<PAGE> 1
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, 2000
-----------------------------------
Commission file number 1-12383
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Rockwell International Corporation
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 25-1797617
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(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
777 East Wisconsin Avenue, Suite 1400, Milwaukee, Wisconsin 53202
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (414) 212-5299
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(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
---- ----
188,023,107 shares of registrant's Common Stock, $1.00 par value, were
outstanding on April 30, 2000.
<PAGE> 2
ROCKWELL INTERNATIONAL CORPORATION
INDEX
Page
No.
----
PART I. FINANCIAL INFORMATION:
Item 1. Consolidated Financial Statements:
Condensed Consolidated Balance Sheet--
March 31, 2000 and September 30, 1999.......... 2
Consolidated Statement of Operations--
Three Months and Six Months Ended
March 31, 2000 and 1999........................ 3
Consolidated Statement of Cash Flows--
Six Months Ended March 31, 2000 and 1999....... 4
Notes to Consolidated Financial Statements..... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................. 8
Item 3. Quantitative and Qualitative Disclosures
About Market Risk.............................. 10
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.............................. 11
Item 4. Submission of Matters to a Vote of
Security Holders............................... 11
Item 5. Other Information.............................. 11
Item 6. Exhibits and Reports on Form 8-K............... 12
Signatures......................................................... 13
<PAGE> 3
PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
March 31 September 30
2000 1999
-------- --------
<S> <C> <C>
ASSETS
------
Current assets:
Cash................................................... $ 165 $ 356
Receivables, net....................................... 1,221 1,294
Inventories, net....................................... 1,380 1,339
Deferred income taxes.................................. 331 364
Other current assets................................... 158 229
-------- -------
Total current assets........................... 3,255 3,582
Property (net of accumulated depreciation:
March 31, 2000, $1,578; September 30, 1999, $1,508).... 1,558 1,581
Intangible assets (net of accumulated amortization:
March 31, 2000, $551; September 30, 1999, $514)........ 1,398 1,390
Other assets.............................................. 154 151
-------- -------
TOTAL............................ $ 6,365 $ 6,704
======== =======
LIABILITIES AND SHAREOWNERS' EQUITY
------------------------------------
Current liabilities:
Short-term debt........................................ $ 27 $ 189
Accounts payable....................................... 724 843
Compensation and benefits.............................. 378 469
Income taxes payable................................... 135 91
Other current liabilities.............................. 489 516
-------- -------
Total current liabilities...................... 1,753 2,108
Long-term debt............................................ 910 911
Retirement benefits....................................... 640 653
Other liabilities......................................... 308 395
Shareowners' equity:
Common Stock (shares issued: 216.4).................... 216 216
Additional paid-in capital............................. 964 960
Retained earnings...................................... 3,244 3,034
Accumulated other comprehensive loss................... (165) (153)
Common Stock in treasury, at cost (shares held:
March 31, 2000, 27.5; September 30, 1999, 25.5)....... (1,505) (1,420)
-------- -------
Total shareowners' equity............. 2,754 2,637
-------- -------
TOTAL............................ $ 6,365 $ 6,704
======== =======
</TABLE>
See Notes to Consolidated Financial Statements.
-2-
<PAGE> 4
ROCKWELL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
(in millions, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
-------------------- --------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Revenues:
Sales ......................................... $ 1,784 $ 1,701 $ 3,444 $ 3,309
Other income, net ............................. 27 25 40 71
------- ------- ------- -------
Total revenues .............................. 1,811 1,726 3,484 3,380
------- ------- ------- -------
Costs and expenses:
Cost of sales ................................. 1,227 1,183 2,350 2,318
Selling, general, and administrative .......... 324 298 621 589
Interest ...................................... 17 24 37 43
------- ------- ------- -------
Total costs and expenses .................... 1,568 1,505 3,008 2,950
------- ------- ------- -------
Income from continuing operations before
income taxes .................................. 243 221 476 430
Income tax provision ............................ (79) (78) (155) (153)
------- ------- ------- -------
Income from continuing operations ............... 164 143 321 277
Loss from discontinued operations ............... -- -- -- (20)
------- ------- ------- -------
Net income ...................................... $ 164 $ 143 $ 321 $ 257
======= ======= ======= =======
Basic earnings per share:
Continuing operations ......................... $ 0.87 $ 0.75 $ 1.69 $ 1.46
Discontinued operations ....................... -- -- -- (0.11)
------- ------- ------- -------
Net income .................................... $ 0.87 $ 0.75 $ 1.69 $ 1.35
======= ======= ======= =======
Diluted earnings per share:
Continuing operations ......................... $ 0.85 $ 0.74 $ 1.67 $ 1.44
Discontinued operations ....................... -- -- -- (0.11)
------- ------- ------- -------
Net income .................................... $ 0.85 $ 0.74 $ 1.67 $ 1.33
======= ======= ======= =======
Cash dividends per share (see note 1) ........... $ 0.255 $ 0.51 $ 0.51 $ 0.765
======= ======= ======= =======
Weighted average outstanding shares:
Basic ........................................ 189.5 190.0 189.8 189.9
======= ======= ======= =======
Diluted (includes effect of stock options).... 192.0 193.2 192.4 192.8
======= ======= ======= =======
</TABLE>
See Notes to Consolidated Financial Statements.
