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
For the Quarterly Period Ended March 31, 1997
Commission file number 1-12383
Rockwell International Corporation
(Exact name of registrant as specified in its charter)
Delaware 25-1797617
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2201 Seal Beach Boulevard, Seal Beach, California 90740-8250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (412) 565-4090
(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 X No
213,072,478 shares of registrant's Common Stock, $1.00 par value, were
outstanding on April 30, 1997.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
<TABLE>
<CAPTION>
Page
No.
<S> <C>
Condensed Consolidated Balance Sheet--
March 31, 1997 and September 30, 1996.......... 2
Statement of Consolidated Income--Three Months
and Six Months Ended March 31, 1997 and 1996.. 3
Statement of Consolidated Cash Flows--
Six Months Ended March 31, 1997 and 1996...... 4
Notes to Financial Statements.................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................. 9
Other Financial Information.................... 13
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings.............................. 14
Item 4. Submission of Matters to a Vote of Security
Holders........................................ 15
Item 5. Other Information.............................. 15
Item 6. Exhibits and Reports on Form 8-K............... 16
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
</TABLE>
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
ASSETS (In millions)
<S> <C> <C>
Current assets:
Cash........................................... $ 693 $ 695
Receivables (less allowance for doubtful
accounts: March 31, 1997, $88;
September 30, 1996, $83)..................... 1,165 1,176
Inventories.................................... 1,499 1,488
Deferred income taxes.......................... 231 211
Other current assets........................... 325 290
Net assets of Automotive....................... 592 567
Net assets of Graphic Systems.................. - 560
Total current assets................... 4,505 4,987
Net property...................................... 2,033 2,001
Intangible assets................................. 1,789 1,759
Other assets...................................... 216 214
TOTAL.................... $ 8,543 $ 8,961
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt................................ $ 246 $ 324
Accounts payable............................... 685 802
Accrued compensation and benefits.............. 368 390
Accrued income taxes........................... 142 151
Other current liabilities...................... 596 538
Net liabilities of A&D Business................ - 1,309
Total current liabilities.............. 2,037 3,514
Long-term debt.................................... 154 156
Accrued retirement benefits....................... 762 753
Other liabilities................................. 288 282
Total liabilities............. 3,241 4,705
Shareowners' equity:
Common Stock (shares issued: March 31, 1997,
216.4; September 30, 1996, 209.5)........... 216 210
Class A Common Stock (shares issued:
September 30, 1996, 27.9 million)........... - 28
Additional paid-in capital..................... 866 199
Retained earnings.............................. 4,504 4,466
Currency translation adjustments............... (142) (103)
Common Stock in treasury, at cost (shares held:
March 31, 1997, 2.1 million;
September 30, 1996, 18.9 million)........... (142) (544)
Total shareowners' equity..... 5,302 4,256
TOTAL.................... $ 8,543 $ 8,961
</TABLE>
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
(In millions)
<S> <C> <C> <C> <C>
Revenues:
Sales........................... $ 1,899 $ 1,794 $ 3,752 $ 3,424
Other income.................... 20 19 38 38
Total revenues................ 1,919 1,813 3,790 3,462
Costs and expenses:
Cost of sales................... 1,325 1,274 2,610 2,400
Selling, general, and
administrative................ 339 334 675 638
Interest........................ 6 7 10 12
Total costs and expenses...... 1,670 1,615 3,295 3,050
Income from continuing operations
before income taxes............. 249 198 495 412
Provision for income taxes........ 94 77 186 160
INCOME FROM CONTINUING
OPERATIONS...................... 155 121 309 252
Income from discontinued
operations...................... 34 93 59 154
Net income ....................... $ 189 $ 214 $ 368 $ 406
(In dollars)
Earnings per share:
CONTINUING OPERATIONS.......... $ .72 $ .55 $ 1.42 $ 1.16
Discontinued operations........ .15 .43 .27 .71
Net income................... $ .87 $ .98 $ 1.69 $ 1.87
Cash dividends per common share... $ .29 $ .29 $ .58 $ .58
(In millions)
Average outstanding shares........ 216.2 217.3 217.4 217.2
</TABLE>
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
March 31
1997 1996
(In millions)
