Summary
Rockwell International Corporation's (ROK) Q2 2001 filing indicates a mixed financial performance. While consolidated sales, including the soon-to-be-spun-off Rockwell Collins, saw an increase year-over-year, net income declined due to lower earnings from continuing operations, higher interest expenses, and increased amortization costs. The company is actively preparing for the spin-off of Rockwell Collins, expected in June 2001, which will result in a new, separately traded public company. For investors, the key takeaway is the strategic shift represented by the Rockwell Collins spin-off, which aims to create two more focused entities. The continuing operations, comprising Control Systems and Power Systems, faced challenges, particularly in North American markets, leading to reduced segment operating earnings. However, international sales growth in Control Systems provided some offset. The company anticipates that full-year earnings for the combined businesses will be near the high end of analyst estimates, contingent on market conditions improving in the latter half of the year.
Key Highlights
- 1Consolidated net income for the three months ended March 31, 2001, was $125 million, down from $164 million in the prior year period.
- 2Sales for the combined businesses (including discontinued Rockwell Collins) increased to $1,851 million in Q2 2001 from $1,784 million in Q2 2000.
- 3The company announced its intention to spin off its Rockwell Collins avionics and communications business into a separate public company, expected to be completed in June 2001.
- 4Income from continuing operations decreased to $71 million in Q2 2001 from $102 million in Q2 2000, reflecting lower segment operating earnings in Control Systems and Power Systems.
- 5Short-term debt increased significantly to $412 million at March 31, 2001, from $16 million at September 30, 2000, primarily due to commercial paper borrowings used to fund acquisitions.
- 6Control Systems segment sales remained stable year-over-year, but segment operating earnings decreased due to lower North American volume and planned lower capacity utilization.
- 7Rockwell Collins' sales increased, driven by recent acquisitions, but segment operating earnings were impacted by a non-recurring charge for inventory write-off.