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Excrept from filing document 2024-09-30

The aggregate market value of registrant s voting stock held by non affiliates of registrant on March 29 2024 was approximately 33 2 billion 112 896 809 shares of registrant s Common Stock par value 1 per share were outstanding on October 31 2024
This Annual Report on Form 10 K contains statements including certain projections and business trends that are forward looking statements as defined in the Private Securities Litigation Reform Act of 1995 Words such as believe estimate project plan expect anticipate will intend and other similar expressions may identify forward looking statements Actual results may differ materially from those projected as a result of certain risks and uncertainties many of which are beyond our control including but not limited to
macroeconomic factors including inflation global and regional business conditions including adverse impacts in certain markets such as Oil Gas commodity prices currency exchange rates the cyclical nature of our customers capital spending and sovereign debt concerns
These forward looking statements reflect our beliefs as of the date of filing this report We undertake no obligation to update or revise any forward looking statement whether as a result of new information future events or otherwise See Item 1A
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
Senior Vice President Software and Control since April 1 2024 previously Vice President and General Manager Production Automation April 2021 April 2024 and Vice President Embedded Software Hardware Engineering September 2019 April 2021
Senior Vice President Strategy and Corporate Development since November 1 2021 previously Senior Vice President Strategy Business Development 2020 2021 Vice President and General Manager Industrial Adhesives and Tapes Division 2019 2020 and Vice President and Chief Ethics Compliance Officer Compliance and Business Conduct Legal Affairs 2017 2019 at 3M Company consumer goods health care and worker safety
Senior Vice President Intelligent Devices since June 6 2022 previously Vice President and General Manager Production Operations Management from April 2021 June 2022 Vice President Product Management from October 2020 April 2021 and Regional President North America
Senior Vice President and Chief Financial Officer since August 19 2024 previously President Global Industrial Division January 2022 August 2024 and President Global Applied Fluid Technologies Division June 2018 December 2021 at Graco Inc provider of fluid handling systems and components
There are no family relationships as defined by applicable SEC rules between any of the above executive officers and any other executive officer or director of the Company No officer of the Company was selected pursuant to any arrangement or understanding between the officer and any person other than the Company All executive officers are elected annually
On both May 2 2022 and September 11 2024 the Board of Directors authorized us to expend an additional 1 0 billion to repurchase shares of our common stock Our repurchase program allows us to repurchase shares at management s discretion or at our broker s discretion pursuant to a share repurchase plan subject to price and volume parameters
The following information is not deemed to be soliciting material or to be filed with the SEC or subject to Regulation 14A or 14C under the Exchange Act or to the liabilities of Section 18 of the Exchange Act and will not be deemed to be incorporated by reference into any filing of the Company under the Securities Act of 1933 as amended or the Exchange Act except to the extent the Company specifically incorporates it by reference into such a filing
The following line graph compares the cumulative total shareowner return on our common stock against the cumulative total return of the S P Composite 500 Stock Index S P 500 Index and the S P 500 Selected GICS groups Capital Goods Software Services and Technology Hardware Equipment for the period of five fiscal years from October 1 2019 to September 30 2024 assuming in each case a fixed investment of 100 at the respective closing prices on September 30 2019 and reinvestment of all dividends
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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 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
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 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
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 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
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 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 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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
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
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned and controlled majority owned subsidiaries Intercompany accounts and transactions have been eliminated in consolidation Investments in affiliates over which we do not have control but exercise significant influence are accounted for using the equity method of accounting These affiliated companies are not material individually or in the aggregate to our financial position results of operations or cash flows
The preparation of consolidated financial statements in accordance with U S GAAP requires 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 Actual results could differ from those estimates We use estimates in accounting for among other items customer returns rebates and incentives allowance for doubtful accounts excess and obsolete inventory share based compensation acquisitions including consolidation and intangible assets goodwill impairment product warranty obligations capitalization of internal use software retirement benefits litigation claims and contingencies including environmental and asbestos matters conditional asset retirement obligations and contractual indemnifications leases and income taxes We account for changes to estimates and assumptions prospectively when warranted by factually based experience
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 We also offer various other 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 Certain distributors are offered a right to return product subject to contractual limitations
We record accruals for customer returns rebates and incentives at the time of revenue recognition based primarily on historical trend experience and expected market conditions Returns are presented on the Consolidated Balance Sheet as a right of return asset and refund liability Incentives in the form of rebates are estimated at the individual customer level and are recorded as a reduction of sales 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
We record an allowance for doubtful accounts and expected credit losses 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 21 8 million at September 30 2024 and 16 8 million at September 30 2023 The changes to our allowance for doubtful accounts during the years ended September 30 2024 and 2023 were not material and primarily consisted of current period provisions write offs charged against the allowance recoveries collected and foreign currency translation
Investments include time deposits certificates of deposit other fixed income securities and equity securities Investments with original maturities longer than three months at the time of purchase and less than one year from period end are classified as short term All other investments are classified as long term Fixed income securities meeting the definition of a security are accounted for as available for sale and recorded at fair value Equity securities with a readily determinable fair value are recorded at fair value Equity securities that do not have a readily determinable fair value which we account for using the measurement alternative under U S GAAP 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 All other investments are recorded at cost which approximates fair value
Property including internal use software and software to provide a service e g SaaS arrangements is recorded at cost Equipment under finance leases are stated at the present value of minimum lease payments We calculate depreciation of property using the straight line method over 3 to 40 years for buildings and improvements 3 to 20 years for machinery and equipment and 3 to 10 years for computer hardware and internal use software We capitalize significant renewals and enhancements and write off replaced units Implementation costs incurred in a cloud computing arrangement that is a service contract are recorded in Other current assets and Other assets on the Consolidated Balance Sheet and are amortized over the expected service period We expense maintenance and repairs as well as renewals of minor amounts Property acquired during the year that is accrued within Accounts payable or Other current liabilities at year end is considered to be a non cash investing activity and is excluded from cash used for capital expenditures in the Consolidated Statement of Cash Flows Capital expenditures of 42 4 million 42 7 million and 23 0 million were accrued within Accounts payable and Other current liabilities at September 30 2024 2023 and 2022 respectively
Goodwill and Other intangible assets generally result from business acquisitions 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 perform our annual evaluation of goodwill and indefinite life intangible assets for impairment as required under U S GAAP during the second quarter of each year or more frequently if events or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value Any excess in carrying value over the estimated fair value is charged to results of operations For our annual evaluation of goodwill we may perform a qualitative test to determine whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount in order to determine whether it is necessary to perform a quantitative goodwill impairment test Our reporting units for goodwill evaluation consist of the Intelligent Devices segment the Software Control segment the Lifecycle Services segment excluding Sensia and Sensia When performing the quantitative goodwill impairment test we determine the fair value of each reporting unit under a combination of an income approach derived from discounted cash flows and a market multiples approach using selected comparable public companies
Significant assumptions used in the income approach include management s forecasted cash flows including estimated future revenue growth rates and margins discount rate and terminal value Forecasts of future revenue growth and margins are based on management s best estimates 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 The discount rate is determined using a weighted average cost of capital adjusted for risk factors specific to the reporting unit including risks associated with our above market revenue growth assumptions historical performance and industry specific and economic factors The terminal value is estimated following the common methodology of calculating the present value of estimated perpetual cash flow beyond the last projected period assuming constant discount and long term growth rates Significant assumptions used in the market multiples approach include selection of the comparable public companies and calculation of the appropriate market multiples
We amortize all intangible assets with finite useful lives on a straight line basis over their estimated useful lives Useful lives assigned range from 3 to 15 years for trademarks 5 to 20 years for customer relationships 4 to 17 years for technology and 3 to 30 years for other intangible assets
