UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549 

_________________________________________

FORM 10-Q 

_________________________________________

(Mark One)

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended December 31, 2019

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from _______ to _______

Commission file number 1-12383

_________________________________________

Rockwell Automation, Inc.

(Exact name of registrant as specified in its charter)

_________________________________________

Delaware		25-1797617
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
1201 South Second Street
Milwaukee,	Wisconsin	53204
(Address of principal executive offices)		(Zip Code)

+1 (414) 382-2000

Registrant’s telephone number, including area code 

Not Applicable

(Former Name or Former Address, if Changed Since Last Report)

_________________________________________

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol	Name of each exchange on which registered
Common Stock ($1.00 par value)	ROK	New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  ☑    No  ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes  ☑    No  ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and "emerging growth company" in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	☑	Accelerated Filer	☐
Non-accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No  ☑

116,183,650 shares of registrant’s Common Stock were outstanding on December 31, 2019.

INDEX

	Page No.
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements:
Consolidated Balance Sheet	4
Consolidated Statement of Operations	5
Consolidated Statement of Comprehensive Income	6
Consolidated Statement of Cash Flows	7
Consolidated Statement of Shareowners' Equity	8
Notes to Consolidated Financial Statements	9
Report of Independent Registered Public Accounting Firm	23
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations	24
Item 3. Quantitative and Qualitative Disclosures About Market Risk	39
Item 4. Controls and Procedures	39
PART II. OTHER INFORMATION
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	41
Item 6. Exhibits	42
Signatures	43

3

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

ROCKWELL AUTOMATION, INC.

CONSOLIDATED BALANCE SHEET

(Unaudited)

(in millions, except per share amounts)

	December 31, 2019			September 30, 2019
ASSETS
Current assets:
Cash and cash equivalents	$	926.2		$	1,018.4
Receivables	1,298.1			1,178.7
Inventories	625.3			575.7
Other current assets	157.9			212.9
Total current assets	3,007.5			2,985.7
Property, net of accumulated depreciation of $1,609.4 and $1,566.0, respectively	574.0			571.9
Operating lease right-of-use assets	331.1			—
Goodwill	1,395.8			1,071.1
Other intangible assets, net	441.8			194.1
Deferred income taxes	368.5			364.1
Long-term investments	860.7			793.9
Other assets	128.5			132.2
Total	$	7,107.9		$	6,113.0
LIABILITIES AND SHAREOWNERS’ EQUITY
Current liabilities:
Short-term debt	$	23.5		$	—
Current portion of long-term debt	301.0			300.5
Accounts payable	708.3			694.6
Compensation and benefits	201.9			239.0
Contract liabilities	319.2			275.6
Customer returns, rebates and incentives	195.3			199.2
Other current liabilities	318.3			227.9
Total current liabilities	2,067.5			1,936.8
Long-term debt	1,953.0			1,956.4
Retirement benefits	1,227.9			1,231.9
Operating lease liabilities	257.8			—
Other liabilities	565.2			583.7
Commitments and contingent liabilities (Note 12)
Shareowners’ equity:
Common stock ($1.00 par value, shares issued: 181.4)	181.4			181.4
Additional paid-in capital	1,775.5			1,709.1
Retained earnings	6,782.0			6,440.2
Accumulated other comprehensive loss	(1,584.3		)	(1,488.0		)
Common stock in treasury, at cost (shares held: 65.2 and 65.7, respectively)	(6,437.6		)	(6,438.5		)
Shareowners’ equity attributable to Rockwell Automation, Inc.	717.0			404.2
Noncontrolling interests	319.5			—
Total shareowners’ equity	1,036.5			404.2
Total	$	7,107.9		$	6,113.0

See Notes to Consolidated Financial Statements.

4

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

	Three Months Ended December 31,
	2019			2018
Sales
Products and solutions	$	1,508.9		$	1,457.6
Services	175.6			184.7
	1,684.5			1,642.3
Cost of sales
Products and solutions	(866.0		)	(782.4		)
Services	(115.6		)	(121.2		)
	(981.6		)	(903.6		)
Gross profit	702.9			738.7
Selling, general and administrative expenses	(403.2		)	(386.7		)
Change in fair value of investments	71.0			(212.7		)
Other income (expense)	(9.7		)	2.2
Interest expense	(26.4		)	(20.7		)
Income before income taxes	334.6			120.8
Income tax provision (Note 14)	(19.2		)	(40.5		)
Net income	315.4			80.3
Net income attributable to noncontrolling interests	4.7			—
Net income attributable to Rockwell Automation, Inc.	$	310.7		$	80.3
Earnings per share:
Basic	$	2.68		$	0.67
Diluted	$	2.66		$	0.66
Weighted average outstanding shares:
Basic	115.7			120.3
Diluted	116.6			121.5

See Notes to Consolidated Financial Statements.

