-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IOw+E/aiSsUMMY7bOeIGpp3Y72tPkbgJNnaDbKo5g9AFkjfuQXPUwbPHgbVQut3y hRI46t1hRInsYJ7+5XJUnQ== 0001024478-97-000006.txt : 19970520 0001024478-97-000006.hdr.sgml : 19970520 ACCESSION NUMBER: 0001024478-97-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKWELL INTERNATIONAL CORP CENTRAL INDEX KEY: 0001024478 STANDARD INDUSTRIAL CLASSIFICATION: 3670 IRS NUMBER: 251797617 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-12383 FILM NUMBER: 97606364 BUSINESS ADDRESS: STREET 1: 2201 SEAL BEACH BOULEVARD CITY: SEAL BEACH STATE: CA ZIP: 90740-8250 BUSINESS PHONE: 4125654090 MAIL ADDRESS: STREET 1: 2201 SEAL BEACH BLVD CITY: SEAL BEACH STATE: CA ZIP: 90740-8250 FORMER COMPANY: FORMER CONFORMED NAME: NEW ROCKWELL INTERNATIONAL CORP DATE OF NAME CHANGE: 19961009 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1997 Commission file number 1-12383 Rockwell International Corporation (Exact name of registrant as specified in its charter) Delaware 25-1797617 (State or other jurisdiction (I.R.S. Employer of incorporation or organization) Identification No.) 2201 Seal Beach Boulevard, Seal Beach, California 90740-8250 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (412) 565-4090 (Office of the Corporate Secretary) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No 213,072,478 shares of registrant's Common Stock, $1.00 par value, were outstanding on April 30, 1997. ROCKWELL INTERNATIONAL CORPORATION INDEX PART I. FINANCIAL INFORMATION: Item 1. Financial Statements:
Page No. Condensed Consolidated Balance Sheet-- March 31, 1997 and September 30, 1996.......... 2 Statement of Consolidated Income--Three Months and Six Months Ended March 31, 1997 and 1996.. 3 Statement of Consolidated Cash Flows-- Six Months Ended March 31, 1997 and 1996...... 4 Notes to Financial Statements.................. 5 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.................................. 9 Other Financial Information.................... 13 PART II. OTHER INFORMATION: Item 1. Legal Proceedings.............................. 14 Item 4. Submission of Matters to a Vote of Security Holders........................................ 15 Item 5. Other Information.............................. 15 Item 6. Exhibits and Reports on Form 8-K............... 16 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ROCKWELL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
March 31 September 30 1997 1996 ASSETS (In millions) Current assets: Cash........................................... $ 693 $ 695 Receivables (less allowance for doubtful accounts: March 31, 1997, $88; September 30, 1996, $83)..................... 1,165 1,176 Inventories.................................... 1,499 1,488 Deferred income taxes.......................... 231 211 Other current assets........................... 325 290 Net assets of Automotive....................... 592 567 Net assets of Graphic Systems.................. - 560 Total current assets................... 4,505 4,987 Net property...................................... 2,033 2,001 Intangible assets................................. 1,789 1,759 Other assets...................................... 216 214 TOTAL.................... $ 8,543 $ 8,961 LIABILITIES AND SHAREOWNERS' EQUITY Current liabilities: Short-term debt................................ $ 246 $ 324 Accounts payable............................... 685 802 Accrued compensation and benefits.............. 368 390 Accrued income taxes........................... 142 151 Other current liabilities...................... 596 538 Net liabilities of A&D Business................ - 1,309 Total current liabilities.............. 2,037 3,514 Long-term debt.................................... 154 156 Accrued retirement benefits....................... 762 753 Other liabilities................................. 288 282 Total liabilities............. 3,241 4,705 Shareowners' equity: Common Stock (shares issued: March 31, 1997, 216.4; September 30, 1996, 209.5)........... 216 210 Class A Common Stock (shares issued: September 30, 1996, 27.9 million)........... - 28 Additional paid-in capital..................... 866 199 Retained earnings.............................. 4,504 4,466 Currency translation adjustments............... (142) (103) Common Stock in treasury, at cost (shares held: March 31, 1997, 2.1 million; September 30, 1996, 18.9 million)........... (142) (544) Total shareowners' equity..... 5,302 4,256 TOTAL.................... $ 8,543 $ 8,961
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION STATEMENT OF CONSOLIDATED INCOME (Unaudited)
Three Months Ended Six Months Ended March 31 March 31 1997 1996 1997 1996 (In millions) Revenues: Sales........................... $ 1,899 $ 1,794 $ 3,752 $ 3,424 Other income.................... 20 19 38 38 Total revenues................ 1,919 1,813 3,790 3,462 Costs and expenses: Cost of sales................... 1,325 1,274 2,610 2,400 Selling, general, and administrative................ 339 334 675 638 Interest........................ 6 7 10 12 Total costs and expenses...... 1,670 1,615 3,295 3,050 Income from continuing operations before income taxes............. 249 198 495 412 Provision for income taxes........ 94 77 186 160 INCOME FROM CONTINUING OPERATIONS...................... 155 121 309 252 Income from discontinued operations...................... 34 93 59 154 Net income ....................... $ 189 $ 214 $ 368 $ 406 (In dollars) Earnings per share: CONTINUING OPERATIONS.......... $ .72 $ .55 $ 1.42 $ 1.16 Discontinued operations........ .15 .43 .27 .71 Net income................... $ .87 $ .98 $ 1.69 $ 1.87 Cash dividends per common share... $ .29 $ .29 $ .58 $ .58 (In millions) Average outstanding shares........ 216.2 217.3 217.4 217.2