Intangible assets also include costs of on premise software developed or purchased by our software business to be sold leased or otherwise marketed Amortization of these computer software products is calculated on a product by product basis as the greater of a the unamortized cost at the beginning of the year times the ratio of the current year gross revenue for a product to the total of the current and anticipated future gross revenue for that product or b the straight line amortization over the remaining estimated economic life of the product
We evaluate the recoverability of the recorded amount of long lived assets including property operating lease right of use assets capitalized implementation costs of a cloud computing arrangement and other intangible assets whenever events or changes in circumstances indicate that the recorded amount of an asset may not be fully recoverable Impairment is assessed when the undiscounted expected future cash flows derived from an asset are less than its carrying amount If we determine that an asset is impaired we measure the impairment to be recognized as the amount by which the recorded amount of the asset exceeds its fair value We report assets to be disposed of at the lower of the recorded amount or fair value less cost to sell We determine fair value using a discounted future cash flow analysis
We use derivative financial instruments in the form of 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 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 Additionally we use derivative financial instruments in the form of interest rate swap contracts to manage our borrowing costs of certain long term debt and use treasury locks to manage the potential change in interest rates in anticipation of issuance of fixed rate debt We designate and account for these derivative financial instruments as hedges under U S GAAP
Furthermore 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 It is our policy to execute such instruments with global financial institutions that we believe to be creditworthy and not to enter into derivative financial instruments for speculative purposes Foreign currency forward exchange contracts are usually denominated in currencies of major industrial countries
We record various financial instruments at fair value 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
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
We hold financial instruments consisting of cash and short term debt The fair values of our cash and short term debt approximate their carrying amounts as reported in our Consolidated Balance Sheet due to the short term nature of these instruments We also hold financial instruments consisting of long term debt investments and derivatives The valuation methodologies for these financial instruments are described in Notes 7 10 11 and 14
We also determine fair value assessments in conjunction with intangible valuations of acquisitions contingent consideration in the purchase price of acquisitions and our annual impairment testing of goodwill and indefinite lived intangible assets The valuation methodologies for these assets are described in Notes 3 and 4
The methods described in these Notes 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 translate assets and liabilities of subsidiaries operating outside of the United States with a functional currency other than the U S dollar into U S dollars using exchange rates at the end of the respective period We translate sales costs and expenses at average exchange rates effective during the respective period We report foreign currency translation adjustments as a component of Other comprehensive income loss Currency transaction gains and losses are included in results of operations in the period incurred
We expense research and development R D costs as incurred these costs were 477 3 million in 2024 529 5 million in 2023 and 440 9 million in 2022 We include R D expenses in Cost of sales in the Consolidated Statement of Operations
We account for uncertain tax positions by determining whether it is more likely than not that a tax position will be sustained upon examination based on the technical merits of the position For tax positions that meet the more likely than not recognition threshold we determine the amount of benefit to recognize in the Consolidated Financial Statements based on our assertion of the most likely outcome resulting from an examination including the resolution of any related appeals or litigation processes
We present basic and diluted earnings per share EPS amounts Basic EPS is calculated by dividing earnings available to common shareowners which is income excluding the allocation to participating securities by the weighted average number of common shares outstanding during the year excluding restricted stock Diluted EPS amounts are based upon the weighted average number of common and common equivalent shares outstanding during the year We use the treasury stock method to calculate the effect of outstanding share based compensation awards which requires us to compute total employee proceeds as the sum of the amount the employee must pay upon exercise of the award and the amount of unearned share based compensation costs attributed to future services Share based compensation awards for which the total employee proceeds of the award exceed the average market price of the same award over the period have an antidilutive effect on EPS and accordingly we exclude them from the calculation Antidilutive share based compensation awards for the years ended September 30 2024 0 5 million shares 2023 0 4 million shares and 2022 0 4 million shares were excluded from the diluted EPS calculation U S GAAP requires unvested share based payment awards that contain non forfeitable rights to dividends or dividend equivalents whether paid or unpaid to be treated as participating securities and included in the computation of EPS pursuant to the two class method Our participating securities are composed of restricted stock and non employee director restricted stock units
We record accruals for product and workers compensation claims in the period in which they are probable and reasonably estimable Our principal self insurance programs include product liability and workers compensation where we self insure up to a specified dollar amount Claims exceeding this amount up to specified limits are covered by insurance policies purchased from commercial insurers We estimate the liability for the majority of the self insured claims using our claims experience for the periods being valued
We record liabilities for environmental and asbestos matters in the period in which our responsibility is probable and the costs can be reasonably estimated We make changes to the liabilities in the periods in which the estimated costs of remediation change At third party environmental sites where more than one potentially responsible party has been identified we record a liability for our estimated allocable share of costs related to our involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties If we determine that recovery from insurers or other third parties is probable and a right of set off exists we record the liability net of the estimated recovery If we determine that recovery from insurers or other third parties is probable but a right of set off does not exist we record a liability for the total estimated costs of remediation and a receivable for the estimated recovery At environmental sites where we are the sole responsible party we record a liability for the total estimated costs of remediation Ongoing operating and maintenance expenditures included in our environmental remediation obligations are discounted to present value over the probable future remediation period Our remaining environmental remediation obligations are undiscounted due to subjectivity of timing and or amount of future cash payments
We record liabilities for costs related to legal obligations associated with the retirement of a tangible long lived asset that results from the acquisition construction development or the normal operation of the long lived asset The obligation to perform the asset retirement activity is not conditional even though the timing or method may be conditional
We have operating leases primarily for real estate vehicles and equipment We have finance leases primarily for 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 We elect to not record lease ROU assets or lease liabilities for leases with an original term of 12 months or less 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 Operating lease expense is recognized on a straight line basis over the lease term for leases with an original term of 12 months or less Amortization expense of the ROU asset for operating and finance leases is recognized on a straight line basis over the lease term and interest expense for finance leases is recognized based on the incremental borrowing rate
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 most 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 operating lease liabilities are presented as Operating lease liabilities and current operating lease liabilities are included in Other current liabilities in the Consolidated Balance Sheet Long term finance lease liabilities are presented as Long term debt and current finance lease liabilities are included in Current portion of long term debt 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 and finance lease ROU assets are presented as Property in the Consolidated Balance Sheet
Lease expenses including amortization of ROU assets for operating and finance 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 Interest expense for finance leases is recorded in Interest expense in the Consolidated Statement of Operations
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 76 6 million and 126 7 million related to these agreements as of September 30 2024 and 2023 respectively The impact of these programs is not material to the Company s overall liquidity
In September 2022 the Financial Accounting Standards Board FASB issued a new standard that requires companies to apply Accounting Standards Codification ASC 405 50 to disclose supplier finance program obligations We adopted the new standard as of October 1 2023 The adoption of this standard did not have a material impact on our Consolidated Financial Statements
In November 2023 the 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 are currently assessing the impact of this ASU on our financial statement disclosures
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
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
For each customer contract we determine if the products and services promised to the customer are distinct performance obligations A product or service is distinct if both of the following criteria are met at contract inception i the customer can benefit from the product or service on its own or together with other readily available resources and ii our promise to transfer the product or perform the service is separately identifiable from other promises in the contract The fact that we regularly sell a product or service separately is an indicator that the customer can benefit from a product or service on its own or with other readily available resources
