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FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended December 31, 1993
Commission file number 1-1035
Rockwell International Corporation
(Exact name of registrant as specified in its charter)
Delaware 95-1054708
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2201 Seal Beach Boulevard, Seal Beach, California 90740
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (412) 565-4004
(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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
180,777,965 shares of registrant's Common Stock, $1.00 par value, and
40,372,810 shares of Class A Common Stock, $1.00 par value, were outstanding on
January 31, 1994.<PAGE>
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ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Page
No.
Condensed Consolidated Balance Sheet--
December 31, 1993 and September 30, 1993........ 2
Statement of Consolidated Income--Three Months
Ended December 31, 1993 and 1992................ 3
Statement of Consolidated Cash Flows--
Three Months Ended December 31, 1993 and 1992... 4
Notes to Financial Statements................... 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations................................... 8
Other Financial Information..................... 10
Exhibit 11 - Computation of Earnings Per Share............ 11
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings............................... 12
Item 5. Other Information............................... 12
Item 6. Exhibits and Reports on Form 8-K................ 12
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
December 31 September 30
1993 1993
(Unaudited)
ASSETS (In millions)
Current assets:
Cash........................................... $ 731.9 $ 772.8
Receivables.................................... 2,111.5 2,209.1
Inventories.................................... 1,430.3 1,430.8
Other current assets........................... 567.7 533.7
Total current assets................... 4,841.4 4,946.4
Net property...................................... 2,293.5 2,325.8
Other assets...................................... 2,623.2 2,612.9
TOTAL.................... $9,758.1 $9,885.1
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt................................ $ 214.7 $ 166.4
Accounts payable - trade....................... 689.2 859.8
Accrued compensation and benefits.............. 627.3 710.1
Advance payments from customers................ 345.7 362.7
Accrued income taxes........................... 138.4 94.1
Other current liabilities...................... 789.2 797.8
Total current liabilities.............. 2,804.5 2,990.9
Long-term debt.................................... 1,022.3 1,028.2
Accrued retirement benefits....................... 2,711.0 2,731.2
Other liabilities................................. 177.1 178.8
Total liabilities............. 6,714.9 6,929.1
Shareowners' equity:
Preferred stock ............................... 1.5 1.5
Common Stock (shares issued - 209.5 million)... 209.5 209.5
Class A Common Stock (shares issued:
December 31, 1993, 40.7 million;
September 30, 1993, 41.6 million)............ 40.7 41.6
Additional paid-in capital..................... 166.7 164.3
Retained earnings.............................. 3,542.7 3,471.9
Currency translation and pension adjustments... (207.8) (196.8)
Common Stock in treasury, at cost (shares held:
December 31, 1993, 28.9 million;
September 30, 1993, 30.1 million).......... (710.1) (736.0)
Total shareowners' equity..... 3,043.2 2,956.0
TOTAL.................... $9,758.1 $9,885.1
See Notes to Financial Statements.<PAGE>
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ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended
December 31
1993 1992
(In millions)
Revenues:
Sales............................................ $2,600.9 $2,488.6
Other income..................................... 15.6 17.7
Total revenues................................. 2,616.5 2,506.3
Costs and expenses:
Cost of sales.................................... 2,028.2 1,977.6
Selling, general and administrative.............. 313.5 291.3
Interest......................................... 26.0 25.6
Total costs and expenses....................... 2,367.7 2,294.5
Income before income taxes.......................... 248.8 211.8
Provision for income taxes.......................... 99.3 84.0
Net income.......................................... $ 149.5 $ 127.8
(In dollars)
Earnings per common share:
Primary.......................................... $ .68 $ .58
Fully diluted.................................... $ .66 $ .57
Cash dividends per common share..................... $ .25 $ .23
(In millions)
Average common shares outstanding:
Primary.......................................... 221.2 219.6
Fully diluted.................................... 225.2 222.7
See Notes to Financial Statements.<PAGE>
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ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
Three Months Ended
December 31
1993 1992
(In millions)
OPERATING ACTIVITIES:
Net income......................................... $ 149.5 $ 127.8
Adjustments to net income to arrive at
cash provided by operating activities:
Depreciation..................................... 103.9 105.3
Amortization of intangible assets................ 12.9 14.2
Deferred income taxes............................ 7.9 (12.7)
Net pension income and contributions............. (15.7) (28.9)
