2025. At September 30, 2023, there were $1.1 million of outstanding common stock share repurchases recorded in Accounts payable that did not settle until 2024. Our decision to repurchase shares in 2025 will depend on business conditions, free cash flow generation, other cash requirements, and stock price. At September 30, 2024, we had approximately $1,346.1 million remaining for share repurchases under our existing board authorizations. See Item 5. ***Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities***, for additional information regarding share repurchases. We expect future uses of cash to include working capital requirements, capital expenditures, dividends to shareowners, repurchases of common stock, repayments of debt, additional contributions to our retirement plans, and acquisitions of businesses and other inorganic investments. We expect capital expenditures in 2025 to be approximately $250 million. Significant long-term uses of cash include the following (in millions): | | Payments by Period Total | 2025 | 2026 | 2027 | 2028 | 2029 | Thereafter | | --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | | Long-term debt and interest (1) | $5,119.4 | $407.8 | $102.3 | $102.3 | $343.9 | $503.1 | $3,660.0 | | Minimum lease payments (Note 19) | 518.6 | 111.0 | 97.2 | 80.6 | 59.7 | 41.3 | 128.8 | | Postretirement benefits (2) | 44.6 | 6.7 | 6.3 | 5.7 | 5.2 | 4.7 | 16.0 | | Pension funding contribution (3) | 19.0 | 19.0 | — | — | — | — | — | | Transition tax (4) | 175.3 | 77.9 | 97.4 | — | — | — | — | | Total | $5,876.9 | $622.4 | $303.2 | $188.6 | $408.8 | $549.1 | $3,804.8 | (1) The amounts for Long-term debt assume that the respective debt instruments will be outstanding until their scheduled maturity dates and include interest but exclude unamortized discount. See Note 7 in the Consolidated Financial Statements for more information regarding our Long-term debt. (2) Our postretirement benefit plans are unfunded and are subject to change. Amounts reported are estimates of future benefit payments, to the extent estimable. (3) Amounts reported for pension funding contributions reflect current estimates. Contributions to our pension plans beyond 2025 will depend on future investment performance of our pension plan assets, changes in discount rate assumptions, and governmental regulations in effect at the time. Amounts subsequent to 2025 are excluded from the summary above, as we are unable to make a reasonably reliable estimate of these amounts. The minimum contribution for our U.S. pension plan as required by the Employee Retirement Income Security Act (ERISA) is currently zero. We may make additional contributions to this plan at the discretion of management. (4) Under the Tax Act, the Company may elect to pay the transition tax interest-free over eight years, with 8% due in each of the first five years, 15% in year six, 20% in year seven, and 25% in year eight. 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. At September 30, 2024, the majority of our Cash and cash equivalents were held by non-U.S. subsidiaries. We use a global cash pooling arrangement to allocate capital resources among our entities. As a result of the broad changes to the U.S. international tax system under the Tax Act, the Company accounts for taxes on earnings of substantially all of its non-U.S. subsidiaries including both non-U.S. and U.S. taxes. The Company has concluded that earnings of a limited number of its non-U.S. subsidiaries are indefinitely reinvested. In June 2022, we replaced our former $1.25 billion unsecured revolving credit facility with a new five-year $1.5 billion unsecured revolving credit facility, expiring in June 2027. This credit facility uses the secured overnight funding rate (SOFR) as the primary basis for determining interest payments. 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 September 30, 2024, or September 30, 2023. 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. 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 $248.5 million at September 30, 2024, were available to non-U.S. subsidiaries, of which approximately $34.6 million was committed under letters of credit. Borrowings under our non-U.S. credit facilities at September 30, 2024 and 2023, were not significant. We were in compliance with all covenants under our credit facilities at September 30, 2024 and 2023. There are no significant commitment fees or compensating balance requirements under our credit facilities. In July 2024, Standard & Poor’s downgraded our short-term rating from A-1 to A-2 and our long-term rating from A to A- and also changed our outlook from negative to stable. No changes were made to existing ratings by Moody’s or Fitch. The following is a summary of our credit ratings as of November 12, 2024: | Credit Rating Agency | Short Term Rating | Long Term Rating | Outlook | | --- | --- | --- | --- | | Standard & Poor’s | A-2 | A- | Stable | | Moody’s | P-2 | A3 | Stable | | Fitch Ratings | F1 | A | Stable | 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. 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. 