-3-
<PAGE> 5
ROCKWELL INTERNATIONAL CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
(in millions)
<TABLE>
<CAPTION>
Six Months Ended
March 31
----------------
2000 1999
------ ------
<S> <C> <C>
Continuing Operations:
Operating Activities:
Income from continuing operations............................. $ 321 $ 277
Adjustments to arrive at cash provided by
operating activities:
Depreciation.............................................. 133 119
Amortization of intangible assets......................... 44 32
Gain on dispositions of property and businesses........... (18) (31)
Changes in assets and liabilities, excluding
effects of acquisitions and divestitures:
Receivables........................................... 78 78
Inventories........................................... (39) (86)
Accounts payable...................................... (122) (4)
Income taxes payable.................................. 82 116
Compensation and benefits............................. (90) (110)
Other assets and liabilities.......................... (80) (57)
------- ------
Cash Provided by Operating Activities............... 309 334
------- ------
Investing Activities:
Property additions............................................ (135) (144)
Acquisitions of businesses, net of cash acquired.............. (66) (156)
Proceeds from dispositions of property and businesses......... 58 98
------- ------
Cash Used for Investing Activities.................. (143) (202)
------- ------
Financing Activities:
Net (decrease) increase in debt............................... (163) 35
Purchases of treasury stock................................... (111) (58)
Cash dividends................................................ (97) (97)
Proceeds from the exercise of stock options................... 14 36
------- ------
Cash Used for Financing Activities.................. (357) (84)
------- ------
Cash (Used for) Provided by Continuing Operations............. (191) 48
------- ------
Cash Used for Discontinued Operations......................... - (47)
------- ------
(Decrease) Increase in Cash................................... (191) 1
Cash at Beginning of Period................................... 356 103
------- ------
Cash at End of Period......................................... $ 165 104
======= ======
</TABLE>
See Notes to Consolidated Financial Statements.
-4-
<PAGE> 6
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of management of Rockwell International Corporation (the
Company or Rockwell), the unaudited consolidated 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, 1999. The
results of operations for the three- and six-month periods ended March
31, 2000 are not necessarily indicative of the results for the full
year. Certain prior year amounts have been reclassified to conform with
the current presentation.
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.
In June 1998, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" (SFAS 133). SFAS 133 will require
the Company to record all derivatives on the balance sheet at fair
value. Derivatives that are not hedges will be adjusted to fair value
through earnings. For derivatives that are hedges, depending on the
nature of the hedge, changes in fair value will be either offset by
changes in the fair value of the hedged assets, liabilities or firm
commitments through earnings or recognized in other comprehensive income
until the hedged item is recognized in earnings. The ineffective portion
of a derivative's change in fair value will be immediately recognized in
earnings. In June 1999, the Financial Accounting Standards Board delayed
the effective date of SFAS 133 to fiscal year 2001, but early adoption
continues to be permitted. When adopted, the Company believes the effect
of this standard will not be material to its results of operations or
equity.
During the 2000 second quarter, the Company declared a dividend of
$0.255 per share payable March 6, 2000 to shareowners of record on
February 14, 2000. During the 1999 second quarter, the Company declared
a dividend of $0.255 per share payable March 8, 1999 and also declared
its third quarter dividend of $0.255 per share payable June 7, 1999.
2. Discontinued operations relate to the Company's former Semiconductor
Systems business (Semiconductor Systems) which was spun off on December
31, 1998 into an independent, separately traded, publicly-held company
by distributing all of the outstanding shares of Conexant Systems, Inc.
to the Company's shareowners. The revenues and net loss of Semiconductor
Systems for the three months ended December 31, 1998 were $289 million
and $20 million, respectively.