<S> <C> <C>
CONTINUING OPERATIONS:
Operating Activities
Income from continuing operations.................... $ 309 $ 252
Adjustments to income from continuing operations
to arrive at cash provided by operating activities:
Depreciation..................................... 178 135
Amortization of intangible assets................ 45 47
Deferred income taxes............................ (25) 50
Pension expense, net of contributions............ 26 28
Changes in assets and liabilities, excluding
effects of acquisitions, divestitures, and
foreign currency adjustments:
Receivables.................................. (25) (88)
Inventories.................................. (27) (96)
Accounts payable............................. (93) (16)
Accrued income taxes......................... (26) (33)
Other assets and liabilities................. 12 (65)
Cash Provided By Operating Activities..... 374 214
Investing Activities
Property additions................................... (257) (279)
Acquisition of businesses (net of cash acquired)..... (23) (2)
Proceeds from disposition of property and businesses. 565 14
Cash Provided By (Used For)
Investing Activities.................... 285 (267)
Financing Activities
(Decrease) increase in short-term borrowings......... (61) 35
Payments of long-term debt........................... (14) (15)
Net (decrease) increase in debt...................... (75) 20
Purchase of treasury stock........................... (342) (40)
Dividends............................................ (126) (126)
Reissuance of common stock........................... 33 31
Cash Used For Financing Activities........ (510) (115)
CASH PROVIDED BY (USED FOR) CONTINUING OPERATIONS.... 149 (168)
Discontinued Operations:
Operating Activities............................. (45) 9
Investing Activities............................. (67) (46)
Financing Activities............................. (39) 133
Cash (Used for) Provided By
Discontinued Operations...................... (151) 96
DECREASE IN CASH..................................... (2) (72)
CASH AT BEGINNING OF PERIOD.......................... 695 675
CASH AT END OF PERIOD................................ $ 693 $ 603
</TABLE>
Income tax payments were $264 million and $277 million in the six months ended
March 31, 1997 and 1996, respectively.
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of the company the unaudited financial statements contain
all adjustments, consisting solely of adjustments of a normal recurring
nature, necessary to present fairly the financial position, results of
operations, and cash flows for the periods presented. These statements
should be read in conjunction with the company's Annual Report on
Form 10-K for the fiscal year ended September 30, 1996. The results of
operations for the three- and six-month periods ended March 31, 1997 are
not necessarily indicative of the results for the full year.
It is the company's practice at the end of each interim reporting period
to make an estimate of the effective tax rate expected to be applicable
for the full fiscal year. The rate so determined is used in providing
for income taxes on a year-to-date basis.
2. Discontinued operations include the Automotive business (Automotive),
the Aerospace and Defense businesses (A&D Business) and the Graphic
Systems business (Graphic Systems).
In March 1997, the company announced its intention to spin-off
Automotive into a new, separately traded, publicly held company. The
spin-off is subject to several conditions including receipt of a ruling
by the U.S. Internal Revenue Service that the transaction will qualify
as a tax-free distribution. The shares of the new Automotive company
will be distributed to Rockwell shareowners with each shareowner
receiving one share of the new Automotive company for every three shares
of Rockwell owned. The transaction is expected to be completed by the
end of the company's 1997 fiscal year.
On December 6, 1996, the company completed the merger of its
A&D Business with The Boeing Company (Boeing) in a tax-free transaction
valued at approximately $3.2 billion, including the assumption by Boeing
of approximately $2.3 billion of liabilities, principally debt. Boeing
issued approximately $860 million of its stock in exchange for the
company's shareowners' interest in the A&D Business.
Immediately prior to the merger, the company transferred its Automation,
Avionics & Communications, Semiconductor Systems, and Automotive
businesses to a new company (New Rockwell), which has retained the
Rockwell name. On the effective date of the transaction, shares of
New Rockwell were distributed to the company's shareowners on a
one-for-one basis, all shares of Common Stock held in treasury were
canceled, and the net liabilities of the A&D Business of approximately
$1.1 billion were recorded as an increase to shareowners' equity.
