Summary
Rockwell Automation, Inc. (ROK) reported a net loss of $6 million for the quarter ended December 31, 2001, a significant decline from a net income of $134 million in the prior year period. This downturn was primarily driven by a substantial decrease in sales, which fell to $938 million from $1,111 million year-over-year, reflecting challenging market conditions, particularly in the United States for its Control Systems segment. The company also adopted new accounting standards (SFAS 142) which resulted in a one-time impairment charge of $35 million after-tax for a trademark and the discontinuation of goodwill and indefinite-lived intangible asset amortization. While operating earnings from continuing operations showed a decrease, the company highlights improvements in free cash flow generation and a reduction in inventory and accounts receivable levels. Despite the reported net loss and declining sales, management believes the first quarter of fiscal 2002 represents the low point for business activity in the current economic cycle. The company is focused on cost reduction initiatives and expects modest earnings improvement in the second quarter, assuming sales remain steady. Investors should note the ongoing transition to SFAS 142 and the potential for an additional goodwill impairment charge, as well as the company's cautious outlook for near-term recovery in its core markets.
Key Highlights
- 1Reported a net loss of $6 million for the quarter ended December 31, 2001, compared to a net income of $134 million in the prior year.
- 2Sales decreased significantly to $938 million from $1,111 million year-over-year, impacted by weak market conditions, especially in the Control Systems segment.
- 3Adopted SFAS 142, leading to a $35 million after-tax impairment charge on a trademark and the cessation of goodwill/intangible asset amortization.
- 4Income from continuing operations before accounting change was $29 million ($0.16/share), down from $69 million ($0.38/share) in the prior year.
- 5Generated $87 million in cash from operating activities, an improvement from $26 million in the prior year period, with free cash flow increasing significantly.
- 6Anticipates a potential goodwill impairment charge of up to $100 million in fiscal 2002 related to the Power Systems reporting unit.
- 7Management expects the current quarter to be the low point for business activity in the economic cycle, with a modest earnings improvement anticipated for the next quarter.