5

CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME

(Unaudited)

(in millions)

	Three Months Ended December 31,
	2019			2018
Net income	$	315.4		$	80.3
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefit plan adjustments (net of tax (expense) of ($7.9) and ($4.3))	27.4			13.8
Currency translation adjustments	22.1			(28.5		)
Net change in unrealized gains and losses on cash flow hedges (net of tax benefit of $1.1 and $6.5)	(2.5		)	(20.8		)
Net change in unrealized gains and losses on available-for-sale investments (net of tax (expense) of ($0.0) and ($0.1))	—			0.5
Other comprehensive income (loss)	47.0			(35.0		)
Comprehensive income	362.4			45.3
Comprehensive income attributable to noncontrolling interests	5.0			—
Comprehensive income attributable to Rockwell Automation, Inc.	$	357.4		$	45.3

See Notes to Consolidated Financial Statements.

6

CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)

	Three Months Ended December 31,
	2019			2018
Operating activities:
Net income	$	315.4		$	80.3
Adjustments to arrive at cash provided by operating activities:
Depreciation	30.2			29.3
Amortization of intangible assets	11.7			6.6
Change in fair value of investments	(71.0		)	212.7
Share-based compensation expense	11.5			11.0
Retirement benefit expense	31.8			17.2
Pension contributions	(7.1		)	(6.1		)
Net loss on disposition of property	—			1.3
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
Receivables	(85.0		)	(6.1		)
Inventories	1.7			(52.4		)
Accounts payable	(0.4		)	(31.2		)
Contract liabilities	37.3			26.9
Compensation and benefits	(38.6		)	(85.4		)
Income taxes	(17.3		)	12.2
Other assets and liabilities	10.9			(4.3		)
Cash provided by operating activities	231.1			212.0
Investing activities:
Capital expenditures	(37.0		)	(42.0		)
Acquisition of businesses, net of cash acquired	(238.5		)	—
Purchases of investments	(1.0		)	(2.8		)
Proceeds from maturities of investments	5.4			185.6
Proceeds from sale of investments	37.9			—
Proceeds from sale of property	0.2			0.1
Cash (used for) provided by investing activities	(233.0		)	140.9
Financing activities:
Net issuance of short-term debt	23.5			80.3
Cash dividends	(117.9		)	(116.9		)
Purchases of treasury stock	(106.0		)	(295.1		)
Proceeds from the exercise of stock options	104.8			4.0
Cash used for financing activities	(95.6		)	(327.7		)
Effect of exchange rate changes on cash	5.3			(11.7		)
(Decrease) increase in cash and cash equivalents	(92.2		)	13.5
Cash and cash equivalents at beginning of period	1,018.4			618.8
Cash and cash equivalents at end of period	$	926.2		$	632.3

See Notes to Consolidated Financial Statements.

7

CONSOLIDATED STATEMENT OF SHAREOWNERS’ EQUITY

(Unaudited)

(in millions, except per share amounts)

	Common stock		Additional paid-in capital		Retained earnings			Accumulated other comprehensive loss			Common stock in treasury, at cost			Total attributable to Rockwell Automation, Inc.			Noncontrolling interests		Total shareowners' equity
Balance at September 30, 2019	$	181.4	$	1,709.1	$	6,440.2		$	(1,488.0	)	$	(6,438.5	)	$	404.2		$	—	$	404.2
Net income	—		—		310.7			—			—			310.7			4.7		315.4
Other comprehensive income (loss)	—		—		—			46.7			—			46.7			0.3		47.0
Common stock issued (including share-based compensation impact)	—		16.3		—			—			101.1			117.4			—		117.4
Share repurchases	—		—		—			—			(100.2		)	(100.2		)	—		(100.2		)
Cash dividends declared (1)	—		—		(117.9		)	—			—			(117.9		)	—		(117.9		)
Adoption of accounting standards	—		—		149.0			(146.8		)	—			2.2			—		2.2
Change in noncontrolling interest	—		50.1		—			3.8			—			53.9			314.5		368.4
Balance at December 31, 2019	$	181.4	$	1,775.5	$	6,782.0		$	(1,584.3	)	$	(6,437.6	)	$	717.0		$	319.5	$	1,036.5

