ROCKWELL AUTOMATION INC

1. Basis of Presentation and Accounting Policies

In the opinion of management of Rockwell Automation, Inc. (Rockwell Automation or the Company), the unaudited Consolidated Financial Statements contain all adjustments necessary to present fairly the financial position, results of operations, and cash flows for the periods presented and, except as otherwise indicated, such adjustments consist only of those of a normal, recurring nature. These statements should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended September 30, 2024. The results of operations for the three and six months ended March 31, 2025, are not necessarily indicative of the results for the full year. All date references to years and quarters herein refer to our fiscal year and fiscal quarter, unless otherwise stated.

Receivables

We record an allowance for doubtful accounts based on customer-specific analysis and general matters such as current assessments of past due balances and economic conditions. Receivables are recorded net of an allowance for doubtful accounts of $25 million at March 31, 2025, and $22 million at September 30, 2024. The changes to our allowance for doubtful accounts during the three and six months ended March 31, 2025 and 2024, were not material and primarily consisted of current-period provisions, write-offs charged against the allowance, recoveries collected, and foreign currency translation.

Earnings Per Share

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

For the three and six months ended March 31, 2025, there were 0.6 million and 1.3 million shares, respectively, related to share-based compensation awards that were excluded from the diluted EPS calculation because they were antidilutive. For both the three and six months ended March 31, 2024, there were 0.5 million shares related to share-based compensation awards that were excluded from the diluted EPS calculation because they were antidilutive.

Non-Cash Investing and Financing Activities

Capital expenditures of $19 million and $7 million were accrued within Accounts payable and Other current liabilities at March 31, 2025 and 2024, respectively. At March 31, 2025 and 2024, respectively, there was $3 million and $2 million of outstanding common stock share repurchases recorded in Accounts payable that did not settle until the next quarter. These non-cash investing and financing activities have been excluded from cash used for capital expenditures and treasury stock purchases in the Consolidated Statement of Cash Flows.

Leases

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

In the six months ended March 31, 2025 and 2024, we realized changes in our right-of-use assets and lease liabilities, both as a result of new leases and existing leases for which we are reasonably certain to exercise future renewal options.

Supplier Financing Arrangements

The Company maintains agreements with third-party financial institutions that offer voluntary supply chain financing (SCF) programs to suppliers. The SCF programs enable suppliers, at their sole discretion, to sell their receivables to third-party financial institutions in order to receive payment on receivables earlier than the negotiated commercial terms between suppliers and the Company. Supplier sale of receivables to third-party financial institutions is on terms negotiated between the supplier and the respective third-party financial institution. The Company agrees on commercial terms for the goods and services procured from suppliers, including prices, quantities, and payment terms, regardless of whether the supplier elects to participate in the SCF programs. A supplier’s voluntary participation in the SCF programs has no bearing on the Company's payment terms and the Company has no economic interest in a supplier’s decision to participate in the SCF programs. The Company agrees to pay participating third-party financial institutions the stated amount of confirmed invoices from suppliers on the original maturity dates of the invoices. Amounts outstanding related to SCF programs are included in Accounts payable in the Consolidated Balance Sheet and in changes in Accounts payable on the Consolidated Statement of Cash Flows. Accounts payable included approximately $56 million and $77 million related to these agreements as of March 31, 2025, and September 30, 2024, respectively. The impact of these programs is not material to the Company's overall liquidity.

Recently Issued Accounting Pronouncements

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

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

In November 2024, the FASB issued ASU 2024-03, which requires disclosure of certain expense amounts comprising Cost of sales and Selling, general and administrative expenses, as well as a qualitative description of the remaining expense amounts. We will expand our disclosures in our 2028 Annual Report on Form 10-K when the standard becomes effective for us.

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

2. Revenue Recognition

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

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

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

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

Unfulfilled Performance Obligations

As of March 31, 2025, we expect to recognize approximately $1,365 million of revenue in future periods from unfulfilled performance obligations from existing contracts with customers. We expect to recognize revenue of approximately $805 million from our remaining performance obligations over the next 12 months with the remaining balance recognized thereafter.

We have applied the practical expedient to exclude the value of remaining performance obligations for (i) contracts with an original term of one year or less and (ii) contracts for which we recognize revenue in proportion to the amount we have the right to invoice for services performed. The amounts above also do not include the impact of contract renewal options that are unexercised as of March 31, 2025.

Disaggregation of Revenue

The following table presents our revenue disaggregation by geographic region for ourthree operating segments (in millions). We attribute sales to the geographic regions based on the country of destination.