In October 1996, the company completed the sale of Graphic Systems to
an affiliate of Stonington Partners, Inc. for approximately $600 million.
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the results of discontinued operations
for the three- and six-month periods ended March 31, 1997 and 1996 (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Revenues:
Automotive.................. $ 827 $ 854 $1,594 $1,619
A&D Business................ - 797 535 1,477
Graphic Systems............. - 237 - 352
Total..................... 827 1,888 2,129 3,448
Income before income taxes:
Automotive.................. 56 64 100 97
A&D Business................ - 90 - (a) 159
Graphic Systems............. - 6 - 5
Total..................... 56 160 100 261
Net Income:
Automotive.................. 34 39 59 60
A&D Business................ - 52 - (a) 93
Graphic Systems............. - 2 - 1
Total..................... $ 34 $ 93 $ 59 $ 154
</TABLE>
(a) The earnings of the A&D Business for the first two months of 1997
were entirely offset by expenses relating to the transaction.
3. Inventories are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
<S> <C> <C>
Finished goods............................. $ 386 $ 377
Work in process............................ 723 735
Raw materials, parts, and supplies......... 399 379
Total.................................... 1,508 1,491
Less allowance to adjust the carrying value
of certain inventories to a last-in,
first-out (LIFO) basis................... (9) (3)
Inventories.............................. $ 1,499 $ 1,488
</TABLE>
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Intangible assets are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
<S> <C> <C>
Goodwill.................................. $ 1,295 $ 1,244
Trademarks, patents, product technology,
and other intangibles................... 494 515
Intangible assets....................... $ 1,789 $ 1,759
</TABLE>
5. Short-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
<S> <C> <C>
Commercial paper......................... $ 190 $ 210
Short-term foreign bank borrowings....... 54 100
Current portion of long-term debt........ 2 14
Short-term debt......................... $ 246 $ 324
</TABLE>
6. Other current liabilities are summarized as follows (in millions):
March 31 September 30
1997 1996
Accrued product warranties................. $ 110 $ 110
Contract reserves and advance payments..... 131 130
Accrued taxes other than income taxes...... 48 49
Other...................................... 307 249
Other current liabilities................ $ 596 $ 538
7. Long-term debt consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
<S> <C> <C>
6.8% notes, payable in 2003............... $ 140 $ 139
Other obligations, principally foreign.... 16 31
Total................................... 156 170
Less current portion...................... 2 14
Long-term debt.......................... $ 154 $ 156
</TABLE>
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. The company's financial instruments include cash, short- and long-term
debt, and foreign currency forward exchange contracts. At March 31,
1997, the carrying values of the company's financial instruments
approximated their fair values based on current market prices and rates.
It is the policy of the company not to enter into derivative financial
instruments for speculative purposes. The company does enter into
foreign currency forward exchange contracts to protect itself from
adverse currency rate fluctuations on foreign currency commitments
entered into in the ordinary course of business. These commitments are
generally for terms of less than one year. The foreign currency forward
exchange contracts are executed with creditworthy banks and are
denominated in currencies of major industrial countries. The notional
amount of outstanding foreign currency forward exchange contracts
aggregated $506 million at March 31, 1997 and $919 million at
September 30, 1996. The contracts outstanding at March 31, 1997 and
September 30, 1996 included contracts relating to the company's
discontinued operations. The company does not anticipate any material
adverse effect on its results of operations or financial position
relating to these foreign currency forward exchange contracts.
9. Accrued retirement benefits consisted of the following (in millions):
<TABLE>
<CAPTION>
March 31 September 30
1997 1996
<S> <C> <C>
Accrued retirement medical costs......... $ 682 $ 684
Accrued pension costs.................... 126 113
Total.................................. 808 797
Amount classified as current liability... 46 44
Accrued retirement benefits............ $ 762 $ 753
</TABLE>
10. Claims have been asserted against the company for utilizing the
intellectual property rights of others in certain of the company's
products. The resolution of these matters may result in the negotiation
of a license agreement, a settlement or the legal resolution of such
claims. The company accrues the estimated cost of disposition of these
matters. Management believes that the resolution of these matters will
not have a material adverse effect on the company's financial
statements.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the company relating to the conduct of
its business, including those pertaining to product liability, safety
and health, environmental, employment, and government contract
matters. The company has agreed to indemnify Boeing and the A&D
Business for certain government contract and environmental matters
related to operations of the A&D Business for periods prior to the
merger. Although the outcome of litigation cannot be predicted with
certainty and some lawsuits, claims, or proceedings may be disposed of
unfavorably to the company, management believes the disposition of
matters which are pending or asserted will not have a material adverse
effect on the company's financial statements.