	Common stock		Additional paid-in capital			Retained earnings			Accumulated other comprehensive loss			Common stock in treasury, at cost			Total attributable to Rockwell Automation, Inc.			Noncontrolling interests		Total shareowners' equity
Balance at September 30, 2018	$	181.4	$	1,681.4		$	6,198.1		$	(941.9	)	$	(5,501.5	)	$	1,617.5		$	—	$	1,617.5
Net income	—		—			80.3			—			—			80.3			—		80.3
Other comprehensive income (loss)	—		—			—			(35.0		)	—			(35.0		)	—		(35.0		)
Common stock issued (including share-based compensation impact)	—		(7.0		)	—			—			22.1			15.1			—		15.1
Share repurchases	—		—			—			—			(292.8		)	(292.8		)	—		(292.8		)
Cash dividends declared (1)	—		—			(116.9		)	—			—			(116.9		)	—		(116.9		)
Adoption of accounting standard	—		—			6.1			—			—			6.1			—		6.1
Balance at December 31, 2018	$	181.4	$	1,674.4		$	6,167.6		$	(976.9	)	$	(5,772.2	)	$	1,274.3		$	—	$	1,274.3

⁽¹⁾ Cash dividends were $1.02 per share and $0.97 per share in the periods ending December 31, 2019 and 2018, respectively.

See Notes to Consolidated Financial Statements.

8

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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, 2019. The results of operations for the three-month period ended December 31, 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 $19.8 million at December 31, 2019, and $17.4 million at September 30, 2019. In addition, receivables are stated net of an allowance for certain customer returns, rebates and incentives of $12.4 million at both December 31, 2019 and September 30, 2019.

Earnings Per Share

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

	Three Months Ended December 31,
	2019			2018
Net income attributable to Rockwell Automation, Inc.	$	310.7		$	80.3
Less: Allocation to participating securities	(0.3		)	(0.1		)
Net income available to common shareowners	$	310.4		$	80.2
Basic weighted average outstanding shares	115.7			120.3
Effect of dilutive securities
Stock options	0.9			1.0
Performance shares	—			0.2
Diluted weighted average outstanding shares	116.6			121.5
Earnings per share:
Basic	$	2.68		$	0.67
Diluted	$	2.66		$	0.66

For the three months ended December 31, 2019, 2.4 million shares related to share-based compensation awards were excluded from the diluted EPS calculation because they were antidilutive. For the three months ended December 31, 2018, 1.8 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 $10.9 million and $17.1 million were accrued within accounts payable and other current liabilities at December 31, 2019 and 2018, respectively. At December 31, 2019 and 2018, there were $3.5 million and $16.0 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.

Leases

We have operating leases primarily for real estate, vehicles, and equipment. We determine if a contract is, or contains, a lease at contract inception. A right-of-use (ROU) asset and a corresponding lease liability are recognized at commencement for contracts that are, or contain, a lease with an original term greater than 12 months. ROU assets represent our right to use an underlying asset during the lease term, including periods for which renewal options are reasonably certain to be exercised, and lease liabilities represent our obligation to make lease payments arising from the lease. Lease expense is recognized on a straight-line basis over the lease term for operating leases with an original term of 12 months or less.

9

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Some leasing arrangements require variable payments that are dependent on usage or may vary for other reasons, such as payments for insurance and tax payments. A portion of our real estate leases is generally subject to annual changes based upon an index. The changes based upon the index are treated as variable lease payments. The variable portion of lease payments is not included in our ROU assets or lease liabilities and is expensed when incurred. We elected to not separate lease and nonlease components of contracts for all underlying asset classes. Accordingly, all expenses associated with a lease contract are accounted for as lease expenses.

Lease liabilities are recognized at the contract commencement date based on the present value of remaining lease payments over the lease term. To calculate the lease liabilities we use our incremental borrowing rate. We determine our incremental borrowing rate at the commencement date using our unsecured borrowing rate, adjusted for collateralization and lease term. For leases denominated in a currency other than the U.S. dollar, the collateralized borrowing rate in the foreign currency is determined using the U.S. dollar and foreign currency swap spread. Long-term lease liabilities are presented as Operating lease liabilities and current lease liabilities are included in Other current liabilities in the Consolidated Balance Sheet.