Changes in assets and liabilities:
Receivables.................................... 88.7 166.8
Inventories.................................... (1.3) (25.0)
Accounts payable - trade....................... (172.7) (237.6)
Accrued compensation and benefits.............. (81.8) (37.2)
Advance payments from customers................ (19.5) (58.1)
Income taxes................................... 45.1 65.6
Other assets and liabilities................... (61.0) (34.3)
Cash provided by operating activities....... 56.0 45.9
INVESTING ACTIVITIES:
Property additions................................. (67.3) (70.4)
Acquisition of businesses.......................... 6.5
Proceeds from disposition of property.............. 2.2 3.4
Cash used for investing activities.......... (58.6) (67.0)
FINANCING ACTIVITIES:
Increase in short-term borrowings.................. 20.8 12.7
Payments of long-term debt......................... (3.8) (7.2)
Net increase in debt............................. 17.0 5.5
Purchase of treasury stock......................... (7.2) (42.8)
Dividends.......................................... (55.3) (50.6)
Reissuance of common stock......................... 7.2 11.0
Cash used for financing activities.......... (38.3) (76.9)
DECREASE IN CASH................................... (40.9) (98.0)
CASH AT BEGINNING OF PERIOD........................ 772.8 602.6
CASH AT END OF PERIOD.............................. $ 731.9 $ 504.6
Income tax payments were $44.1 million and $45.2 million in the three months
ended December 31, 1993 and 1992, respectively.
See Notes to Financial Statements.
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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 for the fiscal year ended
September 30, 1993. The results of operations for the three-month periods ended
December 31, 1993 and 1992 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. Receivables are summarized as follows (in millions):
December 31 September 30
1993 1993
Accounts and notes receivable:
Commercial, less allowance for doubtful
accounts (December 31, 1993, $47.9;
September 30, 1993, $47.3)............ $1,177.6 $1,258.2
United States Government................ 144.6 149.0
Unbilled costs and accrued profits, less
related progress payments
(December 31, 1993, $487.7;
September 30, 1993, $550.5)............. 789.3 801.9
Receivables............................. $2,111.5 $2,209.1
3. Inventories are summarized as follows (in millions):
December 31 September 30
1993 1993
Finished goods............................ $ 323.4 $ 330.3
Long-term contracts in process............ 289.3 338.2
Work in process........................... 534.9 508.7
Raw materials, parts and supplies......... 510.7 492.4
Total................................... 1,658.3 1,669.6
Less allowance to adjust the carrying
value of certain inventories to a
last-in,first-out (LIFO) basis.......... 70.7 67.2
Remainder................................. 1,587.6 1,602.4
Less related progress payments............ 157.3 171.6
Inventories............................. $1,430.3 $1,430.8
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ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Other assets are summarized as follows (in millions):
December 31 September 30
1993 1993
Goodwill................................. $ 579.0 $ 581.5
Patents, product technology and
other intangibles...................... 173.3 175.2
Intangible pension asset................. 47.5 52.5
Prepaid pension costs.................... 1,212.6 1,187.4
Deferred income taxes.................... 361.0 374.6
Customer finance receivables............. 152.8 150.5
Investments and other assets............. 97.0 91.2
Other assets........................... $2,623.2 $2,612.9
5. Other current liabilities are summarized as follows (in millions):
December 31 September 30
1993 1993
Accounts payable - other................... $201.5 $191.8
Accrued product warranties................. 162.9 165.6
Accrued taxes other than income taxes...... 65.7 80.7
Accrued restructuring costs................ 51.1 62.1
Other...................................... 308.0 297.6
Other current liabilities................ $789.2 $797.8
6. Long-term debt consisted of the following (in millions):
December 31 September 30
1993 1993
7-1/2% notes, payable in 1997............ $ 200.0 $ 200.0
8-7/8% notes, payable in 1999............ 300.0 300.0
8-3/8% notes, payable in 2001............ 200.0 200.0
6-3/4% notes, payable in 2002............ 300.0 300.0
Other obligations, principally foreign... 29.5 35.6
Total.................................. 1,029.5 1,035.6
Less current portion..................... 7.2 7.4
Long-term debt......................... $1,022.3 $1,028.2
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ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. Accrued retirement benefits consisted of the following (in millions):
December 31 September 30
1993 1993
Accrued retirement medical costs......... $2,559.0 $2,579.2
Accrued pension costs.................... 352.0 352.0
Total.................................. 2,911.0 2,931.2
Amount classified as current liability... 200.0 200.0
Accrued retirement benefits............ $2,711.0 $2,731.2
8. In the quarter ended December 31, 1993, the company purchased .2 million
shares of Common Stock for $7 million. Since the company's Common Stock
repurchase program began in 1984, the company has purchased 106.6 million shares
of Common Stock for $2.3 billion.