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 and short-term investments 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 may 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. Cash dividends declared to shareowners were $572.8 million in 2024 ($5.00 per common share), $544.0 million in 2023 ($4.72 per common share), and $520.8 million in 2022 ($4.48 per common share). Our quarterly dividend rate as of September 30, 2024, is $1.25 per common share ($5.00 per common share annually), which is determined at the sole discretion of our Board of Directors. ### 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 reported sales to organic sales by geographic region (in millions): | | Year Ended September 30, 2024 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2023 Reported Sales | | --- | ---: | ---: | ---: | ---: | ---: | | North America | $5,052.8 | $81.8 | $(3.4) | $4,974.4 | $5,224.0 | | Europe, Middle East and Africa | 1,504.5 | 9.0 | 21.6 | 1,473.9 | 1,870.6 | | Asia Pacific | 1,072.8 | 4.8 | (18.2) | 1,086.2 | 1,358.0 | | Latin America | 634.1 | 0.4 | 4.5 | 629.2 | 605.4 | | Total Company Sales | $8,264.2 | $96.0 | $4.5 | $8,163.7 | $9,058.0 | | | Year Ended September 30, 2023 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2022 Reported Sales | | --- | ---: | ---: | ---: | ---: | ---: | | North America | $5,224.0 | $15.6 | $(23.9) | $5,232.3 | $4,722.0 | | Europe, Middle East and Africa | 1,870.6 | 57.5 | (26.3) | 1,839.4 | 1,437.6 | | Asia Pacific | 1,358.0 | 18.2 | (80.5) | 1,420.3 | 1,088.0 | | Latin America | 605.4 | 0.1 | 22.8 | 582.5 | 512.8 | | Total Company Sales | $9,058.0 | $91.4 | $(107.9) | $9,074.5 | $7,760.4 | 35 The following is a reconciliation of reported sales to organic sales by operating segment (in millions): | | Year Ended September 30, 2024 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2023 Reported Sales | | --- | ---: | ---: | ---: | ---: | ---: | | Intelligent Devices | $3,804.1 | $68.5 | $3.7 | $3,731.9 | $4,098.2 | | Software & Control | 2,187.4 | — | 2.2 | 2,185.2 | 2,886.0 | | Lifecycle Services | 2,272.7 | 27.5 | (1.4) | 2,246.6 | 2,073.8 | | Total Company Sales | $8,264.2 | $96.0 | $4.5 | $8,163.7 | $9,058.0 | | | Year Ended September 30, 2023 Reported Sales | Less: Effect of Acquisitions | Effect of Changes in Currency | Organic Sales | Year Ended September 30, 2022 Reported Sales | | --- | ---: | ---: | ---: | ---: | ---: | | Intelligent Devices | $4,098.2 | $80.6 | $(46.4) | $4,064.0 | $3,544.6 | | Software & Control | 2,886.0 | — | (30.7) | 2,916.7 | 2,312.9 | | Lifecycle Services | 2,073.8 | 10.8 | (30.8) | 2,093.8 | 1,902.9 | | Total Company Sales | $9,058.0 | $91.4 | $(107.9) | $9,074.5 | $7,760.4 | 36 ### Critical Accounting Estimates We believe the following accounting estimates 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. Accounting principles generally accepted in the United States 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. Refer to Note 1 in the Consolidated Financial Statements for information regarding our significant accounting policies. ### Goodwill - Sensia Reporting Unit The quantitative test of goodwill for impairment requires us to estimate the fair value of our reporting units. During the second quarter of fiscal 2024, we performed our annual quantitative impairment test for our Sensia reporting unit. As a result of that quantitative test, we concluded that the second quarter Goodwill balance within the Sensia reporting unit of $160.7 million was not impaired, as the fair value of the Sensia reporting unit was determined to exceed its carrying value by approximately 25 percent. Critical assumptions used in this approach included management’s estimated future revenue growth rates and margins, a discount rate, and a market multiple. Estimated future revenue growth and margins are based on management’s best estimate about current and future conditions. The revenue growth rate assumption reflects above market growth over the next five years before moderating back to a growth rate approximating longer term average inflationary rates. The forecasted near-term growth rate projections take into account recent revenue performance and the orders backlog. Margin assumptions reflect volume and mix, productivity to offset cost inflation, and price used to fund investments. The assumptions and estimates made are based on a number of factors, including historical experience, reference to external product available market and industry growth publications, analysis of peer group projections, and information obtained from the management team, including backlog. Actual results and forecasts of revenue growth and margins for our Sensia reporting unit may be impacted by its concentration within the Oil & Gas industry and with its customer base. Demand for Sensia hardware and software products, solutions, and services is sensitive to industry volatility and risks, including those related to commodity prices, supply and demand dynamics, production costs, geological activity, and political activities. If such factors impact our ability to achieve forecasted revenue growth rates and margins, the fair value of the reporting unit could decrease, which may result in an impairment. We determined the discount rate using our weighted average cost of capital adjusted for risk factors including risk associated with our above market revenue growth assumptions, historical performance, and industry-specific and economic factors. Also, industry-specific and economic factors that increase the discount rate or decrease the market multiple can decrease the fair value of the Sensia reporting unit, which may result in an impairment. More information regarding goodwill impairment testing is contained in Note 1 and Note 3 in the Consolidated Financial Statements. ### Retirement Benefits - Pension Pension costs and obligations are actuarially determined and are influenced by assumptions used to estimate these amounts, including the discount rate. Changes in any of the assumptions and the amortization of differences between the assumptions and actual experience will affect the amount of pension expense in future periods. Our global pension expense in 2024 was $13.2 million compared to $122.0 million in 2023; global pension expense in 2023 included $123.4 million of settlement charges. Approximately all of our 2024 global pension expense and 70 percent of our global projected benefit obligation relate to our U.S. pension plan. The discount rate used to determine our 2024 U.S. pension expense was 6.10 percent, compared to 5.65 percent for 2023. For 2025, our U.S. discount rate will decrease