Contract Liabilities

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

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

The most significant changes in our Contract liabilities balance during the six months ended March 31, 2025, were due to amounts billed during the period, partially offset by revenue recognized that was included in the Contract liabilities balance at the beginning of the period and revenue recognized on amounts billed during the period. The most significant changes in our Contract liabilities balance during the six months ended March 31, 2024, were due to amounts billed during the period, partially offset by revenue recognized on amounts billed during the period and revenue recognized that was included in the Contract liabilities balance at the beginning of the period.

In the six months ended March 31, 2025, we recognized revenue of approximately $506 million that was included in the Contract liabilities balance at September 30, 2024. In the six months ended March 31, 2024, we recognized revenue of approximately $405 million that was included in the Contract liabilities balance at September 30, 2023. We didnot have a material amount of revenue recognized in the six months ended March 31, 2025 and 2024, from performance obligations satisfied or partially satisfied in previous periods.

3. Share-Based Compensation

We recognized $21 million and $44 million of pre-tax share-based compensation expense during the three and six months ended March 31, 2025, respectively. We recognized $27 million and $51 million of pre-tax share-based compensation expense during the three and six months ended March 31, 2024, respectively. Our annual grant of share-based compensation takes place during the first quarter of each year. The number of shares granted to employees and non-employee directors and the weighted average fair value per share during the periods presented were (in thousands, except per share amounts):

4. Inventories

Inventories consist of (in millions):

5. Acquisitions

2024 Acquisitions

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

Intangible assets identified include $270 million of technology, $41 million of trademarks, and $2 million of customer relationships. We assigned the full amount of goodwill and all other assets acquired to our Intelligent Devices segment. The goodwill recorded represents intangible assets that do not qualify for separate recognition. This goodwill arises because the purchase price for Clearpath reflects a number of factors including the future earnings and cash flow potential for the business and resulting synergies from the business portfolio and industry expertise. We do not expect the goodwill to be deductible for tax purposes. The intangible assets were valued using an income approach, specifically the relief from royalty method and multi-period excess earnings method. The relief from royalty method calculates value based on hypothetical payments that would be saved by owning an asset rather than licensing it. The multi-period excess earnings method is the isolation of cash flows from a single intangible asset and measures fair value by discounting them to present value. These values are considered level 3 measurements under the U.S. GAAP fair value hierarchy. Refer to Note 9 for further information regarding levels in the fair value hierarchy. The key assumption requiring the use of judgement in the valuation of the technology asset was the obsolescence factor, where we estimated a phase out over 12 years; other assumptions included forecasted revenue growth rates and margin and the discount rate. The key assumption requiring the use of judgement in the valuation of the trademarks asset was the weighted average royalty rate of 2.05 percent; other assumptions included forecasted revenue growth rates and the discount rate.

The purchase price included up to $50 million in contingent consideration that could have been earned by the sellers if Clearpath achieved revenue targets intwo performance periods ending February 29, 2024, and February 28, 2025. We developed various risk-based scenarios and a probability outcome model and determined the fair value to be $43 million as of the acquisition date, which is considered a level 3 measurement under the U.S. GAAP fair value hierarchy. We updated the fair value measures quarterly during the performance periods to reflect actual results and remaining expected contingent consideration that could be earned.

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

The consideration for the amount earned for the first performance period was paid during the third quarter of 2024.

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

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

Pro forma consolidated sales for the three and six months ended March 31, 2024, were $2.1 billion and $4.2 billion, respectively, and the impact on earnings wasnot material. The preceding pro forma consolidated financial results of operations are as if the preceding 2024 acquisitions occurred on October 1, 2023. The pro forma information is presented for informational purposes only and is not indicative of the results of operations that would have been achieved had the transaction occurred as of that time.

Total sales from all of the above 2024 acquisitions in the three and six months ended March 31, 2024, were $30 million and $47 million, respectively. Total acquisition-related costs and earnings from all of the above 2024 acquisitions in the three and six months ended March 31, 2024, werenot material.

6. Goodwill and Other Intangible Assets

Changes in the carrying amount of Goodwill for the six months ended March 31, 2025, were (in millions):

We performed our annual evaluation of goodwill and indefinite life intangible assets for impairment as of the beginning of the second quarter of fiscal 2025 and concluded that these assets are not impaired. For our annual evaluation, we performed qualitative tests for our Intelligent Devices, Software & Control, and Lifecycle Services (excluding Sensia) reporting units and a quantitative test for our Sensia reporting unit. We also assessed the changes in events and circumstances subsequent to our annual test and concluded that no triggering events, which would require interim quantitative testing, occurred.

