<PAGE>
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, 1995
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 90740-8250
(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 and (2) has been subject to such filing requirements for
the past 90 days.
Yes X No
181,649,412 shares of registrant's Common Stock, $1.00 par value, and
34,928,078 shares of registrant's Class A Common Stock, $1.00 par value, were
outstanding on April 30, 1995.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Page
No.
Condensed Consolidated Balance Sheet--
March 31, 1995 and September 30, 1994.......... 2
Statement of Consolidated Income--Three Months
and Six Months Ended March 31, 1995 and 1994... 3
Statement of Consolidated Cash Flows--
Six Months Ended March 31, 1995 and 1994....... 4
Notes to Financial Statements.................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................. 11
Other Financial Information.................... 17
Exhibit 11 - Computation of Earnings Per Share........... 18
PART II. OTHER INFORMATION:
Item 5. Other Information.............................. 19
Item 6. Exhibits and Reports on Form 8-K............... 19
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
March 31 September 30
1995 1994
(Unaudited)
ASSETS (In millions)
Current assets:
Cash........................................... $ 640.6 $ 628.3
Receivables.................................... 2,533.4 2,267.2
Inventories.................................... 2,027.5 1,532.8
Other current assets........................... 540.4 499.5
Business held for sale......................... 497.3
Total current assets................... 6,239.2 4,927.8
Net property...................................... 2,795.1 2,383.4
Intangible assets................................. 1,994.5 777.0
Other assets...................................... 1,633.2 1,772.6
TOTAL.................... $12,662.0 $9,860.8
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt................................ $ 1,685.6 $ 160.2
Accounts payable - trade....................... 981.8 976.9
Accrued compensation and benefits.............. 739.9 668.8
Advance payments from customers................ 297.3 294.6
Accrued income taxes........................... 198.3 137.6
Other current liabilities...................... 913.1 781.7
Total current liabilities.............. 4,816.0 3,019.8
Long-term debt.................................... 1,480.3 831.0
Accrued retirement benefits....................... 2,544.9 2,414.8
Other liabilities................................. 324.4 239.6
Total liabilities............. 9,165.6 6,505.2
Shareowners' equity:
Preferred stock ............................... 1.3 1.4
Common Stock (shares issued - 209.5 million)... 209.5 209.5
Class A Common Stock (shares issued:
March 31, 1995, 35.3 million;
September 30, 1994, 36.9 million)............ 35.3 36.9
Additional paid-in capital..................... 176.3 174.0
Retained earnings.............................. 3,954.5 3,762.3
Currency translation........................... (112.7) (97.1)
Common Stock in treasury, at cost (shares held:
March 31, 1995, 28.2 million;
September 30, 1994, 27.8 million).......... (767.8) (731.4)
Total shareowners' equity..... 3,496.4 3,355.6
TOTAL.................... $12,662.0 $9,860.8
See Notes to Financial Statements.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
(In millions)
Revenues:
Sales.......................... $3,361.0 $2,761.5 $5,983.9 $5,362.4
Other income................... 17.4 14.1 40.1 29.7
Total revenues............... 3,378.4 2,775.6 6,024.0 5,392.1
Costs and expenses:
Cost of sales.................. 2,571.9 2,157.9 4,602.5 4,186.1
Selling, general and
administrative............... 444.7 335.4 763.8 648.9
Interest....................... 44.6 25.0 67.6 51.0
Total costs and expenses..... 3,061.2 2,518.3 5,433.9 4,886.0
Income before income taxes....... 317.2 257.3 590.1 506.1
Provision for income taxes....... 125.8 102.6 234.0 201.9
Net income ...................... $ 191.4 $ 154.7 $ 356.1 $ 304.2
(In dollars)
Earnings per common share:
Primary....................... $ .88 $ .70 $ 1.64 $ 1.38
Fully diluted................. $ .87 $ .69 $ 1.61 $ 1.35
Cash dividends per common share.. $ .27 $ .25 $ .54 $ .50
(In millions)
Average common shares outstanding:
Primary....................... 217.0 221.1 217.5 221.1
Fully diluted................. 221.1 225.8 221.7 225.7
See Notes to Financial Statements.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
Six Months Ended
March 31
1995 1994
(In millions)
OPERATING ACTIVITIES:
Net income........................................... $ 356.1 $ 304.2
Adjustments to net income to arrive at
cash provided by operating activities:
Depreciation..................................... 218.4 211.0
Amortization of intangible assets................ 39.8 24.7
Deferred income taxes............................ 55.5 21.0
Net pension income and contributions............. (40.4) (33.2)
Changes in assets and liabilities, excluding
effects of acquisitions and foreign currency
adjustments:
Receivables.................................. (62.4) 16.5
Inventories.................................. (171.4) (72.2)
Accounts payable - trade..................... (85.8) (120.1)
Accrued compensation and benefits............ (12.2) (72.9)
Advance payments from customers.............. (16.7) (10.9)
Income taxes................................. (15.7) 3.2
Other assets and liabilities................. (41.4) (93.0)
Cash provided by operating activities..... 223.8 178.3
INVESTING ACTIVITIES:
Property additions................................... (271.0) (195.4)
Acquisition of businesses, net of $59.7 million
cash balances...................................... (1,578.2)
Proceeds from disposition of property................ 17.2 5.9
Cash used for investing activities........ (1,832.0) (189.5)
FINANCING ACTIVITIES:
Debt activity excluding the acquisition of
existing Reliance debt:
Increase in short-term borrowings................ 1,315.5 112.2
Increase in long-term debt....................... 543.3 17.7
Payments of long-term debt....................... (38.1) (204.5)
Net increase (decrease) in debt................ 1,820.7 (74.6)
Purchase of treasury stock.......................... (93.2) (61.7)
Dividends........................................... (117.7) (110.7)
Reissuance of common stock.......................... 10.7 31.5
Cash provided by (used for) financing
activities.............................. 1,620.5 (215.5)
INCREASE (DECREASE) IN CASH.......................... 12.3 (226.7)
CASH AT BEGINNING OF PERIOD.......................... 628.3 772.8
CASH AT END OF PERIOD................................ $ 640.6 $ 546.1
Income tax payments were $172.3 million and $172.5 million in the six months
ended March 31, 1995 and 1994, 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. Certain prior year
amounts have been reclassified to conform to current year presentation.
These statements should be read in conjunction with the company's Annual
Report for the fiscal year ended September 30, 1994. The results of
operations for the three- and six-month periods ended March 31, 1995 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. In November 1994 the company entered into a definitive agreement to acquire
all shares of common stock of Reliance Electric Company (Reliance), a major
manufacturer of industrial products and telecommunications equipment, for
$1,586 million. The acquisition was completed on January 27, 1995. The
purchase price has been financed through $1,086 million of short-term
borrowings and $500 million of long-term debt.
The company has announced its intention to fund a portion of the purchase
price with proceeds from the sale of Reliance's telecommunications business
which is expected to occur in 1995. The company's results of operations
do not include the results of this business or the interest expense during
the holding period related to the incremental borrowings that are to be
repaid with the assumed proceeds. The company has assumed the proceeds
from the sale of the telecommunications business to be equal to Reliance's
carrying value of the business as of December 31, 1994, adjusted for
interest expense and operating earnings, and this amount has been reflected
in the accompanying balance sheet as "Business held for sale". Any
difference between the actual sales proceeds and the assumed sales proceeds
will result in an adjustment to goodwill.
The acquisition of Reliance has been accounted for as a purchase as of
December 31, 1994 and the results of operations of Reliance (exclusive of
its telecommunications business) are included in the company's statement
of consolidated income commencing January 1, 1995. At December 31, 1994
the assets acquired and liabilities assumed were recorded at estimated fair
values determined by the company's management based on appraisals,
evaluations, estimations and other studies, some of which are still in
process. The excess of the purchase price over the estimated fair value
of the net tangible assets acquired has been recorded as identifiable
intangibles of $380.9 million and goodwill of $812.7 million, which are
being amortized over periods ranging from seven to forty years (see
Note 5).
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
2. (Continued)
The following unaudited pro forma condensed consolidated results of
operations combine the historical results of operations of the company and
Reliance, assuming Reliance had been acquired and its telecommunications
business had been sold at the beginning of each period. The pro forma
results are presented for information purposes only and are not necessarily
indicative of the results which would have occurred if the business
combination had been in effect on the dates presented, or of the results
which may occur in the future. Further, the results do not reflect
additional cost savings or other synergies expected to result from the
integration of Reliance and the company's Automation business.
Six Months Ended March 31
1995 1994
(In millions, except per share amounts)
Sales and other income $ 6,353 $ 5,982
Net income 356 280
Earnings per common share:
Primary 1.64 1.27
Fully Diluted 1.61 1.24
3. Receivables are summarized as follows (in millions):
March 31 September 30
1995 1994
Accounts and notes receivable:
Commercial, less allowance for doubtful
accounts (March 31, 1995, $78.1;
September 30, 1994, $68.0)............ $1,713.3 $1,364.2
United States Government................ 102.0 128.1
Unbilled costs and accrued profits,
less related progress payments
(March 31, 1995, $306.2;
September 30, 1994, $387.4)............. 718.1 774.9
Receivables............................. $2,533.4 $2,267.2
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Inventories are summarized as follows (in millions):
March 31 September 30
1995 1994
Finished goods............................ $ 475.4 $ 355.5
Long-term contracts in process............ 398.1 300.0
Work in process........................... 832.9 619.5
Raw materials, parts and supplies......... 571.2 472.6
Total................................... 2,277.6 1,747.6
Less allowance to adjust the carrying value
of certain inventories to a last-in,
first-out (LIFO) basis.................. 72.1 67.8
Remainder................................. 2,205.5 1,679.8
Less related progress payments............ 178.0 147.0
Inventories............................. $2,027.5 $1,532.8
5. Intangible assets are summarized as follows (in millions):
March 31 September 30
1995 1994
Goodwill................................. $1,429.7 $ 589.3
Trademarks, patents, product technology
and other intangibles.................. 564.8 187.7
Intangible assets...................... $1,994.5 $ 777.0
The increase in goodwill and intangible assets is primarily due to the
acquisition of Reliance (see Note 2).
6. Other assets are summarized as follows (in millions):
March 31 September 30
1995 1994
Prepaid pension costs.................... $1,267.0 $1,214.6
Deferred income taxes.................... 76.5 299.7
Customer finance receivables............. 132.1 137.3
Investments and other assets............. 157.6 121.0
Other assets........................... $1,633.2 $1,772.6
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
7. Short-term debt consisted of the following (in millions):
March 31 September 30
1995 1994
Commercial paper......................... $1,550.0 $ 40.0
Short-term bank borrowings,
principally foreign.................... 116.4 105.2
Current portion of long-term debt........ 19.2 15.0
Short-term debt......................... $1,685.6 $ 160.2
The short-term commercial paper borrowings are primarily due to financing
of the Reliance acquisition and refinancing $200 million of Reliance
short-term borrowings (see Note 2).
