Rockwell Automation - 10-Q quarterly report FY

Table of Contents

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

Rockwell Automation, Inc.
(Exact name of registrant as specified in its charter)

(Office of the Corporate Secretary)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes		No

185,802,553 shares of registrant’s Common Stock, $1.00 par value, were outstanding on July 31, 2002.

Table of Contents

ROCKWELL AUTOMATION, INC.

INDEX

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED BALANCE SHEET
(UNAUDITED)
(IN MILLIONS)

See Notes to Condensed Consolidated Financial Statements.

2

Table of Contents

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS
(UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

See Notes to Condensed Consolidated Financial Statements.

3

Table of Contents

ROCKWELL AUTOMATION, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
(UNAUDITED)
(IN MILLIONS)

See Notes to Condensed Consolidated Financial Statements.

4

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

5

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

6

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

7

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

8

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

9

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

10

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

11

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

12

Table of Contents

ROCKWELL AUTOMATION, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

13

Table of Contents

INDEPENDENT ACCOUNTANTS’ REPORT

14

Table of Contents

ROCKWELL AUTOMATION, INC.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles which require the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the consolidated financial statements and revenues and expenses during the periods reported. Actual results could differ from those estimates. The Company believes the following are the critical accounting policies which could have the most significant effect on the Company’s reported results and require the most difficult, subjective or complex judgments by management. Unless otherwise noted, the Company has not made any changes in estimates or assumptions since September 30, 2001 that had a significant effect on the reported amounts.

Revenue Recognition

Sales are generally recorded when all of the following have occurred: an agreement of sale exists, product delivery and acceptance has occurred or services have been rendered, pricing is fixed or determinable, and collection is reasonably assured. Management is required to make judgments about whether the pricing is fixed and determinable and whether or not collectibility is reasonably assured.

The Company records accruals for sales rebates to distributors at the time of shipment based upon historical experience. Changes in such allowances may be required if future rebates differ from historical experience.

Allowance for Doubtful Accounts

The Company records allowances for doubtful accounts based on customer-specific analysis, and general matters such as current assessments of past due balances and economic conditions. Additional allowances for doubtful accounts may be required if there is deterioration in past due balances, if economic conditions are less favorable than the Company has anticipated or for customer-specific circumstances, such as bankruptcy.

Excess and Obsolete Inventory

The Company records allowances for excess and obsolete inventory based on historical and estimated future demand and market conditions. Additional inventory allowances may be required if future demand or market conditions are less favorable than the Company has projected.

Impairment of Long-Lived Assets

The Company evaluates the recoverability of the carrying amount of long-lived assets whenever events or changes in circumstances indicate that the carrying amount of an asset may not be fully recoverable. The Company evaluates the recoverability of goodwill and other intangible assets with indefinite useful lives annually or more frequently if events or circumstances indicate that an asset might be impaired. The Company uses judgment when applying the impairment rules to determine when an impairment test is necessary. Factors the Company considers which could trigger an impairment review include significant underperformance relative to historical or forecasted operating results, a significant decrease in the market value of an asset, a significant change in the extent or manner in which an asset is used, and significant negative industry or economic trends.

15

Table of Contents

ROCKWELL AUTOMATION, INC.

Impairment of Long-Lived Assets (Continued)

Impairment losses are measured as the amount by which the carrying value of an asset exceeds its estimated fair value. The Company is required to make estimates of its future cash flows related to the asset subject to review. These forecasts require assumptions about demand for the Company’s products and services, future market conditions and technological developments. Other assumptions include determining the discount rate and future growth rates. Changes to these assumptions could result in an impairment charge in future periods.

Product Warranty Obligations

The Company records a liability for product warranty obligations at the time of sale to a customer based upon historical warranty experience. The Company also records a liability for specific warranty matters when they become known and are reasonably estimable. Additional provision for product warranty obligations may be required if actual product performance is less favorable than anticipated.

Retirement Benefits

Pension obligations are actuarially determined and are affected by assumptions including discount rate and assumed annual rate of compensation increase for plan employees, among other assumptions. Changes in discount rate and differences from actual results for each assumption as well as the actual return on plan assets compared to the expected rate of return on plan assets will affect the amount of pension expense recognized in future periods. In 2002, based on an annual review of actuarial assumptions which includes review of economic indicators for the expected long-term rate of return on plan assets, the Company reduced its long-term expected rate of return on plan assets from 9.75 percent to 9.0 percent for the pension plan covering most of its employees. All other factors being equal, this change will result in incremental pension expense in 2002 of approximately $8 million. The obligation for postretirement benefits other than pension is also actuarially determined and is affected by assumptions including the discount rate and expected future increase in per capita costs of covered postretirement health care benefits. Changes in the discount rate and differences between actual and assumed per capita health care costs may affect the recorded amount of the expense in future periods.