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
1997 Second Quarter Compared to 1996 Second Quarter
The contributions to sales and earnings by business segment of the company for
the second quarter of fiscal 1997 and 1996 are presented below (in millions).
<TABLE>
<CAPTION>
Three Months Ended
March 31
1997 1996
<S> <C> <C>
Sales
Automation $ 1,114 $ 1,011
Avionics & Communications 416 350
Semiconductor Systems 369 433
Total sales $ 1,899 $ 1,794
Operating Earnings
Automation $ 149 $ 123
Avionics & Communications 57 25
Semiconductor Systems 71 82
Operating earnings 277 230
General corporate - net (22) (25)
Interest expense (6) (7)
Provision for income taxes (94) (77)
INCOME FROM CONTINUING OPERATIONS 155 121
Income from discontinued operations:
Automotive 34 39
A&D and Graphic Systems businesses - 54
Total 34 93
Net Income $ 189 $ 214
</TABLE>
Sales for 1997's second quarter were six percent higher than 1996's second
quarter. Both Automation and Avionics & Communications achieved double digit
sales growth which was partially offset by lower sales in Semiconductor
Systems due to the product transition to the new K56flex modem chipsets. For
the quarter, international sales accounted for 36 percent of total sales, the
same as last year's second quarter.
Income from continuing operations totaled $155 million for 1997's second
quarter, up 28 percent from $121 million in the comparable quarter last
year. Earnings per share from continuing operations for 1997's second quarter
was 72 cents, an increase of 31 percent over 1996's comparable second quarter
performance of 55 cents per share. The higher percentage increase in earnings
per share resulted from the company's stock repurchase program.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Automation:
Automation earnings increased 21 percent over last year's second quarter as a
result of a 10 percent sales growth, principally in North America and Asia,
combined with continued productivity improvements and product cost
reductions. Automation's second quarter earnings as a percent of sales were
13 percent compared to 12 percent last year.
Avionics & Communications:
Avionics & Communications earnings were more than double 1996's second quarter
results primarily due to improved commercial air transport markets and last
year's $11 million charge related to the Fokker N.V. bankruptcy. Avionics &
Communications earnings as a percent of sales rose to 14 percent from
7 percent in last year's second quarter.
Semiconductor Systems:
Second quarter Semiconductor Systems earnings were 13 percent below last
year's second quarter due primarily to the transition to the new K56flex modem
chipsets. The 19 percent return on sales matched last year's second quarter
as investments to implement more cost-effective manufacturing processes have
reduced Semiconductor Systems' cost to produce wafers as compared to the
higher proportion of more expensive external foundry wafers required a year
ago.
Discontinued Operations:
For the 1997 second quarter, Automotive's sales totaled $822 million, slightly
below 1996's second quarter. Automotive's income, after tax, was $34 million
for the 1997 second quarter compared to $39 million in 1996's second quarter
which included an $8 million after-tax gain on the sale of a plant.
Including the discontinued Automotive business, net income for the
second quarter of 1997 totaled $189 million, or $.87 per share. Comparable
income for the same period in 1996 was $160 million, or $.74 per share. Last
year's net income including the earnings of the divested A&D and Graphic
Systems businesses, as well as the discontinued Automotive business, was
$214 million, or $.98 per share.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Six Months Ended March 31, 1997 Compared to Six Months Ended March 31, 1996
The contributions to sales and earnings by business segment of the company for
the six months ended March 31, 1997 and 1996 are presented below (in
millions).
