What was the impact of the Rockwell Collins spin-off on Rockwell Automation's financial statements?

The spin-off of Rockwell Collins on June 29, 2001, resulted in the removal of Rockwell Collins' assets and liabilities from Rockwell Automation's balance sheet. Rockwell Automation also received a $300 million special payment from Rockwell Collins. Consequently, total assets and liabilities decreased significantly, and the company's operations are now focused on its remaining businesses, such as Control Systems and Power Systems.

What caused the significant drop in sales and earnings for the Control Systems segment?

The primary drivers for the decline in the Control Systems segment's sales and operating earnings were deteriorating market conditions, particularly in the industrial sector within the United States. Additionally, a stronger U.S. dollar negatively impacted reported sales when translated from foreign currencies, and the company experienced costs related to planned lower capacity utilization.

What are the 'special charges' mentioned in the report, and what is their expected impact?

The special charges of $69 million ($45 million after tax) in the third quarter of 2001 were incurred for costs associated with business realignment, including facility consolidation, workforce reduction (approximately 1,200 employees), and asset impairments. The company expects these actions to result in substantial completion by the first quarter of 2002 and anticipates annual pre-tax savings of approximately $100 million beginning in fiscal year 2002.

How will the adoption of SFAS 142 affect Rockwell Automation's future financial performance?

Rockwell Automation expects to adopt SFAS 142, which requires goodwill to be reviewed for impairment rather than amortized. Management anticipates that ceasing the amortization of goodwill will increase net income by approximately $41 million after tax, or 22 cents per diluted share, in fiscal year 2002. The company is still assessing any additional effects of adopting this standard.

ROK 10-Q Quarterly Report Q3 FY2001 — Revenue, Net Income, EPS

Summary

Rockwell International Corporation's (now Rockwell Automation) Q3 2001 filing shows a significant operational shift following the spin-off of its Rockwell Collins business on June 29, 2001. This strategic move resulted in a substantial decrease in total assets and liabilities as the avionics and communications segment became a separate entity. While the spin-off provided Rockwell with a $300 million special payment, the core business faced challenging market conditions, particularly in industrial markets in the United States, leading to a decline in sales and segment operating earnings, especially in the Control Systems segment. The company also incurred significant special charges related to business realignment and workforce reduction, impacting net income for the quarter. Despite these headwinds, the company is undertaking cost-saving initiatives and expects to achieve annual pre-tax savings of approximately $100 million from these actions starting in fiscal year 2002. The adoption of new accounting standards, SFAS 141 and SFAS 142, is anticipated to positively impact future net income by ceasing the amortization of goodwill.

Key Highlights

1Completion of the Rockwell Collins spin-off on June 29, 2001, creating two independent public companies and providing Rockwell Automation with a $300 million special payment.
2Significant decline in sales and segment operating earnings for the Control Systems segment, primarily due to deteriorating market conditions in the United States industrial sector.
3Recording of $69 million ($45 million after-tax) in special charges related to business realignment, facility consolidation, workforce reduction, and asset impairments.
4Reduced income from continuing operations to $113 million for the nine months ended June 30, 2001, down from $281 million in the prior year period, impacted by lower volumes and special charges.
5Expectation of annual pre-tax savings of approximately $100 million starting in fiscal year 2002 from business realignment actions.
6Anticipated positive impact on future net income of approximately $41 million after tax from ceasing goodwill amortization under the new SFAS 142 accounting standard.
7Deteriorating free cash flow for the nine months ended June 30, 2001, at $225 million compared to $310 million in the prior year, largely due to lower earnings.

ROCKWELL AUTOMATION, INC Quarterly Report for Q3 Ended Jun 30, 2001

Summary

Key Highlights

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