ROU assets are recognized at the contract commencement date at the value of the related lease liability, adjusted for any prepayments, lease incentives received and initial direct costs incurred. Operating lease ROU assets are presented as Operating lease right-of-use assets in the Consolidated Balance Sheet.

Lease expenses for operating leases are recognized on a straight-line basis over the lease term and recorded in Cost of sales and Selling, general and administrative expenses in the Consolidated Statement of Operations.

Recently Adopted 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 adopted the new standard using the modified retrospective transition method, which resulted in an immaterial cumulative-effect adjustment to the opening balance of retained earnings as of October 1, 2019, our adoption date. The amount of lease right-of-use assets and corresponding lease liabilities recorded in the Consolidated Balance Sheet upon adoption was $316 million and $329 million, respectively. We have implemented necessary changes to accounting policies, processes, controls and systems to enable compliance with this new standard.

In February 2018, the FASB issued a new standard regarding the reporting of comprehensive loss, which gives entities the option to reclassify tax effects of the Tax Cuts and Jobs Act of 2017 (the “Tax Act”) stranded in accumulated other comprehensive loss into retained earnings. We adopted the new standard as of October 1, 2019, and elected to reclassify tax effects of $146.8 million from accumulated other comprehensive loss into retained earnings.

10

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

2. Revenue Recognition

Unfulfilled Performance Obligations

As of December 31, 2019, we expect to recognize approximately $480 million of revenue in future periods from unfulfilled performance obligations from existing contracts with customers. We expect to recognize revenue of approximately $330 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 December 31, 2019.

Disaggregation of Revenue

The following series of tables present our revenue disaggregation by geographic region and types of products or services, and also present these disaggregation categories for our two operating segments. We attribute sales to the geographic regions based on the country of destination.

The following reflects the disaggregation of our revenues by operating segment and by geographic region (in millions):

	Three Months Ended December 31, 2019
	Architecture & Software		Control Products & Solutions		Total
North America	$	440.2	$	566.7	$	1,006.9
Europe, Middle East and Africa (EMEA)	148.1		162.0		310.1
Asia Pacific	112.2		117.4		229.6
Latin America	51.1		86.8		137.9
Total Company Sales	$	751.6	$	932.9	$	1,684.5

	Three Months Ended December 31, 2018
	Architecture & Software		Control Products & Solutions		Total
North America	$	442.8	$	556.0	$	998.8
Europe, Middle East and Africa (EMEA)	155.5		138.9		294.4
Asia Pacific	101.3		113.1		214.4
Latin America	53.5		81.2		134.7
Total Company Sales	$	753.1	$	889.2	$	1,642.3

11

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

The following reflects the disaggregation of our revenues by operating segment and by major types of products or services (in millions):

	Three Months Ended December 31, 2019
	Architecture & Software		Control Products & Solutions		Total
Products	$	751.6	$	388.6	$	1,140.2
Solutions & Services	—		544.3		544.3
Total Company Sales	$	751.6	$	932.9	$	1,684.5

	Three Months Ended December 31, 2018
	Architecture & Software		Control Products & Solutions		Total
Products	$	753.1	$	372.9	$	1,126.0
Solutions & Services	—		516.3		516.3
Total Company Sales	$	753.1	$	889.2	$	1,642.3

Contract Balances

Contract liabilities primarily relate to consideration received in advance of performance under the contract. We do not have significant contract assets as of December 31, 2019.

Below is a summary of our contract liabilities balance:

	December 31, 2019		December 31, 2018
Balance as of beginning of fiscal year	$	275.6	$	268.6
Balance as of end of period	319.2		293.0

The most significant changes in our contract liabilities balance during the three months ended December 31, 2019, were due to amounts billed, partially offset by revenue recognized that was included in the contract liabilities balance at the beginning of the period.

In the three months ended December 31, 2019, we recognized revenue of approximately $113 million that was included in the opening contract liabilities balance. We did not have a material amount of revenue recognized in the three months ended December 31, 2019, from performance obligations satisfied or partially satisfied in previous periods.