3. Inventories, net of reserves, are summarized as follows (in millions):
<TABLE>
<CAPTION>
March 31 September 30
2000 1999
-------- -------------
<S> <C> <C>
Finished goods ......................... $ 427 $ 415
Work in process ........................ 446 457
Raw materials, parts, and supplies ..... 487 446
------ ------
Total ................................ 1,360 1,318
Adjustment to the carrying value of
certain inventories to a LIFO basis .. 20 21
------ ------
Inventories, net ..................... $1,380 $1,339
====== ======
</TABLE>
-5-
<PAGE> 7
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
4. The reconciliation of net income to comprehensive income is as follows
(in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
------------------ -----------------
2000 1999 2000 1999
----- ----- ----- -----
<S> <C> <C> <C> <C>
Net income ....................... $ 164 $ 143 $ 321 $ 257
Other comprehensive loss:
Net foreign currency translation
adjustment ................... (6) (17) (12) (16)
----- ----- ----- -----
Comprehensive income ............. $ 158 $ 126 $ 309 $ 241
===== ===== ===== =====
</TABLE>
5. In March 2000, the Automation segment acquired Entek IRD International
Corporation (Entek), a leader in machinery condition monitoring
solutions. The acquisition has been accounted for as a purchase. Assets
acquired and liabilities assumed have been recorded at estimated fair
values determined by the Company's management based on information
currently available. The results of Entek have been included in the
consolidated statement of operations since the date of acquisition. Pro
forma financial information is not presented as the acquisition was not
material to the Company's results of operations or financial position.
6. In the third quarter of 1998, the Company recorded special charges of
$597 million in connection with asset impairments and the implementation
of a comprehensive restructuring program. These charges included $100
million for severance and other employee separation costs associated
with a worldwide workforce reduction of approximately 3,100 employees
and $84 million related to facility closures and consolidations and
exiting non-strategic businesses and product lines. These actions were
substantially complete at December 31, 1999.
Total cash expenditures in connection with these actions are expected to
approximate $149 million. The Company spent approximately $88 million
through March 31, 2000, of which $55 million related to severance and
other employee separation costs, and expects to spend an additional $27
million through March 2001. The remaining cash expenditures relate to
employee separation costs and lease obligations for vacant facilities.
Through March 31, 2000, the workforce has been reduced by approximately
2,700 employees.
Revenues and results of operations of businesses and product lines which
have been exited were not material for the three- or six-month periods
ended March 31, 2000.
7. Various 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, intellectual property,
safety and health, environmental and employment matters. Rockwell has
indemnified The Boeing Company for certain government contract and
environmental matters related to operations of its former aerospace and
defense business for periods prior to its divestiture in fiscal 1997.
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 consolidated financial statements.
-6-
<PAGE> 8
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
8. In February 2000, the Company entered into an interest rate swap
contract which effectively converted its $350 million aggregate
principal amount of 6.15% notes, payable in 2008, to floating rate debt
based on 90 day LIBOR. The effective rate the Company will pay through
July 17, 2000 is 4.97%. The Company entered into this contract to
achieve a more balanced mix of fixed and floating rate debt. The Company
accounts for interest rate swap contracts by accruing the underlying
payments and receipts as an adjustment to interest expense on the
underlying notes payable.
9. The sales and results of operations of the Company's reportable segments
are summarized as follows (in millions):
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
March 31 March 31
--------------------- ---------------------
2000 1999 2000 1999
------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales
Automation ...................... $ 1,112 $ 1,079 $ 2,155 $ 2,124
Avionics & Communications ....... 615 567 1,176 1,077
Other Businesses ................ 57 55 113 108
------- ------- ------- -------
Total ....................... $ 1,784 $ 1,701 $ 3,444 $ 3,309
======= ======= ======= =======
Segment operating earnings
Automation ...................... $ 161 $ 163 $ 324 $ 306
Avionics & Communications ....... 92 101 196 186
Other Businesses ................ 7 22 11 24
------- ------- ------- -------
Total ....................... 260 286 531 516
General corporate - net ........... 14 (41) (4) (79)
(Loss) gain on disposition of
businesses ...................... (14) -- (14) 36
Interest expense .................. (17) (24) (37) (43)
Provision for income taxes ........ (79) (78) (155) (153)
------- ------- ------- -------
Income from continuing operations . 164 143 321 277
Loss from discontinued operations . -- -- -- (20)
------- ------- ------- -------
Net income ........................ $ 164 $ 143 $ 321 $ 257
======= ======= ======= =======
</TABLE>
Effective January 1, 2000, gains and losses from the disposition of
businesses are excluded from segment operating earnings. Prior period
amounts have been reclassified to conform with the current presentation.