The objective when assessing whether our promises to transfer products or perform services are distinct within the context of the contract is to determine whether the nature of the promise is to transfer each of those products or perform those services individually or whether the promise is to transfer a combined item or items to which the promised products or services are inputs If a promised product or service is not distinct we combine that product or service with other promised products or services until it comprises a bundle of products or services that is distinct which may result in accounting for all the products or services in a contract as a single performance obligation
For each performance obligation in a contract we determine whether the performance obligation is satisfied over time A performance obligation is satisfied over time if it meets any of the following criteria i the customer simultaneously receives and consumes the benefits provided by our performance as we perform or ii our performance creates or enhances an asset that the customer controls as the asset is created or enhanced or iii our performance does not create an asset for which we have an alternative use and we have an enforceable right to payment for performance completed to date If one or more of these criteria are met then we recognize revenue over time using a method that depicts performance If none of the criteria are met then control transfers to the customer at a point in time and we recognize revenue at that point in time
Our products represent standard catalog products for which we have an alternative use and therefore we recognize revenue at a point in time when control of the product transfers to the customer For the majority of our products control transfers upon shipment though for some contracts control may transfer upon delivery Product type contracts are generally one year or less in length
Revenue in our Software Control segment also includes revenue from perpetual and subscription software licenses under on premise and SaaS arrangements When on premise software licenses are determined to be distinct performance obligations we recognize the related revenue at a point in time when the customer is provided the right to use the license while revenue allocated to upgrades and support are recognized over the term of the contract To the extent that the on premise license is not considered distinct revenue is recognized over time over the period the related services are performed Revenue from SaaS arrangements which allow customers to use hosted software over the contract period without taking possession of the software are recognized over time during the period the customer is provided the right to use the software
We offer a wide variety of solutions and services to our customers for which we recognize revenue over time or at a point in time based on the contract as well as the type of solution or service If one or more of the three criteria above for over time revenue recognition are met we recognize revenue over time as cost is incurred as work is performed or based on time elapsed depending on the type of customer contract If none of these criteria are met we recognize revenue at a point in time when control of the asset being created or enhanced transfers to the customer More than half of our solutions and services revenue is from contracts that are one year or less in length For certain solutions and services offerings when we have the right to invoice our customers in an amount that corresponds to our performance completed to date we apply the practical expedient to measure progress and recognize revenue based on the amount for which we have the right to invoice the customer
When assessing whether we have an alternative use for an asset we consider both contractual and practical limitations These include i the level and cost of customization of the asset that is required to meet a customer s needs ii the activities cost and profit margin after any rework that would be required before the asset could be directed for another use and iii the portion of the asset that could not be reworked for an alternative use
At times we provide products and services free of charge to our customers as incentives when the customers purchase other products or services These represent distinct performance obligations As such we allocate revenue to them based on relative standalone selling price
Most of our global warranties are assurance in nature and do not represent distinct performance obligations See Note 9 for additional information and disclosures We occasionally offer extended warranties to our customers that are considered a distinct performance obligation to which we allocate revenue based on relative standalone selling price which is recognized over the extended warranty period
We account for shipping and handling activities performed after control of a product has been transferred to the customer as a fulfillment cost As such we have applied the practical expedient and we accrue for the costs of shipping and handling activities if revenue is recognized before contractually agreed shipping and handling activities occur
As of September 30 2024 we expect to recognize approximately 1 205 million of revenue in future periods from unfulfilled performance obligations from existing contracts with customers We expect to recognize revenue of approximately 680 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 September 30 2024
The transaction price is the amount of consideration to which we expect to be entitled in exchange for transferring products to or performing services for a customer We estimate the transaction price at contract inception and update the estimate each reporting period for any changes in circumstances In some cases a contract may involve variable consideration including rebates credits allowances for returns or other similar items that generally decrease the transaction price We use historical trend experience and expected market conditions to estimate variable consideration including any constraint
The transaction price including any discounts and variable consideration is allocated between separate products and services based on their relative standalone selling prices The standalone selling prices are determined based on the prices at which we separately sell each good or service For items that are not sold separately we estimate the standalone selling price using available information such as market reference points and other observable data
Our standard payment terms vary globally but do not result in a significant delay between the timing of invoice and payment We occasionally negotiate other payment terms during the contracting process We do not typically include significant financing components in our contracts with customers We have elected the practical expedient to not adjust the transaction price for the period between transfer of products or performance of services and customer payment if expected to be one year or less
For most of our products we invoice at the time of shipment and we do not typically have significant contract balances For our solutions and services as well as some of our products timing may differ between revenue recognition and billing Depending on the terms agreed to with the customer we may invoice in advance of performance or we may invoice after performance When revenue recognition exceeds billing we recognize a receivable and when billing exceeds revenue recognition we recognize a contract liability
The following table presents our revenue disaggregation by geographic region for our three operating segments in millions We attribute sales to the geographic regions based on the country of destination
The most significant changes in our Contract liabilities balance during both the twelve months ended September 30 2024 and 2023 were due to amounts billed during the period 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 twelve months ended September 30 2024 we recognized revenue of approximately 583 5 million that was included in the Contract liabilities balance at September 30 2023 In the twelve months ended September 30 2023 we recognized revenue of approximately 423 9 million that was included in the Contract liabilities balance at September 30 2022 We did not have a material amount of revenue recognized in the twelve months ended September 30 2024 and 2023 from performance obligations satisfied or partially satisfied in previous periods
We capitalize and amortize certain incremental costs to obtain and fulfill contracts These costs primarily consist of incentives paid to sales personnel which are considered incremental costs to obtain customer contracts We elected the practical expedient to expense incremental costs to obtain a contract when the contract has a duration of one year or less for most classes of contracts Our capitalized contract costs which are included in Other assets in our Consolidated Balance Sheet are not significant as of September 30 2024 and 2023 There was no impairment loss in relation to capitalized costs during the years ended September 30 2024 2023 and 2022
We performed our annual evaluation of goodwill and indefinite life intangible assets for impairment during the second quarter of fiscal 2024 and concluded that these assets were 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 Refer to Note 1 for additional information on our goodwill impairment evaluations
Following formation in October 2019 our Sensia joint venture operations were challenged by the global pandemic geopolitical activities volatility in commodity prices and supply chain dynamics The cumulative historical growth and profitability below plan had resulted in a declining cushion between carrying value and fair value in previous impairment tests The joint venture partners appointed a new management team in 2023 and updated the strategy of Sensia which included downward revisions to growth and profitability projections Lower sales growth reflected historical performance and an updated outlook of market conditions Lower profitability reflected an updated view of mix and volume Based upon the update of Sensia s strategy and projections in the fourth quarter of 2023 we determined that it was more likely than not that the fair value of Sensia was below its carrying value As a result of this triggering event we performed an interim quantitative analysis using a combination of an income approach derived from discounted cash flows and a market multiples approach using selected comparable public companies consistent with our annual impairment testing As of the fourth quarter 2023 testing date the carrying value of our Sensia reporting unit of 665 1 million was determined to be in excess of the reporting unit s fair value resulting in a 157 5 million goodwill impairment charge recorded in the Consolidated Statement of Operations As of September 30 2024 160 7 million of goodwill remains within the Sensia reporting unit
Software products represent costs of computer software to be sold leased or otherwise marketed Software products amortization expense was 11 6 million in 2024 11 3 million in 2023 and 9 4 million in 2022 Estimated total amortization expense for all amortized intangible assets is 151 4 million in 2025 148 9 million in 2026 140 7 million in 2027 128 4 million in 2028 and 88 7 million in 2029