8. Other current liabilities are summarized as follows (in millions):
March 31 September 30
1995 1994
Accounts payable - other................... $274.4 $227.0
Accrued product warranties................. 219.0 217.4
Accrued taxes other than income taxes...... 87.4 81.8
Other...................................... 332.3 255.5
Other current liabilities................ $913.1 $781.7
9. Long-term debt consisted of the following (in millions):
March 31 September 30
1995 1994
7-5/8% notes, payable in 1998............ $ 300.0
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
6.8% notes, payable in 2003.............. 137.1
7-7/8% notes, payable in 2005............ 200.0
Other obligations, principally foreign... 62.4 46.0
Total.................................. 1,499.5 846.0
Less current portion..................... 19.2 15.0
Long-term debt......................... $1,480.3 $ 831.0
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
9. (Continued)
In February 1995 the company issued $300 million of 7-5/8% notes due
February 17, 1998 and $200 million of 7-7/8% notes due February 15, 2005.
The proceeds were used to finance the acquisition of Reliance.
The 6.8% notes, payable in 2003, represent $150 million of long-term debt
of Reliance which has been adjusted to reflect interest rates in effect at
the time of the acquisition. The discount is being amortized over the
remaining term of the debt as interest expense.
10. The company's financial instruments include cash, notes receivable,
short-and long-term debt and foreign currency forward exchange contracts.
At March 31, 1995, the carrying values of the company's financial
instruments approximate their fair values based on current market rates.
In December 1994, in connection with the company's intention to issue
$500 million of long-term debt related to financing the Reliance
acquisition, the company entered into two forward interest rate swap
agreements with a creditworthy bank to protect itself against interest rate
increases. In February 1995 the interest rate swap agreements were
terminated in connection with the issuance of the $500 million of long-term
debt. The cost of terminating the swaps was deferred and is being
amortized over the term of the related debt (see Note 9).
The company enters into foreign currency forward exchange contracts to
protect itself from adverse currency rate fluctuations on firm and
identifiable foreign currency commitments entered into in the ordinary
course of business. These foreign currency forward exchange contracts are
executed with creditworthy banks for terms of generally less than six
months and are denominated in currencies of major industrial countries.
Outstanding foreign currency forward exchange contracts, netted on a
bank-by-bank basis, amounted to approximately $237 million at
March 31, 1995. 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.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
11. Accrued retirement benefits consisted of the following (in millions):
March 31 September 30
1995 1994
Accrued retirement medical costs......... $2,571.9 $2,507.0
Accrued pension costs.................... 170.2 97.8
Total.................................. 2,742.1 2,604.8
Amount classified as current liability... 197.2 190.0
Accrued retirement benefits............ $2,544.9 $2,414.8
12. In the quarter ended March 31, 1995, the company purchased 1.3 million
shares of Common Stock for $49 million. Since the company's Common Stock
repurchase program began in 1984, the company has purchased 113.0 million
shares of Common Stock for $2.6 billion.
13. 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, employment and government contract 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>
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
1995 Second Quarter Compared to 1994 Second Quarter
Following the acquisition of Reliance and its integration with Allen-Bradley's
Automation business, the company has expanded disclosure of its Electronics
businesses to disclose separately operating earnings of its Automation business.
(See Exhibit 99-b for an expanded presentation of operating earnings of the
company's Electronics businesses for each of the five years in the period ended
September 30, 1994.) The contributions to sales and earnings by business
segment of the company for the second quarter of fiscal 1995 and 1994 are
presented below (in millions).
Three Months Ended
March 31
1995 1994
Sales
Electronics
Automation $ 974 $ 512
Avionics 310 311
Telecommunications 219 178
Defense Electronics 207 256
Total Electronics 1,710 1,257
Aerospace
Space Systems 482 511
Aircraft 150 147
Total Aerospace 632 658
Automotive
Heavy Vehicle Systems 513 441
Light Vehicle Systems 302 215
Total Automotive 815 656
Graphic Systems 204 132
Sales of ongoing businesses 3,361 2,703
Divested business 58
Total $ 3,361 $ 2,761
Operating Earnings
Electronics
Automation $ 138.5 $ 72.7
Avionics/Telecom/Defense 94.2 105.8
Total Electronics 232.7 178.5
Aerospace 85.5 93.6
Automotive 60.9 25.6
Graphic Systems 21.4 5.2
Operating earnings of ongoing businesses 400.5 302.9
Divested business 3.6
General corporate - net (38.7) (24.2)
Interest expense (44.6) (25.0)
Provision for income taxes (125.8) (102.6)
Net Income $ 191.4 $ 154.7<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Sales for the second quarter of $3.4 billion were $.6 billion, or 21 percent,
higher than 1994's second quarter sales of $2.8 billion. The increase is about
equally attributable to the inclusion of the recently acquired Reliance and to
growth in the company's other commercial businesses. In the quarter, commercial
and international sales were up 38 percent from last year's second quarter, and
now comprise 73 percent of total revenues compared to 64 percent in the second
quarter of 1994.
Earnings per share for the 1995 second quarter of 88 cents increased 26 percent
over last year's 70 cents per share, marking the ninth consecutive quarter the
company has achieved double-digit earnings per share growth. For the quarter,
Reliance contributed $339 million in sales, and its earnings, after considering
the financing cost of the acquisition and amortization of goodwill and other
intangible assets, added three cents per share to the company's results. In its
second quarter earnings release the company's chairman and chief executive
officer said, "As we look to the second half of our fiscal year, we see our
businesses continuing at a strong level and expect to achieve full year earnings
per share in the range of $3.35 to $3.40."
Net income of $191.4 million for 1995's second quarter increased 24 percent from
1994's second quarter net income of $154.7 million primarily due to major
earnings gains by the company's Automation, Automotive and Graphic Systems
businesses.
Second quarter earnings of the Electronics businesses were 30 percent higher
than last year's second quarter due to the major earnings gain in Automation.
Operating earnings, which exclude interest expense, of the Automation business
were up $66 million over the year earlier quarter with equal contribution from
continued strong worldwide markets for Allen-Bradley products and the inclusion
of Reliance in this quarter's results. Automation's incoming orders increased
to $16.8 million per day, a 1.1 book to bill ratio. With Reliance operations
fully integrated with Allen-Bradley, Automation's sales and earnings in the
second half of this year are expected to be substantially ahead of last year's
second half.
In the company's other Electronics businesses, earnings of the Avionics business
were ahead of last year's second quarter primarily due to increased sales in its
commercial markets. The company expects Avionics will achieve continued
earnings improvements in the second half of 1995. As expected,
Telecommunications earnings in the quarter were below 1994, principally due to
continued pricing pressures on lower-speed data modems and launch costs
associated with the next generation high-speed data modem products. As
production of these new products continues to ramp up to meet strong demand, the
company expects higher Telecommunications earnings in the second half of 1995.
Earnings of Defense Electronics were below 1994's second quarter due to lower
sales.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Aerospace second quarter earnings were down nine percent primarily due to lower
award fees.
Automotive's second quarter earnings more than doubled last year's second
quarter. Heavy Vehicle Systems had a strong earnings increase resulting from a
16 percent increase in sales, improved operating performance and lower product
warranty costs. Light Vehicle Systems also recorded higher second quarter
earnings due to improved volume which more than offset higher new product launch
costs. Automotive's second quarter return on sales increased to 7.5 percent
compared to 3.9 percent in 1994's second quarter.
Earnings of the Graphic Systems business were substantially higher than 1994's
second quarter primarily due to increased sales, particularly in the higher-
margin large newspaper printing press business. While the Company expects
Graphic Systems earnings for the second half of 1995 will continue to be above
the comparable 1994 periods, total second half earnings are expected to be lower
than this year's first half.
The company's current year second quarter results were adversely affected by
higher corporate expenses, principally adjustments to reserves for costs related
to divested businesses. Interest expense for the second quarter increased due
to borrowings for the Reliance acquisition.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Six Months Ended March 31, 1995 Compared to Six Months Ended March 31, 1994
The contributions to sales and earnings by business segment of the company for
the six months ended March 31, 1995 and 1994 are presented below (in millions).
Six Months Ended
March 31
1995 1994
Sales
Electronics
Automation $ 1,546 $ 973
Avionics 574 607
Telecommunications 378 340
Defense Electronics 392 521
Total Electronics 2,890 2,441
Aerospace
Space Systems 923 1,004
Aircraft 264 264
Total Aerospace 1,187 1,268
Automotive
Heavy Vehicle Systems 963 832
Light Vehicle Systems 576 423
Total Automotive 1,539 1,255
Graphic Systems 368 287
Sales of ongoing businesses 5,984 5,251
Divested business 111
Total $ 5,984 $ 5,362
Operating Earnings
Electronics
Automation $ 229.6 $ 124.6
Avionics/Telecom/Defense 164.7 222.8
Total Electronics 394.3 347.4
Aerospace 171.7 175.3
Automotive 109.8 60.7
Graphic Systems 38.2 14.1
Operating earnings of ongoing businesses 714.0 597.5
Divested business 3.5
General corporate - net (56.3) (43.9)
Interest expense (67.6) (51.0)
Provision for income taxes (234.0) (201.9)
Net Income $ 356.1 $ 304.2<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Sales of $6 billion for the first six months of 1995 increased $622 million, or
12 percent, over the same period a year ago principally due to the inclusion of
second quarter sales of Reliance and to strong demand for the company's
Allen-Bradley Automation products and its Automotive heavy and light vehicle
components products. In addition, higher sales, particularly of large newspaper
printing presses, were recorded by the Graphic Systems business. Sales of the
company's Defense Electronics and Aerospace businesses were lower due to the
completion last year of a major defense electronics contract and reduced
government spending levels. Net income for the first six months of 1995 was up
17 percent over 1994's first half net income.
Electronics earnings for the first six months of fiscal 1995 were up 14 percent
from the same period a year ago due to substantial earnings increases in the
Automation business resulting from strong worldwide markets and the inclusion of
Reliance in the second quarter results. Avionics earnings were lower due to
depressed air transport markets in the first quarter and new product
investments. Earnings of the Telecommunications business were down significantly
due to pricing pressures on lower-speed data modems and launch costs associated
with the next generation high-speed data modem products. Defense Electronics
earnings were slightly below those of last year's first half due to lower sales.
Aerospace earnings for the first six months of 1995 were slightly below those of
the comparable 1994 period even though last year's earnings were reduced by a
cost adjustment on the AC-130U Gunship Program. Current year earnings were
adversely affected by lower sales and award fees.