The loss on disposition of a business in 2000 relates to the sale of an
Automation business. The gain on disposition of a business in 1999
relates to the sale of an Avionics & Communications business.
-7-
<PAGE> 9
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
2000 Second Quarter Compared to 1999 Second Quarter
Sales in the 2000 second quarter of $1.8 billion were five percent higher than
the same period a year ago. Income from continuing operations for the 2000
second quarter was $164 million, or 85 cents per diluted share, compared to
income from continuing operations of $143 million, or 74 cents per diluted
share, for the second quarter of 1999. Earnings per diluted share were up 15
percent over the prior year primarily due to higher sales volume, continued
strong profitability at each of the core businesses and a lower effective income
tax rate.
Automation
Automation's sales of $1.1 billion increased three percent from last year's
second quarter primarily due to a 10 percent increase in sales at the software
and industrial services businesses and a more than five percent increase in
sales at the integrated platforms business. Second quarter operating earnings of
$161 million were about the same as last year's second quarter and include
approximately $8 million of costs associated with the launch of
SourceAlliance.com and other e-commerce initiatives. Automation's return on
sales was 14.5 percent compared to 15.1 percent for last year's second quarter.
Avionics & Communications
Avionics & Communications sales increased eight percent over the same period a
year ago to $615 million. Sales increases of approximately 25 percent at
business and regional systems and 15 percent at government systems more than
offset a 15 percent decline in sales at the air transport systems business.
Second quarter operating earnings were $92 million compared to $101 million for
the 1999 second quarter. Operating earnings in the 2000 second quarter include
$6 million of development costs associated with the new In Flight Network joint
venture and a charge of $8 million related to the termination of a government
contract. Avionics & Communications' return on sales was 16.3 percent in the
2000 second quarter (excluding the contract termination charge) compared to 17.8
percent for the same period a year ago.
Other Businesses
Sales at Rockwell Electronic Commerce and Rockwell Science Center were up four
percent to $57 million from $55 million a year ago. Operating earnings were $7
million in the 2000 second quarter compared to $22 million for the same period a
year ago. Operating earnings in 1999 include a $14 million gain resulting from
the resolution of an intellectual property matter. Return on sales for the
second quarter of 2000 was 12.3 percent compared to 14.5 percent for the 1999
second quarter (excluding the intellectual property matter).
General corporate - net in the second quarter of 2000 was lower than the same
period a year ago due to a gain of $32 million on the sale of real estate in
Colorado Springs, Colorado in the 2000 second quarter and charges associated
with relocation of the Company's corporate office in the 1999 second quarter.
The second quarter 2000 effective income tax rate of 32.5 percent was lower than
1999's second quarter rate of 35.3 percent. This improvement reflects the
benefits of the development and implementation of strategies to achieve
meaningful and sustainable tax rate reductions. These strategies include
utilization over the next few years of large foreign tax credit carryforwards,
lower state income tax rates, and lower taxes associated with our growing
international business due to the rationalization of our European distribution,
warehousing and customer support operations.
-8-
<PAGE> 10
ROCKWELL INTERNATIONAL CORPORATION
Six Months Ended March 31, 2000 Compared to Six Months Ended March 31, 1999
Overall, sales were four percent higher in 2000 compared to sales in the same
period a year ago. Income from continuing operations for the first six months of
2000 was $321 million, or $1.67 per diluted share, compared to $277 million, or
$1.44 per diluted share, for the first six months of 1999. Earnings per diluted
share were up 16 percent primarily due to higher sales volume, continued strong
performance at each of the core businesses and a lower effective income tax
rate.
Automation
Automation's sales increased $31 million primarily due to increases at the
software, industrial services and integrated platforms businesses. Automation's
operating earnings for the first six months of 2000 of $324 million were six
percent higher than for the same period last year. The benefits of manufacturing
process improvements, material cost reductions from the Company's Strategic
Sourcing Initiative and higher control systems volume more than offset
investments in new product development, SourceAlliance.com launch costs and the
earnings effect of lower motors volume. Automation's return on sales increased
to 15.0 percent from 14.4 percent a year ago.