3. Share-Based Compensation

We recognized $11.5 million and $11.0 million of pre-tax share-based compensation expense during the three months ended December 31, 2019 and 2018, respectively. Our annual grant of share-based compensation takes place during the first quarter of each fiscal 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):

	Three Months Ended December 31,
	2019			2018
	Grants	Wtd. Avg. Share Fair Value		Grants	Wtd. Avg. Share Fair Value
Stock options	953	$	35.86	919	$	32.51
Performance shares	37	265.04		57	155.04
Restricted stock and restricted stock units	45	193.70		39	172.14
Unrestricted stock	5	162.29		4	188.01

12

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

4. Inventories

Inventories consist of (in millions):

	December 31, 2019		September 30, 2019
Finished goods	$	272.8	$	223.7
Work in process	179.0		178.4
Raw materials	173.5		173.6
Inventories	$	625.3	$	575.7

5. Acquisitions

Sensia joint venture

On October 1, 2019, we completed the formation of a joint venture, Sensia, a fully integrated digital oilfield automation solutions provider. Sensia operates as an independent entity, with Rockwell Automation owning 53% and Schlumberger owning 47% of the joint venture. As part of the transaction, we made a $250 million payment to Schlumberger, which was funded by cash on hand. We control Sensia and, as of October 1, 2019, have consolidated Sensia in our financial results.

Rockwell Automation recorded assets acquired and liabilities assumed in connection with the formation of Sensia based on their estimated fair values as of the October 1, 2019, acquisition date. The preliminary purchase price allocation is as follow (in millions):

	Purchase Price Allocation
Cash	$	16.2
Accounts receivable	22.6
Inventory	46.9
Other current assets	1.2
Property, plant and equipment	9.3
Other assets	6.2
Goodwill	314.1
Intangible assets	254.1
Total assets acquired	670.6
Less: Liabilities assumed	(37.1		)
Less: Deferred income taxes	(8.0		)
Less: Noncontrolling interest portion	(293.8		)
Net assets acquired	$	331.7
	Purchase consideration
Cash	$	250.0
Noncontrolling interest portion of Rockwell Automation's contributed business	21.1
Additional paid in capital adjustment	53.6
Other	7.0
Net purchase consideration	$	331.7

13

ROCKWELL AUTOMATION, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

Intangible assets assigned include $254.1 million of customer relationships, technology, and/or trade names (approximately 11-year weighted average useful life). We assigned the full amount of goodwill and all other assets acquired to our Control Products & Solutions segment. Some of the goodwill recorded is expected to be deductible for tax purposes. The 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 it to present value. These values are considered level 3 measurements under accounting principles generally accepted in the United States (U.S. GAAP) fair value hierarchy. Key assumptions used in the valuation of these intangible assets included: (1) a discount rate of 11%, (2) the estimated remaining life of technology and trademarks of from 5 to 15 years, and (3) the customer attrition rate ranging from 7.5% to 25%.

The allocation of the purchase price to identifiable assets is based on the preliminary valuations performed to determine the fair value of the net assets as of the acquisition date. The measurement period for the valuation of net assets acquired ends as soon as information on the facts and circumstances that existed as of the acquisition dates becomes available, but not to exceed 12 months following the acquisition date. Adjustments in purchase price allocations may require a change in the amounts allocated to net assets acquired during the periods in which the adjustments are determined. The fair value of the noncontrolling interest of the contributed business upon acquisition was $293.8 million. The consolidated value of Sensia is recorded at fair value for Schlumberger's contribution and at carrying value for Rockwell Automation's contribution.

Acquisition-related costs recorded as expenses in the year ended September 30, 2019, and in the three months ended December 31, 2019, were not material.

Pro forma consolidated sales for the three months ended December 31, 2018, are approximately $1.7 billion and the impact on earnings is not material. The preceding pro forma consolidated financial results of operations are as if the 2019 formation of Sensia occurred on October 1, 2018. 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.

Other acquisitions

In October 2019, we acquired MESTECH Services, a global provider of Manufacturing Execution Systems / Manufacturing Operations Management, digital solutions consulting, and systems integration services. We assigned the full amount of goodwill related to this acquisition to our Control Products & Solutions segment.

