<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 June 30, 1997
Commission file number 1-12383
Rockwell International Corporation
(Exact name of registrant as specified in its charter)
Delaware 25-1797617
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
2201 Seal Beach Boulevard, Seal Beach, California 90740-8250
(Address of principal executive offices) (Zip Code)
Registrant's telephone number,
including area code (412) 565-4090
(Office of the Corporate Secretary)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
208,813,632 shares of registrant's Common Stock, $1.00 par value, were
outstanding on July 31, 1997.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
INDEX
PART I. FINANCIAL INFORMATION:
Item 1. Financial Statements:
Page
No.
Condensed Consolidated Balance Sheet--
June 30, 1997 and September 30, 1996........... 2
Statement of Consolidated Income--Three Months
and Nine Months Ended June 30, 1997 and 1996... 3
Statement of Consolidated Cash Flows--
Nine Months Ended June 30, 1997 and 1996....... 4
Notes to Financial Statements.................. 5
Item 2. Management's Discussion and Analysis
of Financial Condition and Results
of Operations.................................. 9
Other Financial Information.................... 13
PART II. OTHER INFORMATION:
Item 1. Legal Proceedings.............................. 14
Item 5. Other Information.............................. 14
Item 6. Exhibits and Reports on Form 8-K............... 15
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
ROCKWELL INTERNATIONAL CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEET
(Unaudited)
<TABLE>
<CAPTION>
June 30 September 30
1997 1996
ASSETS (In millions)
<S> <C> <C>
Current assets:
Cash........................................... $ 379 $ 663
Receivables (less allowance for doubtful
accounts: June 30, 1997, $80;
September 30, 1996, $84)..................... 1,221 1,183
Inventories.................................... 1,539 1,481
Deferred income taxes.......................... 233 211
Other current assets........................... 313 285
Net assets of Automotive....................... 654 612
Net assets of Graphic Systems.................. - 560
Total current assets................... 4,339 4,995
Net property...................................... 2,107 2,008
Intangible assets................................. 1,778 1,762
Other assets...................................... 272 211
TOTAL.................... $ 8,496 $ 8,976
LIABILITIES AND SHAREOWNERS' EQUITY
Current liabilities:
Short-term debt................................ $ 346 $ 323
Accounts payable............................... 699 801
Accrued compensation and benefits.............. 392 391
Accrued income taxes........................... 130 155
Other current liabilities...................... 585 545
Net liabilities of A&D Business................ - 1,309
Total current liabilities.............. 2,152 3,524
Long-term debt.................................... 155 156
Accrued retirement benefits....................... 783 764
Other liabilities................................. 272 276
Total liabilities............. 3,362 4,720
Shareowners' equity:
Common Stock (shares issued: June 30, 1997,
216.4; September 30, 1996, 209.5)........... 216 210
Class A Common Stock (shares issued:
September 30, 1996, 27.9)................... - 28
Additional paid-in capital..................... 870 199
Retained earnings.............................. 4,592 4,466
Currency translation adjustments............... (146) (103)
Common Stock in treasury, at cost (shares held:
June 30, 1997, 6.1;
September 30, 1996, 18.9)................... (398) (544)
Total shareowners' equity..... 5,134 4,256
TOTAL.................... $ 8,496 $ 8,976
</TABLE>
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
(In millions)
<S> <C> <C> <C> <C>
Revenues:
Sales........................... $ 1,929 $ 1,891 $ 5,681 $ 5,315
Other income.................... 41 12 79 50
Total revenues................ 1,970 1,903 5,760 5,365
Costs and expenses:
Cost of sales................... 1,371 1,335 3,981 3,735
Selling, general, and
administrative................ 348 324 1,023 962
Purchased research and
development................... 30 - 30 -
Interest........................ 10 4 20 16
Total costs and expenses...... 1,759 1,663 5,054 4,713
Income from continuing operations
before income taxes............. 211 240 706 652
Provision for income taxes........ 80 94 266 254
INCOME FROM CONTINUING
OPERATIONS...................... 131 146 440 398
Income from discontinued
operations...................... 36 77 95 231
Net income ....................... $ 167 $ 223 $ 535 $ 629
(In dollars)
Earnings per share:
CONTINUING OPERATIONS.......... $ .62 $ .67 $ 2.04 $ 1.83
Discontinued operations........ .17 .35 .44 1.06
Net income................... $ .79 $ 1.02 $ 2.48 $ 2.89
Cash dividends per common share... $ .29 $ .29 $ .87 $ .87
(In millions)
Average outstanding shares........ 212.3 217.7 215.7 217.3
</TABLE>
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
STATEMENT OF CONSOLIDATED CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION> Nine Months Ended