Self-Insurance Liabilities

The Company’s self-insurance programs include health care, product liability and workers’ compensation. For product liability and workers’ compensation, the Company self-insures from the first dollar of loss up to specified retention levels. Eligible losses in excess of self-insurance retention levels and up to stated limits of liability are covered by policies purchased from third-party insurers. The aggregate self-insurance liability is estimated using the Company’s claim experience and risk exposure levels for the periods being valued. Adjustments to the self-insured liabilities may be required to reflect emerging claims experience and other factors such as inflationary trends or jury awards.

Litigation, Claims and Contingencies

The Company records environmental liabilities based on estimates for known environmental remediation exposures utilizing information received from independent environmental consultants. The liabilities include accruals for sites owned by the Company and third-party sites where the Company was determined to be a potentially responsible party. At third-party sites where more than one potentially responsible party has been identified, the Company records a liability for its estimated allocable share of costs related to its involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. At environmental sites in which the Company is the only responsible party, a liability is recorded for the total estimated costs of remediation. Costs of future expenditures for environmental remediation obligations are not discounted to their present value. Environmental liability estimates may be affected by changing determinations of what constitutes an environmental exposure or an acceptable level of cleanup. To the extent that remediation procedures change or the financial condition of other potentially responsible parties are adversely affected, the estimate of the Company’s environmental liabilities may change.

16

Table of Contents

ROCKWELL AUTOMATION, INC.

Income Taxes

At the end of each interim reporting period, the Company estimates the effective tax rate expected to be applicable for the full fiscal year. The estimated effective tax rate contemplates the expected jurisdiction where income is earned (e.g. United States compared to non-United States) as well as tax planning strategies. If the actual results are different from the Company’s estimates, adjustments to the effective tax rate may be required in the period such determination is made. In the third quarter of 2002, based on a current analysis, the Company reduced its effective tax rate from 26.6 percent to 24.0 percent.

The Company records a liability for potential tax assessments based on its estimate of the potential exposure. Due to the subjectivity and complex nature of the underlying issues, actual payments or assessments may differ from estimates. To the extent the Company’s estimates differ from actual payments or assessments, income tax expense is adjusted. During 2002, the Company has resolved certain matters from previous years resulting in a tax benefit of $48 million.

The Company has recorded a valuation allowance for substantially all of its deferred tax assets related to foreign tax credit carryforwards and net operating loss carryforwards. The valuation allowance is based on an evaluation of the uncertainty of the amount of foreign tax credit carryforwards and net operating loss carryforwards that are expected to be realized. The carryforward period for the majority of the net operating losses is indefinite. The carryforward for all the foreign tax credits ends in 2002. An adjustment to income could be required if the Company determines it could utilize more foreign tax credit carryforwards or net operating loss carryforwards than originally expected.

RESULTS OF OPERATIONS

The Company’s sales and operating earnings by segment, excluding intersegment sales, are summarized below (in millions).

2002 Third Quarter Compared to 2001 Third Quarter

Sales were $995 million in the third quarter of 2002 compared to $1,027 million in the third quarter of 2001. Income from continuing operations before accounting change for the third quarter of 2002 was $90 million, or 47 cents per diluted share, which includes a tax benefit from the favorable resolution of certain tax matters of $30 million, or 16 cents per diluted share; a benefit from a reduction in the effective tax rate from 26.6 percent to 24.0 percent of $4 million, or 2 cents per diluted share; and a benefit from the favorable settlement of intellectual property matters of $5 million ($4 million after-tax, or 2 cents per diluted share). This result compares to a loss of $27 million, or 15 cents per diluted share, for the third quarter of 2001. Excluding amortization of goodwill and certain other intangible assets, as well as a $69 million charge ($45 million after-tax, or 25 cents per diluted share) for costs associated with the consolidation and closure of facilities and workforce reductions and a benefit of $9 million, or 5 cents per diluted share, from a reduction in the effective tax rate, 2001 third quarter income from continuing operations before accounting change would have been $21 million, or 11 cents per diluted share.

17

Table of Contents

ROCKWELL AUTOMATION, INC.

Control Systems

Control Systems’ sales in the 2002 third quarter were $788 million compared to $784 million in the 2001 third quarter. Global Manufacturing Solutions sales were relatively strong, driven by substantial growth in sales of Process Solutions. In addition, Logix™ integrated architecture product sales increased by more than 30 percent compared to the 2001 third quarter.