Automotive's earnings for the first six months of 1995 increased 81 percent over
last year's first six months primarily due to substantial earnings growth in its
Heavy Vehicle Systems business resulting from strong North American truck
markets, improved operating performance and lower product warranty costs.
Earnings of Automotive's Light Vehicle Systems business were also up from last
year's first six months due to improved volume which more than offset higher new
product launch costs.
Earnings of the Graphic Systems business for the first half of 1995 improved
significantly from the year earlier due to increased sales particularly in the
higher-margin large newspaper printing press business.
FINANCIAL CONDITION
Changes to the company's financial condition since its September 30, 1994 fiscal
year-end are principally related to the inclusion of the assets and liabilities
of Reliance and the financing of the company's acquisition of Reliance (see
Note 2 of Notes to Financial Statements).
The company has financed the $1,586 million purchase price of Reliance through
$1,086 million of short-term debt and $500 million of long-term debt. The
company's total debt to total capital ratio (debt as a percent of shareowners'
equity plus debt) increased to 48 percent at March 31, 1995 from 23 percent at
September 30, 1994.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION (CONTINUED)
With the strong annual cash flow generated by the company's businesses and the
proceeds from the company's anticipated sale of Reliance's telecommunications
business, the company expects its debt to total capital ratio will return to the
25 to 35 percent range within a three-year period.
The company's working capital at March 31, 1995 was $1,423 million, down
$485 million from working capital at September 30, 1994. The decrease is
principally due to the $1,086 million short-term financing of the Reliance
acquisition at March 31, 1995 offset by the addition of $557 million in working
capital of Reliance.
During the second quarter, the company increased its 1995 plan for capital
expenditures from $575 million to $675 million to provide for capital spending
by the Reliance and other Automation operations as well as additional
expenditures in the company's Telecommunications business.
On March 31, 1995, the company filed amended claims with respect to contractual
disputes on the AC-130U gunship full-scale development and production contracts
increasing its claims to $547 million. While management cannot reasonably
estimate the length of time that will be required to resolve these claims, it
believes their resolution will not have a material adverse effect on the
company's financial statements.
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 18 - 19 of the
company's Annual Report on Form 10-K for the fiscal year ended September 30,
1994 and, with respect to Reliance, in Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations, on page 15 of the
company's Quarterly Report on Form 10-Q for the quarterly period ended December
31, 1994. Management believes that at March 31, 1995 there has been no material
change to this information.<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Other Financial Information
(a) The company's backlog on March 31, 1995 was $11.3 billion compared to
$11.7 billion on March 31, 1994. The backlog includes $4.7 billion of
commercial orders, $2.3 billion of funded government orders and
$4.3 billion of unfunded government orders. Backlog by major businesses
is as follows (in millions):
March 31 March 31
1995 1994
Electronics
Automation $ 647 $ 207
Avionics 1,119 1,136
Telecommunications 450 269
Defense Electronics 1,281 1,455
3,497 3,067
Aerospace
Space Systems 4,575 5,937
Aircraft 2,158 1,568
6,733 7,505
Automotive 592 619
Graphic Systems 507 541
Total Backlog $11,329 $11,732
(b) The composition of the company's sales by customer is as follows (in
millions):
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
U.S. Commercial $1,332 $ 917 $2,226 $1,771
International 1,115 854 2,036 1,657
U.S. Government:
DOD 550 571 1,011 1,128
NASA 364 419 711 806
Total $3,361 $2,761 $5,984 $5,362
<PAGE>
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended
March 31 March 31
1995 1994 1995 1994
(In millions, except per share amounts)
Primary earnings per share:
Net income...................... $191.4 $154.7 $356.1 $304.2
Deduct dividend requirements
on preferred stock............ 0.1 0.1 0.1 0.1
Total primary earnings.......... $191.3 $154.6 $356.0 $304.1
Average number of common
shares outstanding during
the period............... 217.0 221.1 217.5 221.1
Primary earnings per share...... $ .88 $ .70 $ 1.64 $ 1.38
Fully diluted earnings per share:
Net income...................... $191.4 $154.7 $356.1 $304.2
Average number of common shares
outstanding during the period
assuming full dilution:
Common stock................ 217.0 221.1 217.5 221.1
Assumed issuance of stock
under award plans and
conversion of preferred
stock..................... 4.1 4.7 4.2 4.6
Total fully diluted shares...... 221.1 225.8 221.7 225.7
Fully diluted earnings
per share.................... $ .87 $ .69 $ 1.61 $ 1.35
<PAGE>
PART II. OTHER INFORMATION
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
reasonable estimates, supported by the opinion of 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 3 - Copy of By-Laws of the company as
amended effective May 3, 1995
Exhibit 10 - Copy of letter dated February 1, 1995
from the company to Judith L. Estrin
Exhibit 11 - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to
Fixed Charges and Computation of Pro
Forma Ratio of Earnings to Fixed
Charges for the six months ended
March 31, 1995.
Exhibit 27 - Financial Data Schedule
Exhibit 99-a - Unaudited pro forma condensed
consolidated statement of income of
the company and Reliance for the six
months ended March 31, 1995.
Exhibit 99-b - Operating Earnings of the Company's
Electronics Businesses for each of
the five years in the period ended
September 30, 1994.
PART II. OTHER INFORMATION (CONTINUED)
Item 6. Exhibits and Reports on Form 8-K (Continued)
(b) Reports on Form 8-K:
The Registrant filed a Current Report on Form 8-K, dated
February 23, 1995, in respect of the issuance of $300 million
aggregate principal amount of its 7-5/8% Notes due February 17, 1998
and $200 million aggregate principal amount of its 7-7/8% Notes due
February 15, 2005. The items reported in such current report were
Item 5 (Other Events) and Item 7 (Financial Statements, Pro Forma
Financial Information and Exhibits).<PAGE>
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 10, 1995 By L. J. Komatz
L. J. Komatz
Vice President and Controller
(Principal Accounting Officer)
Date May 10, 1995 By W. J. Calise, Jr.
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX OF EXHIBITS TO FORM 10-Q
FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1995
Page
Exhibit 3 Copy of By-Laws of the company as amended
effective May 3, 1995 23
Exhibit 10 Copy of letter dated February 1, 1995 from the
company to Judith L. Estrin 50
Exhibit 12 Computation of Ratio of Earnings to Fixed
Charges and Computation of Pro Forma Ratio of
Earnings to Fixed Charges for the six months
ended March 31, 1995 51
Exhibit 99-a Unaudited pro forma condensed consolidated
statement of income of the company and Reliance
for the six months ended March 31, 1995. 52
Exhibit 99-b Operating Earnings of the Company's Electronics
Businesses for each of the five years in the
period ended September 30, 1994. 55
<PAGE>
BY-LAWS
of Rockwell International Corporation
As Amended Effective May 3, 1995
<PAGE>
BY-LAWS
OF
Rockwell International Corporation
ARTICLE I.
Offices
SECTION 1. Registered Office in Delaware; Resident Agent. The
address of the Corporation's registered office in the State of Delaware and the
name and address of its resident agent in charge thereof are as filed with the
Secretary of State of the State of Delaware.
SECTION 2. Other Offices. The Corporation may also have an office or
offices at such other place or places either within or without the State of
Delaware as the Board of Directors may from time to time determine or the
business of the Corporation requires.
ARTICLE II.
Meetings Of Stockholders
SECTION 1. Place of Meetings. All meetings of the stockholders of the
Corporation shall be held in the City of Los Angeles, State of California, or at
such other place, within or without the State of Delaware, as may from time to
time be designated by resolution passed by the Board of Directors.
SECTION 2. Annual Meeting. An annual meeting of the stockholders for
the election of directors and for the transaction of such other proper business,
notice of which was given in the notice of meeting, shall be held on a date and
at a time as may from time to time be designated by resolution passed by the
Board of Directors.
SECTION 3. Special Meetings. A special meeting of the stockholders for
any purpose or purposes, unless otherwise prescribed by law, may be called at
any time by the Chairman of the Board, by order of the Board of Directors or by
a stockholder or stockholders holding of record at least twenty percent of the
outstanding stock of the Corporation entitled to vote at such meeting.
SECTION 4. Notice of Meetings. Except as otherwise provided by law,
written notice of each meeting of the stockholders, whether annual or special,
shall be mailed, postage prepaid, not less than ten nor more than sixty days
before the date of the meeting, to each stockholder entitled to vote at such
meeting, at his address as it appears on the records of the Corporation. Every
such notice shall state the place, date and hour of the meeting and, in the case
of a special meeting, the purpose or purposes for which the meeting is called.
Notice of any adjourned meeting of the stockholders shall not be required to be
given, except when expressly required by law.
SECTION 5. List of Stockholders. The Secretary shall, from information
obtained from the transfer agent, prepare and make, at least ten days before
every meeting of stockholders, a complete list of the stockholders entitled to
vote at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder, for
any purpose germane to the meeting, during ordinary business hours, for a period
of at least ten days prior to the meeting, either at a place within the city
where the meeting is to be held, which place shall be specified in the notice of
the meeting, or if not so specified, at the place where the meeting is to be
held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any stockholder
who is present. The stock ledger shall be the only evidence as to who are the
stockholders entitled to examine the stock ledger, the list referred to in this
section or the books of the Corporation, or to vote in person or by proxy at any
meeting of stockholders.
SECTION 6. Quorum. At each meeting of the stockholders, the holders of
a majority of the issued and outstanding stock of the Corporation present either
in person or by proxy shall constitute a quorum for the transaction of business
except where otherwise provided by law for a specified action or by the
Certificate of Incorporation or by these by-laws. At each meeting at which the
holders of the Preferred Stock are entitled to elect a director or directors,
the holders of a majority of the issued and outstanding Preferred Stock, present
either in person or by proxy, shall constitute a quorum for the election of said
director or directors. Except as otherwise provided by law, in the absence of a
quorum, a majority in interest of the stockholders of the Corporation present in
person or by proxy and entitled to vote shall have the power to adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until stockholders holding the requisite amount of stock shall be
present or represented. At any such adjourned meeting at which a quorum may be
present, any business may be transacted which might have been transacted at a
meeting as originally called. The absence from any meeting of the number
required by law or by the Certificate of Incorporation or by these by-laws for
action upon any given matter shall not prevent action at such meeting upon any
other matter or matters which may properly come before the meeting, if the
number of stockholders required in respect of such other matter or matters
shall be present.
SECTION 7. Organization. At every meeting of the stockholders the
Chairman of the Board, or, in his absence, an Executive Vice President or
director designated by the Board shall act as Chairman. The Secretary, or, in
his absence, an Assistant Secretary, shall act as Secretary at all meetings of
the stockholders. In the absence from any such meeting of the Secretary and the
Assistant Secretaries, the Chairman may appoint any person to act as Secretary
of the meeting.
