What was the primary driver for the improvement in the third-quarter net income compared to the prior year?

The primary drivers for the significant improvement in the third-quarter net income were an increase in operating earnings from the Control Systems segment, driven by higher sales of Process Solutions and Logix™ integrated architecture products, along with beneficial tax adjustments including a $30 million tax benefit from the resolution of tax matters and a reduction in the effective tax rate.

Why did the net income for the nine-month period decrease year-over-year, despite an improvement in income from continuing operations?

The decrease in net income for the nine-month period is largely due to a one-time cumulative effect of accounting changes related to the adoption of SFAS No. 142. This resulted in impairment charges for goodwill and trademarks totaling $108 million after tax, which significantly reduced the reported net income, even as the core operations (income from continuing operations before accounting changes) showed an increase.

How has the company's financial position changed in terms of cash and debt?

Cash and cash equivalents increased to $214 million at June 30, 2002, from $121 million at September 30, 2001. Total current liabilities increased, driven by a significant rise in short-term debt to $207 million from $10 million, primarily to fund recent acquisitions. Long-term debt decreased to $760 million from $909 million.

What is the outlook for the company in the near future?

Management anticipates a continuation of the uncertain business environment, projecting flat to modest sequential sales growth in the fourth quarter. Earnings per share for the fourth quarter are estimated to be in the range of 27 to 29 cents per diluted share.

ROK 10-Q Quarterly Report Q3 FY2002 — Revenue, Net Income, EPS

Summary

Rockwell Automation, Inc. reported its fiscal third-quarter and nine-month results for the period ending June 30, 2002. For the third quarter, the company posted net income of $90 million, or $0.47 per diluted share, a significant improvement from a net loss of $27 million, or $0.15 per diluted share, in the same quarter of the prior year. This turnaround was driven by improved performance in the Control Systems segment and a tax benefit from the resolution of certain tax matters and a reduction in the effective tax rate. For the nine-month period ended June 30, 2002, net income was $72 million, or $0.38 per diluted share, compared to $293 million, or $1.58 per diluted share, in the prior year. This year-over-year decline in nine-month net income is largely attributable to a significant cumulative effect of an accounting change related to goodwill and intangible asset impairment charges recognized in the current year, totaling $108 million after tax. Despite the headline net income decrease for the nine months, income from continuing operations before accounting changes showed improvement, reaching $177 million compared to $113 million in the prior year, indicating underlying operational recovery.

Key Highlights

1Net income for the three months ended June 30, 2002, was $90 million ($0.47 per diluted share), a substantial increase from a net loss of $27 million ($0.15 per diluted share) in the prior year's quarter.
2The nine-month period ended June 30, 2002, saw net income of $72 million ($0.38 per diluted share), down from $293 million ($1.58 per diluted share) in the same period last year, primarily due to a $108 million after-tax accounting charge for goodwill and intangible asset impairment.
3Sales for the nine months ended June 30, 2002, were $2,892 million, a decrease from $3,309 million in the prior year's comparable period.
4Income from continuing operations before accounting change improved for the nine months, rising to $177 million compared to $113 million in the prior year.
5The company adopted SFAS No. 142, resulting in non-amortization of goodwill and intangible assets and triggering impairment charges of $108 million after tax.
6Cash provided by operating activities for the nine months was $295 million, down from $343 million in the prior year, but free cash flow remained strong at $224 million.
7The company made several acquisitions during the period, including Propack Data GmbH, Tesch GmbH, and the controller division of Samsung Electronics Company Limited's Mechatronics business.

ROCKWELL AUTOMATION, INC Quarterly Report for Q3 Ended Jun 30, 2002

Summary

Key Highlights

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