On a sequential basis, sales were $39 million, or five percent, higher than second quarter 2002 sales of $749 million, due primarily to increased sales in the United States and in Asia Pacific. Sales in the United States increased 7 percent and in Asia Pacific increased 17 percent from the second quarter of 2002.

Segment operating earnings were $91 million in the 2002 third quarter compared to $66 million in the 2001 third quarter. The increase was due primarily to costs savings realized from the realignment of business operations in the 2001 third quarter. On a sequential basis, segment operating earnings increased $10 million from $81 million in the 2002 second quarter due primarily to increased volume. Control Systems’ return on sales for the third quarter of 2002 was 11.5 percent compared to 8.4 percent for the third quarter of 2001. This performance represents an improvement over the 10.8 return in the second quarter of 2002.

Power Systems

Power Systems’ sales in the 2002 third quarter were $178 million compared to $187 million in the 2001 third quarter. On a sequential basis, sales increased one percent compared to second quarter 2002 sales, with an increase in mechanical sales offsetting a decrease in motors sales. Segment operating earnings were $15 million in the 2002 third quarter compared to $12 million in the 2001 third quarter. The increase was due primarily to the benefits of cost savings initiatives. Segment operating earnings improved by $3 million from the second quarter of 2002. Power Systems’ return on sales for the third quarter of 2002 was 8.4 percent compared to 6.4 percent for the third quarter of 2001 and 6.8 percent for the second quarter of 2002.

FirstPoint Contact

Sales at FirstPoint Contact were $29 million in the 2002 third quarter compared to $34 million in the 2001 third quarter. Segment operating earnings were $1 million in the 2002 third quarter compared to a loss of $1 million in the 2001 third quarter.

General Corporate-Net

General corporate expenses were $9 million in the 2002 third quarter compared to $22 million in the 2001 third quarter, driven in part by lower corporate spending. Also included in the 2002 third quarter results was $5 million of income related to the settlement of intellectual property matters. Included in the 2001 third quarter was $3 million of costs associated with the spinoff of Rockwell Collins, Inc.

Interest Expense

Interest expense was $17 million in the third quarter of 2002 compared to $20 million in third quarter of 2001. The $3 million decrease was due to lower weighted-average borrowings and lower weighted-average commercial paper borrowing rates.

Nine Months Ended June 30, 2002 Compared to Nine Months Ended June 30, 2001

Sales in the first nine months of 2002 were $2,892 million compared to $3,309 million in the first nine months of 2001. Income from continuing operations before accounting change in the first nine months of 2002 was $177 million, or 94 cents per diluted share, compared to $113 million, or 61 cents per diluted share, for the first nine months of 2001. After the effect of the Statement of Financial Accounting Standards (SFAS) No. 142, Goodwill and Other Intangible Assets (SFAS 142) accounting change and income from discontinued operations of $3 million, net income for the first nine months of 2002 was $72 million, or 38 cents per diluted share. Excluding amortization of goodwill and certain other intangible assets as well as a $69 million charge ($45 million after-tax, or 25 cents per diluted share) for costs associated with the consolidation and closure of facilities and workforce reductions, earnings in the first nine months of 2001 would have been $193 million, or $1.04 per diluted share.

18

Table of Contents

ROCKWELL AUTOMATION, INC.

Control Systems

Control Systems’ sales in the first nine months of 2002 were $2,260 million compared to $2,560 million in the first nine months of 2001. The decrease was primarily the result of depressed market conditions relative to the prior year for automation products in the United States, where sales declined 14 percent. International shipments (which exclude the effect of foreign currency translation) declined 6 percent compared to the first nine months of 2001 primarily as a result of a decrease of 9 percent in Europe. Despite the overall sales decline, sales of Logix™ integrated architecture products increased 30 percent and sales in the Global Manufacturing Solutions business increased 7 percent from the first nine months in 2001.

Segment operating earnings were $239 million compared to $352 million in the first nine months of 2001. The decline was due primarily to lower volume. Control Systems’ return on sales for the first nine months of 2002 was 10.6 percent compared to 13.8 percent for the first nine months of 2001.

Power Systems

Power Systems’ sales in the first nine months of 2002 were $532 million compared to $581 million in the first nine months of 2001. Segment operating earnings in the first nine months of 2002 were $38 million compared to $40 million in the same period a year ago. The decline was due primarily to lower volume offset partially by the benefits of cost savings initiatives. Power Systems’ return on sales for the first nine months of 2002 was 7.1 percent compared to 6.9 percent for the first nine months of 2001.