to 5.10 percent from 6.10 percent in 2024. The discount rate was set as of our September 30 measurement date and was determined by modeling a portfolio of bonds that match the expected cash flow of our benefit plans. The changes in our discount rate have an inverse relationship with our net periodic benefit cost and projected benefit obligation. The following chart illustrates the estimated change in projected benefit obligation and annual net periodic benefit cost assuming a change of 25 basis points in the discount rate for our U.S. pension plans (in millions): | | Pension Benefits Change in Projected Benefit Obligation | Change in Net Periodic Benefit Cost (1) | | --- | ---: | ---: | | Discount rate | $64.9 | $6.9 | (1) Change includes both operating and non-operating pension costs. More information regarding pension benefits is contained in Note 14 in the Consolidated Financial Statements. ### Revenue Recognition - Customer Incentives We offer various incentive programs that provide distributors and direct sale customers with cash rebates, account credits, or additional hardware and software products, solutions, and services based on meeting specified program criteria. Customer incentives are recognized as a reduction of sales if distributed in cash or customer account credits. We record accruals at the time of revenue recognition as a current liability within Customer returns, rebates, and incentives in our Consolidated Balance Sheet or, where a right of setoff exists, as a reduction of Receivables. Customer incentives for additional hardware and software products, solutions, and services to be provided are considered distinct performance obligations. As such, we allocate revenue to them based on relative standalone selling price. Until the incentive is redeemed, the revenue is recorded as a contract liability. Our primary incentive program provides distributors with cash rebates or account credits based on agreed amounts that vary depending on the customer to whom our distributor ultimately sells the product. A critical assumption used in estimating the accrual for this program is the time period from when revenue is recognized to when the rebate is processed. Our estimate is based primarily on historical experience. If the time period were to change by 10 percent, the effect would be an adjustment to the accrual of approximately $20.7 million. More information regarding our revenue recognition and returns, rebates, and incentives policies are contained in Note 1 and Note 2 in the Consolidated Financial Statements. ### Acquisitions - Clearpath Intangible Assets Valuation We account for business acquisitions by allocating the purchase price to tangible and intangible assets acquired and liabilities assumed at their fair values; the excess of the purchase price over the allocated amount is recorded as goodwill. We engaged an independent third-party valuation specialist to assist with the fair value allocation of the intangible assets assumed through the acquisition of Clearpath. The intangible assets were valued using income approaches, specifically the relief from royalty method and multi-period excess earnings method. This required the use of several assumptions and estimates including forecasted revenue growth rates, margin, and cash flows attributable to existing customers, obsolescence factor, royalty rate, contributory asset charges, customer attrition rate, and discount rates. Although we believe the assumptions and estimates made were reasonable and appropriate, these estimates require judgment and are based in part on historical experience and information obtained from Clearpath management. The key assumption requiring the use of judgement in the valuation of the $269.9 million technology asset was the obsolescence factor. The obsolescence factor of 12 years was calculated based on the depletion of existing technology using a variety of factors including research and development spend toward new product development and scheduled patent expiration. A two-year change in this assumption would result in a change of approximately $82 million in intangible assets. The key assumption requiring the use of judgement in the valuation of the $41.6 million trademark intangible asset was the weighted average royalty rate of 2.05 percent. This rate was based on royalty market data. A 100 basis point change in the royalty rate would result in a change of $20 million in intangible assets. More information regarding this business combination is contained in Note 4 in the Consolidated Financial Statements. ### Recent Accounting Pronouncements See Note 1 in the Consolidated Financial Statements regarding recent accounting pronouncements. ## Market risk As filed, 5,625 characters. We are exposed to market risk during the normal course of business from changes in foreign currency exchange rates and interest rates. We manage exposure to these risks through a combination of normal operating and financing activities as well as derivative financial instruments in the form of foreign currency forward exchange contracts. ### Foreign Currency Risk We are exposed to foreign currency risks that arise from normal business operations. These risks include the translation of local currency balances of foreign subsidiaries, transaction gains and losses associated with intercompany loans with foreign subsidiaries, and transactions denominated in currencies other than a location’s functional currency. Our objective is to minimize our exposure to these risks through a combination of normal operating activities and the use of foreign currency forward exchange contracts. Contracts are usually denominated in currencies of major industrial countries. The fair value of our foreign currency forward exchange contracts is an asset of $17.1 million and a liability of $33.5 million at September 30, 2024. We enter into