SECTION 8. Business and Order of Business. At each meeting of the
stockholders such business may be transacted as may properly be brought before
such meeting, except as otherwise provided by law or in these by-laws. The
order of business at all meetings of the stockholders shall be as determined by
the Chairman, unless otherwise determined by a majority in interest of the
stockholders present in person or by proxy at such meeting and entitled to vote
thereat.
SECTION 9. Voting. Except as otherwise provided by law, the
Certificate of Incorporation or these by-laws, each stockholder shall at every
meeting of the stockholders be entitled to one vote for each share of stock held
by such stockholder. Any vote on stock may be given by the stockholder entitled
thereto in person or by his proxy appointed by an instrument in writing,
subscribed (or transmitted by electronic means and authenticated as provided by
law) by such stockholder or by his attorney thereunto authorized, and delivered
to the Secretary; provided, however, that no proxy shall be voted on after three
years from its date unless the proxy provides for a longer period. Except as
otherwise provided by law, the Certificate of Incorporation or these by-laws, at
all meetings of the stockholders, all matters shall be decided by the vote
(which need not be by ballot) of a majority in interest of the stockholders
present in person or by proxy and entitled to vote thereat, a quorum being
present.
ARTICLE III.
Board of Directors
SECTION 1. General Powers. The property, affairs and business of the
Corporation shall be managed by or under the direction of its Board of
Directors.
SECTION 2. Number, Qualifications, and Term of Office. The number
of directors shall be thirteen, but the number may be increased, or may be
reduced to not less than three, by amendment of these by-laws or by resolution
passed by a majority of the whole Board. Directors need not be stockholders.
Except as otherwise provided in these by-laws, the directors shall be elected
annually, and each director shall hold office until the annual meeting held next
after his election and until his successor shall have been elected and shall
qualify, or until his death or until he shall resign or shall have been removed
in the manner hereinafter provided.
SECTION 3. Election of Directors. At each meeting of the stockholders
for the election of directors, at which a quorum is present, the directors shall
be the persons receiving the greatest number of votes cast by the holders of
stock entitled to vote for such directors.
SECTION 4. Quorum and Manner of Acting. A majority of the members of the
Board of Directors shall constitute a quorum for the transaction of business at
any meeting, and the act of a majority of the directors present at any meeting
at which a quorum is present shall be the act of the Board of Directors unless
otherwise provided by law, the Certificate of Incorporation or these by-laws. In
the absence of a quorum, a majority of the directors present may adjourn any
meeting from time to time until a quorum shall be obtained. Notice of any
adjourned meeting need not be given. The directors shall act only as a board
and the individual directors shall have no power as such.
<PAGE>
SECTION 5. Place of Meetings. The Board of Directors may hold its
meetings at such place or places within or without the State of Delaware as the
Board may from time to time determine or as shall be specified or fixed in the
respective notices or waivers of notice thereof.
SECTION 6. First Meeting. Promptly after each annual election of
directors, the Board of Directors shall meet for the purpose of organization,
the election of officers and the transaction of other business, at the same
place as that at which the annual meeting of stockholders was held or as
otherwise determined by the Board. Notice of such meeting need not be given.
Such meeting may be held at any other time or place which shall be specified in
a notice given as hereinafter provided for special meetings of the Board of
Directors.
SECTION 7. Regular Meetings. Regular meetings of the Board of
Directors shall be held at such places and at such times as the Board shall from
time to time determine. If any day fixed for a regular meeting shall be a legal
holiday at the place where the meeting is to be held, then the meeting which
would otherwise be held on that day shall be held at the same hour on the next
succeeding business day not a legal holiday. Notice of regular meetings need
not be given.
SECTION 8. Special Meetings; Notice. Special meetings of the Board
of Directors shall be held whenever called by the Chairman of the Board and
shall be called by him or the Secretary at the written request of three
directors. Notice of each such meeting stating the time and place of the
meeting shall be given to each director by mail, telephone or personally. If by
mail, such notice shall be given not less than five days before the meeting; and
if by telephone or personally, not less than two days before the meeting. A
notice mailed at least two weeks before the meeting need not state the purpose
thereof except as otherwise provided in these by-laws. In all other cases the
notice shall state the principal purpose or purposes of the meeting. Notice of
any meeting of the Board need not be given to a director, however, if waived by
him in writing before or after such meeting or if he shall be present at the
meeting.
SECTION 9. Organization. At each meeting of the Board of Directors,
the Chairman of the Board, or, in his absence, an Executive Vice President or
director designated by the Board shall act as Chairman. The Secretary, or, in
his absence, an Assistant Secretary, or in the absence of both the Secretary and
the Assistant Secretaries, any person appointed by the Chairman, shall act as
Secretary of the meeting.
SECTION 10. Order of Business. At all meetings of the Board of
Directors, business shall be transacted in the order determined by the Board.
SECTION 11. Resignations. Any director of the Corporation may resign
at any time by giving written notice to the Chairman of the Board or to the
Secretary of the Corporation. The resignation of any director shall take effect
at the time specified therein, and unless otherwise specified therein, the
acceptance of such resignation shall not be necessary to make it effective.
SECTION 12. Removal of Directors. Any director may be removed,
either with or without cause, at any time, by the affirmative vote of a majority
in interest of the holders of record of the stock having voting power at a
special meeting of the stockholders called for the purpose; and the vacancy in
the Board of Directors caused by any such removal may be filled by the
stockholders at such meeting; provided, that a director elected by the holders
of the Preferred Stock, voting as a class, may be so removed only by the
affirmative vote of a majority in interest of the holders of record of such
Preferred Stock, and the vacancy in the Board of Directors caused by such
removal may be filled as provided in the Certificate of Incorporation.
SECTION 13. Vacancies. Any vacancy in the Board of Directors caused
by death, resignation, removal, disability, disqualification, an increase in the
number of directors, or any other cause (except a vacancy in the office of a
director elected by the holders of the Preferred Stock, voting as a class) may
be filled by the majority vote of the remaining directors, though less than a
quorum, or by the stockholders of the Corporation at the next annual meeting or
any special meeting called for the purpose, and each director so elected shall
hold office for a term to expire at the next annual election of directors, and
until his successor shall be duly elected and qualified, or until his death or
until he shall resign or shall have been removed in the manner herein provided.
A vacancy in the office of a director elected by the holders of the Preferred
Stock, voting as a class, may be filled as provided in the Certificate of
Incorporation. In case all the directors shall die or resign or be removed or
disqualified, any stockholder having voting powers may call a special meeting of
the stockholders, upon notice given as herein provided for meetings of the
stockholders, at which directors for the unexpired terms may be elected.
SECTION 14. Compensation. Each director shall be paid such
compensation, if any, as shall be fixed by the Board of Directors.
SECTION 15. Indemnification of Directors and Officers. (A) The
Corporation shall indemnify any person who was or is a party or is threatened to
be made a party to any threatened, pending or completed action, suit or
proceeding, whether civil, criminal, administrative or investigative (other
than an action by or in the right of the Corporation) by reason of the fact that
he is or was a director, officer, employee or agent of the Corporation or is or
was serving at the request of the Corporation as a director, officer, employee
or agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions that
supersede or abrogate indemnification under this section) of another corporation
or of any partnership, joint venture, trust, employee benefit plan or other
enterprise, against expenses (including attorney's fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful. The termination of any
action, suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best
interests of the Corporation, and, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(B) The Corporation shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or completed
action or suit by or in the right of the Corporation to procure a judgment in
its favor by reason of the fact that he is or was a director, officer, employee
or agent of the Corporation, or is or was serving at the request of the
Corporation as a director, officer, employee or agent (except in each of the
foregoing situations to the extent any agreement, arrangement or understanding
of agency contains provisions that supersede or abrogate indemnification under
this section) of another corporation or of any partnership, joint venture,
trust, employee benefit plan or other enterprise against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection with the
defense or settlement of such action or suit if he acted in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation and except that no indemnification shall be made in respect of
any claim, issue or matter as to which such person shall have been adjudged to
be liable to the Corporation unless and only to the extent that the Court of
Chancery of Delaware or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person
is fairly and reasonably entitled to indemnity for such expenses which the
Court of Chancery of Delaware or such other court shall deem proper.
(C) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in defense of any
action, suit or proceeding referred to in subsections (A) and (B), or in defense
of any claim, issue or matter therein, he shall be indemnified against expenses
(including attorneys' fees) actually and reasonably incurred by him or on his
behalf in connection therewith. If any such person is not wholly successful in
any such action, suit or proceeding but is successful, on the merits or
otherwise, as to one or more but less than all claims, issues or matters
therein, the Corporation shall indemnify him against all expenses (including
attorneys' fees) actually and reasonably incurred by him or on his behalf in
connection with each claim, issue or matter that is successfully resolved. For
purposes of this subsection and without limitation, the termination of any
claim, issue or matter by dismissal, with or without prejudice, shall be deemed
to be a successful result as to such claim, issue or matter.
(D) Notwithstanding any other provision of this section, to the extent any
person is a witness in, but not a party to, any action, suit or proceeding,
whether civil, criminal, administrative or investigative, by reason of the fact
that he is or was a director, officer, employee or agent of the Corporation, or
is or was serving at the request of the Corporation as a director, officer,
employee or agent (except in each of the foregoing situations to the extent any
agreement, arrangement or understanding of agency contains provisions that
supersede or abrogate indemnification under this section) of another corporation
or of any partnership, joint venture, trust, employee benefit plan or other
enterprise, he shall be indemnified against all expenses (including attorneys'
fees) actually and reasonably incurred by him or on his behalf in connection
therewith.
(E) Indemnification under subsections (A) and (B) (unless ordered by
a court) shall be made only as authorized in the specific case upon a deter-
mination that indemnification of the director, officer, employee or agent is
proper in the circumstances because he has met the applicable standard of
conduct set forth in subsections (A) and (B). Such determination shall be made
(1) if a Change of Control (as hereinafter defined) shall not have occurred, (a)
by the Board of Directors by a majority vote of the Disinterested Directors (as
hereinafter defined), even though less than a quorum or (b) if there are no
Disinterested Directors or, even if there are Disinterested Directors, a
majority of such Disinterested Directors so directs, by (i) Independent Counsel
(as hereinafter defined) in a written opinion to the Board of Directors, a copy
of which shall be delivered to the claimant, or (ii) the stockholders of the
Corporation; or (2) if a Change of Control shall have occurred, by Independent
Counsel selected by the claimant in a written opinion to the Board of Directors,
a copy of which shall be delivered to the claimant, unless the claimant shall
request that such determination be made by or at the direction of the Board of
Directors, in which case it shall be made in accordance with clause (1) of this
sentence. Any claimant shall be entitled to be indemnified against the expenses
(including attorneys' fees) actually and reasonably incurred by him in
cooperating with the person or entity making the determination of his
entitlement to indemnification (irrespective of the determination as to the
claimant's entitlement to indemnification) and, to the extent successful, in
connection with any litigation or arbitration with respect to such claim or the
enforcement thereof.