Avionics & Communications
Avionics & Communications' sales increased $99 million due to strong increases
posted by the government systems, business and regional systems, and passenger
systems businesses which offset the decline at the air transport systems
business. Avionics & Communications' operating earnings were $196 million, a
five percent increase over operating earnings of $186 million for the first six
months of 1999. Avionics & Communications return on sales was 16.7 percent
compared to 17.3 percent a year ago.
Other Businesses
Sales at Rockwell Electronic Commerce and Rockwell Science Center were up five
percent to $113 million from $108 million a year ago. Operating earnings for
Other Businesses were $11 million for the first six months of 2000 compared to
$24 million for the same period a year ago. Operating earnings in 1999 included
a $14 million gain resulting from the resolution of an intellectual property
matter.
General corporate - net for the first six months of 2000 was lower than the same
period a year ago due to a gain of $32 million on the sale of real estate in
Colorado Springs, Colorado in the 2000 second quarter and charges associated
with relocation of the Company's corporate office in the 1999 second quarter.
The effective income tax rate for the first six months of 2000 of 32.6 percent
was lower than the 35.6 percent for the same period in 1999. This improvement
reflects the benefits of the development and implementation of strategies to
achieve meaningful and sustainable tax rate reductions. These strategies include
utilization over the next few years of large foreign tax credit carryforwards,
lower state income tax rates, and lower taxes associated with our growing
international business due to the rationalization of our European distribution,
warehousing and customer support operations.
Based upon the continued strong profitability at each of the core businesses
through the first six months of 2000, management believes that the Company is
well positioned to continue delivering earnings growth in fiscal 2000 in excess
of the long-term goal of low double digit annual growth.
-9-
<PAGE> 11
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION
The major uses of cash for the first six months of 2000 were $66 million for
acquisitions of businesses, $135 million for property additions, $97 million for
cash dividends paid to shareowners and $111 million for the repurchase of common
stock in connection with the Company's stock repurchase program. At March 31,
2000, the Company had approximately $131 million remaining on its current $250
million stock repurchase program.
Future significant uses of cash, which are expected to be funded by cash
generated by operating activities and commercial paper borrowings, are expected
to include property additions, dividends to shareowners, investments in the In
Flight Network joint venture and may include acquisitions and the repurchase of
common stock in connection with the Company's stock repurchase program.
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 38 and 39 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, 1999. Management believes that at March
31, 2000 there has been no material change to this information.
CAUTIONARY STATEMENT
This Quarterly Report may contain statements (including certain projections and
business trends) accompanied by such phrases as "believes", "estimates",
"expects", "could", "likely", "anticipates", and other similar expressions, 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
economic and political changes in international markets where the Company
competes, such as currency exchange rates, inflation rates, recession, foreign
ownership restrictions and other external factors over which the Company has no
control; domestic and foreign government spending, budgetary and trade policies;
demand for and market acceptance of new and existing products; successful
development of advanced technologies; competitive product and pricing pressures;
and the uncertainties of litigation, 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. These forward-looking statements are
made only as of the date hereof, and the Company undertakes no obligation to
update or revise the forward-looking statements, whether as a result of new
information, future events or otherwise.
Item 3. Quantitative And Qualitative Disclosures About Market Risk
Information with respect to the Company's exposure to interest rate risk and
foreign currency risk is contained in pages 16 and 17 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,
1999. Management believes that at March 31, 2000, except as discussed below,
there has been no material change to this information.
In February 2000, the Company entered into an interest rate swap contract which
effectively converted its $350 million aggregate principal amount of 6.15%
notes, payable in 2008, to floating rate debt based on 90 day LIBOR.
-10-
<PAGE> 12
ROCKWELL INTERNATIONAL CORPORATION
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
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 August 12,
1993 by owners of flood plain real property near Russellville, Kentucky
allegedly damaged by polychlorinated biphenyls (PCBs) discharged from a
plant owned and operated by the Company's Measurement & Flow Control
Division prior to its divestiture in March l989. On January 14, 2000,
the Kentucky Court of Appeals reversed the lower court's judgment and
directed entry of judgment in Rockwell's favor on all claims as a
matter of law. The plaintiffs have sought discretionary review of the
decision in the state supreme court.
Item 4. Submission of Matters to a Vote of Security Holders
(a) The regular annual meeting of shareowners of the Company was held
on February 2, 2000.
