Nick Gangestad
Senior Vice President And Chief Financial Officer at Rockwell Automation
Thank you, Blake, and good morning, everyone. Ill start on slide nine, fourth quarter key financial information. Fourth quarter reported sales were up 17.6% over last year. Q4 organic sales were up 20.5% and acquisitions contributed 1.9 points to total growth. Currency translation decreased sales by 4.8 points. Segment operating margin expanded to 23.3% and was in line with our expectations. The 540 basis point increase was driven by higher sales and positive price costs, partially offset by the negative impact from currency. Corporate and other expense was $35 million and in line with the prior year. Adjusted EPS of $3.04 was in line with our guidance and grew 30% versus the prior year. Ill cover a year-over-year adjusted EPS bridge on a later slide. The adjusted effective tax rate for the fourth quarter was 17.8%. The year-over-year increase was related to the cumulative impact of several onetime discrete items recognized in the prior year. Free cash flow was $359 million and was up $200 million over the prior year, driven by higher pretax income.
Working capital on a currency-neutral basis grew 10% sequentially versus our plans for a 10% decline. Our planned inventory reductions did not materialize in the quarter due to the continued build of raw material and work in process waiting on critical components. The actions we put in place to rightsize inventory are taking longer to implement in the current supply chain environment. Our inventory days on hand at the end of the current year were close to 130 days versus a pre-pandemic average of 90 to 100 days. One additional item not shown on the slide. We repurchased approximately 300,000 shares in the quarter at a cost of $76 million. For the full year, our share repurchases totaled $301 million, in line with our July guidance. On September 30, $1.3 billion remained available under our repurchase authorization. slide 10 provides the sales and margin performance overview of our three operating segments. Total and organic sales grew double digits across all three segments with software and control growing over 30% year-over-year.
Backlog for all three segments grew sequentially and was up over 75% year-over-year. Segment margins for the Intelligent Devices segment expanded to 22.3% on higher sales and positive price/costs, partially offset by the negative impact from currency. Compared to last year, Software & Control margins were up over 10 percentage points driven by higher sales and positive price/cost, partially offset by negative currency impacts. Lifecycle Services segment margin was 10.7% and increased 260 basis points versus prior year, benefiting from higher sales. Book-to-bill in the quarter was 1.02. The next slide 11 provides the adjusted EPS walk from Q4 fiscal 21 to Q4 fiscal 22. Core performance was up $1.15 on a 20.5% organic sales increase. Approximately $0.10 were related to nonrecurring accelerated investments that were made in the prior year. These investments were mostly in our Software & Control segment.
The impact of currency was a $0.25 reduction in EPS, which was about $0.10 worse than our expectations, reflecting the continued strengthening of the U.S. dollar throughout the quarter. Incentive compensation was a $0.10 benefit. As previously noted, our higher adjusted effective tax rate was a $0.60 headwind due to prior year comps. Acquisitions, including the impact of interest added $0.15, primarily related to the prior year Plex deal fees. Our reduction in outstanding shares added about $0.05. slide 12 provides a walk from our Q4 midpoint in our July guidance to our actual Q4 adjusted EPS results. Other than currency, sales and profits in the quarter played out in line with our guidance. Currency impact on sales was about $25 million worse than we expected and a 0.10 worse on EPS. The impact from currency on EPS was offset by a slightly lower incentive compensation and a more favorable adjusted tax rate. Strong organic sales growth and good execution delivered over 23% operating margin in the quarter. slide 13 provides key financial information for the full year fiscal 22.
Reported sales grew 10.9% to $7.8 billion, including over two points coming from acquisitions. Currency negatively impacted sales by approximately $200 million or 2.7 points. Organic sales were up over 11% with growth bounced across all regions and business segments. Full year segment margin remained at about 20%. The benefit from higher volumes and lower incentive compensation was fully offset by higher wages and labor inefficiencies in our projects and in our plants caused by supply chain constraints. Margins were also negatively impacted by negative price costs, primarily in the first half of the year. We increased our growth investments by double digits this year with a big focus on key product launches, new digital capabilities, increased sales force investments and plant capacity expansion. Corporate and other was down $16 million, mostly related to acquisition costs associated with the Plex acquisition in the prior year.
Adjusted EPS was up 1%. A detailed year-over-year adjusted EPS walk can be found in the appendix for your reference. Excluding the impact of the tax rate and the prior year onetime items, which included a favorable legal settlement and onetime accelerated investments, our adjusted EPS was up 11%. As discussed earlier, free cash flow performance was below our expectations with free cash flow conversion of 61%. The $460 million decrease in free cash flow was driven by a 50% increase in working capital on a currency-neutral basis as well as the payments of the fiscal year 21 bonus in fiscal year 22. There was no bonus payment made in fiscal year 21. Working capital as a percent of sales was 16% compared to 12% a year earlier. Return on invested capital was 15.2% for fiscal year 22 and 16 points worse than the prior year, primarily related to higher invested capital and lower pretax GAAP income driven by our mark-to-market adjustments made on our PTC investment in both years. For the year, we deployed about $900 million of capital towards dividends, share repurchases and inorganic investments in fiscal 22.