FirstPoint Contact

FirstPoint Contact’s sales in the first nine months of 2002 were $100 million compared to $108 million in the first nine months of 2001. Segment operating earnings in the first nine months of 2002 were $4 million compared to $2 million in the same period a year ago. FirstPoint Contact’s return on sales for the first nine months of 2002 was 4.0 percent compared to 1.9 percent for the first nine months of 2001.

General Corporate-Net

General corporate expenses decreased to $43 million in the first nine months of 2002 compared to $53 million in the first nine months of 2001 primarily as a result of lower corporate spending. Also included in the 2002 results was $5 million of income related to the settlement of intellectual property matters. Included in 2001 were $3 million of costs associated with the spinoff of Rockwell Collins, Inc. and a $5 million gain on the sale of real estate.

Interest Expense

Interest expense was $50 million in the first nine months of 2002 compared to $66 million in the first nine months of 2001. The decrease was due to lower weighted-average borrowings and lower weighted-average commercial paper borrowing rates.

Rockwell Scientific Company LLC

Effective June 29, 2001, the Company and Rockwell Collins, Inc. each owns 50 percent of Rockwell Scientific Company LLC (RSC) (formerly known as Rockwell Science Center). Beginning with the fourth quarter of 2001, the Company’s 50 percent ownership interest in RSC is accounted for using the equity method, and the Company’s proportional share of RSC’s earnings or losses are included in general corporate-net.

Income Taxes

The effective income tax rate for the first nine months of 2002, excluding the $48 million (or 26 cents per diluted share) benefit from the resolution of tax matters, was 24.0 percent. The effective income tax rate was 23.6 percent for the same period in 2001. The 2002 effective income tax rate reflects the effect of ceasing amortization of goodwill and trademarks in the first quarter of 2002 as a result of adopting SFAS 142. The effective income tax rate in 2001 would have been 21.6 percent had the Company ceased amortizing its goodwill and trademarks effective October 1, 2000.

19

Table of Contents

ROCKWELL AUTOMATION, INC.

Accounting Change

Effective October 1, 2001, the Company adopted SFAS 142. This standard requires that companies no longer amortize goodwill and indefinite life intangible assets, such as trademarks. This standard also requires that companies evaluate goodwill and indefinite life intangible assets for impairment. As a result of this evaluation, the Company recorded charges of $56 million ($35 million after-tax, or 19 cents per diluted share) related to a trademark impairment and $73 million (before and after-tax, or 39 cents per diluted share) related to goodwill impairment at a Power Systems reporting unit.

Recent Accounting Pronouncements

On July 1, 2001, the Company adopted Emerging Issues Task Force (EITF) Issue No. 00-10, Accounting for Shipping and Handling Fees and Costs, and on January 1, 2002, the Company adopted EITF Issue No. 01-14, Income Statement Characterization of Reimbursements Received for ‘Out of Pocket’ Expenses Incurred, on January 1, 2002. These standards require the Company to classify as sales certain amounts billed to customers that have historically been classified as a reduction of cost of sales. Accordingly, the Company has reclassified an aggregate of $6 million in the three months ended June 30, 2001 and an aggregate of $18 million in the nine months ended June 30, 2001 from cost of sales to sales.

Information with respect to accounting pronouncements which have been issued but not yet adopted by the Company is contained in Note 2 of the Notes to Condensed Consolidated Financial Statements.

Business Outlook

Management is anticipating a continuation of the current uncertain business environment in the near term and is thus assuming flat to modest sequential sales growth in the fourth quarter. Management is estimating fourth quarter earnings per share in the range of 27 to 29 cents per diluted share.

FINANCIAL CONDITION

Cash provided by operating activities was $295 million for the nine months ended June 30, 2002 compared to $343 million for the same period in 2001. Free cash flow was $224 million for the nine months ended June 30, 2002, after a $24 million contribution made to the Company’s qualified pension plan trust related to the spinoff of Rockwell Collins, compared to $225 million for the same period in 2001. The strong free cash flow performance was the result of working capital improvements, along with a decrease in capital expenditures. The Company defines free cash flow, which is used as an internal performance measurement, as cash provided by operating activities reduced by capital expenditures. The Company’s definition of free cash flow may be different from definitions used by other companies.