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited)
Six Months Ended March 31 1997 1996 (In millions) CONTINUING OPERATIONS: Operating Activities Income from continuing operations.................... $ 309 $ 252 Adjustments to income from continuing operations to arrive at cash provided by operating activities: Depreciation..................................... 178 135 Amortization of intangible assets................ 45 47 Deferred income taxes............................ (25) 50 Pension expense, net of contributions............ 26 28 Changes in assets and liabilities, excluding effects of acquisitions, divestitures, and foreign currency adjustments: Receivables.................................. (25) (88) Inventories.................................. (27) (96) Accounts payable............................. (93) (16) Accrued income taxes......................... (26) (33) Other assets and liabilities................. 12 (65) Cash Provided By Operating Activities..... 374 214 Investing Activities Property additions................................... (257) (279) Acquisition of businesses (net of cash acquired)..... (23) (2) Proceeds from disposition of property and businesses. 565 14 Cash Provided By (Used For) Investing Activities.................... 285 (267) Financing Activities (Decrease) increase in short-term borrowings......... (61) 35 Payments of long-term debt........................... (14) (15) Net (decrease) increase in debt...................... (75) 20 Purchase of treasury stock........................... (342) (40) Dividends............................................ (126) (126) Reissuance of common stock........................... 33 31 Cash Used For Financing Activities........ (510) (115) CASH PROVIDED BY (USED FOR) CONTINUING OPERATIONS.... 149 (168) Discontinued Operations: Operating Activities............................. (45) 9 Investing Activities............................. (67) (46) Financing Activities............................. (39) 133 Cash (Used for) Provided By Discontinued Operations...................... (151) 96 DECREASE IN CASH..................................... (2) (72) CASH AT BEGINNING OF PERIOD.......................... 695 675 CASH AT END OF PERIOD................................ $ 693 $ 603
Income tax payments were $264 million and $277 million in the six months ended March 31, 1997 and 1996, respectively. See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. In the opinion of the company the unaudited financial statements contain all adjustments, consisting solely of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. These statements should be read in conjunction with the company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996. The results of operations for the three- and six-month periods ended March 31, 1997 are not necessarily indicative of the results for the full year. It is the company's practice at the end of each interim reporting period to make an estimate of the effective tax rate expected to be applicable for the full fiscal year. The rate so determined is used in providing for income taxes on a year-to-date basis. 2. Discontinued operations include the Automotive business (Automotive), the Aerospace and Defense businesses (A&D Business) and the Graphic Systems business (Graphic Systems). In March 1997, the company announced its intention to spin-off Automotive into a new, separately traded, publicly held company. The spin-off is subject to several conditions including receipt of a ruling by the U.S. Internal Revenue Service that the transaction will qualify as a tax-free distribution. The shares of the new Automotive company will be distributed to Rockwell shareowners with each shareowner receiving one share of the new Automotive company for every three shares of Rockwell owned. The transaction is expected to be completed by the end of the company's 1997 fiscal year. On December 6, 1996, the company completed the merger of its A&D Business with The Boeing Company (Boeing) in a tax-free transaction valued at approximately $3.2 billion, including the assumption by Boeing of approximately $2.3 billion of liabilities, principally debt. Boeing issued approximately $860 million of its stock in exchange for the company's shareowners' interest in the A&D Business. Immediately prior to the merger, the company transferred its Automation, Avionics & Communications, Semiconductor Systems, and Automotive businesses to a new company (New Rockwell), which has retained the Rockwell name. On the effective date of the transaction, shares of New Rockwell were distributed to the company's shareowners on a one-for-one basis, all shares of Common Stock held in treasury were canceled, and the net liabilities of the A&D Business of approximately $1.1 billion were recorded as an increase to shareowners' equity. In October 1996, the company completed the sale of Graphic Systems to an affiliate of Stonington Partners, Inc. for approximately $600 million. ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) The following table summarizes the results of discontinued operations for the three- and six-month periods ended March 31, 1997 and 1996 (in millions):