June 30
1997 1996
(In millions)
<S> <C> <C>
CONTINUING OPERATIONS:
Operating Activities
Income from continuing operations.................... $ 440 $ 398
Adjustments to income from continuing operations
to arrive at cash provided by operating activities:
Depreciation..................................... 274 231
Amortization of intangible assets................ 68 66
Deferred income taxes............................ (15) (15)
Pension expense, net of contributions............ (42) 38
Purchased research and development............... 30 -
Changes in assets and liabilities, excluding
effects of acquisitions, divestitures, and
foreign currency adjustments:
Receivables.................................. (72) (63)
Inventories.................................. (74) (179)
Accounts payable............................. (87) (4)
Accrued income taxes......................... (47) (52)
Other assets and liabilities................. (2) 118
Cash Provided By Operating Activities..... 473 538
Investing Activities
Property additions................................... (406) (450)
Acquisition of businesses (net of cash acquired)..... (67) (37)
Proceeds from disposition of property and businesses. 589 21
Cash Provided By (Used For)
Investing Activities.................... 116 (466)
Financing Activities
Increase in short-term borrowings.................... 39 26
Payments of long-term debt........................... (15) (14)
Net increase in debt................................. 24 12
Purchase of treasury stock........................... (629) (47)
Dividends............................................ (188) (189)
Reissuance of common stock........................... 49 36
Cash Used For Financing Activities........ (744) (188)
CASH USED FOR CONTINUING OPERATIONS.................. (155) (116)
Discontinued Operations:
Operating Activities............................. (14) 90
Investing Activities............................. (81) (99)
Financing Activities............................. (34) 64
Cash (Used for) Provided By
Discontinued Operations...................... (129) 55
DECREASE IN CASH..................................... (284) (61)
CASH AT BEGINNING OF PERIOD.......................... 663 642
CASH AT END OF PERIOD................................ $ 379 $ 581
</TABLE>
Income tax payments were $360 million and $412 million in the nine months
ended June 30, 1997 and 1996, respectively.
See Notes to Financial Statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. In the opinion of Rockwell International Corporation (the company or
Rockwell) the unaudited financial statements contain all adjustments,
consisting solely of adjustments of a normal recurring nature, necessary
to present fairly the financial position, results of operations, and
cash flows for the periods presented. These statements should be read
in conjunction with the company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996. The results of operations for the
three- and nine-month periods ended June 30, 1997 are not necessarily
indicative of the results for the full year. Certain prior year amounts have
been reclassified to conform with the current presentation.
It is the company's practice at the end of each interim reporting period
to make an estimate of the effective tax rate expected to be applicable
for the full fiscal year. The rate so determined is used in providing
for income taxes on a year-to-date basis.
2. Discontinued operations include the Automotive business (Automotive),
the Aerospace and Defense businesses (A&D Business) and the Graphic
Systems business (Graphic Systems).
In March 1997, the company announced its intention to spin-off
Automotive into a new, separately traded, publicly held company. The
spin-off is subject to several conditions including receipt of a ruling
by the U.S. Internal Revenue Service that the transaction will qualify
as a tax-free distribution. The shares of the new Automotive company
will be distributed to Rockwell shareowners with each shareowner
receiving one share of the new Automotive company for every three shares
of Rockwell owned. The transaction is expected to be completed by the
end of the company's 1997 fiscal year.
On December 6, 1996, the company completed the merger of its A&D
Business with The Boeing Company (Boeing) in a tax-free transaction
valued at approximately $3.2 billion, including the assumption by Boeing
of approximately $2.3 billion of liabilities, principally debt. Boeing
issued approximately $860 million of its stock in exchange for the
company's shareowners' interest in the A&D Business. Immediately prior
to the merger, the company transferred its Automation, Avionics &
Communications, Semiconductor Systems, and Automotive businesses to a
new company (New Rockwell), which has retained the Rockwell name. On the
effective date of the transaction, shares of New Rockwell were
distributed to the company's shareowners on a one-for-one basis, all
shares of Common Stock held in treasury were canceled, and the net
liabilities of the A&D Business of approximately $1.1 billion were
recorded as an increase to shareowners' equity.