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 269 9 million of technology 41 6 million of trademarks and 1 9 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 1 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 can be earned by sellers if Clearpath achieves revenue targets that it had established prior to the acquisition in two performance periods ending February 29 2024 and February 28 2025 We developed various risk based scenarios and a probability outcome model to measure the fair value of the contingent consideration which is considered a level 3 measurement under the U S GAAP fair value hierarchy We determined the fair value to be 43 million as of the acquisition date and as of December 31 2023 We updated the fair value measures during the second quarter to reflect actual contingent consideration earned during the first performance period In the fourth quarter of 2024 we assessed the probability outcome model for the second performance period and determined that the fair value was 4 5 million as of September 30 2024
The consideration for the amount earned for the first performance period was paid during the third quarter of 2024 The contingent consideration for the second performance period is included in Other current liabilities at September 30 2024 Any amount earned for the second performance period will be paid during the third quarter of 2025 The 28 7 million net reduction in the fair value of total contingent consideration is reported in Other income expense in the Consolidated Statement of Operations for the year ended September 30 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 year ended September 30 2024 and 2023 were 8 3 billion and 9 1 billion respectively and the impact on earnings was not material The preceding pro forma consolidated financial results of operations are as if the preceding 2024 acquisitions occurred on October 1 2022 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 year ended September 30 2024 were 83 5 million Total acquisition related costs from all of the above 2024 acquisitions in the year ended September 30 2024 were not material Net losses from all of the above 2024 acquisitions in the year ended September 30 2024 were 52 8 million
In October 2022 we acquired CUBIC a company that specializes in modular systems for the construction of electrical panels headquartered in Bronderslev Denmark We assigned the full amount of goodwill related to this acquisition to our Intelligent Devices segment
In February 2023 we acquired Knowledge Lens a services and solutions provider headquartered in Bengaluru India We assigned the full amount of goodwill related to this acquisition to our Lifecycle Services segment
We recorded assets acquired and liabilities assumed in connection with these acquisitions based on their estimated fair values as of the acquisition dates of October 31 2022 and February 28 2023 respectively The aggregate purchase price allocation is as follows in millions
Pro forma consolidated sales for the year ended September 30 2023 and 2022 were approximately 9 1 billion and 7 9 billion respectively and the impact on earnings is not material The preceding pro forma consolidated financial results of operations are as if the preceding fiscal 2023 acquisitions occurred on October 1 2021 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 Acquisition related costs recorded as expenses in the year ended September 30 2023 were not material
In November 2021 we acquired AVATA a services provider for supply chain management enterprise resource planning and enterprise performance management solutions We assigned the full amount of goodwill related to this acquisition to our Lifecycle Services segment
In March 2022 we through our Sensia affiliate acquired Swinton Technology a provider of metering supervisory systems and measurement expertise in the Oil Gas industry We assigned the full amount of goodwill related to this acquisition to our Lifecycle Services segment
Pro forma consolidated sales for the year ended September 30 2022 and 2021 were approximately 7 8 billion and 7 0 billion respectively and the impact on earnings is not material The preceding pro forma consolidated financial results of operations are as if the preceding fiscal 2022 acquisitions occurred on October 1 2020 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 Acquisition related costs recorded as expenses in the year ended September 30 2022 were not material
Our long term debt and notes payable maturities in the next five years include a 300 0 million note that matures in fiscal year 2025 a 250 0 million debt issuance that matures in fiscal year 2028 and a 425 0 million note that matures in fiscal year 2029
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
On June 29 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 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 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 Under our current policy 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 financial 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
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 1 for further information regarding levels in the fair value hierarchy The carrying value of our short term debt approximates fair value
We record a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience Most of our products are covered under a warranty period that runs for twelve months from either the date of sale or installation We also record a liability for specific warranty matters when they become known and reasonably estimable
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 in Note 1 The carrying values at September 30 2024 and 2023 include cumulative upward adjustments from observed price changes of 22 5 million and 17 5 million respectively The carrying values at September 30 2024 and 2023 include cumulative downward adjustments from observed price changes of 7 3 million and 1 5 million respectively
We record gains and losses on investments within the Change in fair value of investments line in the Consolidated Statement of Operations The gains and losses on investments we recorded for the following periods were in millions
Net gain loss on equity securities level 1 in 2023 and 2022 consisted of the change in fair value and gain on sale of shares of PTC Inc PTC common stock PTC Shares As of September 30 2023 all PTC Shares had been sold
We use foreign currency forward exchange contracts and foreign currency denominated debt obligations to manage certain foreign currency risks We have also used treasury locks to manage risks associated with interest rate fluctuations The following information explains how we use and value these types of derivative instruments and how they impact our consolidated financial statements
We enter into foreign currency forward exchange 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 cash flow hedges We report in Other comprehensive income loss the effective portion of the gain or loss on derivative financial instruments that we designate and that qualify as cash flow hedges We reclassify these gains or losses into earnings in the same periods when the hedged transactions affect earnings To the extent forward exchange contracts designated as cash flow hedges are ineffective changes in value are recorded in earnings through the maturity date There was no impact on earnings due to ineffective cash flow hedges At September 30 2024 we had a U S dollar equivalent gross notional amount of 852 0 million of foreign currency forward exchange contracts designated as cash flow hedges
The pre tax amount of losses gains recorded in Other comprehensive income loss related to cash flow hedges that would have been recorded in the Consolidated Statement of Operations had they not been so designated was in millions
The pre tax amount of gains losses reclassified from Accumulated other comprehensive loss into the Consolidated Statement of Operations related to derivative forward exchange contracts designated as cash flow hedges which offset the related gains and losses on the hedged items during the periods presented was in millions
Approximately 11 6 million of pre tax net unrealized losses on cash flow hedges as of September 30 2024 will be reclassified into earnings during the next twelve months We expect that these net unrealized losses will be offset when the hedged items are recognized in earnings
We have also used foreign currency forward exchange contracts and foreign currency denominated debt obligations to hedge portions of our net investments in non U S subsidiaries net investment hedges against the effect of exchange rate fluctuations on the translation of foreign currency balances to the U S dollar For all instruments that are designated as net investment hedges and meet effectiveness requirements the net changes in value of the designated hedging instruments are recorded in Accumulated other comprehensive loss within Shareowners equity where they offset gains and losses recorded on our net investments globally To the extent forward exchange contracts or foreign currency denominated debt designated as net investment hedges are ineffective changes in value are recorded in earnings through the maturity date There was no impact on earnings due to ineffective net investment hedges At September 30 2024 and 2023 we had no foreign currency forward exchange contracts designated as net investment hedges
Certain of our locations have assets and liabilities denominated in currencies other than their functional currencies resulting from intercompany loans and other transactions with third parties denominated in foreign currencies We enter into foreign currency forward exchange contracts that we do not designate as hedging instruments to offset the transaction gains or losses associated with some of these assets and liabilities Gains and losses on derivative financial instruments for which we do not elect hedge accounting are recognized in the Consolidated Statement of Operations in each period based on the change in the fair value of the derivative financial instruments At September 30 2024 we had a U S dollar equivalent gross notional amount of 1 254 1 million of foreign currency forward exchange contracts not designated as hedging instruments
We recognize all derivative financial instruments as either assets or liabilities at fair value in the Consolidated Balance Sheet We value our forward exchange contracts using a market approach We use a valuation model based on inputs including forward and spot prices for currency and interest rate curves We did not change our valuation techniques during fiscal 2024 2023 or 2022 It is our policy to execute such instruments with major financial institutions that we believe to be creditworthy and not to enter into derivative financial instruments for speculative purposes We diversify our foreign currency forward exchange contracts among counterparties to minimize exposure to any one of these entities Our foreign currency forward exchange contracts are usually denominated in curre
ncies of major industrial countries The U S dollar equivalent gross notional amount of our forward exchange contracts totaled 2 106 1 million at September 30 2024 Currency pairs buy sell comprising the most significant contract notional values were Euro United States dollar USD USD Canadian dollar USD Singapore dollar USD Swiss Franc United Kingdom pound USD and USD Mexican peso
At September 30 2024 the authorized stock of the Company consisted of one billion shares of common stock par value 1 00 per share and 25 million shares of preferred stock without par value At September 30 2024 12 2 million shares of authorized common stock were reserved for various incentive plans
During 2024 2023 and 2022 we recognized 99 8 million 88 3 million and 68 1 million of pre tax share based compensation expense respectively The total income tax benefit related to share based compensation expense was 15 9 million 14 9 million and 11 2 million during 2024 2023 and 2022 respectively As of September 30 2024 total unrecognized compensation cost related to share based compensation awards net of estimated forfeitures was 101 1 million which we expect to recognize over a weighted average period of approximately 1 7 years