Three Months Ended Six Months Ended March 31 March 31 1997 1996 1997 1996 Revenues: Automotive.................. $ 827 $ 854 $1,594 $1,619 A&D Business................ - 797 535 1,477 Graphic Systems............. - 237 - 352 Total..................... 827 1,888 2,129 3,448 Income before income taxes: Automotive.................. 56 64 100 97 A&D Business................ - 90 - (a) 159 Graphic Systems............. - 6 - 5 Total..................... 56 160 100 261 Net Income: Automotive.................. 34 39 59 60 A&D Business................ - 52 - (a) 93 Graphic Systems............. - 2 - 1 Total..................... $ 34 $ 93 $ 59 $ 154
(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):
March 31 September 30 1997 1996 Finished goods............................. $ 386 $ 377 Work in process............................ 723 735 Raw materials, parts, and supplies......... 399 379 Total.................................... 1,508 1,491 Less allowance to adjust the carrying value of certain inventories to a last-in, first-out (LIFO) basis................... (9) (3) Inventories.............................. $ 1,499 $ 1,488
ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 4. Intangible assets are summarized as follows (in millions):
March 31 September 30 1997 1996 Goodwill.................................. $ 1,295 $ 1,244 Trademarks, patents, product technology, and other intangibles................... 494 515 Intangible assets....................... $ 1,789 $ 1,759
5. Short-term debt consisted of the following (in millions):
March 31 September 30 1997 1996 Commercial paper......................... $ 190 $ 210 Short-term foreign bank borrowings....... 54 100 Current portion of long-term debt........ 2 14 Short-term debt......................... $ 246 $ 324
6. Other current liabilities are summarized as follows (in millions): March 31 September 30 1997 1996 Accrued product warranties................. $ 110 $ 110 Contract reserves and advance payments..... 131 130 Accrued taxes other than income taxes...... 48 49 Other...................................... 307 249 Other current liabilities................ $ 596 $ 538 7. Long-term debt consisted of the following (in millions):
March 31 September 30 1997 1996 6.8% notes, payable in 2003............... $ 140 $ 139 Other obligations, principally foreign.... 16 31 Total................................... 156 170 Less current portion...................... 2 14 Long-term debt.......................... $ 154 $ 156
ROCKWELL INTERNATIONAL CORPORATION NOTES TO FINANCIAL STATEMENTS (Unaudited) 8. The company's financial instruments include cash, short- and long-term debt, and foreign currency forward exchange contracts. At March 31, 1997, the carrying values of the company's financial instruments approximated their fair values based on current market prices and rates. It is the policy of the company not to enter into derivative financial instruments for speculative purposes. The company does enter into foreign currency forward exchange contracts to protect itself from adverse currency rate fluctuations on foreign currency commitments entered into in the ordinary course of business. These commitments are generally for terms of less than one year. The foreign currency forward exchange contracts are executed with creditworthy banks and are denominated in currencies of major industrial countries. The notional amount of outstanding foreign currency forward exchange contracts aggregated $506 million at March 31, 1997 and $919 million at September 30, 1996. The contracts outstanding at March 31, 1997 and September 30, 1996 included contracts relating to the company's discontinued operations. The company does not anticipate any material adverse effect on its results of operations or financial position relating to these foreign currency forward exchange contracts. 9. Accrued retirement benefits consisted of the following (in millions):
March 31 September 30 1997 1996 Accrued retirement medical costs......... $ 682 $ 684 Accrued pension costs.................... 126 113 Total.................................. 808 797 Amount classified as current liability... 46 44 Accrued retirement benefits............ $ 762 $ 753
10. Claims have been asserted against the company for utilizing the intellectual property rights of others in certain of the company's products. The resolution of these matters may result in the negotiation of a license agreement, a settlement or the legal resolution of such claims. The company accrues the estimated cost of disposition of these matters. Management believes that the resolution of these matters will not have a material adverse effect on the company's financial statements. Various other lawsuits, claims and proceedings have been or may be instituted or asserted against the company relating to the conduct of its business, including those pertaining to product liability, safety and health, environmental, employment, and government contract matters. The company has agreed to indemnify Boeing and the A&D Business for certain government contract and environmental matters related to operations of the A&D Business for periods prior to the merger. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims, or proceedings may be disposed of unfavorably to the company, management believes the disposition of matters which are pending or asserted will not have a material adverse effect on the company's financial statements. ROCKWELL INTERNATIONAL CORPORATION Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations RESULTS OF OPERATIONS 1997 Second Quarter Compared to 1996 Second Quarter The contributions to sales and earnings by business segment of the company for the second quarter of fiscal 1997 and 1996 are presented below (in millions).