In October 1996, the company completed the sale of Graphic Systems to an
affiliate of Stonington Partners, Inc. for approximately $600 million.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
The following table summarizes the results of discontinued operations
for the three- and nine-month periods ended June 30, 1997 and 1996 (in
millions):
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
Revenues:
Automotive.................. $ 897 $ 817 $2,491 $2,436
A&D Business................ - 796 535 2,273
Graphic Systems............. - 145 - 497
Total..................... $ 897 $1,758 $3,026 $5,206
Income (loss) before income taxes:
Automotive.................. $ 60 $ 40 $ 160 $ 137
A&D Business................ - 94 -(a) 253
Graphic Systems............. - (11) - (6)
Total..................... $ 60 $ 123 $ 160 $ 384
Net Income (loss):
Automotive.................. $ 36 $ 26 $ 95 $ 86
A&D Business................ - 57 -(a) 150
Graphic Systems............. - (6) - (5)
Total..................... $ 36 $ 77 $ 95 $ 231
(a) The earnings of the A&D Business for the first two months of 1997
were entirely offset by expenses relating to the transaction.
3. Inventories are summarized as follows (in millions):
June 30 September 30
1997 1996
Finished goods............................. $ 379 $ 372
Work in process............................ 740 734
Raw materials, parts, and supplies......... 431 378
Total.................................... 1,550 1,484
Less allowance to adjust the carrying value
of certain inventories to a last-in,
first-out (LIFO) basis................... 11 3
Inventories.............................. $ 1,539 $ 1,481
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
4. Intangible assets are summarized as follows (in millions):
June 30 September 30
1997 1996
Goodwill.................................. $ 1,286 $ 1,244
Trademarks, patents, product technology,
and other intangibles................... 492 518
Intangible assets....................... $ 1,778 $ 1,762
5. Short-term debt consisted of the following (in millions):
June 30 September 30
1997 1996
Commercial paper......................... $ 290 $ 210
Short-term foreign bank borrowings....... 53 98
Current portion of long-term debt........ 3 15
Short-term debt......................... $ 346 $ 323
6. Other current liabilities are summarized as follows (in millions):
June 30 September 30
1997 1996
Accrued product warranties................. $ 112 $ 110
Contract reserves and advance payments..... 122 128
Accrued taxes other than income taxes...... 51 49
Other...................................... 300 258
Other current liabilities................ $ 585 $ 545
7. Long-term debt consisted of the following (in millions):
June 30 September 30
1997 1996
6.8% notes, payable in 2003............... $ 141 $ 139
Other obligations, principally foreign.... 17 32
Total................................... 158 171
Less current portion...................... 3 15
Long-term debt.......................... $ 155 $ 156
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
8. The company's financial instruments include cash, short- and long-term
debt, and foreign currency forward exchange contracts. At June 30,
1997, the carrying values of the company's financial instruments
approximated their fair values based on current market prices and rates.
It is the policy of the company not to enter into derivative financial
instruments for speculative purposes. The company does enter into
foreign currency forward exchange contracts to protect itself from
adverse currency rate fluctuations on foreign currency commitments
entered into in the ordinary course of business. These commitments are
generally for terms of less than one year. The foreign currency forward
exchange contracts are executed with creditworthy banks and are
denominated in currencies of major industrial countries. The notional
amount of outstanding foreign currency forward exchange contracts
aggregated $437 million at June 30, 1997 and $919 million at September
30, 1996. The contracts outstanding at June 30, 1997 and September 30,
1996 included contracts relating to the company's discontinued
operations. The company does not anticipate any material adverse effect
on its results of operations or financial position relating to these
foreign currency forward exchange contracts. The company has not entered
into foreign currency forward exchange contracts for other purposes, and
the company's financial condition and results of operations could be
affected (negatively or positively) by currency fluctuations.