During 2020 we adopted and our shareowners approved our 2020 Long Term Incentives Plan 2020 Plan which replaced our 2012 Long Term Incentives Plan as amended 2012 Plan and our 2003 Directors Stock Plan as amended Directors Plan Our 2020 Plan authorizes us to deliver up to 13 0 million shares of our common stock upon exercise of stock options upon grant or in payment of stock appreciation rights performance shares performance units restricted stock units or restricted stock Our Directors Plan authorized us to deliver up to 0 5 million shares of our common stock upon exercise of stock options upon grant or in payment of restricted stock units Shares relating to awards under our 2012 Plan that terminate by expiration forfeiture cancellation or otherwise without the issuance or delivery of shares or that are settled in cash in lieu of shares will be available for further awards under the 2020 Plan Approximately 6 9 million shares under our 2020 Plan remain available for future grant or payment at September 30 2024 We use treasury stock to deliver shares of our common stock under these plans Our 2020 Plan does not permit share based compensation awards to be granted after February 4 2030
We have granted non qualified and incentive stock options to purchase our common stock under various incentive plans at prices equal to the fair market value of the stock on the grant dates The exercise price for stock options granted under the plans may be paid in cash already owned shares of common stock or a combination of cash and such shares Stock options expire ten years after the grant date and vest ratably over three years
The per share weighted average fair value of stock options granted during the years ended September 30 2024 2023 and 2022 was 85 63 77 62 and 87 68 respectively The total intrinsic value of stock options exercised was
69 8 million and 52 8 million during 2024 2023 and 2022 respectively We estimated the fair value of each stock option on the date of grant using the Black Scholes pricing model and the following assumptions
The average risk free interest rate is based on U S Treasury security rates corresponding to the expected term in effect as of the grant date The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date We determined expected volatility using daily historical volatility of our stock price over the most recent period corresponding to the expected term as of the grant date We determined the expected term of the stock options using historical data adjusted for the estimated exercise dates of unexercised options
Certain officers and key employees are also eligible to receive shares of our common stock in payment of performance share awards granted to them Grantees of performance shares will be eligible to receive shares of our common stock depending upon our total shareowner return assuming reinvestment of all dividends relative to the performance of companies in the S P 500 Index over a three year period for the awards granted in fiscal 2020 The number of shares actually earned for awards granted in fiscal 2020 will range from zero percent to 200 percent of the targeted number of performance shares for the three year performance periods and will be paid to the extent earned in the fiscal quarter following the end of the applicable three year performance period Beginning with the awards granted in fiscal 2021 the total shareowner return is measured relative to the performance of companies in the following S P 500 Selected GICS groups Capital Goods Software and Services and Technology Hardware and Equipment The number of shares actually earned for awards granted in fiscal 2024 2023 and 2022 will range from zero percent to 200 percent of the targeted number of performance shares for the three year performance periods and will be paid to the extent earned in the fiscal quarter following the end of the applicable three year performance period
For the three year performance period ending September 30 2024 the payout will be zero percent of the target number of shares with no shares to be delivered in payment under the awards in December 2024
The per share fair value of performance share awards granted during the years ended September 30 2024 2023 and 2022 was 295 06 340 77 and 481 28 respectively which we determined using a Monte Carlo simulation and the following assumptions
The average risk free interest rate is based on the three year U S Treasury security rate in effect as of the grant date The expected dividend yield is based on the expected annual dividend as a percentage of the market value of our common stock as of the grant date The expected volatilities were determined using daily historical volatility for the most recent three year period as of the grant date
We grant restricted stock units to certain employees and non employee directors may elect to receive a portion of their compensation in restricted stock units Restrictions on employee restricted stock and employee restricted stock units generally lapse over periods ranging from one to five years Director restricted stock units generally are payable upon retirement We value restricted stock and restricted stock units at the closing market value of our common stock on the date of grant The weighted average fair value of restricted stock and restricted stock unit awards granted during the years ended September 30 2024 2023 and 2022 was 276 34 263 67 and 298 44 respectively The total fair value of shares vested during the years ended September 30 2024 2023 and 2022 was 59 7 million 54 4 million and 35 6 million respectively
We also granted approximately 5 700 shares of unrestricted common stock to non employee directors during the year ended September 30 2024 The weighted average grant date fair value of the unrestricted stock awards granted during the years ended September 30 2024 2023 and 2022 was 278 35 261 56 and 345 00 respectively
We sponsor funded and unfunded pension plans and other postretirement benefit plans for our employees The pension plans provide for monthly pension payments to eligible employees after retirement Pension benefits for salaried employees generally are based on years of credited service and average earnings Pension benefits for hourly employees are primarily based on specified benefit amounts and years of service Effective July 1 2010 we closed participation in our U S and Canada pension plans to employees hired after June 30 2010 Employees hired after June 30 2010 are instead eligible to participate in defined contribution plans Effective October 1 2010 we also closed participation in our U K pension plan to employees hired after September 30 2010 and these employees are now eligible for a defined contribution plan Benefits to be provided to plan participants hired before July 1 2010 or October 1 2010 respectively are not affected by these changes Our policy with respect to funding our pension obligations is to fund at a minimum the amount required by applicable laws and governmental regulations We were not required to make contributions to satisfy minimum funding requirements in our U S pension plans in 2024 2023 or 2022 We did not make voluntary contributions to our U S qualified pension plan in 2024 2023 and 2022
We sponsor various defined contribution savings plans that allow eligible employees to contribute a portion of their income in accordance with plan specific guidelines We contribute to savings plans and or will match a percentage of the employee contributions up to certain limits The Company contributions to defined contribution plans are based on age and years of service and range from 3 to 7 of eligible compensation Expense related to these plans was 91 7 million in 2024 76 9 million in 2023 and 63 8 million in 2022
Other postretirement benefits are primarily in the form of retirement medical plans that cover certain employees in the U S and Canada and provide for the payment of certain medical costs of eligible employees and dependents after retirement The postretirement benefit plan was closed to employees hired after December 31 2004
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
The actuarial losses recorded within the benefit obligation in 2024 were primarily the result of a decrease in the discount rate for the U S Plans which decreased from 6 10 in 2023 to 5 10 in 2024 The actuarial losses recorded in 2023 were primarily the result of significant lump sum payments made using a lower discount rate than our valuation rate Approximately 70 percent of our 2024 global projected benefit obligation relates to our U S pension plan
During 2024 we recognized settlement charges of 0 1 million 0 0 million net of tax and net actuarial losses of 0 5 million 0 4 million net of tax in pension and other postretirement net periodic benefit cost which were included in Accumulated other comprehensive loss at September 30 2023
The health care cost trend rate reflects the estimated increase in gross medical claims costs As a result of the plan amendment adopted effective October 1 2002 our effective per person retiree medical cost increase is zero percent beginning in 2005 for the majority of our postretirement benefit plans For our other plans we assume the gross health care cost trend rate will increase to 14 35 in 2025 and decrease to 4 97 in 2026 for U S Plans and will not change in future periods for Non U S Plans
In determining the expected long term rate of return on assets assumption we consider actual returns on plan assets over the long term adjusted for forward looking considerations such as inflation interest rates equity performance and the active management of the plan s invested assets We also considered our current and expected mix of plan assets in setting this assumption This resulted in the selection of the weighted average long term rate of return on assets assumption Our global weighted average targeted and actual asset allocations at September 30 by asset category are
The investment objective for pension funds related to our defined benefit plans is to meet the plan s benefit obligations while maximizing the long term growth of assets without undue risk We strive to achieve this objective by investing plan assets within target allocation ranges and diversification within asset categories Target allocation ranges are guidelines that are adjusted periodically based on ongoing monitoring by plan fiduciaries Investment risk is controlled by rebalancing to target allocations on a periodic basis and ongoing monitoring of investment manager performance relative to the investment guidelines established for each manager
In certain countries where we operate there are no legal requirements or financial incentives provided to companies to pre fund pension obligations In these instances we typically make benefit payments directly from cash as they become due rather than by creating a separate pension fund
Preferred and corporate debt Valued at either the yields currently available on comparable securities of issuers with similar credit ratings or valued under a discounted cash flow approach that maximizes observable inputs such as current yields of similar instruments but includes adjustments for certain risks that may not be observable such as credit and liquidity risks
Government securities Valued at the most recent closing price on the active market on which the individual securities are traded or absent an active market utilizing observable inputs such as closing prices in less frequently traded markets