Three Months Ended March 31 1997 1996 Sales Automation $ 1,114 $ 1,011 Avionics & Communications 416 350 Semiconductor Systems 369 433 Total sales $ 1,899 $ 1,794 Operating Earnings Automation $ 149 $ 123 Avionics & Communications 57 25 Semiconductor Systems 71 82 Operating earnings 277 230 General corporate - net (22) (25) Interest expense (6) (7) Provision for income taxes (94) (77) INCOME FROM CONTINUING OPERATIONS 155 121 Income from discontinued operations: Automotive 34 39 A&D and Graphic Systems businesses - 54 Total 34 93 Net Income $ 189 $ 214
Sales for 1997's second quarter were six percent higher than 1996's second quarter. Both Automation and Avionics & Communications achieved double digit sales growth which was partially offset by lower sales in Semiconductor Systems due to the product transition to the new K56flex modem chipsets. For the quarter, international sales accounted for 36 percent of total sales, the same as last year's second quarter. Income from continuing operations totaled $155 million for 1997's second quarter, up 28 percent from $121 million in the comparable quarter last year. Earnings per share from continuing operations for 1997's second quarter was 72 cents, an increase of 31 percent over 1996's comparable second quarter performance of 55 cents per share. The higher percentage increase in earnings per share resulted from the company's stock repurchase program. ROCKWELL INTERNATIONAL CORPORATION RESULTS OF OPERATIONS (CONTINUED) Automation: Automation earnings increased 21 percent over last year's second quarter as a result of a 10 percent sales growth, principally in North America and Asia, combined with continued productivity improvements and product cost reductions. Automation's second quarter earnings as a percent of sales were 13 percent compared to 12 percent last year. Avionics & Communications: Avionics & Communications earnings were more than double 1996's second quarter results primarily due to improved commercial air transport markets and last year's $11 million charge related to the Fokker N.V. bankruptcy. Avionics & Communications earnings as a percent of sales rose to 14 percent from 7 percent in last year's second quarter. Semiconductor Systems: Second quarter Semiconductor Systems earnings were 13 percent below last year's second quarter due primarily to the transition to the new K56flex modem chipsets. The 19 percent return on sales matched last year's second quarter as investments to implement more cost-effective manufacturing processes have reduced Semiconductor Systems' cost to produce wafers as compared to the higher proportion of more expensive external foundry wafers required a year ago. Discontinued Operations: For the 1997 second quarter, Automotive's sales totaled $822 million, slightly below 1996's second quarter. Automotive's income, after tax, was $34 million for the 1997 second quarter compared to $39 million in 1996's second quarter which included an $8 million after-tax gain on the sale of a plant. Including the discontinued Automotive business, net income for the second quarter of 1997 totaled $189 million, or $.87 per share. Comparable income for the same period in 1996 was $160 million, or $.74 per share. Last year's net income including the earnings of the divested A&D and Graphic Systems businesses, as well as the discontinued Automotive business, was $214 million, or $.98 per share. ROCKWELL INTERNATIONAL CORPORATION Six Months Ended March 31, 1997 Compared to Six Months Ended March 31, 1996 The contributions to sales and earnings by business segment of the company for the six months ended March 31, 1997 and 1996 are presented below (in millions).