9. 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, environmental, safety and health, and
employment matters. 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.<PAGE>
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ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
1994 First Quarter Compared to 1993 First Quarter
The contributions to sales and earnings by business segment of the company for
the first quarter of fiscal 1994 and 1993 are presented below. Operating
earnings of the Graphics segment have been adjusted to include interest income
related to customer financing receivables, previously included in General
Corporate - Net ($2.8 million for the first quarter of 1994 and $4.4 million for
the first quarter of 1993).
Sales Earnings
1994 1993 1994 1993
(in millions)
Electronics...................... $1,184 $1,078 $ 168.9 $ 139.9
Aerospace........................ 610 644 81.7 86.2
Automotive....................... 652 615 35.0 26.2
Graphics......................... 155 152 8.9 3.9
Sales and operating earnings.. 2,601 2,489 294.5 256.2
General corporate - net.......... (19.8) (18.8)
Interest expense................. (26.0) (25.6)
Provision for income taxes....... (99.2) (84.0)
Total......................... $2,601 $2,489 $ 149.5 $ 127.8
Sales in the 1994 first quarter were up five percent from the same period a year
ago principally due to strengthening markets and increased market share of the
Telecommunications and Allen-Bradley Industrial Automation businesses within the
Electronics business segment. Automotive's Heavy Vehicle business also recorded
increased sales in the 1994 first quarter due to the strong North American truck
markets. During the quarter, sales of North American trailer axles set an
all-time record at 88,000 units, an increase of 34 percent over 1993's
first quarter.
Net income and earnings per share for 1994's first quarter increased 17 percent
from last year's first quarter. This marks the fourth consecutive quarter the
company has recorded a double-digit earnings per share increase.
In the current quarter, three of the company's four business segments --
Electronics, Automotive and Graphics -- recorded major earnings increases over
their 1993 first quarter results. Earnings of the fourth segment, Aerospace,
were also strong, although slightly below last year's first quarter due to an
unfavorable contract adjustment.
Within the business segments, six of the nine business units recorded higher
first quarter earnings, with particularly strong contributions by the
Telecommunications and Allen-Bradley Industrial Automation businesses. The
Space, Heavy Vehicle, Light Vehicle and Graphics business units also posted
higher 1994 first quarter earnings.
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ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (Continued)
The Electronics businesses posted record quarterly earnings in 1994's
first quarter, up 21 percent from last year's first quarter, due to substantial
earnings increases in the Telecommunications and Allen-Bradley Industrial
Automation businesses. Telecommunications earnings for the quarter reached a
record high for any quarter in its history, primarily due to very strong demand
for high speed data modems, while orders of Allen-Bradley's Industrial
Automation business averaged $8.1 million per day in the first quarter, the
highest in its history. Earnings of both Avionics and Defense Electronics were
six percent below last year's comparable quarter as a result of lower sales
volumes in the defense and commercial airline markets.
Aerospace earnings in 1994's first quarter were down five percent from 1993's
first quarter due to an $11 million cost adjustment on Aircraft's AC-130U
Gunship program.
Automotive's 1994 first quarter earnings increased 34 percent from the
comparable quarter a year ago primarily due to the strong North American truck
markets.
First quarter earnings of the Graphics business were up significantly from
1993's first quarter, continuing the improvement begun in last year's fourth
quarter. Although worldwide printing press markets remain depressed, Graphics
results are improving due to continuing cost containment actions and the
benefits of its market leadership positions.
FINANCIAL CONDITION
There were no significant changes in the company's financial position during the
three months ended December 31, 1993.
In October 1993, Western Digital Corporation cancelled the previously announced
$115 million sale of its semiconductor wafer plant to the company's
Telecommunications business. Telecommunications subsequently announced plans to
invest $150 million to establish an 8 inch wafer production capability and to
expand sub-micron wafer fabrication capacity at its Newport Beach, California,
facility.