6. Goodwill and Other Intangible Assets

Changes in the carrying amount of goodwill for the three months ended December 31, 2019, are (in millions):

	Architecture & Software		Control Products & Solutions		Total
Balance as of September 30, 2019	$	432.3	$	638.8	$	1,071.1
Acquisition of businesses	—		316.3		316.3
Translation	3.0		5.4		8.4
Balance as of December 31, 2019	$	435.3	$	960.5	$	1,395.8

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(Unaudited)

Other intangible assets consist of (in millions):

	December 31, 2019
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Computer software products	$	190.6	$	130.9	$	59.7
Customer relationships	305.2		75.6		229.6
Technology	154.2		73.3		80.9
Trademarks	55.3		28.3		27.0
Other	10.8		9.9		0.9
Total amortized intangible assets	716.1		318.0		398.1
Allen-Bradley® trademark not subject to amortization	43.7		—		43.7
Total	$	759.8	$	318.0	$	441.8

	September 30, 2019
	Carrying Amount		Accumulated Amortization		Net
Amortized intangible assets:
Computer software products	$	190.6	$	128.3	$	62.3
Customer relationships	110.5		69.2		41.3
Technology	110.4		69.5		40.9
Trademarks	31.4		26.4		5.0
Other	10.6		9.7		0.9
Total amortized intangible assets	453.5		303.1		150.4
Allen-Bradley® trademark not subject to amortization	43.7		—		43.7
Total	$	497.2	$	303.1	$	194.1

Estimated amortization expense is $47.5 million in 2020, $46.7 million in 2021, $43.8 million in 2022, $42.6 million in 2023 and $39.7 million in 2024.

We perform our annual evaluation of goodwill and indefinite life intangible assets for impairment as required by U.S. GAAP during the second quarter of each fiscal year.

7. Short-term Debt

Our short-term debt of $23.5 million as of December 31, 2019, consists of interest-bearing loans from Schlumberger to Sensia due September 30, 2020. These loans were entered into following formation of Sensia. See Note 5 in the Consolidated Financial Statements for additional information on Sensia.

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(Unaudited)

8. Other Current Liabilities

Other current liabilities consist of (in millions):

	December 31, 2019		September 30, 2019
Unrealized losses on foreign exchange contracts	$	7.7	$	5.4
Product warranty obligations	24.2		25.2
Taxes other than income taxes	50.4		43.8
Accrued interest	28.2		15.5
Income taxes payable	61.3		62.9
Operating lease liabilities	86.8		—
Other	59.7		75.1
Other current liabilities	$	318.3	$	227.9

9. Investments

Our investments consist of (in millions):

	December 31, 2019			September 30, 2019
Fixed income securities	$	0.6		$	43.9
Equity securities	792.5			721.5
Other	68.2			68.1
Total investments	861.3			833.5
Less: Short-term investments(1)	(0.6		)	(39.6		)
Long-term investments	$	860.7		$	793.9

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

Equity Securities

On July 19, 2018, we purchased 10,582,010 shares of PTC Inc. ("PTC") common stock (the "PTC Shares") in a private placement at a purchase price of $94.50 per share for an aggregate purchase price of approximately $1.0 billion (the "Purchase"). The PTC Shares are considered equity securities. For a period of approximately 3 years after the Purchase, we are subject to entity-specific transfer restrictions subject to certain exceptions. Since the first anniversary of the Purchase, the Company has had the ability to transfer, in the aggregate in any 90-day period, a number of PTC Shares equal to up to 1.0% of PTC's total outstanding shares of common stock as of the first day in such 90-day period, but no more than 2.0% of PTC's total outstanding shares of common stock in each of the second year and the third year after the Purchase.

Fair Value of Investments

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:

Level 1: Quoted prices in active markets for identical assets or liabilities.

Level 2: Quoted prices in active markets for similar assets or liabilities, quoted prices for identical or similar assets or liabilities in markets that are not active, or inputs other than quoted prices that are observable for the asset or liability.

Level 3: Unobservable inputs for the asset or liability.

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

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(Unaudited)

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 period presented.

The PTC Shares are classified as level 1 in the fair value hierarchy and recognized at fair value in the Consolidated Balance Sheet using the most recent closing price of PTC common stock quoted on Nasdaq. At December 31, 2019, the fair value of the PTC Shares was $792.5 million, which was recorded in long-term investments in the Consolidated Balance Sheet. For the three months ended December 31, 2019, we recorded gains of $71.0 million related to the PTC Shares. For the three months ended December 31, 2018, we recorded a loss of $212.7 million related to the PTC Shares.