Six Months Ended March 31 1997 1996 Sales Automation $ 2,175 $ 1,991 Avionics & Communications 790 689 Semiconductor Systems 787 744 Total sales $ 3,752 $ 3,424 Operating Earnings Automation $ 280 $ 234 Avionics & Communications 116 66 Semiconductor Systems 152 162 Operating earnings 548 462 General corporate - net (43) (38) Interest expense (10) (12) Provision for income taxes (186) (160) INCOME FROM CONTINUING OPERATIONS 309 252 Income from discontinued operations: Automotive 59 60 A&D and Graphic Systems businesses - 94 Total 59 154 Net Income $ 368 $ 406
Sales for the first six months of 1997 increased 10 percent over the same period a year ago. The results were led by Avionics & Communications with a 15 percent increase in sales over last year due to improved commercial air transport markets. Additionally, Automation recorded a nine percent increase in sales, principally in North America and Asia. Income from continuing operations for the first six months of 1997 totaled $309 million, up 23 percent over last year's income of $252 million. On a per share basis, earnings for the first six months of 1997 of $1.42 per share increased 22 percent over last year's per share earnings of $1.16. Automation: Automation earnings for the first six months of 1997 increased 20 percent over the same period a year ago due to increased sales volume of higher margin products along with productivity improvements and product cost reductions. Earnings were lowered by significant investments in international marketing and new product launches. ROCKWELL INTERNATIONAL CORPORATION RESULTS OF OPERATIONS (CONTINUED) Avionics & Communications: Avionics & Communications earnings for the first six months of 1997 increased 75 percent over last year as a result of improved sales, improved cost performance in defense avionics, and an $11 million charge related to the Fokker N.V. bankruptcy recorded in 1996. Semiconductor Systems: Semiconductor Systems earnings decreased six percent for the first six months of 1997 compared to the first six months of 1996 due to large investments in new product development, particularly the new high-speed 56 kilobits-per-second (K56flex) modem chipsets and wireless communications and internet access products. Discontinued Operations: For the first six months of 1997, Automotive's sales totaled $1,577, slightly below 1996's comparable period. Automotive's income, after-tax, was $59 million for the first six months of 1997 compared to $60 million in 1996's first six months which included an $8 million after-tax gain on the sale of a plant. Including the discontinued Automotive business, net income for the first six months of 1997 totaled $368 million, or $1.69 per share. Comparable income for the same period in 1996 was $312 million, or $1.44 per share. Last year's net income including the earnings of the divested A&D and Graphic Systems businesses, as well as the discontinued Automotive business, was $406 million, or $1.87 per share. FINANCIAL CONDITION Sources of cash for the first six months of 1997 include the proceeds from the sale of the Graphic Systems business for approximately $600 million, consisting of $553 million in cash and $47 million in preferred stock. These proceeds are being used to reduce short-term debt, fund the company's working capital needs and repurchase Common Stock. The net assets of Automotive at March 31, 1997 and September 30, 1996 and its net income for the three- and six-month periods ended March 31, 1997 and 1996 have been presented as discontinued operations. Prior to the spin-off, the new Automotive company will make a special dividend payment of approximately $450 million to the company. Following the completion of the divestiture of the A&D Business, the company initiated a $1 billion Common Stock repurchase program which is expected to be substantially completed by the end of the fiscal year. Since the program was announced, the company has purchased approximately 5.3 million shares of common stock as of March 31, 1997 for approximately $341 million. Future Common Stock repurchases are expected to be financed by the operating activities of continuing operations, the Automotive special dividend noted above, and commercial paper borrowings if necessary. The company's Class A Common Stock was converted into Common Stock in accordance with its terms on February 23, 1997. ROCKWELL INTERNATIONAL CORPORATION FINANCIAL CONDITION (CONTINUED) Information with respect to the effect on the company and its manufacturing operations of compliance with environmental protection requirements and resolution of environmental claims is contained under the caption Environmental Issues in Item 7, Management's Discussion and Analysis of Financial Condition and Results of Operations of the company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996. As discussed in Item 1 of Part II of this Quarterly Report, a judgment was entered into with respect to the company's remediation efforts at its former Russellville, Kentucky plant. Management currently believes that the cost of these remediation efforts will not have a material adverse effect on the company's financial position or results of operations. Other Financial Information (a) The composition of the company's sales by customer is as follows (in millions):
Three Months Ended Six Months Ended March 31 March 31 1997 1996 1997 1996 U.S. Commercial $1,063 $1,029 $2,122 $1,992 International 687 654 1,365 1,204 U.S. Government 149 111 265 228 Total $1,899 $1,794 $3,752 $3,424