<TABLE>
<CAPTION>
Six Months Ended
March 31
1997 1996
<S> <C> <C>
Sales
Automation $ 2,175 $ 1,991
Avionics & Communications 790 689
Semiconductor Systems 787 744
Total sales $ 3,752 $ 3,424
Operating Earnings
Automation $ 280 $ 234
Avionics & Communications 116 66
Semiconductor Systems 152 162
Operating earnings 548 462
General corporate - net (43) (38)
Interest expense (10) (12)
Provision for income taxes (186) (160)
INCOME FROM CONTINUING OPERATIONS 309 252
Income from discontinued operations:
Automotive 59 60
A&D and Graphic Systems businesses - 94
Total 59 154
Net Income $ 368 $ 406
</TABLE>
Sales for the first six months of 1997 increased 10 percent over the same
period a year ago. The results were led by Avionics & Communications with a
15 percent increase in sales over last year due to improved commercial air
transport markets. Additionally, Automation recorded a nine percent increase
in sales, principally in North America and Asia.
Income from continuing operations for the first six months of 1997 totaled
$309 million, up 23 percent over last year's income of $252 million. On a per
share basis, earnings for the first six months of 1997 of $1.42 per share
increased 22 percent over last year's per share earnings of $1.16.
Automation:
Automation earnings for the first six months of 1997 increased 20 percent over
the same period a year ago due to increased sales volume of higher margin
products along with productivity improvements and product cost
reductions. Earnings were lowered by significant investments in international
marketing and new product launches.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Avionics & Communications:
Avionics & Communications earnings for the first six months of 1997 increased
75 percent over last year as a result of improved sales, improved cost
performance in defense avionics, and an $11 million charge related to the
Fokker N.V. bankruptcy recorded in 1996.
Semiconductor Systems:
Semiconductor Systems earnings decreased six percent for the first six months
of 1997 compared to the first six months of 1996 due to large investments in
new product development, particularly the new high-speed
56 kilobits-per-second (K56flex) modem chipsets and wireless communications
and internet access products.
Discontinued Operations:
For the first six months of 1997, Automotive's sales totaled $1,577, slightly
below 1996's comparable period. Automotive's income, after-tax, was
$59 million for the first six months of 1997 compared to $60 million in 1996's
first six months which included an $8 million after-tax gain on the sale of a
plant.
Including the discontinued Automotive business, net income for the first
six months of 1997 totaled $368 million, or $1.69 per share. Comparable
income for the same period in 1996 was $312 million, or $1.44 per share. Last
year's net income including the earnings of the divested A&D and Graphic
Systems businesses, as well as the discontinued Automotive business, was
$406 million, or $1.87 per share.
FINANCIAL CONDITION
Sources of cash for the first six months of 1997 include the proceeds from
the sale of the Graphic Systems business for approximately $600 million,
consisting of $553 million in cash and $47 million in preferred stock. These
proceeds are being used to reduce short-term debt, fund the company's working
capital needs and repurchase Common Stock.
The net assets of Automotive at March 31, 1997 and September 30, 1996 and its
net income for the three- and six-month periods ended March 31, 1997 and 1996
have been presented as discontinued operations. Prior to the spin-off, the
new Automotive company will make a special dividend payment of approximately
$450 million to the company.
Following the completion of the divestiture of the A&D Business, the company
initiated a $1 billion Common Stock repurchase program which is expected to be
substantially completed by the end of the fiscal year. Since the program was
announced, the company has purchased approximately 5.3 million shares of
common stock as of March 31, 1997 for approximately $341 million. Future
Common Stock repurchases are expected to be financed by the operating
activities of continuing operations, the Automotive special dividend noted
above, and commercial paper borrowings if necessary.
The company's Class A Common Stock was converted into Common Stock in
accordance with its terms on February 23, 1997.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION (CONTINUED)
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 under the caption
Environmental Issues in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations of the company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996. As discussed in
Item 1 of Part II of this Quarterly Report, a judgment was entered into with
respect to the company's remediation efforts at its former Russellville,
Kentucky plant. Management currently believes that the cost of these
remediation efforts will not have a material adverse effect on the company's
financial position or results of operations.