Other intangible assets consist of (in millions):

Estimated total amortization expense for all amortized intangible assets is $152 million in 2025, $150 million in 2026, $141 million in 2027, $129 million in 2028, and $89 million in 2029.

7. Short-Term and Long-Term Debt

Our Short-term debt as of March 31, 2025, included commercial paper borrowings of $996 million, with a weighted average interest rate of 4.57 percent, and a weighted average maturity period of 31 days. Our Short-term debt as of September 30, 2024, included commercial paper borrowings of $657 million, with a weighted average interest rate of 5.14 percent, and a weighted average maturity period of 24 days. In December 2022, Sensia entered into an unsecured $75 million line of credit. As of March 31, 2025, and September 30, 2024, included in Short-term debt was $70 million borrowed against the line of credit with an interest rate of 5.32 percent and 6.17 percent, respectively. Also included in Short-term debt as of March 31, 2025, and September 30, 2024, was $42 million of interest-bearing loans from Schlumberger (SLB) to Sensia. In April 2025, the loans were extended to October 15, 2026, and $14 million of new interest-bearing loans from SLB to Sensia were entered into and are due July 2025.

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

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

8. Other Current Liabilities

Other current liabilities consist of (in millions):

9. Investments

Our investments consist of (in millions):

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

(2)Long-term investments are included in Other assets in the Consolidated Balance Sheet.

Equity Securities

Equity securities (other) consist of various securities that do not have a readily determinable fair value, which we account for using the measurement alternative under U.S. GAAP. These securities are recorded at the investment cost, less impairment, plus or minus observable price changes (in orderly transactions) of an identical or similar investment of the same issuer in the Consolidated Balance Sheet. Observable price changes are classified as level 2 in the fair value hierarchy, as described below. The carrying values at both March 31, 2025, and September 30, 2024, included cumulative upward adjustments from observed price changes of $23 million. The carrying values at March 31, 2025, and September 30, 2024, included cumulative downward adjustments from observed price changes and impairments of $11 million and $7 million, respectively.

We record gains and losses on investments within the Change in fair value of investments line in the Consolidated Statement of Operations. Total net unrealized losses on investments were $3 million in both the three and six months ended March 31, 2025. Total net unrealized gains on equity securities were $3 million and $5 million in the three and six months ended March 31, 2024, respectively.

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

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

10. Retirement Benefits

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

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

11. Other Income

The components of Other income were (in millions):

12. Accumulated Other Comprehensive Loss

Common Stock

In the six months ended March 31, 2025, we retired 40 million shares of common stock that we held in our treasury. These shares are now designated as authorized and unissued.

Changes in Accumulated other comprehensive loss attributable to Rockwell Automation by component for the following periods were (in millions):

The reclassifications out of Accumulated other comprehensive loss in the Consolidated Statement of Operations were (in millions):

(1) These components are included in the computation of net periodic pension and postretirement benefit cost. See Note 10 for further information.

13. Commitments and Contingent Liabilities

Various lawsuits, claims, and proceedings have been or may be instituted or asserted against us relating to the conduct of our business, including those pertaining to product liability, environmental, safety and health, intellectual property, employment, and contract matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to us, we believe the disposition of matters that are pending or have been asserted will not have a material effect on our business, financial condition, or results of operations. The following outlines additional background for obligations associated with asbestos, divested businesses, and intellectual property.

We (including our subsidiaries) have been named as a defendant in lawsuits alleging personal injury as a result of exposure to asbestos that was used in certain components of our products many years ago, including products from divested businesses for which we have agreed to defend and indemnify claims. Currently there are lawsuits that name us as defendants, together with hundreds of other companies. But in all cases, for those claimants who do show that they worked with our products or products of divested businesses for which we are responsible, we nevertheless believe we have meritorious defenses, in substantial part due to the integrity of the products, the encapsulated nature of any asbestos-containing components, and the lack of any impairing medical condition caused by our products. We defend those cases vigorously. However, certain of our agreements relating to divested businesses do not provide us the ability to directly control management of those asbestos claims, and our ongoing reimbursement of outside counsel and other expenses relating to defense of such claims represent the vast majority of our annual asbestos net litigation spend. Historically, we have been dismissed from the vast majority of asbestos claims with no payment to claimants.