PART II. OTHER INFORMATION Item 1. Legal Proceedings On September 27, 1995, Celeritas Technologies, Ltd., filed a suit against the company in the U.S. District Court, Central District of California, for patent infringement, misappropriation of trade secrets and breach of contract relating to cellular telephone data transmission technology utilized in certain modem products produced by Rockwell Semiconductor Systems in 1995 and 1996. As previously reported in the company's Form 10-Q for the quarter ended December 31, 1996, the court entered judgment against the company on January 27, 1997. On May 5, 1997, the court granted in part and denied in part post-trial motions by the company for judgment notwithstanding the verdict or, alternatively, a new trial. The court vacated its prior damage award of $115 million and awarded the company a new trial on damages unless the plaintiff accepts a reduction in the award of damages that would result in a maximum judgment against the company in this action of $57 million plus attorneys fees. The plaintiff has not made its election. The company believes that the original and revised verdicts are in error and will continue to pursue appellate review. On June 24, 1996, judgment was entered against the company in a civil action in the Circuit Court of Logan County, Kentucky on a jury verdict awarding $8 million in compensatory and $210 million in punitive damages for property damage. The action had been brought in 1993 by owners of floodplain real property near Russellville, Kentucky allegedly damaged by PCBs discharged from a plant owned and operated by the Company's Measurement & Flow Control Division prior to its divestiture in March 1989. On December 26, 1996, the court denied the company's post-trial motions for judgment notwithstanding the verdict or in the alternative for a new trial. The company believes that the verdict is unsupported by the evidence and on January 22, 1997, filed a notice of appeal. On March 24, 1997, the Circuit Court of Franklin County, Kentucky in Commonwealth of Kentucky, Natural Resources and Environmental Protection Cabinet vs. Rockwell, an action filed in 1986 seeking remediation of PCB contamination resulting from unpermitted discharges of PCBs from the company's former Russellville, Kentucky plant, entered judgment establishing PCB cleanup levels for the former plant site and certain offsite property and ordering additional characterization of possible contamination in the Mud River and its floodplain. The company is proceeding with additional remediation and characterization efforts consistent with the Court's ruling. The Court deferred any decision on the imposition of fines or penalties pending implementation of an appropriate remediation program. PART II. OTHER INFORMATION (Continued) Item 4. Submission of Matters to a Vote of Security Holders (a) The regular annual meeting of shareowners of the registrant was held February 5, 1997. (c) At the annual meeting, the shareowners: (i) voted to elect four directors of the company. Each nominee for director was elected by a vote of the shareowners as follows: Affirmative Votes Votes Withheld Richard M. Bressler 356,109,541 4,913,727 Judith L. Estrin 356,011,824 5,011,444 James Clayburn La Force, Jr. 355,758,122 5,265,146 John D. Nichols 356,150,376 4,872,892 (ii) voted upon a proposal to approve the selection by the Board of Directors of the firm of Deloitte & Touche LLP as auditors of the company. The proposal was approved by a vote of the shareowners as follows: Affirmative votes 355,744,742 Negative votes 2,617,893 Abstentions 2,660,633 Item 5. Other Information Government Contracts For information on the company's United States government contracting business, certain risks of that business and claims related thereto, see the information set forth under the caption "Government Contracts" in Item 1, Business, on pages 4-5 of the company's Annual Report on Form 10-K for the fiscal year ended September 30, 1996, which is incorporated herein by reference. Cautionary Statement This Quarterly Report on Form 10-Q contains statements relating to future results of the company (including certain projections and business trends) that are "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to changes in political and economic conditions; domestic and foreign government spending; budgetary and trade policies; demand for and market acceptance of new and existing products; successful development of advanced technologies; and competitive product and pricing pressures, as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company's Securities and Exchange Commission filings. PART II. OTHER INFORMATION (Continued) Item 6. Exhibits and Reports on Form 8-K (a) Exhibits: Exhibit 11 - Computation of Earnings Per Share Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges for the six months ended March 31, 1997. Exhibit 27 - Financial Data Schedule (b) Reports on Form 8-K: There were no reports on Form 8-K filed during the quarter ended March 31, 1997. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. ROCKWELL INTERNATIONAL CORPORATION (Registrant) Date May 15, 1997 By L. J. Komatz L. J. Komatz Vice President and Controller (Principal Accounting Officer) Date May 15, 1997 By W. J. Calise, Jr. W. J. Calise, Jr. Senior Vice President, General Counsel and Secretary - - -17- ROCKWELL INTERNATIONAL CORPORATION INDEX OF EXHIBITS TO FORM 10-Q FOR THE QUARTERLY PERIOD ENDED MARCH 31, 1997 Page Exhibit 11 - Computation of Earnings Per Share 19 Exhibit 12 - Computation of Ratio of Earnings to Fixed 20 Charges for the Six Months Ended March 31, 1997.