9. Accrued retirement benefits consisted of the following (in millions):
June 30 September 30
1997 1996
Accrued retirement medical costs......... $ 692 $ 691
Accrued pension costs.................... 137 117
Total.................................. 829 808
Amount classified as current liability... 46 44
Accrued retirement benefits............ $ 783 $ 764
10. Claims have been asserted against the company for utilizing the
intellectual property rights of others in certain of the company's
products. The resolution of these matters may result in the negotiation
of a license agreement, a settlement or the resolution of such claims
through litigation. The company accrues the estimated cost of
disposition of these matters. Management believes that the resolution
of these matters will not have a material adverse effect on the
company's financial statements.
Various other lawsuits, claims and proceedings have been or may be
instituted or asserted against the company relating to the conduct of
its business, including those pertaining to product liability, safety
and health, environmental, employment, and government contract matters.
The company has agreed to indemnify Boeing and the A&D Business for
certain government contract and environmental matters related to
operations of the A&D Business for periods prior to the merger.
Although the outcome of litigation cannot be predicted with certainty
and some lawsuits, claims, or proceedings may be disposed of unfavorably
to the company, management believes the disposition of matters which are
pending or asserted will not have a material adverse effect on the
company's financial statements.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
RESULTS OF OPERATIONS
1997 Third Quarter Compared to 1996 Third Quarter
The contributions to sales and earnings by business segment of the company for
the third quarter of fiscal 1997 and 1996 are presented below (in millions).
Three Months Ended
June 30
1997 1996
Sales
Automation $ 1,143 $ 1,072
Avionics & Communications 418 374
Semiconductor Systems 368 445
Total sales $ 1,929 $ 1,891
Operating Earnings
Automation $ 159 $ 145
Avionics & Communications 65 46
Semiconductor Systems 40 86
Purchased research and development (30) -
Operating earnings 234 277
General corporate - net (13) (33)
Interest expense (10) (4)
Provision for income taxes (80) (94)
INCOME FROM CONTINUING OPERATIONS 131 146
Income from discontinued operations:
Automotive 36 26
A&D and Graphic Systems businesses - 51
Total 36 77
Net Income $ 167 $ 223
Sales for 1997's third quarter were slightly ahead of 1996's third quarter.
Increases in sales by both Avionics & Communications and Automation were
partially offset by lower sales in Semiconductor Systems due to the highly
competitive product transition to the new high-speed K56flex personal computer
modem chipsets.
Income from continuing operations before an acquisition-related special charge
was $150 million for 1997's third quarter, up three percent from $146 million
in the comparable quarter last year. Earnings per share from continuing
operations before the special charge was 71 cents, an increase of six percent
over 1996's third quarter of 67 cents per share. The higher percentage
increase in earnings per share resulted from the company's stock repurchase
program. The third quarter special charge of $30 million ($19 million
after-tax) or nine cents per share relates to the write-off of purchased
research and development in connection with the acquisition of the Hi-Media
broadband communication chipset business of ComStream Corporation, a
Semiconductor Systems business.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
In this year's third quarter, Automation, the company's largest business with
59 percent of sales, achieved a 10 percent earnings increase over 1996 and
Avionics & Communications earnings grew by 41 percent. Both of these
businesses are having outstanding results in 1997, capitalizing on strong
global markets, market share growth and cost containment initiatives.
Automation's quarterly return on sales was a strong 13.9 percent, while
Avionics & Communications' return on sales rose to 15.6 percent compared to
12.3 percent in 1996's third quarter.
Earnings of Semiconductor Systems were down 53 percent in 1997's third quarter
primarily due to the highly competitive transition to the business' new
high-speed K56flex personal computer modem chipsets which has accelerated
price reductions, particularly on the older V.34 modem chipsets. Earnings
were also reduced by management initiatives to make substantial research and
new product development investments in non-personal computer modem product
lines, such as wireless communications, digital infotainment and wide and
local area network access, where over the next two years sales are projected
to more than double from the current $400 million level.
The improvement in general corporate-net is due to a $30 million gain on the
sale of property and lower corporate costs partially offset by a $20 million
charge for environmental costs expected to be incurred at a previously-owned
facility.
For the fiscal fourth quarter, management expects a continuing earnings pattern
by the company's businesses -- very strong performances by Automation and
Avionics & Communications partially offset by lower Semiconductor Systems
earnings compared to last year. Semiconductor Systems fourth quarter earnings
are expected to improve over this year's third quarter. Management expects
the fourth quarter earnings per share from continuing operations will be about
equal to last year's and our full year 1997 earnings per share will be about
12 percent over 1996, excluding special acquisition-related charges for the
write-off of purchased research and development in both years.