Other Financial Information
(a) The composition of the company's sales by customer is as follows (in
millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
<S> <C> <C> <C> <C>
U.S. Commercial $1,063 $1,029 $2,122 $1,992
International 687 654 1,365 1,204
U.S. Government 149 111 265 228
Total $1,899 $1,794 $3,752 $3,424
</TABLE>
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 27, 1995, Celeritas Technologies, Ltd., filed a suit
against the company in the U.S. District Court, Central District of
California, for patent infringement, misappropriation of trade
secrets and breach of contract relating to cellular telephone data
transmission technology utilized in certain modem products produced
by Rockwell Semiconductor Systems in 1995 and 1996. As previously
reported in the company's Form 10-Q for the quarter ended
December 31, 1996, the court entered judgment against the company on
January 27, 1997. On May 5, 1997, the court granted in part and
denied in part post-trial motions by the company for judgment
notwithstanding the verdict or, alternatively, a new trial. The
court vacated its prior damage award of $115 million and awarded
the company a new trial on damages unless the plaintiff accepts a reduction
in the award of damages that would result in a maximum judgment against the
company in this action of $57 million plus attorneys fees. The
plaintiff has not made its election. The company believes that the
original and revised verdicts are in error and will continue to
pursue appellate review.
On June 24, 1996, judgment was entered against the company in a civil
action in the Circuit Court of Logan County, Kentucky on a jury
verdict awarding $8 million in compensatory and $210 million in
punitive damages for property damage. The action had been brought in
1993 by owners of floodplain real property near Russellville,
Kentucky allegedly damaged by PCBs discharged from a plant owned and
operated by the Company's Measurement & Flow Control Division prior
to its divestiture in March 1989. On December 26, 1996, the court
denied the company's post-trial motions for judgment notwithstanding
the verdict or in the alternative for a new trial. The company
believes that the verdict is unsupported by the evidence and on
January 22, 1997, filed a notice of appeal.
On March 24, 1997, the Circuit Court of Franklin County, Kentucky in
Commonwealth of Kentucky, Natural Resources and Environmental
Protection Cabinet vs. Rockwell, an action filed in 1986 seeking
remediation of PCB contamination resulting from unpermitted
discharges of PCBs from the company's former Russellville, Kentucky
plant, entered judgment establishing PCB cleanup levels for the
former plant site and certain offsite property and ordering
additional characterization of possible contamination in the
Mud River and its floodplain. The company is proceeding with
additional remediation and characterization efforts consistent with
the Court's ruling. The Court deferred any decision on the
imposition of fines or penalties pending implementation of an
appropriate remediation program.
<PAGE>
PART II. OTHER INFORMATION (Continued)
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of shareowners of the registrant was
held February 5, 1997.
(c) At the annual meeting, the shareowners:
(i) voted to elect four directors of the company. Each
nominee for director was elected by a vote of the
shareowners as follows:
Affirmative Votes
Votes Withheld
Richard M. Bressler 356,109,541 4,913,727
Judith L. Estrin 356,011,824 5,011,444
James Clayburn La Force, Jr. 355,758,122 5,265,146
John D. Nichols 356,150,376 4,872,892
(ii) voted upon a proposal to approve the selection by the
Board of Directors of the firm of Deloitte & Touche LLP as
auditors of the company. The proposal was approved by a
vote of the shareowners as follows:
Affirmative votes 355,744,742
Negative votes 2,617,893
Abstentions 2,660,633
Item 5. Other Information
Government Contracts
For information on the company's United States government contracting
business, certain risks of that business and claims related thereto,
see the information set forth under the caption "Government
Contracts" in Item 1, Business, on pages 4-5 of the company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996,
which is incorporated herein by reference.
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements relating to
future results of the company (including certain projections and
business trends) that are "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those projected as a result of certain
risks and uncertainties, including but not limited to changes in
political and economic conditions; domestic and foreign government
spending; budgetary and trade policies; demand for and market
acceptance of new and existing products; successful development of
advanced technologies; and competitive product and pricing pressures,
as well as other risks and uncertainties, including but not limited
to those detailed from time to time in the company's Securities and
Exchange Commission filings.