(b) At the annual meeting, the shareowners:
(i) voted to elect one director of the Company. John D. Nichols
was elected to a term expiring in 2003 by a vote of the
shareowners as follows:
Affirmative votes 161,778,628
Votes withheld 2,523,715
(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 162,495,554
Negative votes 789,256
Abstentions 1,017,533
(iii) voted on a proposal to approve the Company's 2000 Long-Term
Incentives Plan. The proposal was approved by a vote of the
shareowners as follows:
Affirmative votes 130,795,962
Negative votes 13,784,351
Abstentions 2,433,746
Broker non-votes 17,288,284
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 page 3 of the Company's Annual Report on Form 10-K
for the year ended September 30, 1999.
-11-
<PAGE> 13
ROCKWELL INTERNATIONAL CORPORATION
PART II. OTHER INFORMATION (continued)
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 10.1 - Directors Stock Plan of Rockwell International
Corporation, as amended February 2, 2000.
Exhibit 10.2 - Rockwell International Corporation 2000
Long-Term Incentives Plan, filed as Exhibit A
to the Proxy Statement for the Company's 2000
Annual Meeting, is hereby incorporated by
reference.
Exhibit 10.3 - Rockwell International Corporation Deferred
Compensation Plan, filed as Exhibit 4-d to
Registration Statement No. 333-34826, is hereby
incorporated by reference
Exhibit 12 - Computation of Ratio of Earnings to Fixed
Charges for the Six Months Ended March 31,
2000.
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K during the quarter ended March 31, 2000:
None
-12-
<PAGE> 14
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 11, 2000 By W. E. Sanders
------------------ -----------------------------
W. E. Sanders
Vice President and Controller
(Principal Accounting Officer)
Date: May 11, 2000 By W. J. Calise, Jr.
------------------ -----------------------------
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
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AS AMENDED FEBRUARY 2, 2000
DIRECTORS STOCK PLAN
OF
ROCKWELL INTERNATIONAL CORPORATION
1. PURPOSE OF THE PLAN.
The purpose of the Directors Stock Plan (the Plan) is to strengthen the
link of the compensation of non-employee directors of Rockwell
International Corporation (Rockwell) directly with the interests of the
shareowners.
2. PARTICIPANTS.
Participants in the Plan shall consist of directors of Rockwell who are
not employees of Rockwell or any of its subsidiaries (Non-Employee
Director). The term "subsidiary" as used in the Plan means a
corporation more than 50% of the voting stock of which, or an
unincorporated business entity more than 50% of the equity interest in
which, shall at the time be owned directly or indirectly by Rockwell.
3. SHARES RESERVED UNDER THE PLAN.
Subject to the provisions of Section 10 of the Plan, there shall be
reserved for delivery under the Plan shares of Common Stock of Rockwell
(Shares) in the following aggregate amounts: 75,000 Shares under
Section 6; 150,000 Shares under Section 8; and 75,000
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Shares under Section 9. Shares to be delivered under the Plan may be
authorized and unissued Shares, Shares held in treasury or any
combination thereof.
4. ADMINISTRATION OF THE PLAN.
The Plan shall be administered by the Compensation and Management
Development Committee of the Board of Directors of Rockwell (the
Committee). The Committee shall have authority to interpret the Plan,
and to prescribe, amend and rescind rules and regulations relating to
the administration of the Plan, and all such interpretations, rules and
regulations shall be conclusive and binding on all persons.
5. EFFECTIVE DATE OF THE PLAN.
The Plan, as amended on December 6, 1995, shall be submitted to the
shareowners of Rockwell for approval at the Annual Meeting of
Shareowners to be held on February 7, 1996, or any adjournment thereof,
and, if approved by the shareowners, shall become effective on the date
and at the time of such approval. The Plan approved at the Annual
Meeting of Shareowners held February 1, 1995 shall be in full force and
effect if the Plan, as amended, is not so approved.
6. AWARD OF SHARES.
Each Non-Employee Director who is elected a director at, or who was
previously elected and continues as a director after, any Annual
Meeting of Shareowners of Rockwell shall receive an award of 400 Shares
effective immediately after that Annual Meeting. Each
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Non-Employee Director who is elected a director at any meeting of the
Board shall receive effective immediately after that meeting an award
of 400 Shares if elected after the annual meeting and prior to May 1;
an award of 300 Shares if elected between May 1 and July 31; an award
of 200 Shares if elected between August 1 and October 31; and an award
of 100 Shares if elected between November 1 and the next annual
meeting. A participant shall not be required to make any payment for
any Shares delivered under the Plan. Upon the delivery of Shares under
the Plan, the recipient shall have the entire beneficial ownership
interest in, and all rights and privileges of a shareowner as to those
Shares, including the right to vote the Shares and to receive dividends
thereon.