Discontinued Operations:
For the 1997 third quarter, Automotive's sales totaled $892 million, an
increase of 11 percent over 1996's third quarter. Automotive's income, after
tax, was up 38 percent over last year's third quarter due to increased volume
and a restructuring charge in last year's third quarter. Net income for
1996's third quarter includes the earnings of the divested A&D and Graphic
Systems businesses as well as the discontinued Automotive business.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
Nine Months Ended June 30, 1997 Compared to Nine Months Ended June 30, 1996
The contributions to sales and earnings by business segment of the company for
the nine months ended June 30, 1997 and 1996 are presented below (in
millions).
Nine Months Ended
June 30
1997 1996
Sales
Automation $ 3,318 $ 3,063
Avionics & Communications 1,208 1,063
Semiconductor Systems 1,155 1,189
Total sales $ 5,681 $ 5,315
Operating Earnings
Automation $ 439 $ 379
Avionics & Communications 181 112
Semiconductor Systems 192 248
Purchased research and development (30) -
Operating earnings 782 739
General corporate - net (56) (71)
Interest expense (20) (16)
Provision for income taxes (266) (254)
INCOME FROM CONTINUING OPERATIONS 440 398
Income from discontinued operations:
Automotive 95 86
A&D and Graphic Systems businesses - 145
Total 95 231
Net Income $ 535 $ 629
Sales for the first nine months of 1997 increased seven percent over the same
period a year ago. The results were led by Avionics & Communications with a
14 percent increase in sales over last year due to improved commercial air
transport markets. Additionally, Automation recorded an eight percent
increase in sales, principally in North America and Asia. Semiconductor
Systems sales were slightly lower than 1996's primarily resulting from the
product transition to the new K56flex modem chipsets.
For the first nine months of 1997, income from continuing operations before
the acquisition-related special charge (described under 1997 Third Quarter
Compared to 1996 Third Quarter) increased 15 percent to $459 million, or $2.13
per share, from $398 million, or $1.83 per share in last year's first nine
months.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
RESULTS OF OPERATIONS (CONTINUED)
Automation earnings for the first nine months of 1997 increased 16 percent
over the same period a year ago due to increased sales volume of higher margin
products along with productivity improvements and product cost reductions
which were partially offset by significant investments in international
marketing and new product launches.
Avionics & Communications earnings for the first nine months of 1997 increased
62 percent over last year as a result of improved sales, improved cost
performance in defense avionics, and an $11 million charge related to the
Fokker N.V. bankruptcy recorded in 1996.
Semiconductor Systems earnings decreased 23 percent for the first nine months
of 1997 compared to the first nine months of 1996 due to the product
transition to the new high-speed K56flex modem chipsets and substantial
investments in research and new product development, particularly in the
K56flex modem chipsets and non-personal computer modem product lines.
Discontinued Operations:
Automotive's sales for the first nine months of 1997 totaled $2.5 billion
slightly ahead of 1996's comparable period. Automotive's income, after-tax,
increased to $95 million for the first nine months of 1997 compared to $86
million in 1996's first nine months primarily due to volume increases in both
Heavy and Light Vehicle Systems products. Automotive's income for the first
nine months of 1996 included an $8 million after-tax gain on the sale of a
plant, partially offset by a $3 million after-tax restructuring charge. Net
income for the nine months ended June 30, 1996 includes the earnings for the
divested A&D and Graphic Systems businesses, as well as the discontinued
Automotive business.
FINANCIAL CONDITION
Sources of cash for the first nine months of 1997 include the proceeds from
the sale of the Graphic Systems business for approximately $600 million,
consisting of $553 million in cash and $47 million in preferred stock. These
proceeds are being used to fund the company's working capital needs,
acquisitions and the repurchase of Common Stock. During the third quarter,
the company acquired Hi-Media, a broadband communications chipset business,
for approximately $42 million.
The net assets of Automotive at June 30, 1997 and September 30, 1996 and its
net income for the three- and nine-month periods ended June 30, 1997 and 1996
have been presented as discontinued operations. Prior to the spin-off, the
new Automotive company will make a special dividend payment of approximately
$445 million to the company.