We also paid down debt by about $150 million. Our capital structure and liquidity remains strong. Before I cover fiscal year 23 guidance, lets turn to Page 14. In fiscal year 22, our backlog grew by over 75% year-over-year, including strong double-digit growth in each segment. Pre-pandemic, we had about one month or less of the following years revenue in the backlog for Software & Control and Intelligent Devices. Our backlog now represents over 50% of our fiscal year 23 sales guide for both of these segments. This unprecedented backlog coverage adds to our confidence in our revenue outlook. Our backlog also includes the benefits of price increases that were implemented throughout fiscal year 22. Lets move on to the next slide, 15, guidance for fiscal year 23. We are expecting sales of about $8.5 billion in fiscal 23, up 9.5% at the midpoint of the range. We expect organic sales growth to be in a range of 9% to 13% and 11% at the midpoint of our range.
This outlook includes our current backlog levels, our latest assumptions on supply chain stabilization as well as continued price growth momentum. We expect full year segment operating margins to be about 20.5%. At the midpoint, our guidance assumes full year core earnings conversion of between 30% and 35%. Ill cover a few more details on this on the next slide. We expect the full year adjusted effective tax rate will be around 18%. We do not anticipate any material discrete items to impact our tax rate in fiscal 23. Our adjusted EPS guidance is $10.20 to $11. This compares to fiscal 22 adjusted EPS of $9.49. At the midpoint of the range, this represents 12% adjusted EPS growth. I will cover a year-over-year adjusted EPS walk on a later slide. We expect full year fiscal 23 free cash flow conversion of about 95% of adjusted income. This reflects $190 million of capital expenditures. We are planning for a reduction in our working capital days with a focus on inventory days on hand. Our working capital is targeted to be about 15% of sales, still above our historic amount of around 12% as the return to pre-pandemic supplier lead times is slow.
Finally, our projections include additional income tax payments of around $100 million related to the change in U.S. tax law that no longer allows for the immediate expensing of R&D. A few additional comments on fiscal 23 guidance. Corporate and other expense is expected to be around $120 million. Net interest expense for fiscal 23 is expected to be around $120 million. And finally, were assuming average diluted shares outstanding of 115.1 million shares. Lets turn to slide 16. Given the continued supply chain volatility and many moving pieces, we wanted to provide a slide that lays out the tailwinds and headwinds that are included in our fiscal year 23 guidance. From a top line perspective, our 11% organic sales growth is supported by our higher backlog. This includes about 7% from higher volumes due to general supply chain stabilization, low cancellation rates and resiliency benefits coming from our redesign efforts done in fiscal 22 and continuing in fiscal 23. About 4% is coming from price growth, mostly tied to price actions that went into effect in fiscal 22. We also have factored in about 1% inorganic growth for our recently completed acquisition of CUBIC.
While the supply chain shows some signs of stabilization in Q4, there continues to be volatility along with a dynamic macro environment, macroeconomic environment, including the unfavorable impact of currency. All of these factors have informed our sales guidance and range. On adjusted EPS, we expect margin expansion from increased volume and positive price growth. The net favorable impact of price cost on margins is about 100 basis points. We also will benefit from a higher discount rate favorably impacting our pension expense and well see about a $0.15 benefit from share repurchases. We continue to make investments in attracting and retaining key talent as well as restoring our bonus payout back to 100%. Combined, these two items are around a 150 basis point headwind to our margins. While we do expect a positive price/cost for the year, we are also factoring in continued inflation, primarily in electronic components.
We expect our margins to be negatively impacted by unfavorable mix and currency. Combined, these two items will be a negative impact of around 150 basis points. We are expecting an adjusted effective tax rate of 18% or about a $0.20 headwind. The next slide, 17, provides the adjusted EPS walk from fiscal 22 to fiscal 23 guidance at the midpoint for your reference and which I spoke to on the previous slide. From a calendarization viewpoint, we expect our second and third quarters to have the highest sales growth rates for the year with each up mid- to high teens year-over-year. We expect Q1 and Q4 to be in the single-digit growth range. Following the first quarter, we expect sequential sales to improve over the balance of the year.
We expect segment margins and adjusted EPS to decline year-over-year in Q1. We see segment margins in the mid-teens for Q1, which is factored into our full year view of 20.5%. In Q1, we are projecting a year-over-year margin decrease from increases in spend, unfavorable mix and currency, partially offset by positive price/cost. We are seeing improved -- margins improve sequentially following Q1, driven by higher volumes and continued positive price/cost. Moving on to the next slide, 18. Ill make a few comments on our capital deployment framework. Our long-term capital deployment priorities remain the same. Our first priority is organic growth. After that, we focus capital deployment on inorganic activities. Then we focus on capital returns to shareholders through our dividend and then share repurchases. In addition to our organic and inorganic investments, our capital deployment plans for fiscal 23 include a focus on delevering, dividends of about $540 million and share repurchases of between $200 million and $300 million. With that, Ill turn it back over to Blake for some closing remarks before we start Q&A.