(F) If a Change of Control shall not have occurred, or if a Change of
Control shall have occurred and a director, officer, employee or agent requests
pursuant to clause (2) of the second sentence in subsection (E) that the
determination whether the claimant is entitled to indemnification be made by or
at the direction of the Board of Directors, the claimant shall be conclusively
presumed to have been determined pursuant to subsection (E) to be entitled to
indemnification if (1)(a) within fifteen days after the next regularly scheduled
meeting of the Board of Directors following receipt by the Corporation of the
request therefor, the Board of Directors shall not have resolved by majority
vote of the Disinterested Directors to submit such determination to (i)
Independent Counsel for its determination or (ii) the stockholders for their
determination at the next annual meeting, or any special meeting that may be
held earlier, after such receipt, and (b) within sixty days after receipt by the
Corporation of the request therefor (or within ninety days after such receipt if
the Board of Directors in good faith determines that additional time is required
by it for the determination and, prior to expiration of such sixty-day period,
notifies the claimant thereof), the Board of Directors shall not have made the
determination by a majority vote of the Disinterested Directors, or (2) after a
resolution of the Board of Directors, timely made pursuant to clause (1)(a)(ii)
above, to submit the determination to the stockholders, the stockholders meeting
at which the determination is to be made shall not have been held on or before
the date prescribed (or on or before a later date, not to exceed sixty days
beyond the original date, to which such meeting may have been
postponed or adjourned on good cause by the Board of Directors acting in
good faith); provided, however, that this sentence shall not apply if the
claimant has misstated or failed to state a material fact in connection with his
request for indemnification. Such presumed determination that a claimant is
entitled to indemnification shall be deemed to have been made (I) at the end of
the sixty-day or ninety-day period (as the case may be) referred to in clause
(1)(b) of the immediately preceding sentence or (II) if the Board of Directors
has resolved on a timely basis to submit the determination to the stockholders,
on the last date within the period prescribed by law for holding such
stockholders meeting (or a postponement or adjournment thereof as permitted
above).
(G) Expenses (including attorneys' fees) incurred in defending a civil,
criminal, administrative or investigative action, suit or proceeding shall be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding to a director or officer, promptly after receipt of a request
therefor stating in reasonable detail the expenses incurred, and to an employee
or agent as authorized by the Board of Directors; provided that in each case the
Corporation shall have received an undertaking by or on behalf of the director,
officer, employee or agent to repay such amount if it shall ultimately be
determined that he is not entitled to be indemnified by the Corporation as
authorized in this section.
(H) The Board of Directors shall establish reasonable procedures for the
submission of claims for indemnification pursuant to this section, determination
of the entitlement of any person thereto and review of any such determination.
Such procedures shall be set forth in an appendix to these by-laws and shall be
deemed for all purposes to be a part hereof.
(I) For purposes of this section,
(1) "Change of Control" means a change of control of the Corporation
of a nature that would be required to be reported in response to Item
5(f) of Schedule 14A of Regulation 14A (or in response to any similar item on
any similar schedule or form) promulgated under the Securities Exchange Act of
1934 (the "Act"), whether or not the Corporation is then subject to such
reporting requirement; provided, however, that, without limitation, a Change of
Control shall be deemed to have occurred if (i) any "person" (as such term is
used in Sections 13(d) and 14(d) of the Act) is or becomes the "beneficial
owner" (as defined in Rule 13d-3 under the Act), directly or indirectly, of
securities of the Corporation representing 20% or more of the combined voting
power of the Corporation's then outstanding securities without the prior
approval of at least two-thirds of the members of the Board of Directors in
office immediately prior to such person attaining such percentage interest; (ii)
the Corporation is a party to a merger, consolidation, sale of assets or other
reorganization, or a proxy contest, as a consequence of which members of the
Board of Directors in office immediately prior to such transaction or event
constitute less than a majority of the Board of Directors immediately
thereafter; or (iii) during any period of two consecutive years, individuals who
at the beginning of such period constituted the Board of Directors (including
for this purpose any new director whose election or nomination for election by
the Corporation's stockholders was approved by a vote of at least two-thirds of
the directors then still in office who were directors at the beginning
of such period) cease for any reason to constitute at least a
majority of the Board of Directors.
(2) "Disinterested Director" means a director of the Corporation
who is not and was not a party to an action, suit or proceeding in respect of
which indemnification is sought by a director, officer, employee or agent.
(3) "Independent Counsel" means a law firm, or a member of a
law firm, that (i) is experienced in matters of corporation law; (ii) neither
presently is, nor in the past five years has been, retained to represent the
Corporation, the director, officer, employee or agent claiming indemnification
or any other party to the action, suit, or proceeding giving rise to a claim for
indemnification under this section, in any matter material to the Corporation,
the claimant or any such other party, and (iii) would not, under applicable
standards of professional conduct then prevailing, have a conflict of interest
in representing either the Corporation or such director, officer, employee or
agent in an action to determine the Corporation's or such person's rights under
this section.
(J) The Indemnification and advancement of expenses herein provided,
or granted pursuant hereto, shall not be deemed exclusive of any other rights to
which any of those indemnified or eligible for advancement of expenses may be
entitled under any agreement, vote of stockholders or Disinterested Directors or
otherwise, both as to action in his official capacity and as to action in
another capacity while holding such office, and shall continue as to a person
who has ceased to be a director, officer, employee or agent and shall inure to
the benefit of the heirs, executors and administrators of such person.
Notwithstanding any amendment, alteration or repeal of this section or any of
its provisions, or of any of the procedures established by the Board of
Directors pursuant to subsection (H) hereof, any person who is or was a
director, officer, employee or agent of the Corporation or
is or was serving at the request of the Corporation as a director,
officer, employee or agent of another corporation or of any partnership, joint
venture, employee benefit plan or other enterprise shall be entitled to
indemnification in accordance with the provisions hereof and thereof with
respect to any action taken or omitted prior to such amendment, alteration or
repeal except to the extent otherwise required by law.
(K) No indemnification shall be payable pursuant to this section with
respect to any action against the Corporation commenced by an officer, director,
employee or agent unless the Board of Directors shall have authorized the
commencement thereof or unless and to the extent that this section or the
procedures established pursuant to subsection (H) shall specifically provide for
indemnification of expenses relating to the enforcement of rights under this
section and such procedures.
ARTICLE IV.
Committees
SECTION 1. Appointment and Powers. The Board of Directors may, by
resolution passed by a majority of the whole Board, designate one or more
committees, each committee to consist of two or more of the directors of the
Corporation, which, to the extent provided in said resolution or in these by-
laws, shall have and may exercise the powers of the Board of Directors in the
management of the business and affairs of the Corporation, and may authorize the
seal of the Corporation to be affixed to all papers which may require it. Such
committee or committees shall have such name or names as may be stated in
these by-laws or as may be determined from time to time by resolution adopted
by the Board of Directors.
SECTION 2. Term of Office and Vacancies. Each member of a committee
shall continue in office until a director to succeed him shall have been
elected and shall have qualified, or until he ceases to be a director or until
he shall have resigned or shall have been removed in the manner hereinafter
provided. Any vacancy in a committee shall be filled by the vote of a majority
of the whole Board of Directors at any regular or special meeting thereof.
SECTION 3. Alternates. The Board of Directors may, by resolution
passed by a majority of the whole Board, designate one or more directors as
alternate members of any committee, who may replace any absent or disqualified
member at any meeting of the committee.
SECTION 4. Organization. Unless otherwise provided by the Board of
Directors or these by-laws, each committee shall appoint a chairman. Each
committee shall keep a record of its acts and proceedings and report the same
from time to time to the Board of Directors.
SECTION 5. Resignations. Any regular or alternate member of a committee
may resign at any time by giving written notice to the Chairman of the Board
or to the Secretary of the Corporation. Such resignation shall take effect at
the time of the receipt of such notice or at any later time specified therein,
and, unless otherwise specified therein, the acceptance of such resignation
shall not be necessary to make it effective.
SECTION 6. Removal. Any regular or alternate member of a committee
may be removed with or without cause at any time by resolution passed by a
majority of the whole Board of Directors at any regular or special meeting for
which notice of the purpose was given.
SECTION 7. Meetings. Regular meetings of each committee, of which no
notice shall be necessary, shall be held on such days and at such places as the
chairman of the committee shall determine or as shall be fixed by a resolution
passed by a majority of all the members of such committee. Special meetings of
each committee will be called by the Secretary at the request of any two members
of such committee, or in such other manner as may be determined by the
committee. Notice of each special meeting of a committee shall be mailed to
each member thereof at least two days before the meeting or shall be telegraphed
to him or given personally or by telephone at least one day before the meeting.
Every such notice shall state the time and place, but need not state the
purposes of the meeting. No notice of any meeting of a committee shall be
required to be given to any alternate.
SECTION 8. Quorum and Manner of Acting. Unless otherwise provided
by resolution of the Board of Directors, a majority of a committee (including
alternates when acting in lieu of regular members of such committee) shall
constitute a quorum for the transaction of business and the act of a majority of
those present at a meeting at which a quorum is present shall be the act of such
committee. The members of each committee shall act only as a committee and
the individual members shall have no power as such.
SECTION 9. Compensation. Each regular or alternate member of a
committee shall be paid such compensation, if any, as shall be fixed by the
Board of Directors.
ARTICLE V.
Officers
SECTION 1. Officers. The officers of the Corporation shall be a
Chairman and a Vice Chairman of the Board of Directors, each of whom shall
be chosen from the members of the Board of Directors, one or more Executive
Vice Presidents, one or more Vice Presidents (one or more of whom may be
Senior Vice Presidents or otherwise as may be designated by the Board), a
Secretary and a Treasurer, all of whom shall be elected by the Board of
Directors. Any two or more offices may be held by the same person. The Board
of Directors may also from time to time elect such other officers as it deems
necessary.
SECTION 2. Term of Office. Each officer shall hold office until his
successor shall have been duly elected and qualified in his stead, or until
his death or until he shall have resigned or shall have been removed in the
manner hereinafter provided.
SECTION 3. Additional Officers; Agents. The Chairman of the Board
may from time to time appoint and remove such additional officers and agents as
may be deemed necessary. They shall hold office for such period, have such
authority, and perform such duties as in these by-laws provided or as the
Chairman of the Board or an Executive Vice President may from time to time
prescribe. The Board of Directors or the Chairman of the Board may from time
to time authorize any officer to appoint and remove agents and employees and to
prescribe their powers and duties.
SECTION 4. Salaries. Unless otherwise provided by resolution passed
by a majority of the whole Board, the salaries of all officers elected by the
Board of Directors shall be fixed by the Board of Directors.