10. Retirement Benefits

The components of net periodic benefit cost are (in millions):

	Pension Benefits
	Three Months Ended December 31,
	2019			2018
Service cost	$	22.8		$	19.6
Interest cost	34.2			39.6
Expected return on plan assets	(61.2		)	(61.2		)
Amortization:
Prior service cost	0.2			0.3
Net actuarial loss	36.8			19.5
Settlements	(0.7		)	(0.2		)
Net periodic benefit cost	$	32.1		$	17.6

	Other Postretirement Benefits
	Three Months Ended December 31,
	2019			2018
Service cost	$	0.3		$	0.2
Interest cost	0.4			0.6
Amortization:
Prior service credit	(1.4		)	(1.4		)
Net actuarial loss	0.4			0.2
Net periodic benefit credit	$	(0.3	)	$	(0.4	)

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 (expense) in the Consolidated Statement of Operations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

11. Accumulated Other Comprehensive Loss

Changes in accumulated other comprehensive loss attributable to Rockwell Automation by component were (in millions):

Three Months Ended December 31, 2019
	Pension and other postretirement benefit plan adjustments, net of tax			Accumulated currency translation adjustments, net of tax			Net unrealized gains (losses) on cash flow hedges, net of tax			Net unrealized gains (losses) on available-for-sale investments, net of tax		Total accumulated other comprehensive loss, net of tax
Balance as of September 30, 2019	$	(1,133.7	)	$	(341.3	)	$	(13.0	)	$	—	$	(1,488.0	)
Other comprehensive income (loss) before reclassifications	—			21.8			0.9			—		22.7
Amounts reclassified from accumulated other comprehensive loss	27.4			—			(3.4		)	—		24.0
Other comprehensive income (loss)	27.4			21.8			(2.5		)	—		46.7
Adoption of accounting standard/other	(146.8		)	3.8			—			—		(143.0		)
Balance as of December 31, 2019	$	(1,253.1	)	$	(315.7	)	$	(15.5	)	$	—	$	(1,584.3	)

Three Months Ended December 31, 2018
	Pension and other postretirement benefit plan adjustments, net of tax			Accumulated currency translation adjustments, net of tax			Net unrealized gains (losses) on cash flow hedges, net of tax			Net unrealized gains (losses) on available-for-sale investments, net of tax			Total accumulated other comprehensive loss, net of tax
Balance as of September 30, 2018	$	(658.1	)	$	(286.0	)	$	4.4		$	(2.2	)	$	(941.9	)
Other comprehensive income (loss) before reclassifications	(0.3		)	(28.5		)	(19.2		)	0.5			(47.5		)
Amounts reclassified from accumulated other comprehensive loss	14.1			—			(1.6		)	—			12.5
Other comprehensive income (loss)	13.8			(28.5		)	(20.8		)	0.5			(35.0		)
Balance as of December 31, 2018	$	(644.3	)	$	(314.5	)	$	(16.4	)	$	(1.7	)	$	(976.9	)

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

(Unaudited)

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

	Three Months Ended December 31,						Affected Line in the Consolidated Statement of Operations
	2019			2018
Pension and other postretirement benefit plan adjustments:
Amortization of prior service credit	$	(1.2	)	$	(1.1	)	(a)
Amortization of net actuarial loss	37.2			19.7			(a)
Settlements	(0.7		)	(0.2		)	(a)
	35.3			18.4			Income before income taxes
	(7.9		)	(4.3		)	Income tax provision
	$	27.4		$	14.1		Net income attributable to Rockwell Automation
Net unrealized losses (gains) on cash flow hedges:
Forward exchange contracts	$	(0.1	)	$	0.4		Sales
Forward exchange contracts	(5.0		)	(3.2		)	Cost of sales
Forward exchange contracts	0.1			0.5			Selling, general and administrative expenses
Treasury locks related to 2019 debt issuance	0.5			—			Interest expense
	(4.5		)	(2.3		)	Income before income taxes
	1.1			0.7			Income tax provision
	$	(3.4	)	$	(1.6	)	Net income attributable to Rockwell Automation
Total reclassifications	$	24.0		$	12.5		Net income attributable to Rockwell Automation

(a) Reclassified from accumulated other comprehensive loss into other income (expense). These components are included in the computation of net periodic benefit cost (credit). See Note 10 in the Consolidated Financial Statements for further information.

12. 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 a few thousand claimants in 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 on the part of many claimants. We defend those cases vigorously. Historically, we have been dismissed from the vast majority of these claims with no payment to claimants.

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(Unaudited)

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 throughout the remaining life of asbestos liability. 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