these contracts with major financial institutions that we believe to be creditworthy. We do not enter into derivative financial instruments for speculative purposes. The strengthening of the U.S. dollar against foreign currencies has an unfavorable impact on our sales and results of operations. While future changes in foreign currency exchange rates are difficult to predict, our sales and profitability may be adversely affected if the U.S. dollar strengthens relative to current levels. Certain of our locations have assets and liabilities denominated in currencies other than their functional currencies. We enter into foreign currency forward exchange contracts to offset the transaction gains or losses associated with some of these assets and liabilities. For such assets and liabilities without offsetting foreign currency forward exchange contracts, a 10 percent adverse change in the underlying foreign currency exchange rates would reduce our pre-tax income by approximately $61.6 million. We record all derivatives on the balance sheet at fair value regardless of the purpose for holding them. The use of foreign currency forward exchange contracts allows us to manage transactional exposure to exchange rate fluctuations as the gains or losses incurred on these contracts will offset, in whole or in part, losses or gains on the underlying foreign currency exposure. Derivatives that are not designated as hedges for accounting purposes are adjusted to fair value through earnings. For derivatives that are hedges, depending on the nature of the hedge, changes in fair value are either offset by changes in the fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in Other comprehensive income (loss) until the hedged item is recognized in earnings. We recognize the ineffective portion of a derivative’s change in fair value in earnings immediately. There was no impact on earnings due to ineffective hedges in 2024, 2023, or 2022. A hypothetical 10 percent adverse change in underlying foreign currency exchange rates associated with the hedged exposures and related contracts would not be significant to our financial condition or results of operations. ### Interest Rate Risk In addition to existing cash balances and cash provided by normal operating activities, we use a combination of short-term and long-term debt to finance operations. We are exposed to interest rate risk on certain of these debt obligations. Our Short-term debt as of September 30, 2024, includes commercial paper borrowings of $657.0 million with a weighted average interest rate of 5.14 percent and a weighted average maturity period of 24 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 September 30, 2024 and 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 September 30, 2024 and September 30, 2023 was $23.5 million of interest-bearing loans from SLB to Sensia, due April 2025. In April 2024, $18.8 million of new interest-bearing loans from SLB to Sensia were entered into and were due August 2024, extended to April 2025. We have issued, and anticipate continuing to issue, short-term commercial paper obligations as needed. Changes in market interest rates on commercial paper borrowings affect our results of operations. A hypothetical 50 basis point increase in average market interest rates related to our short-term debt would not be significant to our results of operations or financial condition. We had outstanding fixed rate long-term and current portion of long-term debt obligations with a carrying value of $2,868.7 million at September 30, 2024, and $2,871.5 million at September 30, 2023. The fair value of this debt was approximately $2,638.5 million at September 30, 2024, and $2,451.2 million at September 30, 2023. The potential increase in fair value on such fixed-rate debt obligations from a hypothetical 50 basis point decrease in market interest rates would not be significant to our results of operations or financial condition. We currently have no plans to repurchase our outstanding fixed-rate instruments before their maturity and, therefore, fluctuations in market interest rates would not have an effect on our results of operations or shareowners’ equity. ## Controls and procedures As filed, 2,523 characters. ### Evaluation of Disclosure Controls and Procedures Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness, as of September 30, 2024, of our disclosure controls and procedures, as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective as of September 30, 2024. ### Management’s Report on Internal Control Over Financial Reporting We are responsible for establishing and maintaining adequate internal control over financial reporting, as defined in Rule 13a-15(f) under the Exchange Act. Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we evaluated the effectiveness of our internal control over financial reporting based on the framework in *Internal Control - Integrated Framework (2013)* issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Based on that evaluation, management has concluded that our internal control over financial reporting was effective as of September 30, 2024. The effectiveness of our internal control over financial reporting, as of September 30, 2024, has been audited by Deloitte & Touche LLP, as stated in their report that is included on the previous page. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ### Changes in Internal Control Over Financial Reporting There has not been any change in our internal control over financial reporting (as such term is defined in Rule 13a-15(f) under the Exchange Act) during the fiscal quarter to which this report relates that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting. Filed Nov 12, 2024. Source: SEC EDGAR, the filing index for accession 0001024478-24-000107. Last ingested by Listed: Oct 24, 2026, 15:02 ET. No prices; not investment advice.