SECTION 5. Removal. Except where otherwise expressly provided in
a contract authorized by the Board of Directors, any officer may be removed,
either with or without cause, by the vote of a majority of the Board at any
regular or special meeting or, except in the case of an officer elected by the
Board, by any superior officer upon whom the power of removal may be conferred
by the Board or by these by-laws.
SECTION 6. Resignations. Any officer elected by the Board of Directors
may resign at any time by giving written notice to the Board or to the Chairman
of the Board or to the Secretary. Any other officer may resign at any time by
giving written notice to the Chairman of the Board or to an Executive Vice
President. Any such resignation shall take effect at the date of receipt of
such notice or at any later time specified therein, and unless otherwise
specified therein, the acceptance of such resignation shall not be necessary
to make it effective.
SECTION 7. Vacancies. A vacancy in any office because of death,
resignation, removal, or otherwise, shall be filled for the unexpired portion
of the term in the manner provided in these by-laws for regular election or
appointment to such office.
SECTION 8. Chairman of the Board of Directors. The Chairman of the Board
of Directors shall be chief executive officer of the Corporation and, subject
to the control of the Board of Directors, shall have general and overall charge
of the business and affairs of the Corporation and of its officers. He shall
keep the Board of Directors appropriately informed on the business and affairs
of the Corporation. He shall preside at all meetings of the stockholders and of
the Board of Directors and shall enforce the observance of the rules of order
for the meetings of the Board and the stockholders and the by-laws of the
Corporation. In the case of his absence or disability, the person who may be
designated by the Board of Directors shall perform all his duties and functions
and exercise all his powers and be subject to all the restrictions as are
applicable to him.
SECTION 9. Executive Vice Presidents. One or more Executive Vice
Presidents shall be chief operating officers of components of the Corporation
designated by the Chairman of the Board and, subject to the control of the
Chairman of the Board, shall direct and be responsible for the operation of the
business and affairs of such designated components of the Corporation. Each
Executive Vice President shall keep the Chairman of the Board and, as he or it
may request, the Board of Directors, appropriately informed on the business and
affairs of the designated components of the Corporation.
SECTION 10. Vice Chairman of the Board of Directors. The Vice Chairman
of the Board of Directors shall be senior advisor to the chief executive and
chief operating officers of the Corporation and, subject to the control of the
Chairman of the Board, shall perform such duties as may from time to time be
assigned by the Chairman of the Board or the Executive Vice Presidents.
SECTION 11. Vice Presidents. The Vice Presidents shall perform such
duties as may from time to time be assigned to them or any of them by the
Chairman of the Board, an Executive Vice President or the Board of Directors.
SECTION 12. Secretary. The Secretary shall keep or cause to be kept in
books provided for the purpose the minutes of the meetings of the stockholders,
of the Board of Directors and of any committee constituted pursuant to
Article IV of these by-laws. He shall be custodian of the corporate seal and
see that it is affixed to all documents as required and attest the same. He
shall perform all duties incident to the office of Secretary and such other
duties as from time to time may be assigned to him.
SECTION 13. Assistant Secretaries. At the request of the Secretary, or
in his absence or disability, the Assistant Secretary designated by him shall
perform all the duties of the Secretary and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Secretary. The
Assistant Secretaries shall perform such other duties as from time to time may
be assigned to them.
SECTION 14. Treasurer. The Treasurer shall have charge of and be
responsible for the receipt, disbursement and safekeeping of all funds and
securities of the Corporation. He shall deposit all such funds in the name of
the Corporation in such banks, trust companies or other depositories as shall be
selected in accordance with the provisions of these by-laws. From time to time
and whenever requested to do so, he shall render statements of the condition of
the finances of the Corporation to the Board of Directors. He shall perform all
the duties incident to the office of Treasurer and such other duties as from
time to time may be assigned to him.
SECTION 15. Assistant Treasurers. At the request of the Treasurer, or
in his absence or disability, the Assistant Treasurer designated by him shall
perform all the duties of the Treasurer and, when so acting, shall have all the
powers of, and be subject to all the restrictions upon, the Treasurer. The
Assistant Treasurers shall perform such other duties as from time to time may be
assigned to them.
SECTION 16. Certain Agreements. The Board of Directors shall have power
to authorize or direct the proper officers of the Corporation, on behalf of
the Corporation, to enter into valid and binding agreements in respect of
employment, incentive or deferred compensation, stock options, and similar or
related matters, notwithstanding the fact that a person with whom the
Corporation so contracts may be a member of its Board of Directors. Any such
agreement may validly and lawfully bind the Corporation for a term of more than
one year, in accordance with its terms, notwithstanding the fact that one of the
elements of any such agreement may involve the employment by the Corporation of
an officer, as such, for such term.
ARTICLE VI.
Authorizations
SECTION 1. Contracts. The Board of Directors, except as in these by-
laws otherwise provided, may authorize any officer, employee or agent of the
Corporation to enter into any contract or execute and deliver any instrument in
the name of and on behalf of the Corporation, and such authority may be general
or confined to specific instances.
SECTION 2. Loans. No loan shall be contracted on behalf of the
Corporation and no negotiable paper shall be issued in its name, unless
authorized by the Board of Directors.
SECTION 3. Checks, Drafts, Etc. All checks, drafts or other orders for
the payment of money, notes or other evidences of indebtedness issued in the
name of the Corporation shall be signed by such officer or officers, employee or
employees, of the Corporation as shall from time to time be determined in
accordance with authorization of the Board of Directors.
SECTION 4. Deposits. All funds of the Corporation shall be deposited from
time to time to the credit of the Corporation in such banks, trust companies
or other depositories as the Board of Directors may from time to time designate,
or as may be designated by any officer or officers of the Corporation to whom
such power may be delegated by the Board, and for the purpose of such deposit
the officers and employees who have been authorized to do so in accordance with
the determinations of the Board may endorse, assign and deliver checks, drafts,
and other orders for the payment of money which are payable to the order of the
Corporation.
SECTION 5. Proxies. Except as otherwise provided in these by-laws or
in the Certificate of Incorporation, and unless otherwise provided by resolution
of the Board of Directors, the Chairman of the Board, or any other officer may
from time to time appoint an attorney or attorneys or agent or agents of the
Corporation, in the name and on behalf of the Corporation to cast the votes
which the Corporation may be entitled to cast as a stockholder or otherwise in
any other corporation any of whose stock or other securities may be held by the
Corporation, at meetings of the holders of the stock or other securities of such
other corporations, or to consent in writing to any action by such other
corporation, and may instruct the person or persons so appointed as to the
manner of casting such vote or giving such consent, and may execute or cause to
be executed in the name and on behalf of the Corporation and under its
corporate seal, or otherwise, all such written proxies or other instruments as
he may deem necessary or proper in the premises.
<PAGE>
ARTICLE VII.
Shares and Their Transfer
SECTION 1. Certificates of Stock. Certificates for shares of the stock
of the Corporation shall be in such form as shall be approved by the Board of
Directors. They shall be numbered in the order of their issue, by class and
series, and shall be signed by the Chairman of the Board, an Executive Vice
President or a Vice President, and the Treasurer or an Assistant Treasurer, or
the Secretary or an Assistant Secretary, of the Corporation. If such
certificate is countersigned (1) by a transfer agent other than the Corporation
or its employee, or, (2) by a registrar other than the Corporation or its
employee, any other signature on the certificate may be a facsimile. In case
any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it
may be issued by the Corporation with the same effect as
if he were such officer, transfer agent, or registrar at the date of issue.
SECTION 2. Record Ownership. A record of the name and address of
the holder of each certificate, the number of shares represented thereby and the
date of issuance thereof shall be made on the Corporation's books. The
Corporation shall be entitled to treat the holder of record of any share of
stock as the holder in fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to or interest in such share on the part
of any other person, whether or not it shall have express or other notice
thereof, except as required by law.
SECTION 3. Transfer of Stock. Shares of stock shall be transferable on the
books of the Corporation by the person named in the certificate for such stock
in person or by his attorney or other duly constituted representative upon
surrender of such certificate with an assignment endorsed thereon or attached
thereto duly executed and with such guarantee of signature as the Corporation
may reasonably require.
SECTION 4. Lost, Destroyed and Mutilated Certificates. The Corporation
may issue a new certificate of stock in the place of any certificate
theretofore issued by it, alleged to have been lost, stolen or destroyed, and
the Corporation may require the owner of the lost, stolen or destroyed
certificate, or his legal representative, to give the Corporation a bond
sufficient to indemnify it against any claim that may be made against it on
account of the alleged loss, theft or destruction of any such certificate or
the issuance of such new certificate.
SECTION 5. Transfer Agent and Registrar; Regulations. The
Corporation shall, if and whenever the Board of Directors shall so determine,
maintain one or more transfer offices or agencies, each in charge of a transfer
agent designated by the Board of Directors, where the shares of the stock of the
Corporation shall be directly transferable, and also one or more registry
offices, each in charge of a registrar designated by the Board of Directors,
where such shares of stock shall be registered, and no certificate for shares
of the stock of the Corporation, in respect of which a registrar and
transfer agent shall have been designated, shall be valid unless
countersigned by such transfer agent and registered by such registrar.
The Board of Directors may also make such additional rules and regulations
as it may deem expedient concerning the issue, transfer and
registration of certificates for shares of stock of the Corporation.
SECTION 6. Fixing Record Date. For the purpose of determining the
stockholders entitled to notice of or to vote at any meeting of stockholders or
any adjournment thereof, or to express consent to corporate action in
writing without a meeting, or entitled to receive payment of any dividend
or other distribution or allotment of any rights, or entitled to exercise
any rights in respect of any change, conversion or exchange of stock
or for the purpose of any other lawful action, the Board of Directors
may fix, in advance, a record date, which shall not be more than sixty nor
less than ten days before the date of such meeting, nor more than sixty days
prior to any other action. If no record date is fixed (1) the record date
for determining stockholders entitled to notice of or to vote at a meeting of
stockholders shall be at the close of business on the day next preceding the day
on which notice is given, or, if notice is waived, at the close of business
on the day next preceding the day on which the meeting is held and (2) the
record date for determining stockholders for any other purpose shall be at
the close of business on the day on which the Board of Directors adopts the
resolution relating thereto. A determination of stockholders of record
entitled to notice of or to vote at a meeting of stockholders shall apply to
any adjournment of the meeting; provided, however, that the Board of
Directors may fix a new record date for the adjourned meeting.
SECTION 7. Examination of Books by Stockholders. The Board of
Directors shall, subject to the laws of the State of Delaware, have power to
determine from time to time, whether and to what extent and under what
conditions and regulations the accounts and books of the Corporation, or any of
them, shall be open to the inspection of the stockholders; and no stockholder
shall have any right to inspect any book or document of the Corporation,
except as conferred by the laws of the State of Delaware, unless and until
authorized so to do by resolution of the Board of Directors or of the
stockholders of the Corporation.