<PAGE>
ROCKWELL INTERNATIONAL CORPORATION
FINANCIAL CONDITION (CONTINUED)
Following the completion of the divestiture of the A&D Business, the company
initiated a $1 billion Common Stock repurchase program which is expected to be
substantially completed by the end of the fiscal year. Since the program was
announced, the company has purchased approximately 9.8 million shares of
common stock as of June 30, 1997 for approximately $629 million. Future
Common Stock repurchases are expected to be financed by the operating
activities of continuing operations, the Automotive special dividend noted
above, and commercial paper borrowings if necessary.
The company's Class A Common Stock was converted into Common Stock in
accordance with its terms on February 23, 1997.
Information with respect to the effect on the company and its manufacturing
operations of compliance with environmental protection requirements and
resolution of environmental claims is contained under the caption
Environmental Issues in Item 7, Management's Discussion and Analysis of
Financial Condition and Results of Operations of the company's Annual Report
on Form 10-K for the fiscal year ended September 30, 1996. During the third
quarter of 1997, the company recorded a $20 million charge for additional
environmental costs expected to be incurred at a previously owned facility.
Management believes that the expenditures necessary for the resolution of
environmental claims will not have a material adverse effect on the company's
liquidity and capital resources, competitive position, or financial
statements.
Other Financial Information
(a) The composition of the company's sales by customer is as follows (in
millions):
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
U.S. Commercial $1,120 $1,076 $3,242 $3,068
International 666 688 2,031 1,892
U.S. Government 143 127 408 355
Total $1,929 $1,891 $5,681 $5,315
<PAGE>
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
On September 27, 1995, Celeritas Technologies, Ltd., filed a suit
against the company in the U.S. District Court, Central District of
California, for patent infringement, misappropriation of trade
secrets and breach of contract relating to cellular telephone data
transmission technology utilized in certain modem products produced
by Rockwell Semiconductor Systems in 1995 and 1996. As previously
reported in the company's Form 10-Q for the quarter ended December
31, 1996, the court entered judgment against the company on January
27, 1997. On May 5, 1997, the court granted in part and denied in
part post-trial motions by the company for judgment notwithstanding
the verdict or, alternatively, a new trial. The court vacated its
prior damage award of $115 million and, on July 1, 1997, entered a
revised judgment reducing the damages award to $57 million plus
attorney's fees. The company believes that the judgment is in error
and filed a notice of appeal on July 25, 1997.
On March 24, 1997, the Circuit Court of Franklin County, Kentucky in
Commonwealth of Kentucky, Natural Resources and Environmental
Protection Cabinet vs. Rockwell, an action filed in 1986 seeking
remediation of PCB contamination resulting from unpermitted
discharges of PCBs from the company's former Russellville, Kentucky
plant, entered judgment establishing PCB cleanup levels for the
former plant site and certain offsite property and ordering
additional characterization of possible contamination in the Mud
River and its floodplain. On June 30, 1997, the company filed a
notice of appeal, but is, nevertheless, proceeding with additional
remediation and characterization efforts consistent with the Court's
judgment. The Court deferred any decision on the imposition of fines
or penalties pending implementation of an appropriate remediation
program.
Item 5. Other Information
Government Contracts
For information on the company's United States government contracting
business, certain risks of that business and claims related thereto,
see the information set forth under the caption "Government
Contracts" in Item 1, Business, on pages 4-5 of the company's Annual
Report on Form 10-K for the fiscal year ended September 30, 1996,
which is incorporated herein by reference.
<PAGE>
PART II. OTHER INFORMATION (Continued)
Item 5. Other Information (Continued)
Cautionary Statement
This Quarterly Report on Form 10-Q contains statements relating to
future results of the company (including certain projections and
business trends) that are "forward-looking statements" as defined in
the Private Securities Litigation Reform Act of 1995. Actual results
may differ materially from those projected as a result of certain
risks and uncertainties, including but not limited to changes in
political and economic conditions; domestic and foreign government
spending; budgetary and trade policies; demand for and market
acceptance of new and existing products; successful development of
advanced technologies; and competitive product and pricing pressures,
as well as other risks and uncertainties, including but not limited
to those detailed from time to time in the company's Securities and
Exchange Commission filings.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits:
Exhibit 11 - Computation of Earnings Per Share
Exhibit 12 - Computation of Ratio of Earnings to Fixed
Charges for the nine months ended June 30,
1997
Exhibit 27 - Financial Data Schedule
(b) Reports on Form 8-K:
There were no reports on Form 8-K filed during the quarter
ended June 30, 1997.