Common collective trusts Valued at the net asset value NAV as determined by the custodian of the fund The NAV is based on the fair value of the underlying assets owned by the fund minus its liabilities then divided by the number of units outstanding
Private equity and alternative equity Valued at the estimated fair value as determined by and subject to the judgment of the respective fund manager based on the NAV of the investment units held at year end
Real estate funds Consists of the real estate funds which provide an indirect investment into a diversified and multi sector portfolio of property assets Publicly traded real estate funds are valued at the most recent closing price reported on the SIX Swiss Exchange The remainder is valued at the estimated fair value as determined by the respective fund manager based on the NAV of the investment units held at year end which is subject to judgment
Insurance contracts Valued at the aggregate amount of accumulated contribution and investment income less amounts used to make benefit payments and administrative expenses which approximates fair value
Other Consists of other fixed income investments and common collective trusts with a mix of equity and fixed income underlying assets Other fixed income investments are valued at the most recent closing price reported in the markets in which the individual securities are traded which may be infrequently
In accordance with ASC Subtopic 820 10 certain investments that are measured at fair value using the NAV or its equivalent practical expedient have not been classified in the fair value hierarchy The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the line items presented in the consolidated financial statements
Income tax liabilities of 97 4 million and 175 3 million related to the U S transition tax under the Tax Cuts and Jobs Act of 2017 the Tax Act that are payable greater than 12 months from September 30 2024 and 2023 respectively are recorded in Other liabilities in the Consolidated Balance Sheet Furthermore taxes paid as a result of the transition tax was 58 4 million during the year ended September 30 2024 31 1 million during the year ended September 30 2023 and 31 2 million during the year ended September 30 2022 as included in total income taxes paid
During fiscal year 2023 the effective tax rate increased by 4 1 resulting from a valuation allowance recorded on certain deferred tax assets of our Sensia joint venture and tax effects of the related goodwill impairment
We operate in certain non U S tax jurisdictions under government sponsored tax incentive programs which may be extended if certain additional requirements are met The program which generates the primary benefit has been extended to expire in 2032 The tax benefit attributable to these programs was 35 6 million 0 31 per diluted share in 2024 62 1 million 0 54 per diluted share in 2023 and 58 3 million 0 50 per diluted share in 2022
We provide for deferred taxes on the majority of earnings of our non U S subsidiaries and have done so since the enactment of the Tax Act in 2017 We do not provide for deferred taxes on a limited number of our non U S subsidiaries established in jurisdictions that apply significant restrictions for repatriating cash The amount of cumulative non distributed earnings considered to be indefinitely reinvested outside the U S at September 30 2024 is 155 9 million It is not practicable to estimate the amount of additional taxes that may be payable upon distribution of these earnings
Accrued interest and penalties related to unrecognized tax benefits were 2 0 million 0 9 million and 1 4 million at September 30 2024 2023 and 2022 respectively We recognize interest and penalties related to unrecognized tax benefits in the income tax provision Expenses benefits recognized in 2024 2023 and 2022 were 1 1 million 0 5 million and 0 0 million respectively
We believe it is reasonably possible that the amount of gross unrecognized tax benefits could be reduced by up to 2 4 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 1 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 U S state and local income tax examinations for years before 2014 and non U S income tax examinations for years before 2008
Federal state and local requirements relating to the discharge of substances into the environment the disposal of hazardous wastes and other activities affecting the environment have and will continue to have an effect on our manufacturing operations Thus far compliance with environmental requirements and resolution of environmental claims have been accomplished without material effect on our business financial condition or results of operations
We have been designated as a potentially responsible party at 14 Superfund sites excluding sites as to which our records disclose no involvement or as to which our potential liability has been finally determined and assumed by third parties In addition various other lawsuits claims and proceedings have been asserted against us seeking remediation of alleged environmental impairments principally at previously owned properties
Based on our assessment we believe that our expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material effect on our business financial condition or results of operations We cannot assess the possible effect of compliance with future requirements Environmental remediation cost liabilities net of related expected recoveries were 47 8 million and 44 5 million as of September 30 2024 and 2023 respectively
We accrue for costs related to a legal obligation associated with the retirement of a tangible long lived asset that results from the acquisition construction development or the normal operation of the long lived asset The obligation to perform the asset retirement activity is not conditional even though the timing or method may be conditional Identified conditional asset retirement obligations include asbestos abatement and remediation of soil contamination beneath current and previously divested facilities and lease restoration costs We estimate conditional asset retirement obligations using site specific knowledge and historical industry expertise There have been no significant changes in liabilities incurred liabilities settled accretion expense or revisions in estimated cash flows for the years ended September 30 2024 2023 and 2022 Conditional asset retirement obligations net of related expected recoveries were 51 0 million and 38 8 million as of September 30 2024 and 2023 respectively
Various other 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 in the case of claims involving a small number of our divested businesses certain of our agreements relating to those divestitures 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
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 September 30 2024 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
As of September 30 2024 we recorded restructuring charges of 97 4 million 73 1 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 include 92 3 million for severance benefits and 5 1 million for strategic advisory services related to the targeted severance actions In the Consolidated Statement of Operations for the year ended September 30 2024 31 5 million of the charges were recorded in Cost of sales while 65 9 million was recorded in Selling general and administrative expenses We expect the total cash expenditures associated with these restructuring actions to be 97 4 million of which we paid 27 7 million for the year ended September 30 2024
We have operating leases primarily for real estate vehicles and equipment We have finance leases primarily for equipment Our leases have remaining lease terms from less than one year to approximately 15 years
As of September 30 2024 we have additional operating leases for facilities that have not yet commenced with undiscounted lease obligations of approximately 13 7 million These leases will commence in fiscal 2025
We determine our operating segments based on the information used by our chief operating decision maker our Chief Executive Officer to allocate resources and assess performance We organize our business into three operating segments Intelligent Devices Software Control and Lifecycle Services This structure emphasizes our essential offerings leverages our sharpened industry focus and recognizes the growing importance of software in delivering value to our customers The composition of our segments is as follows
The Intelligent Devices operating segment combines a comprehensive portfolio of smart products that create the foundation of an agile resilient and sustainable production system This comprehensive portfolio includes
Motion Control Servo drives rotary servo motors linear actuators autonomous mobile robots and independent cart technologies offering a comprehensive portfolio of servo control and production logistics technologies
The Software Control operating segment contains a comprehensive portfolio of production automation and production operations platforms including hardware and software This integrated portfolio is merging information technology IT and operational technology OT bringing the benefits of the Connected Enterprise
Our production automation portfolio is multi discipline and scalable with the ability to handle applications in discrete batch hybrid and continuous process drives control motion and robotics control and machine and process safety Our products include programmable automation controllers design visualization and simulation software human machine interface products industrial computers machine and process safety products industrial networks and security products
Our production operations portfolio helps industrial clients to plan execute manage and optimize their production leveraging industrial data and software Our software products include manufacturing execution systems performance quality supply chain management data management edge analytics and machine learning software that enables customers to improve operational productivity and meet regulatory requirements These solutions enable enterprise visibility reduction of unplanned downtime and optimization of processes
The Lifecycle Services operating segment contains a complete portfolio of professionally delivered services and annually recurring managed support contracts This comprehensive portfolio combines technology and domain expertise to help maximize customers investment and provide total lifecycle support as they innovate design operate and sustain their business investments This includes
Among other considerations we evaluate performance and allocate resources based upon segment operating earnings before purchase accounting depreciation and amortization impairment corporate and other non operating pension and postretirement benefit cost change in fair value of investments restructuring charges aligned with enterprise wide strategic initiatives interest expense net and income tax provision 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
The following tables summarize the identifiable assets at September 30 2024 2023 and 2022 and the provision for depreciation and amortization and the amount of capital expenditures for property for the years then ended for each of the reportable segments and Corporate in millions
Identifiable assets at Corporate consist principally of cash net deferred income tax assets prepaid pension and property Property shared by the segments and used in operating activities is also reported in Corporate identifiable assets and Corporate capital expenditures Corporate identifiable assets include shared net property balances of 261 4 million 240 9 million and 205 8 million at September 30 2024 2023 and 2022 respectively for which depreciation expense has been allocated to segment operating earnings based on the expected benefit to be realized by each segment Corporate capital expenditures in 2024 2023 and 2022 primarily consist of property that will be shared by our operating segments