Additionally, we have maintained insurance coverage that includes indemnity and defense costs, over and above self-insured retentions, for many of these claims. We believe these arrangements will provide substantial coverage for future defense and indemnity costs for these asbestos claims for many years into the future. The uncertainties of asbestos claim litigation make it difficult to predict accurately the ultimate outcome of asbestos claims. That uncertainty is increased by the possibility of adverse rulings or new legislation affecting asbestos claim litigation or the settlement process. Subject to these uncertainties and based on our experience defending asbestos claims, we do not believe these lawsuits will have a material effect on our business, financial condition, or results of operations.

We have, from time to time, divested certain of our 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 to satisfy those liabilities if the divested business is unable to do so. We do not believe these liabilities will have a material effect on our business, financial condition, or results of operations.

In many countries we provide a limited intellectual property indemnity as part of our terms and conditions of sale and at times in other contracts with third parties. As of March 31, 2025, we were not aware of any material indemnification claims that were probable or reasonably possible of an unfavorable outcome. Historically, claims that have been made under the indemnification agreements have not had a material impact on our business, financial condition, or results of operations; however, to the extent that valid indemnification claims arise in the future, future payments by us could be significant and could have a material adverse effect on our business, financial condition, or results of operations in a particular period.

14. Restructuring Charges

In 2024, we recorded restructuring charges of $97 million ($73 million, net of tax or $0.64 per diluted share) related to actions in conjunction with an enterprise-wide comprehensive program to optimize cost structure and expand margins. The charges included $92 million for severance benefits and $5 million for strategic advisory services related to the targeted severance actions. We expect the total cash expenditures associated with these restructuring actions to be $97 million of which we paid $12 million and $26 million during the three and six months ended March 31, 2025, respectively. Accruals remaining under these restructuring actions were $44 million and $70 million at March 31, 2025, and September 30, 2024, respectively.

15. Income Taxes

At the end of each interim period, we estimate a base effective tax rate that we expect for the full year based on our most recent forecast of pre-tax income, permanent book and tax differences, and global tax planning strategies. We use this base rate to provide for income taxes on a year-to-date basis, excluding the effect of significant unusual items and items that are reported net of their related tax effects in the period in which they occur.

The effective tax rate was 17.1 percent and 16.8 percent for the three and six months ended March 31, 2025, respectively, compared to 14.5 percent and 16.1 percent for the three and six months ended March 31, 2024, respectively. The effective tax rate was lower than the U.S. statutory rate of 21 percent for the three and six months ended March 31, 2025, primarily due to the geographical mix of pre-tax income. The effective tax rate was lower than the U.S. statutory rate of 21 percent for the three and six months ended March 31, 2024, primarily due to the geographical mix of pre-tax income and other discrete benefits.

Our final payment of $97 million related to the U.S. transition tax under the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) will be paid in the second quarter of 2026 and is classified in Other current liabilities in the Consolidated Balance Sheet as of March 31, 2025. This amount was classified in Other liabilities in the Consolidated Balance Sheet as of September 30, 2024.

Unrecognized Tax Benefits

The amount of gross unrecognized tax benefits was $27 million at March 31, 2025, and $25 million at September 30, 2024, respectively, of which the entire amount would reduce our effective tax rate if recognized.

Accrued interest and penalties related to unrecognized tax benefits were $2 million at both March 31, 2025 and September 30, 2024. We recognize interest and penalties related to unrecognized tax benefits in the income tax provision.

We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to $2 million in the next 12 months as a result of the resolution of tax matters in various global jurisdictions and the lapses of statutes of limitations. If all of the unrecognized tax benefits were recognized, the net reduction to our income tax provision, including the recognition of interest and penalties and offsetting tax assets, could be up to $3 million.

We conduct business globally and are routinely audited by the various tax jurisdictions in which we operate. We are no longer subject to U.S. federal income tax examinations for years before 2018, state and local income tax examinations for years before 2014, and foreign income tax examinations for years before 2008.

16. Business Segment Information

Sales and operating results of our reportable segments were (in millions):

Among other considerations, we evaluate performance and allocate resources based upon segment operating earnings before purchase accounting depreciation and amortization, corporate and other, non-operating pension and postretirement benefit credit, change in fair value of investments, and interest expense, net. Depending on the product, intersegment sales within a single legal entity are either at cost or cost plus a mark-up, which does not necessarily represent a market price. Sales between legal entities are at an appropriate transfer price. We allocate costs related to shared segment operating activities to the segments consistent with the methodology used by management to assess segment performance.