- - -18- EX-11 2 COMPUTATAION OF EARNINGS PER SHARE EXHIBIT 11 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF EARNINGS PER SHARE
Three Months Ended Six Months Ended March 31 March 31 1997 1996 1997 1996 (In millions, except per share amounts) Primary earnings per share: Income from continuing operations.. $155.1 $120.5 $308.8 $251.4 Deduct dividend requirements on preferred stock............... - - - 0.1 Total primary earnings from continuing operations............ $155.1 $120.5 $308.8 $251.3 Average number of common shares outstanding during the period.... 216.2 217.3 217.4 217.2 Primary earnings per share from continuing operations............ $ .72 $ .55 $ 1.42 $ 1.16 Primary earnings per share from discontinued operations.......... .15 .43 .27 .71 Net primary earnings per share .... $ .87 $ .98 $ 1.69 $ 1.87 Fully diluted earnings per share: Income from continuing operations.. $155.1 $120.5 $308.8 $251.4 Average number of common shares outstanding during the period assuming full dilution: Common stock.................. 216.2 217.3 217.4 217.2 Assumed issuance of stock under award plans and conversion of preferred stock............. 3.4 4.1 3.3 3.8 Total fully diluted shares......... 219.6 221.4 220.7 221.0 Fully diluted earnings per share from continuing operations....... $ .70 $ .54 $ 1.40 $ 1.14 Fully diluted earnings per share from discontinued operations..... .15 .43 .26 .70 Net fully diluted earnings per share........................ $ .85 $ .97 $ 1.66 $ 1.84
EX-12 3 COMPUTATION OF RATIO OF EARNINGS TO FIXED ASSETS Exhibit 12 ROCKWELL INTERNATIONAL CORPORATION COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES SIX MONTHS ENDED MARCH 31, 1997 (In millions, except ratio) EARNINGS AVAILABLE FOR FIXED CHARGES: Income from continuing operations before income taxes....... $ 495 Adjustments: Undistributed income of affiliates....................... (4) Minority interest in loss of subsidiaries................ 7 498 Add fixed charges included in earnings: Interest expense......................................... 10 Interest element of rentals.............................. 28 38 Total earnings available for fixed charges.................. $ 536 FIXED CHARGES: Fixed charges included in earnings.......................... $ 38 Capitalized interest........................................ 4 Total fixed charges...................................... $ 42 RATIO OF EARNINGS TO FIXED CHARGES (1)......................... 13 (1) In computing the ratio of earnings to fixed charges, earnings are defined as income from continuing operations before income taxes adjusted for minority interest in income or loss of subsidiaries, undistributed earnings of affiliates, and fixed charges exclusive of capitalized interest. Fixed charges consist of interest on borrowings and that portion of rentals deemed representative of the interest factor. EX-27 4 FINANCIAL DATA SCHEDULE
5 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE MARCH 31, 1997 CONSOLIDATED BALANCE SHEET, STATEMENT OF CONSOLIDATED INCOME FOR THE SIX MONTHS ENDED MARCH 31, 1997 AND NOTES TO FINANCIAL STATEMENTSAND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000,000 6-MOS SEP-30-1996 MAR-31-1997 693 0 1165 88 1499 4505 2033 0 8543 2037 154 0 0 216 5086 8543 3752 3790 2610 3295 0 0 10 495 186 309 59 0 0 368 1.69 1.66
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