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Basis of Presentation and Accounting Policies
 9 Months Ended
Jun. 30, 2019
Accounting Policies [Abstract]  
Basis of Presentation and Accounting Policies 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, 2018. The results of operations for the three- and nine-month periods ended June 30, 2019, 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
Receivables are stated net of an allowance for doubtful accounts of $20.1 million at June 30, 2019, and $17.1 million at September 30, 2018. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $10.2 million at June 30, 2019, and $8.7 million at September 30, 2018.
Earnings Per Share
The following table reconciles basic and diluted earnings per share (EPS) amounts (in millions, except per share amounts):
 
Three Months Ended
June 30,
 
Nine Months Ended
June 30,
 
2019
 
2018
 
2019
 
2018
Net income
$
261.4

 
$
198.6

 
$
687.7

 
$
189.6

Less: Allocation to participating securities
(0.3
)
 
(0.1
)
 
(0.7
)
 
(0.2
)
Net income available to common shareowners
$
261.1

 
$
198.5


$
687.0

 
$
189.4

Basic weighted average outstanding shares
117.6

 
124.4

 
119.0

 
126.5

Effect of dilutive securities
 
 
 
 
 
 
 
Stock options
1.0

 
1.2

 
0.9

 
1.4

Performance shares
—

 
0.2

 
0.1

 
0.2

Diluted weighted average outstanding shares
118.6

 
125.8

 
120.0

 
128.1

Earnings per share:
 
 
 
 
 
 
 
Basic
$
2.22

 
$
1.60

 
$
5.77

 
$
1.50

Diluted
$
2.20

 
$
1.58

 
$
5.73

 
$
1.48


For each of the three and nine months ended June 30, 2019, 1.8 million shares related to share-based compensation awards were excluded from the diluted EPS calculation because they were antidilutive. For each of the three and nine months ended June 30, 2018, 0.9 million shares related to share-based compensation awards were excluded from the diluted EPS calculation because they were antidilutive.
Non-Cash Investing and Financing Activities
Capital expenditures of $12.4 million and $13.4 million were accrued within accounts payable and other current liabilities at June 30, 2019 and 2018, respectively. At June 30, 2019 and 2018, there were $6.0 million and $22.6 million, respectively, of outstanding common stock share repurchases recorded in accounts payable that did not settle until the next fiscal 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.
Joint Venture Announcement
On February 19, 2019, we announced that we have entered into an agreement to create a new joint venture, Sensia, the first fully integrated digital oilfield automation solutions provider. The transaction is expected to close in calendar 2019, subject to receipt of regulatory approvals and satisfaction of other customary conditions. Under the terms of the agreement, Sensia will operate as an independent entity, with Rockwell Automation owning 53% and Schlumberger owning 47% of the joint venture. As part of the transaction, we will make a $250 million payment to Schlumberger at closing, which will be funded by cash on hand. We expect that we will consolidate Sensia in our financial results. Sensia is expected to generate initial annual revenue of approximately $400 million, slightly less than half of which relates to businesses to be contributed to the joint venture by Rockwell Automation.
Recently Adopted Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (FASB) issued a new standard, referred to as Accounting Standards Codification (ASC) 606, on revenue recognition related to contracts with customers. This standard supersedes nearly all existing revenue recognition guidance and involves a five-step principles-based approach to recognizing revenue. The underlying principle is to recognize revenue when promised goods or services are transferred to customers in an amount that reflects the consideration that is expected to be received for those goods or services. The new standard also requires additional qualitative and quantitative disclosures about contracts with customers, significant judgments made in applying the revenue guidance, and assets recognized from the costs to obtain or fulfill a contract. We adopted the new revenue standard using the modified retrospective transition method, which resulted in an adjustment to the opening balance of retained earnings as of October 1, 2018, our adoption date. The prior period information has not been restated and continues to be reported under the accounting standards in effect for the period presented. See Note 2 in the Consolidated Financial Statements for additional accounting policy and transition disclosures.
In March 2017, the FASB issued a new standard regarding the presentation of net periodic pension and postretirement benefit cost. This standard requires the service cost component to be reported in the income statement in the same line item as other compensation costs arising from services rendered by the related employees during the period. The other components of net periodic benefit cost are required to be presented separately from the service cost component in either a separate line item or within another appropriate line item with disclosure of where those costs are recorded. This standard also requires that only the service cost component is eligible for capitalization, when applicable. We adopted the new standard as of October 1, 2018, and applied the standard retrospectively. As a result of applying the pension standard retrospectively, the following adjustments were made to the Consolidated Statement of Operations (in millions):
 
Three Months Ended June 30, 2018
 
Nine Months Ended June 30, 2018
 
As Reported
 
Impact of adoption
 
As Restated
 
As Reported
 
Impact of adoption
 
As Restated
Cost of sales
 
 
 
 
 
 
 
 
 
 
 
Products and solutions
$
(846.0
)
 
$
2.6

 
$
(843.4
)
 
$
(2,468.0
)
 
$
8.0

 
$
(2,460.0
)
Services
(111.0
)
 
0.4

 
(110.6
)
 
(328.9
)
 
1.2

 
(327.7
)
 
(957.0
)
 
3.0

 
(954.0
)
 
(2,796.9
)
 
9.2

 
(2,787.7
)
Gross profit
741.7

 
3.0

 
744.7

 
2,139.6

 
9.2

 
2,148.8

Selling, general and administrative expenses
(402.2
)
 
2.6

 
(399.6
)
 
(1,180.7
)
 
7.9

 
(1,172.8
)
Other income (expense)
(71.3
)
 
(5.6
)
 
(76.9
)
 
(56.0
)
 
(17.1
)
 
(73.1
)

Effective October 1, 2018, we realigned our reportable segments for a transfer of business activities between our segments. We also reclassified interest income from General corporate - net to Interest (expense) income - net. As a result, the prior period presentation of reportable segments has been restated to conform to the current segment reporting structure. These changes did not impact the Consolidated Statement of Operations. See Note 14 in the Consolidated Financial Statements for additional information about the restatements.
Recently Issued Accounting Pronouncements
In February 2016, the FASB issued a new standard on accounting for leases that requires lessees to recognize right-of-use assets and lease liabilities for most leases, among other changes to existing lease accounting guidance. The new standard also requires additional qualitative and quantitative disclosures about leasing activities. We intend to adopt this standard in the first fiscal quarter of 2020 and apply the new standard at the adoption date, and recognize a cumulative-effect adjustment to the opening balance of retained earnings.
We have established a project plan and a cross-functional implementation team to adopt and apply the new standard. We are in the process of implementing necessary changes to accounting policies, processes, controls and systems to enable compliance with this new standard. We continue to evaluate the impact the adoption of this standard will have on our Consolidated Financial Statements and related disclosures.