ARTICLE VIII.
Notice
SECTION 1. Manner of Giving Written Notice. Any notice in writing
required by law or by these by-laws to be given to any person may be delivered
personally or may be given by depositing the same in the post office or letter
box in a postpaid envelope addressed to such person at such address as appears
on the books of the Corporation. Notice by mail shall be deemed to be given at
the time when the same shall be mailed.
SECTION 2. Waiver of Notice. Whenever any notice is required to be
given to any person, a waiver thereof by such person in writing or by telegraph
or cable, whether before or after the time stated therein, shall be deemed
equivalent thereto.
ARTICLE IX.
Seal
The corporate seal shall have inscribed thereon the name of the
Corporation, the year of its organization and the words "Corporate Seal" and
"Delaware."
ARTICLE X.
Fiscal Year
The fiscal year of the Corporation shall begin on the first day of October
in each year.
<PAGE>
ARTICLE XI.
Amendments
All by-laws of the Corporation shall be subject to alteration, amendment
or repeal, and new by-laws not inconsistent with any provision of the
Certificate of Incorporation or any provision of law may be made, either by the
affirmative vote of the holders of record of a majority of the outstanding stock
of the Corporation entitled to vote in respect thereof, given at an annual
meeting or at any special meeting, provided that notice of the proposed
alteration, amendment or repeal or of the proposed new by-laws be included in
the notice of such meeting, or by the Board of Directors at any regular or
special meeting. By-laws made, altered or amended by the Board of Directors
shall be subject to alteration, amendment or repeal by the stockholders or by
the Board.
APPENDIX
Procedures for Submission and Determination of Claims for
Indemnification Pursuant to Article III, Section 15 of the By-Laws.
SECTION 1. Purpose. Effective as of November 5, 1986, the Board of
Directors of Rockwell International Corporation, a Delaware corporation (the
"Corporation"), has adopted these Procedures for Submission and Determination
of Claims for Indemnification Pursuant to Article III, Section 15 of the by-laws
(the "Procedures") to implement the provisions of Article III, Section 15 of the
by-laws of the Corporation (the "by-laws") in compliance with the requirement
of subsection (H) thereof.
SECTION 2. Definitions. For purposes of these Procedures:
(A) All terms that are defined in Article III, Section 15 of the by-laws
shall have the meanings ascribed to them therein when used in these Procedures
unless otherwise defined herein.
(B) "Expenses" include all reasonable attorneys' fees, court costs,
transcript costs, fees of experts, witness fees, travel expenses, duplicating
costs, printing and binding costs, telephone charges, postage, delivery service
fees, and all other disbursements or expenses of the types customarily incurred
in connection with prosecuting, defending, preparing to prosecute or defend,
investigating, or being or preparing to be a witness in, a Proceeding; and shall
also include such retainers as counsel may reasonably require in advance of
undertaking the representation of an indemnitee in a Proceeding.
(C) "Indemnitee" includes any person who was or is, or is threatened to
be made, a witness in or a party to any Proceeding by reason of the fact that he
is or was a director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee or
agent (except in each of the foregoing situations to the extent any agreement,
arrangement or understanding of agency contains provisions that supersede or
abrogate indemnification under Article III, Section 15 of the by-laws) of
another corporation or of any partnership, joint venture, trust, employee
benefit plan or other enterprise.
(D) "Proceeding" includes any action, suit, arbitration, alternative dispute
resolution mechanism, investigation, administrative hearing or any other
proceeding, whether civil, criminal, administrative or investigative, except one
initiated by an Indemnitee unless the Board of Directors shall have authorized
the commencement thereof.
SECTION 3. Submission and Determination of Claims.
(A) To obtain indemnification or advancement of Expenses under Article
III, Section 15 of the by-laws, an Indemnitee shall submit to the Secretary of
the Corporation a written request therefor, including therein or therewith such
documentation and information as is reasonably available to the Indemnitee and
is reasonably necessary to permit a determination as to whether and what extent
the Indemnitee is entitled to indemnification or advancement of Expenses, as the
case may be. The Secretary shall, promptly upon receipt of a request for
indemnification, advise the Board of Directors thereof in writing if a
determination in accordance with Article III, Section 15(E) of the by-laws is
required.
(B) Upon written request by an Indemnitee for indemnification pursuant
to Section 3(A) hereof, a determination with respect to the Indemnitee's
entitlement thereto in the specific case, if required by the by-laws, shall be
made in accordance with Article III, Section 15(E) of the by-laws, and, if it is
so determined that the Indemnitee is entitled to indemnification, payment to the
Indemnitee shall be made within ten days after such determination. The
Indemnitee shall cooperate with the person, persons or entity making such
determination, with respect to the Indemnitee's entitlement to indemnification,
including providing to such person, persons or entity upon reasonable advance
request any documentation or information which is not privileged or otherwise
protected from disclosure and which is reasonably available to the Indemnitee
and reasonably necessary to such determination.
(C) If entitlement to indemnification is to be made by Independent
Counsel pursuant to Article III, Section 15(E) of the by-laws, the Independent
Counsel shall be selected as provided in this Section 3(C). If a Change of
Control shall not have occurred, the Independent Counsel shall be selected by
the Board of Directors, and the Corporation shall give written notice to the
Indemnitee advising him of the identity of the Independent Counsel so selected.
If a Change of Control shall have occurred, the Independent Counsel shall be
selected by the Indemnitee (unless the Indemnitee shall request that such
selection be made by the Board of Directors, in which event the immediately
preceding sentence shall apply), and the Indemnitee shall give written notice to
the Corporation advising it of the identity of the Independent Counsel so
selected. In either event, the Indemnitee or the Corporation,
as the case may be, may, within seven days after such written
notice of selection shall have been given, deliver to the Corporation or to the
Indemnitee, as the case may be, a written objection to such selection.
Such objection may be asserted only on the ground that the Independent
Counsel so selected does not meet the requirements of "Independent Counsel" as
defined in Article III, Section 15 of the by-laws, and the objection
shall set forth with particularity the factual basis of such assertion.
If such written objection is made, the Independent Counsel so selected may not
serve as Independent Counsel unless and until a court has determined that such
objection is without merit. If, within twenty days after the next regularly
scheduled Board of Directors meeting following submission by the Indemnitee of
a written request for indemnification pursuant to Section 3(A) hereof, no
Independent Counsel shall have been selected and not objected to, either the
Corporation or the Indemnitee may petition the Court of Chancery of the State
of Delaware or other court of competent jurisdiction for resolution of any
objection which shall have been made by the Corporation or the Indemnitee to the
other's selection of Independent Counsel and/or for the appointment as
Independent Counsel of a person selected by the Court or by such other person
as the Court shall designate, and the person with respect to whom an objection
is favorably resolved or the person so appointed shall act as Independent
Counsel under Article III, Section 15(E) of the by-laws. The Corporation shall
pay any and all reasonable fees and expenses (including without limitation any
advance retainers reasonably required by counsel) of Independent Counsel
incurred by such Independent Counsel in connection with acting pursuant to
Article III, Section 15(E) of the by-laws, and the
Corporation shall pay all reasonable fees and expenses (including
without limitation any advance retainers reasonably required
by counsel) incident to the procedures of Article III, Section 15(E) of the
by-laws and this Section 3(C), regardless of the manner in which Independent
Counsel was selected or appointed. Upon the delivery of its opinion pursuant to
Article III, Section 15 of the by-laws or, if earlier, the due commencement of
any judicial proceeding or arbitration pursuant to Section 4(A)(3) of these
Procedures, Independent Counsel shall be discharged and relieved of any further
responsibility in such capacity (subject to the applicable standards of
professional conduct then prevailing).
(D) If a Change of Control shall have occurred, in making a
determination with respect to entitlement to indemnification under the by-laws,
the person, persons or entity making such determination shall presume that an
Indemnitee is entitled to indemnification under the by-laws if the Indemnitee
has submitted a request for indemnification in accordance with Section 3(A)
hereof, and the Corporation shall have the burden of proof to overcome that
presumption in connection with the making by any person, persons or entity of
any determination contrary to that presumption.
SECTION 4. Review and Enforcement of Determination.
(A) In the event that (1) advancement of Expenses is not timely made
pursuant to Article III, Section 15(G) of the by-laws, (2) payment of
indemnification is not made pursuant to Article III, Section 15(C) or (D) of the
by-laws within ten days after receipt by the Corporation of written request
therefor, (3) a determination is made pursuant to Article III, Section 15(E) of
the by-laws that an Indemnitee is not entitled to indemnification under the
by-laws, (4) the determination of entitlement to indemnification is to be made
by Independent Counsel pursuant to Article III, Section 15(E) of the by-laws and
such determination shall not have been made and delivered in a written opinion
within ninety days after receipt by the Corporation of the written request for
indemnification, or (5) payment of indemnification is not made within ten days
after a determination has been made pursuant to Article III, Section 15(E) of
the by-laws that an Indemnitee is entitled to indemnification or within ten days
after such determination is deemed to have been made pursuant to Article III,
Section 15(F) of the by-laws, the Indemnitee shall be entitled to an
adjudication in an appropriate court of the State of Delaware, or in any other
court of competent jurisdiction, of his entitlement to such indemnification or
advancement of Expenses. Alternatively, the Indemnitee, at his option, may
seek an award in arbitration to be conducted by a single arbitrator pursuant
to the rules of the American Arbitration Association. The Indemnitee shall
commence such proceeding seeking an adjudication or an award in arbitration
within one year following the date on which the Indemnitee first has the right
to commence such proceeding pursuant to this Section 4(A). The Corporation
shall not oppose the Indemnitee's right to seek any such adjudication or award
in arbitration.
(B) In the event that a determination shall have been made pursuant to
Article III, Section 15(E) of the by-laws that an Indemnitee is not entitled to
indemnification, any judicial proceeding or arbitration commenced pursuant to
this Section 4 shall be conducted in all respects as a de novo trial, or
arbitration, on the merits and the Indemnitee shall not be prejudiced by reason
of that adverse determination. If a Change of Control shall have occurred, the
Corporation shall have the burden of proving in any judicial proceeding or
arbitration commenced pursuant to this Section 4 that the Indemnitee is not
entitled to indemnification or advancement of Expenses, as the case may be.
(C) If a determination shall have been made or deemed to have been
made pursuant to Article III, Section 15 (E) or (F) of the by-laws that an
Indemnitee is entitled to indemnification, the Corporation shall be bound by
such determination in any judicial proceeding or arbitration commenced pursuant
to this Section 4, absent (1) a misstatement or omission of a material fact in
connection with the Indemnitee's request for indemnification, or (2) a
prohibition of such indemnification under applicable law.