PART II. OTHER INFORMATION (Continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed
Charges for the six months ended March 31,
1997.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended March 31, 1997.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ROCKWELL INTERNATIONAL CORPORATION
(Registrant)
Date May 15, 1997 By L. J. Komatz
L. J. Komatz
Vice President and Controller
(Principal Accounting Officer)
Date May 15, 1997 By W. J. Calise, Jr.
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
- - -17-
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX OF EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997
<TABLE>
Page
<S> <C> <C>
Exhibit 11 - Computation of Earnings Per Share 19
Exhibit 12 - Computation of Ratio of Earnings to Fixed 20
Charges for the Six Months Ended March 31,
1997.
</TABLE>
- - -18-
<PAGE>
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
1997 1996 1997 1996
(In millions, except per share amounts)
<S> <C> <C> <C> <C>
Primary earnings per share:
Income from continuing operations.. $155.1 $120.5 $308.8 $251.4
Deduct dividend requirements
on preferred stock............... - - - 0.1
Total primary earnings from
continuing operations............ $155.1 $120.5 $308.8 $251.3
Average number of common shares
outstanding during the period.... 216.2 217.3 217.4 217.2
Primary earnings per share from
continuing operations............ $ .72 $ .55 $ 1.42 $ 1.16
Primary earnings per share from
discontinued operations.......... .15 .43 .27 .71
Net primary earnings per share .... $ .87 $ .98 $ 1.69 $ 1.87
Fully diluted earnings per share:
Income from continuing operations.. $155.1 $120.5 $308.8 $251.4
Average number of common shares
outstanding during the period
assuming full dilution:
Common stock.................. 216.2 217.3 217.4 217.2
Assumed issuance of stock under
award plans and conversion of
preferred stock............. 3.4 4.1 3.3 3.8
Total fully diluted shares......... 219.6 221.4 220.7 221.0
Fully diluted earnings per share
from continuing operations....... $ .70 $ .54 $ 1.40 $ 1.14
Fully diluted earnings per share
from discontinued operations..... .15 .43 .26 .70
Net fully diluted earnings
per share........................ $ .85 $ .97 $ 1.66 $ 1.84
<PAGE>
</TABLE>
Exhibit 12
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS ENDED MARCH 31, 1997
(In millions, except ratio)
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income from continuing operations before income taxes....... $ 495
Adjustments:
Undistributed income of affiliates....................... (4)
Minority interest in loss of subsidiaries................ 7
498
Add fixed charges included in earnings:
Interest expense......................................... 10
Interest element of rentals.............................. 28
38
Total earnings available for fixed charges.................. $ 536
FIXED CHARGES:
Fixed charges included in earnings.......................... $ 38
Capitalized interest........................................ 4
Total fixed charges...................................... $ 42
RATIO OF EARNINGS TO FIXED CHARGES (1)......................... 13
(1) In computing the ratio of earnings to fixed charges, earnings are
defined as income from continuing operations before income taxes
adjusted for minority interest in income or loss of subsidiaries,
undistributed earnings of affiliates, and fixed charges exclusive
of capitalized interest. Fixed charges consist of interest on
borrowings and that portion of rentals deemed representative of
the interest factor.
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 1997 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE
SIX MONTHS ENDED MARCH 31, 1997 AND NOTES TO FINANCIAL STATEMENTSAND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> MAR-31-1997
<CASH> 693
<SECURITIES> 0
<RECEIVABLES> 1165
<ALLOWANCES> 88
<INVENTORY> 1499
<CURRENT-ASSETS> 4505
<PP&E> 2033
<DEPRECIATION> 0
<TOTAL-ASSETS> 8543
<CURRENT-LIABILITIES> 2037
<BONDS> 154
0
0
<COMMON> 216
<OTHER-SE> 5086
<TOTAL-LIABILITY-AND-EQUITY> 8543
<SALES> 3752
<TOTAL-REVENUES> 3790
<CGS> 2610
<TOTAL-COSTS> 3295
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10
<INCOME-PRETAX> 495
<INCOME-TAX> 186
<INCOME-CONTINUING> 309
<DISCONTINUED> 59
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 368
<EPS-PRIMARY> 1.69
<EPS-DILUTED> 1.66
</TABLE>