Each Non-Employee Director may elect each year, not later than December
31 of the year preceding the year in which the annual award of Shares
is to be made, to receive the annual grant in the form of restricted
stock (Restricted Shares). Upon receipt of Restricted Shares, the
recipient shall have the right to vote the Shares and to receive
dividends thereon, and the Shares shall have all the attributes of
outstanding shares, except that certificates for such Shares shall be
delivered to and held by Rockwell until ten days after the recipient
retires from the Board under the Board's retirement policy or if the
recipient resigns from the Board or ceases to be a Director by reason
of the antitrust laws, compliance with Rockwell's conflict of interest
policies, death, disability or other circumstances the Board determines
not to be adverse to the best interests of Rockwell, when certificates
so held shall be delivered to the Director and cease to be Restricted
Shares. If a Change of Control as defined in Article III, Section
13(I)(1) of Rockwell's
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By-Laws shall occur, then the restrictions on all shares granted as
Restricted Shares under the Plan at any time before the occurrence of
that Change of Control shall forthwith lapse, those Shares shall cease
to be Restricted Shares and certificates for those Shares shall be
delivered as promptly as practicable to the Directors in whose names
they are registered.
7. RESTRICTION ON TRANSFER OF SHARES.
No Shares received by a participant under Section 6 or 9 of the Plan
may be sold, assigned, transferred, pledged or otherwise encumbered or
disposed of for a period of six months after receipt of those Shares,
except in the case of the participant's death or disability during that
six-month period.
8. STOCK OPTIONS.
Each Non-Employee Director who is elected a director at, or who was
previously elected and continues as a director after, any Annual
Meeting of Shareowners of Rockwell shall receive an option to purchase
1,000 Shares immediately after that Annual Meeting; provided, however,
that if R. M. Bressler, J. D. Nichols and J. F. Toot are reelected
directors at the Corporation's 1996 Annual Meeting, options to purchase
9,000, 9,000 and 5,000 Shares, respectively, shall be granted to them
immediately thereafter. Each Non-Employee Director who is elected a
director at any meeting of the Board shall receive immediately after
that meeting an option to purchase 1,000 Shares if elected after the
annual meeting and prior to May 1; an option to purchase 750 Shares if
elected between May 1 and July 31; an option to purchase 500 Shares if
elected between August 1 and
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October 31; and an option to purchase 250 Shares if elected between
November 1 and the next annual meeting. The exercise price for each
option so granted shall be one-hundred percent (100%) of the closing
price (the fair market value) of the Common Stock of Rockwell on the
date of grant as reported in the New York Stock Exchange - Composite
Transactions (or on the next preceding day such stock was traded if it
was not traded on the date of grant).
The purchase price of the Shares with respect to which an option or
portion thereof is exercised shall be payable in full in cash, shares
of Common Stock of Rockwell valued at their fair market value on the
date of exercise, or a combination thereof. Each option may be
exercised in whole or in part at any time after it becomes exercisable;
and each option shall become exercisable in approximately three equal
installments on each of the first, second and third anniversaries of
the date the option is granted. No option shall be exercisable prior to
one year nor after ten years from the date of the grant thereof;
provided, however, that if the holder of an option dies, the option may
be exercised from and after the date of the optionee's death for a
period of three years (or until the expiration date specified in the
option if earlier) even if it was not exercisable at the date of death.
Moreover, if an optionee retires at age 72 or prior thereto with at
least ten years service, all options then held by such optionee shall
be exercisable even if they were not exercisable at such retirement
date; provided, however, that each such option shall expire at the
earlier of five years from the date of the optionee's retirement or the
expiration date specified in the option. If a Change of Control as
defined in Article III, Section 13(I)(1) of
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Rockwell's By-Laws shall occur, then all options then outstanding
pursuant to the Plan shall forthwith become fully exercisable whether
or not otherwise then exercisable.
Options granted under the Plan are not transferable other than (i) by
will or by the laws of descent and distribution; or (ii) by gift to the
grantee's spouse or natural, adopted or step-children or grandchildren
(immediate family members) or to a trust for the benefit of one or more
of the grantee's immediate family members or to a family charitable
trust established by the grantee or a member of the grantee's family.
If an optionee ceases to be a director while holding unexercised
options, such options are then void, except in the case of (i) death,
(ii) disability, (iii) retirement after attaining the age of 72 or
having completed ten years service as a director, or (iv) resignation
from the Board for reasons of the antitrust laws, compliance with the
Corporation's conflict of interest policies or other circumstances that
the Committee may determine as serving the best interests of Rockwell.