(D) The Corporation shall be precluded from asserting in any judicial
proceeding or arbitration commenced pursuant to this Section 4 that the
procedures and presumptions of these Procedures are not valid, binding and
enforceable, and shall stipulate in any such judicial proceeding or arbitration
that the Corporation is bound by all the provisions of these Procedures.
(E) In the event that an Indemnitee, pursuant to this Section 4, seeks to
enforce his rights under, or to recover damages for breach of, Article III,
Section 15 of the by-laws or these Procedures in a judicial proceeding or
arbitration, the Indemnitee shall be entitled to recover from the Corporation,
and shall be indemnified by the Corporation against, any and all expenses (of
the types described in the definition of Expenses in Section 2 of these
Procedures) actually and reasonably incurred by him in such judicial proceeding
or arbitration, but only if he prevails therein. If it shall be determined in
such judicial proceeding or arbitration that the Indemnitee is entitled to
receive part but not all of the indemnification or advancement of Expenses
sought, the expenses incurred by the Indemnitee in connection with such
judicial proceeding or arbitration shall be appropriately prorated.
SECTION 5. Amendments. These Procedures may be amended at any
time and from time to time in the same manner as any by-law of the Corporation
in accordance with Article XI of the by-laws; provided, however, that
notwithstanding any amendment, alteration or repeal of these Procedures or any
provision hereof, any Indemnitee shall be entitled to utilize these Procedures
with respect to any claim for indemnification arising out of any action taken
or omitted prior to such amendment, alteration or repeal except to the extent
otherwise required by law.
Exhibit 10
February 1, 1995
Ms. Judith L. Estrin
101 First Street
Suite 508
Los Altos, California 94022
Dear Judy:
As you know, I am pleased that incident to your service as Director you will
be serving as Special Advisor to me. Don Davis and I look forward to your
working with us on issues particularly affecting our Digital Communications,
Allen-Bradley and Avionics' businesses. In accordance with our discussions,
you will be paid an annual retainer of $5,000, payable quarterly.
Sincerely,
Donald R. Beall
Donald R. Beall
Exhibit 12
ROCKWELL INTERNATIONAL CORPORATION
<TABLE>
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND
COMPUTATION OF PRO FORMA RATIO OF EARNINGS TO FIXED CHARGES
SIX MONTHS ENDED MARCH 31, 1995
(In millions, except for ratios)
<CAPTION>
Pro Forma Pro Forma
Rockwell(1) Reliance(2) Adjustments Combined
<S> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income before income taxes $590.1 $(51.3) $53.5 (3) $592.3
Adjustments:
Undistributed (income) of affiliates.......... (2.1) (2.1)
Minority interest in loss of subsidiaries..... 5.3 5.3
593.3 (51.3) 53.5 595.5
Add fixed charges included in earnings:
Interest expense............................ 67.6 6.0 20.6 94.2
Interest element of rentals................. 32.2 2.5 34.7
Total..................................... 99.8 8.5 20.6 128.9
Total earnings available for fixed charges.... $693.1 $(42.8) $74.1 $724.4
FIXED CHARGES:
Fixed charges included in earnings............... $ 99.8 $ 8.5 $20.6 $128.9
Capitalized interest............................. 6.1 6.1
Total fixed charges............................ $105.9 $ 8.5 $20.6 $135.0
RATIO OF EARNINGS TO FIXED CHARGES (4) 6.5 5.4
(1) The Rockwell information presented includes Reliance for the
three months ended March 31, 1995.
(2) The Reliance information presented is for the three months ended
December 31, 1994.
(3) Pro forma adjustments include the following (see Exhibit 99-a):
A) To reflect the divestiture of Reliance's telecommunications business $ (8.2)
B) Amortize over an average period of 35 years the excess of
purchase price over the estimated fair value of net assets acquired (7.4)
C) Recognize interest expense on borrowings to fund acquisition
(at assumed rates of 7% on short-term debt and 8.2% on long-term debt) (20.6)
D) Remove unusual expenses incurred by Reliance relatingto costs
associated with abandonment of a prior merger agreement and costs
associated with the acquisition by Rockwell 89.7
Total adjustments to income before taxes and change in accounting $ 53.5
(4) In computing the ratio of earnings to fixed charges, earnings are defined
as income before income taxes adjusted for minority interest in income
or loss of subsidiaries, undistributed earnings of affiliates and fixed
charges exclusive of capitalizedinterest. Fixed charges consist of interest
on borrowings and that portion of rentals deemed representative of the
interest factor.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
MARCH 31, 1995 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED
INCOME FOR THE SIX MONTHS ENDED MARCH 31, 1995 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-30-1995
<PERIOD-END> MAR-31-1995
<CASH> 641
<SECURITIES> 0
<RECEIVABLES> 2533
<ALLOWANCES> 78
<INVENTORY> 2028
<CURRENT-ASSETS> 6239
<PP&E> 2795
<DEPRECIATION> 0
<TOTAL-ASSETS> 12662
<CURRENT-LIABILITIES> 4816
<BONDS> 1480
<COMMON> 245
0
1
<OTHER-SE> 3250
<TOTAL-LIABILITY-AND-EQUITY> 12662
<SALES> 5984
<TOTAL-REVENUES> 6024
<CGS> 4603
<TOTAL-COSTS> 5434
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 68
<INCOME-PRETAX> 590
<INCOME-TAX> 234
<INCOME-CONTINUING> 356
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 356
<EPS-PRIMARY> 1.64
<EPS-DILUTED> 1.61
</TABLE>
Exhibit 99-a
ROCKWELL INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
The following unaudited pro forma condensed consolidated statement of income
has been prepared by Rockwell's management. This statement reflects Rockwell's
acquisition of Reliance and combines the historical consolidated income
statements of Rockwell and Reliance for the six months ending March 31, 1995,
using the purchase method of accounting.
The unaudited pro forma condensed consolidated statement of income has been
prepared assuming the acquisition of Reliance had occurred at the beginning of
Rockwell's fiscal year ending September 30, 1995. This pro forma statement
should be read in conjunction with the historical consolidated financial
statements and related notes of Rockwell and Reliance. The pro forma
statement includes preliminary estimates and assumptions which Rockwell
management believes are reasonable. Pro forma adjustments reflecting
anticipated cost savings and other synergies resulting from the integration
of Reliance and Rockwell's Automation business are, under most circumstances,
not permitted. As a result, the pro forma results are not intended to be a
projection of future results and are not necessarily indicative of the results
which would have occurred if the business combination had been in effect on
the dates presented.
The pro forma condensed consolidated statement of income has been prepared using
the following facts and assumptions:
Rockwell acquires all the common stock of Reliance for a total cash payment
of $1,586 million. Simultaneously with the acquisition of Reliance,
Rockwell sells the telecommunications business of Reliance to fund a portion
of the acquisition price. For purposes of this pro forma statement, it is
assumed the sales proceeds will be equal to the December 31, 1994 net book
value of the telecommunications business of $498 million. Rockwell expects
the sale of the telecommunications business of Reliance to occur by
December 31, 1995 and the actual sales proceeds may be higher or lower than
the assumed amount.
Rockwell borrows $1,088 million to finance the remaining portion of the
$1,586 million acquisition price.
In accordance with generally accepted accounting principles, the purchase
price of Reliance was allocated to the assets and liabilities of Reliance
based upon their respective fair values. Such allocations were based upon
appraisals, evaluations, estimations and other studies, some of which are
still in process. For purposes of the accompanying pro forma statement, the
pro forma adjustments have been reflected on an estimated basis using
information currently available. Accordingly, the allocation of the
purchase price to the acquired assets and assumed liabilities of Reliance
is subject to revision as a result of the final determination of fair
values.<PAGE>
<TABLE>
ROCKWELL INTERNATIONAL CORPORATION
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
SIX MONTHS ENDED MARCH 31, 1995
(Dollars in Millions)
<CAPTION>
Pro Forma
Business Adjustments
Sold By Increase Pro Forma
Rockwell (1) Reliance (2) Rockwell (3) (Decrease) Combined
<S> <C> <C> <C> <C> <C>
Sales and other income........................ $ 6,024 $ 449 $(120) $ 6,353
Costs and expenses:
Cost of sales............................... 4,602 337 (89) 4,850
Selling, general and administrative......... 764 68 (19) $ 813
Other expense, net.......................... 89 (3) 7 (4) 3
(90)(5)
Interest.................................... 68 6 21 (6) 95
Total costs and expenses.................. 5,434 500 (111) (62) 5,761
Income before income taxes.................... 590 (51) (9) 62 592
Provision for income taxes.................... (234) 5 (7)(7) (236)
Net income.................................... $ 356 $ (51) $ (4) $ 55 $ 356
Earnings per common share (in dollars) (8):
Primary..................................... $ 1.64 $ 1.64
Fully diluted............................... $ 1.61 $ 1.61
Average common shares outstanding (in millions):
Primary..................................... 217.5 217.5
Fully diluted............................... 221.7 221.7
See accompanying notes to unaudited pro forma condensed consolidated statement of income.
</TABLE>
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO UNAUDITED PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF INCOME
1. The Rockwell information presented includes Reliance for the three months
ended March 31, 1995.
2. The Reliance information presented is for the three months ended
December 31, 1994.
3. To reflect the divestiture of Reliance's telecommunications business.
4. Amortize over an average period of 35 years the excess of purchase price over
the estimated fair value of net assets acquired.
5. Remove unusual expenses incurred by Reliance relating to costs associated
with abandonment of a prior merger agreement and costs associated with the
acquisition by Rockwell.
6. Recognize interest expense on borrowings to fund acquisition (at assumed
rates of 7% on short-term debt and 8.2% on long-term debt).
7. Increase in the provision for income taxes primarily associated with the
removal of unusual expenses noted in 3 above and reduced by the effect of
additional interest expense.
8. Pro forma primary and fully-diluted earnings per share are computed on the
same basis as historical amounts.
EXHIBIT 99-b
OPERATING EARNINGS OF THE COMPANY'S ELECTRONICS BUSINESSES
Following the acquisition of Reliance and its integration with Allen-Bradley's
Automation business, the company has expanded disclosure of its Electronics
businesses to disclose separately operating earnings of its Automation business.
The following sets forth an expanded presentation of operating earnings of the
company's Electronics businesses (in millions):
YEAR ENDED SEPTEMBER 30
1994 1993 1992 1991 1990
OPERATING EARNINGS
Electronics:
Automation $ 264.8 $ 193.3 $ 101.8 $ 96.6 $ 106.6
Avionics/Telecom/Defense 423.2 404.8 383.6 451.1 427.5
Total Electronics $ 688.0 $ 598.1 $ 485.4 $ 547.7 $ 534.1