<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 August 13, 1997 By W. M. Barnes
W. M. Barnes
Senior Vice President,
Finance & Planning and
Chief Financial Officer
(Prinicipal Accounting Officer)
Date August 13, 1997 By W. J. Calise, Jr.
W. J. Calise, Jr.
Senior Vice President,
General Counsel and Secretary
EXHIBIT 11
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Nine Months Ended
June 30 June 30
1997 1996 1997 1996
(In millions, except per share amounts)
Primary earnings per share:
Income from continuing operations.. $ 131 $ 146 $ 440 $ 398
Deduct dividend requirements
on preferred stock............... - - - -
Total primary earnings from
continuing operations............ $ 131 $ 146 $ 440 $ 398
Average number of common shares
outstanding during the period.... 212.3 217.7 215.7 217.3
Primary earnings per share from
continuing operations............ $ .62 $ .67 $ 2.04 $ 1.83
Primary earnings per share from
discontinued operations.......... .17 .35 .44 1.06
Net primary earnings per share .... $ .79 $ 1.02 $ 2.48 $ 2.89
Fully diluted earnings per share:
Income from continuing operations.. $ 131 $ 146 $ 440 $ 398
Average number of common shares
outstanding during the period
assuming full dilution:
Common stock.................. 212.3 217.7 215.7 217.3
Assumed issuance of stock under
award plans and conversion of
preferred stock............. 3.1 3.6 3.4 3.8
Total fully diluted shares......... 215.4 221.3 219.1 221.1
Fully diluted earnings per share
from continuing operations....... $ .61 $ .66 $ 2.01 $ 1.80
Fully diluted earnings per share
from discontinued operations..... .17 .34 .43 1.04
Net fully diluted earnings
per share........................ $ .78 $ 1.00 $ 2.44 $ 2.84
- - - -17-
<PAGE>
Exhibit 12
ROCKWELL INTERNATIONAL CORPORATION
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
NINE MONTHS ENDED JUNE 30, 1997
(In millions, except ratio)
EARNINGS AVAILABLE FOR FIXED CHARGES:
Income from continuing operations before income taxes....... $ 706
Adjustments:
Undistributed income of affiliates....................... (6)
Minority interest in loss of subsidiaries................ 1
701
Add fixed charges included in earnings:
Interest expense......................................... 20
Interest element of rentals.............................. 42
62
Total earnings available for fixed charges.................. $ 763
FIXED CHARGES:
Fixed charges included in earnings.......................... $ 62
Capitalized interest........................................ 4
Total fixed charges...................................... $ 66
RATIO OF EARNINGS TO FIXED CHARGES (1)......................... 12
(1) In computing the ratio of earnings to fixed charges, earnings are
defined as income from continuing operations before income taxes
adjusted for minority interest in income or loss of subsidiaries,
undistributed earnings of affiliates, and fixed charges exclusive
of capitalized interest. Fixed charges consist of interest on
borrowings and that portion of rentals deemed representative of
the interest factor.
- - - -18-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30,
1997 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE NINE
MONTHS ENDED JUNE 30, 1997 AND NOTES TO THE FINANCIAL STATEMENTS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1997
<CASH> 379
<SECURITIES> 0
<RECEIVABLES> 1221
<ALLOWANCES> 80
<INVENTORY> 1539
<CURRENT-ASSETS> 4339
<PP&E> 2107
<DEPRECIATION> 0
<TOTAL-ASSETS> 8496
<CURRENT-LIABILITIES> 2152
<BONDS> 155
0
0
<COMMON> 216
<OTHER-SE> 4918
<TOTAL-LIABILITY-AND-EQUITY> 8496
<SALES> 5681
<TOTAL-REVENUES> 5760
<CGS> 3981
<TOTAL-COSTS> 5054
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<INCOME-PRETAX> 706
<INCOME-TAX> 266
<INCOME-CONTINUING> 440
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<NET-INCOME> 535
<EPS-PRIMARY> 2.48
<EPS-DILUTED> 2.44
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