We attribute sales to the geographic regions based on the country of destination Sales in North America include 4 611 9 million 4 773 2 million and 4 315 5 million related to the U S in 2024 2023 and 2022 respectively
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 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
We have audited the accompanying consolidated balance sheets of Rockwell Automation Inc and subsidiaries the Company as of September 30 2024 and 2023 the related consolidated statements of operations comprehensive income cash flows and shareowners equity for each of the three years in the period ended September 30 2024 and the related notes and the schedule listed in the Index at Item 15 a 2 collectively referred to as the financial statements We also have audited the Company s internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by the Committee of Sponsoring Organizations of the Treadway Commission COSO
In our opinion the financial statements referred to above present fairly in all material respects the financial position of the Company as of September 30 2024 and 2023 and the results of its operations and its cash flows for each of the three years in the period ended September 30 2024 in conformity with accounting principles generally accepted in the United States of America Also in our opinion the Company maintained in all material respects effective internal control over financial reporting as of September 30 2024 based on criteria established in Internal Control Integrated Framework 2013 issued by COSO
The Company s management is responsible for these financial statements for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management s Report on Internal Control over Financial Reporting Our responsibility is to express an opinion on these financial statements and an opinion on the Company s internal control over financial reporting based on our audits We are a public accounting firm registered with the Public Company Accounting Oversight Board United States PCAOB and are required to be independent with respect to the Company in accordance with the U S federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB
We conducted our audits in accordance with the standards of the PCAOB Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud and whether effective internal control over financial reporting was maintained in all material respects
Our audits of the financial statements included performing procedures to assess the risks of material misstatement of the financial statements whether due to error or fraud and performing procedures to respond to those risks Such procedures included examining on a test basis evidence regarding the amounts and disclosures in the financial statements Our audits also included evaluating the accounting principles used and significant estimates made by management as well as evaluating the overall presentation of the financial statements Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting assessing the risk that a material weakness exists and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk Our audits also included performing such other procedures as we considered necessary in the circumstances We believe that our audits provide a reasonable basis for our opinions
A company s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles A company s internal control over financial reporting includes those policies and procedures that 1 pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company 2 provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company and 3 provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition use or disposition of the company s assets that could have a material effect on the financial statements
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
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that 1 relates to accounts or disclosures that are material to the financial statements and 2 involved our especially challenging subjective or complex judgments The communication of critical audit matters does not alter in any way our opinion on the financial statements taken as a whole and we are not by communicating the critical audit matter below providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates
The Company performed their annual quantitative test for goodwill impairment as of the beginning of the second quarter of fiscal 2024 using a combination of an income approach derived from discounted cash flows and a market multiples approach using selected comparable public companies As of the annual measurement date the Company determined that the fair value of the Sensia reporting unit exceeded its carrying value by approximately 25 percent and therefore no impairment was recognized
The determination of the fair value using the income approach requires management to make significant estimates and assumptions related to the discount rate and forecasts of future revenues and Earnings Before Interest Taxes Depreciation and Amortization EBITDA margins The determination of fair value using the market multiples approach requires management to make significant assumptions related to the selection of the market multiple The Company s consolidated goodwill balance was 3 993 3 million as of September 30 2024 of which 160 7 million related to the Sensia reporting unit Changes in the critical assumptions outlined above could have a significant impact on the fair value of the reporting unit
We identified the impairment evaluation of goodwill for the Sensia reporting unit as a critical audit matter because of the inherent subjectivity involved in management s estimates and assumptions related to forecasts of future revenues and EBITDA margins and selection of the discount rate and market multiple The audit procedures to evaluate the reasonableness of management s estimates and assumptions required a high degree of auditor judgment and an increased extent of effort including the need to involve our fair value specialists
We tested the effectiveness of controls over management s goodwill impairment evaluation including those over management s development of forecasts of future revenues and EBITDA margins as well as the selection of the discount rate and market multiple
We evaluated the reasonableness of management s forecasts by comparing the forecasts to 1 historical results 2 internal communications to management and those charged with governance of Sensia and 3 forecasted information included in analyst and industry reports for the Company and its peer companies including the impact of industry specific and economic factors on Sensia s Oil Gas customers
With the assistance of our fair value specialists we evaluated the reasonableness of the discount rate by 1 testing the source information underlying the determination of the discount rate 2 testing the mathematical accuracy of the calculations and 3 developing a range of independent estimates and comparing those to the discount rate selected by management
With the assistance of our fair value specialists we evaluated the reasonableness of the selected market multiple by 1 assessing the appropriateness of the selected comparable public companies 2 testing the source information utilized and 3 comparing the market multiple selected by management to such companies
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
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
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
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
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
During the quarter ended September 30 2024 the following officers of the Company adopted Rule 10b5 1 trading arrangements that are each intended to satisfy the affirmative defense of Rule 10b5 1 c promulgated under the Exchange Act with such details of the arrangements as further follows
Blake D Moret President and Chief Executive Officer adopted a Rule 10b5 1 trading arrangement on August 26 2024 that will terminate on the earlier of August 28 2025 or the execution of all trades in the trading arrangement Mr Moret s trading arrangement covers the i exercise of 26 700 stock options and the sale of the underlying shares of the Company s common stock and ii sale of the number of shares of the Company s common stock required to be sold to cover taxes on upcoming restricted stock unit and performance share vests
Isaac R Woods Vice President and Treasurer adopted a Rule 10b5 1 trading arrangement on August 26 2024 that will terminate on the earlier of June 10 2025 or the execution of all trades in the trading arrangement Mr Woods trading arrangement covers the sale of i the number of long shares having a value of up to 250 000 and ii the number of shares of the Company s common stock required to be sold to cover taxes on an upcoming restricted stock unit vest
For the arrangements above referencing transactions to sell shares to cover taxes on vests the aggregate number of shares to be sold pursuant to each trading arrangement described above is dependent on the taxes on the applicable restricted stock unit and performance share vests and therefore is indeterminable at this time Additionally the number of shares to be sold pursuant to
During the quarter ended September 30 2024 no director or officer of the Company adopted or terminated a non Rule 10b5 1 trading arrangement as defined in Item 408 of Regulation S K no director of the Company adopted or terminated a Rule 10b5 1 trading arrangement and no officer of the Company terminated a Rule 10b5 1 trading arrangement
No nominee for director was selected pursuant to any arrangement or understanding between the nominee and any person other than the Company pursuant to which such person is or was to be selected as a director or nominee See also the information about executive officers of the Company under Item 4A of Part I
We have adopted a code of ethics that applies to our executive officers including the principal executive officer principal financial officer and principal accounting officer A copy of our Code of Conduct is posted on our Internet site at
under the Investors link In the event that we amend or grant any waiver from a provision of the code of ethics that applies to the principal executive officer principal financial officer or principal accounting officer and that requires disclosure under applicable SEC rules we intend to disclose such amendment or waiver and the reasons therefor on our Internet site
We have adopted insider trading policies and procedures governing the purchase sale and or other disposition of Company securities by directors officers employees and the Company that are reasonably designed to promote compliance with insider trading laws rules and regulations and the NYSE listing standards A copy of our policies and procedures are attached to this Annual Report on Form 10 K as Exhibit 19
The following table provides information as of September 30 2024 about our common stock that may be issued upon the exercise of options warrants and rights granted to employees consultants or directors under all of our existing equity compensation plans
Represents outstanding options shares issuable in payment of outstanding performance shares at maximum payout and restricted stock units under our 2020 Long Term Incentives Plan 2012 Long Term Incentives Plan 2008 Long Term Incentives Plan and 2003 Directors Stock Plan