9. SHARES IN LIEU OF CASH COMPENSATION.
Each Non-Employee Director may elect each year, not later than December
31 of the year preceding the year as to which deferral of fees is to be
applicable, to defer all or any portion of the cash retainer to be paid
for board, committee or other service in the following calendar year
through the issuance or transfer of Restricted Shares, valued at the
closing price on the New York Stock Exchange - Composite Transactions
on the date when each payment of such retainer amount would otherwise
be made in cash. Such
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Restricted Shares shall be the same as and subject to the same
provisions as are applicable to the Restricted Shares issued or
delivered pursuant to Section 6 of the Plan.
10. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION.
If there shall be any change in or affecting Shares on account of any
merger, consolidation, reorganization, recapitalization,
reclassification, stock dividend, stock split or combination, or other
distribution to holders of Shares (other than a cash dividend), there
shall be made or taken such amendments to the Plan and such adjustments
and actions thereunder as the Board may deem appropriate under the
circumstances.
11. GOVERNMENT AND OTHER REGULATIONS.
The obligations of Rockwell to deliver Shares under Section 6 of the
Plan or upon exercise of options granted under Section 8 of the Plan
shall be subject to (i) all applicable laws, rules and regulations and
such approvals by any governmental agencies as may be required,
including, without limitation, compliance with the Securities Act of
1933, as amended, and (ii) the condition that such shares shall have
been duly listed on the New York Stock Exchange.
12. AMENDMENT AND TERMINATION OF THE PLAN.
The Plan may be amended by the Board in any respect, provided that,
without shareowner approval, no amendment shall (i) materially increase
the maximum number of shares of Common Stock available for delivery
under the Plan (other than adjustments pursuant to
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Section 10 hereof), (ii) materially increase the benefits accruing to
participants under the Plan, or (iii) materially modify the
requirements as to eligibility for participation in the Plan, and
provided, further, that Section 6 of the Plan may not be amended more
than once every six months except to comport with the changes in the
Internal Revenue Code of 1986, as amended, the Employee Retirement
Income Securities Act of 1974, as amended, or the regulations under
either thereof. The Plan may also be terminated at any time by the
Board.
13. MISCELLANEOUS.
(a) Nothing contained in this Plan shall be deemed to confer upon
any person any right to continue as a director of or to be
associated in any other way with Rockwell.
(b) To the extent that Federal laws do not otherwise control, the
Plan and all determinations made and actions taken pursuant
hereto shall be governed by the law of the State of Delaware.
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EXHIBIT 12
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS ENDED MARCH 31, 2000
(in millions, except ratio)
<TABLE>
<S> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income from continuing operations before income taxes .. $ 476
Minority interest in losses of subsidiaries ............ (1)
-----
475
Add fixed charges included in earnings:
Interest expense .................................... 37
Interest element of rentals ......................... 26
-----
63
-----
Total earnings available for fixed charges ............. $ 538
=====
FIXED CHARGES:
Fixed charges included in earnings ..................... $ 63
Capitalized interest ................................... 2
-----
Total fixed charges ................................. $ 65
=====
RATIO OF EARNINGS TO FIXED CHARGES (1) .................... 8.28
=====
</TABLE>
(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.
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH
31, 2000 CONDENSED CONSOLIDATED BALANCE SHEET AND CONSOLIDATED STATEMENT OF
OPERATIONS FOR THE SIX MONTHS ENDED MARCH 31, 2000 AND NOTES TO FINANCIAL
STATEMENTS AND 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-30-1999
<PERIOD-END> MAR-31-2000
<CASH> 165
<SECURITIES> 0
<RECEIVABLES> 1,221
<ALLOWANCES> 47
<INVENTORY> 1,380
<CURRENT-ASSETS> 3,255
<PP&E> 3,136
<DEPRECIATION> 1,578
<TOTAL-ASSETS> 6,365
<CURRENT-LIABILITIES> 1,753
<BONDS> 910
0
0
<COMMON> 216
<OTHER-SE> 2,538
<TOTAL-LIABILITY-AND-EQUITY> 6,365
<SALES> 3,444
<TOTAL-REVENUES> 3,484
<CGS> 2,350
<TOTAL-COSTS> 3,008
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 37
<INCOME-PRETAX> 476
<INCOME-TAX> (155)
<INCOME-CONTINUING> 321
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 321
<EPS-BASIC> $1.69
<EPS-DILUTED> $1.67
</TABLE>