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 Results of
Operations, Environmental Issues in Item 7, Management's Discussion and Analysis
of Financial Condition and Results of Operations, on pages 16 - 17 of the
company's Annual Report on Form 10-K for the fiscal year ended
September 30, 1993, and is incorporated herein by reference. Management
believes that at December 31, 1993 there has been no material change to this
information.
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ROCKWELL INTERNATIONAL CORPORATION
Other Financial Information
(a) The company's backlog on December 31, 1993 was $12.4 billion compared to
$14.2 billion on December 31, 1992. The backlog includes $3.7 billion of
commercial orders, $2.3 billion of funded government orders and $6.4
billion of unfunded government orders. Backlog by major business segment is
as follows (in billions):
December 31 December 31
1993 1992
Aerospace
Space Systems $ 6.5 $ 8.2
Aircraft 1.6 2.1
8.1 10.3
Defense Electronics 1.6 1.5
Other 2.7 2.4
Total Backlog $12.4 $14.2
(b) Sales by major product lines are summarized as follows (in millions):
Three Months Ended
December 31
1993 1992
Electronics
Industrial Automation $ 461 $ 380
Avionics 296 289
Telecommunications 162 114
Defense Electronics 265 295
1,184 1,078
Aerospace
Space Systems 493 495
Aircraft 117 149
610 644
Automotive
Heavy Vehicles 391 334
Light Vehicles 261 281
652 615
Graphics 155 152
Total Sales $2,601 $2,489
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<PAGE> EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended
December 31
1993 1992
(In millions, except
per share amounts)
Primary earnings per share:
Net income................................ $149.5 $127.8
Deduct dividend requirements on
preferred stock........................ 0.1 0.1
Total primary earnings.................... $149.4 $127.7
Average number of common shares
outstanding during the period.......... 221.2 219.6
Primary earnings per share................ $ .68 $ .58
Fully diluted earnings per share:
Net income................................ $149.5 $127.8
Average number of common shares
outstanding during the
period assuming full dilution:
Common stock......................... 221.2 219.6
Assumed issuance of stock under
award plans and conversion of
preferred stock.................... 4.0 3.1
Total fully diluted shares................ 225.2 222.7
Fully diluted earnings per share.......... $ .66 $ .57
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PART II.OTHER INFORMATION
Item 1. Legal Proceedings
Reference is made to the second paragraph of Item 3, Legal Proceedings,
on pages 8-9 of the company's Annual Report on Form 10-K for the fiscal year
ended September 30, 1993, with respect to an action brought in 1990 in the
United States District Court for the District of Colorado by five present or
former employees of the Rocky Flats Plant, Golden, Colorado (the Plant) and
labor organizations representing a few of the Plant's employees against the
company and another former operator of the Plant. On December 20, 1993, the
United States Court of Appeals for the Tenth Circuit dismissed the motion for
rehearing and suggestion for rehearing en banc of its affirmance in October 1993
of the District Court's judgment dismissing that action.
Item 5. Other Information
The company's government contract operations are subject to
U.S. Government investigations of business practices and audits of contract
performance and cost classification from which claims have been or may be
asserted against the company. Although such claims are usually resolved through
fact-finding and negotiation, civil, criminal or administrative proceedings may
result and a contractor can be fined, as well as be suspended or debarred from
government contracts. Management believes there are no claims, audits or
investigations currently pending against the company which will have a material
adverse effect on either the company's business or its financial condition.
The company's financial statements have been prepared on the basis of
conservative estimates, supported by outside legal counsel, of the revenue
expected to be recovered from the company's claims against the U.S. Government
arising out of the government's termination of contracts for its convenience and
certain contractual disputes. While management cannot reasonably estimate the
length of time that will be required to resolve its claims or whether they will
be resolved through negotiation or litigation, it believes their resolution will
not have a material adverse effect on the company's financial statements.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Share
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter ended
December 31, 1993.
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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 February 10, 1994 By L. J. Komatz
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L. J. Komatz
Vice President and Controller
(Principal Accounting Officer)
Date February 10, 1994 By C. H. Harff
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C. H. Harff
Senior Vice President,
General Counsel and Secretary
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