Cash used for investing activities was $139 million for the nine months ended June 30, 2002 compared to cash provided by investing activities of $190 million for the same period in 2001. During 2002, cash was used for the acquisitions of Propack Data GmbH, Tesch GmbH, and the controller division of Samsung Electronics Company Limited’s Mechatronics business. Capital expenditures were lower in the first nine months of 2002 compared to the same period in 2001 in response to less favorable business conditions. Capital expenditures in 2002 are expected to be approximately $125 million. In connection with the spinoff of the Company’s former Rockwell Collins avionics and communications business on June 29, 2001, the Company received a special payment of $300 million which was used to repay commercial paper borrowings.

20

Table of Contents

ROCKWELL AUTOMATION, INC.

FINANCIAL CONDITION (CONTINUED)

Cash used for financing activities was $23 million for the nine months ended June 30, 2002. Debt increased $45 million from September 30, 2001 to June 30, 2002 principally to fund the acquisitions, the pension contribution, and the payment of certain obligations related to discontinued businesses in the second quarter of 2002. The Company did not repurchase any of its shares in the first nine months of 2002 compared to $63 million of purchases in the same period of 2001. At June 30, 2002 the Company had approximately $104 million remaining on its current $250 million stock repurchase program.

Future significant uses of cash are expected to include capital expenditures, dividends to shareowners, acquisitions, repurchases of common stock in connection with the Company’s stock repurchase program and may include contributions to the qualified pension plan trust. In addition, the Company’s $150 million of 6.8% notes mature in April 2003. It is expected that each of these future uses of cash will be funded by cash generated by operating activities and commercial paper borrowings, or a new issue of debt or other securities.

The Company elects to utilize commercial paper markets as its principal source of short-term financing. As of June 30, 2002, the Company had an outstanding commercial paper balance of $45 million. The weighted average interest rate on those borrowings was 2.15 percent. During the quarter ended June 30, 2002, the Company had average borrowings of $113 million under its commercial paper program. During the nine months ended June 30, 2002, the Company had average borrowings of $81 million under its commercial paper program.

As of June 30, 2002, the Company had $1 billion of unsecured committed credit facilities available to support its commercial paper borrowings. These credit facilities expire December 5, 2002. Prior to that date, the Company expects to enter into similar types of facilities with a group of banks in an amount deemed sufficient to support its operations. Outstanding commercial paper balances reduce the amount of available borrowings under the unsecured committed credit facilities.

The Company’s current commercial paper credit ratings are as follows: Moody’s (P-2), Standard & Poor’s (A-1) and Fitch (F-1). Should the Company’s access to the commercial paper market be adversely affected due to a change in market conditions or otherwise, the Company would expect to rely on a combination of available cash and the unsecured committed credit facilities to provide short-term funding. In such event, the cost of borrowings under the unsecured committed credit facilities could be higher than the cost of commercial paper borrowings.

ENVIRONMENTAL

Information with respect to the effect on the Company and its manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained on pages 41 and 42 in Note 18 of the Notes to Consolidated Financial Statements in Item 8, Consolidated Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K for the fiscal year ended September 30, 2001. Management believes that at June 30, 2002, there has been no material change to this information.

STOCK OPTION ACCOUNTING

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Stock options are granted at prices equal to the fair market value of the Company’s common stock on the grant dates, therefore no compensation cost is recognized in connection with stock options granted to employees.

If the Company were to account for its stock-based plans using the fair value method provided by SFAS 123, Accounting for Stock Based Compensation effective October 1, 2002, the expected pre-tax compensation cost recognized would be approximately $4 million ($3 million after tax, or 1 cent per diluted share). This amount represents the effect for options expected to be granted during 2003 and assuming options are granted in future periods at similar levels and with similar terms as options granted in 2002. The effect would likely be greater in 2004, 2005 and future periods as additional grants are made since the expense is recognized over the vesting period, which is typically three years. This estimate is based upon the use of the Black-Scholes pricing model using assumptions considering current conditions for the exercise price, fair value of common stock on date of grant, risk-free interest rate, expected dividend yield, expected volatility and expected life for the options. Actual results could differ materially from those set forth above if assumptions in future periods vary from those currently applied.

21

Table of Contents

ROCKWELL AUTOMATION, INC.

STOCK OPTION ACCOUNTING (CONTINUED)

Information with respect to the pro forma effects of using the fair value method provided by SFAS 123 for fiscal years 1999, 2000 and 2001 is included on page 34 in Note 13 of the Notes to Consolidated Financial Statements in Item 8, Consolidated Financial Statements and Supplementary Data, of the Company’s Annual Report on Form 10-K (the Form 10-K) for the fiscal year ended September 30, 2001. The information contained in the Form 10-K includes stock options granted to employees of the Company’s former Rockwell Collins business which were converted into options to purchase shares of Rockwell Collins, Inc. common stock following the Spinoff.