Schedules not filed herewith are omitted because of the absence of conditions under which they are required or because the information called for is shown in the consolidated financial statements or notes thereto
Indenture dated as of December 1 1996 between the Company and The Bank of New York Trust Company N A formerly JPMorgan Chase successor to The Chase Manhattan Bank successor to Mellon Bank N A as Trustee filed as Exhibit 4 a to Registration Statement No 333 43071 is hereby incorporated by reference
Memorandum of Amendments to the Company s 2003 Directors Stock Plan approved and adopted by the Board of Directors of the Company on April 25 2003 filed as Exhibit 10 1 to the Company s Quarterly Report on Form 10 Q for the quarter ended June 30 2003 is hereby incorporated by reference
Memorandum of Amendments to the Company s 2003 Directors Stock Plan approved and adopted by the Board of Directors of the Company on November 7 2007 filed as Exhibit 10 3 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2007 is hereby incorporated by reference
Memorandum of Amendments to the Company s 2003 Directors Stock Plan approved and adopted by the Board of Directors of the Company on September 3 2008 filed as Exhibit 10 b 16 to the Company s Annual Report on Form 10 K for the year ended September 30 2008 is hereby incorporated by reference
Form of Restricted Stock Unit Agreement under Section 6 of the Company s 2003 Director s Stock Plan as amended filed as Exhibit 10 3 to the Company s Quarterly Report on Form 10 Q for the quarter ended March 31 2008 is hereby incorporated by reference
Copy of the Company s Directors Deferred Compensation Plan approved and adopted by the Board of Directors of the Company on November 5 2008 filed as Exhibit 10 2 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2008 is hereby incorporated by reference
Copy of the Company s 2012 Long Term Incentives Plan as amended and restated through February 2 2016 filed as Exhibit 4 c to the Company s Registration Statement on Form S 8 No 333 209706 is hereby incorporated by reference
Form of Stock Option Agreement under the Company s 2012 Long Term Incentives Plan for options granted to executive officers of the Company after December 5 2012 filed as Exhibit 10 1 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2012 is hereby incorporated by reference
Form of Restricted Stock Agreement under the Company s 2012 Long Term Incentives Plan for shares of restricted stock awarded to executive officers of the Company after December 5 2012 filed as Exhibit 10 2 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2012 is hereby incorporated by reference
Form of Performance Share Agreement under the Company s 2012 Long Term Incentives Plan for performance shares awarded to executive officers of the Company after December 5 2012 filed as Exhibit 10 3 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2012 is hereby incorporated by reference
Form of Restricted Stock Agreement under the Company s 2012 Long Term Incentives Plan for certain awards of shares of restricted stock to executive officers of the Company after October 29 2019 filed as Exhibit 10 b 10 to the Company s Annual Report on Form 10 K for the year ended September 30 2019 is hereby incorporated by reference
Form of Restricted Stock Agreement under the Company s 2020 Long Term Incentives Plan for certain awards of shares of restricted stock to executive officers of the Company filed as Exhibit 10 1 to the Company s Quarterly Report on Form 10 Q for the quarter ended June 30 2020 is hereby incorporated by reference
Form of Restricted Stock Unit Agreement under the Company s 2020 Long Term Incentives Plan for certain awards of restricted stock units to executive officers of the Company filed as Exhibit 10 b 13 to the Company s Annual Report on Form 10 K for the year ended September 30 2020 is hereby incorporated by reference
Form of Global Restricted Stock Unit Agreement under the Company s 2020 Long Term Incentives Plan for certain awards of restricted stock units to executive officers of the Company after December 9 2020 filed as Exhibit 10 b 14 to the Company s Annual Report on Form 10 K for the year ended September 30 2020 is hereby incorporated by reference
Form of Stock Option Agreement for U S Employees under the Company s 2020 Long Term Incentives Plan for options awarded to executive officers of the Company after December 9 2020 filed as Exhibit 10 1 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2020 is hereby incorporated by reference
Form of Restricted Stock Unit Agreement for U S Employees under the Company s 2020 Long Term Incentives Plan for restricted stock units awarded to executive officers of the Company after December 9 2020 filed as Exhibit 10 2 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2020 is hereby incorporated by reference
Form of Performance Share Agreement for U S Employees under the Company s 2020 Long Term Incentives Plan for performance shares awarded to executive officers of the Company after December 9 2020 filed as Exhibit 10 3 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2020 is hereby incorporated by reference
Copy of the Company s Deferred Compensation Plan as amended and restated September 6 2006 filed as Exhibit 10 f to the Company s Annual Report on Form 10 K for the year ended September 30 2006 is hereby incorporated by reference
Memorandum of Proposed Amendment and Restatement of the Company s Deferred Compensation Plan approved and adopted by the Board of Directors of the Company on November 7 2007 filed as Exhibit 10 2 to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 2007 is hereby incorporated by reference
Copy of the Company s Incentive Compensation Plan effective October 1 2020 filed as Exhibit 10 d 1 to the Company s Annual Report on Form 10 K for the year ended September 30 2020 is hereby incorporated by reference
Copy of the Company s Annual Incentive Compensation Plan for Senior Executive Officers as amended December 3 2003 filed as Exhibit 10 i 1 to the Company s Annual Report for the year ended September 30 2004 is hereby incorporated by reference
Change of Control Agreement dated as of September 30 2022 between the Company and Blake D Moret filed as Exhibit 99 1 to the Company s Current Report on Form 8 K dated October 21 2022 is hereby incorporated by reference
Form of Change of Control Agreement between the Company and each of Nicholas C Gangestad Scott A Genereux Rebecca W House Frank Kulaszewicz and certain other officers filed as Exhibit 99 2 to the Company s Current Report on Form 8 K dated October 21 2022 is hereby incorporated by reference
Letter Agreement dated July 1 2016 between Registrant and Blake D Moret filed as Exhibit 10 3 to the Company s Quarterly Report on Form 10 Q for the quarter ended June 30 2016 is hereby incorporated by reference
Agreement and Plan of Distribution dated as of December 6 1996 among Rockwell International Corporation renamed Boeing North American Inc the Company formerly named New Rockwell International Corporation Allen Bradley Company Inc Rockwell Collins Inc Rockwell Semiconductor Systems Inc Rockwell Light Vehicle Systems Inc and Rockwell Heavy Vehicle Systems Inc filed as Exhibit l0 b to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 1996 is hereby incorporated by reference
Post Closing Covenants Agreement dated as of December 6 1996 among Rockwell International Corporation renamed Boeing North American Inc The Boeing Company Boeing NA Inc and the Company formerly named New Rockwell International Corporation filed as Exhibit 10 c to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 1996 is hereby incorporated by reference
Tax Allocation Agreement dated as of December 6 1996 among Rockwell International Corporation renamed Boeing North American Inc the Company formerly named New Rockwell International Corporation and The Boeing Company filed as Exhibit 10 d to the Company s Quarterly Report on Form 10 Q for the quarter ended December 31 1996 is hereby incorporated by reference
Distribution Agreement dated as of September 30 1997 by and between the Company and Meritor Automotive Inc filed as Exhibit 2 1 to the Company s Current Report on Form 8 K dated October 10 1997 is hereby incorporated by reference
Employee Matters Agreement dated as of September 30 1997 by and between the Company and Meritor Automotive Inc filed as Exhibit 2 2 to the Company s Current Report on Form 8 K dated October 10 1997 is hereby incorporated by reference
Tax Allocation Agreement dated as of September 30 1997 by and between the Company and Meritor Automotive Inc filed as Exhibit 2 3 to the Company s Current Report on Form 8 K dated October 10 1997 is hereby incorporated by reference
Distribution Agreement dated as of June 29 2001 by and among the Company Rockwell Collins Inc and Rockwell Scientific Company LLC filed as Exhibit 2 1 to the Company s Current Report on Form 8 K dated July 11 2001 is hereby incorporated by reference
Employee Matters Agreement dated as of June 29 2001 by and among the Company Rockwell Collins Inc and Rockwell Scientific Company LLC filed as Exhibit 2 2 to the Company s Current Report on Form 8 K dated July 11 2001 is hereby incorporated by reference
Tax Allocation Agreement dated as of June 29 2001 by and between the Company and Rockwell Collins Inc filed as Exhibit 2 3 to the Company s Current Report on Form 8 K dated July 11 2001 is hereby incorporated by reference
1 500 000 000 Five Year Credit Agreement dated as of June 29 2022 among the Company the Banks listed on the signature pages thereof and Bank of America N A as Administrative Agent filed as Exhibit 99 to the Company s Current Report on Form 8 K dated July 1 2022 is hereby incorporated by reference
Purchase and Sale Agreement dated as of August 24 2005 by and between the Company and First Industrial Acquisitions Inc including the form of Lease Agreement attached as Exhibit I thereto together with the First Amendment to Purchase and Sale Agreement dated as of September 30 2005 and the Second Amendment to Purchase and Sale Agreement dated as of October 31 2005 filed as Exhibit 10 p to the Company s Annual Report on Form 10 K for the year ended September 30 2005 is hereby incorporated by reference
Purchase Agreement dated as of November 6 2006 by and among Rockwell Automation Inc Rockwell Automation of Ohio Inc Rockwell Automation Canada Control Systems Grupo Industrias Reliance S A de C V Rockwell Automation GmbH formerly known as Rockwell International GmbH and Baldor Electric Company contained in the Company s Current Report on Form 8 K dated November 9 2006 is hereby incorporated by reference
First Amendment to Purchase Agreement dated as of January 24 2007 by and among Rockwell Automation Inc Rockwell Automation of Ohio Inc Rockwell Automation Canada Control Systems Grupo Industrias Reliance S A de C V Rockwell Automation GmbH and Baldor Electric Company filed as Exhibit 10 2 to the Company s Quarterly Report on Form 10 Q for the quarter ended March 31 2007 is hereby incorporated by reference
Pursuant to the requirements of the Securities Exchange Act of 1934 this report has been signed below on the 12th day of November 2024 by the following persons on behalf of the registrant and in the capacities indicated
Consists of amounts written off for the allowance for doubtful accounts and adjustments resulting from our ability to utilize foreign tax credits capital losses or net operating loss carryforwards for which a valuation allowance had previously been recorded

Company Name	ROCKWELL AUTOMATION, INC Vist SEC web-site
Category	MEASURING & CONTROLLING DEVICES, NEC
Trading Symbol	ROK