-----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, KrfZBHWyttFOSNL4POFJ57A4addIU45+k3+InphnG4FGhUFEi9Fui5dQB90XwIrW ZxLBzdizOmeeMiQSHIzl9Q== 0001024478-97-000015.txt : 19971121 0001024478-97-000015.hdr.sgml : 19971121 ACCESSION NUMBER: 0001024478-97-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970813 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: ROCKWELL INTERNATIONAL CORP/ CENTRAL INDEX KEY: 0000084636 STANDARD INDUSTRIAL CLASSIFICATION: 3760 IRS NUMBER: 951054708 STATE OF INCORPORATION: DE FISCAL YEAR END: 0930 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-12383 FILM NUMBER: 97658507 BUSINESS ADDRESS: STREET 1: 2201 SEAL BEACH BOULEVARD CITY: SEAL BEACH STATE: CA ZIP: 90740 BUSINESS PHONE: 4125654004 MAIL ADDRESS: STREET 1: 2201 SEAL BEACH BOULEVARD CITY: SEAL BEACH STATE: CA ZIP: 90740 FORMER COMPANY: FORMER CONFORMED NAME: NORTH AMERICAN AVIATION INC DATE OF NAME CHANGE: 19671017 10-Q 1 FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 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 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. 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 PART I. FINANCIAL INFORMATION Item 1. Financial Statements ROCKWELL INTERNATIONAL CORPORATION CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)
June 30 September 30 1997 1996 ASSETS (In millions) 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
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION STATEMENT OF CONSOLIDATED INCOME (Unaudited)
Three Months Ended Nine Months Ended June 30 June 30 1997 1996 1997 1996 (In millions) 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
See Notes to Financial Statements. ROCKWELL INTERNATIONAL CORPORATION STATEMENT OF CONSOLIDATED CASH FLOWS (Unaudited)
Nine Months Ended June 30 1997 1996 (In millions) 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
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. 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. 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 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 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. 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. 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. 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. 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. 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 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. 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. 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 EX-11 2 COMPUTATAION OF EARNINGS PER SHARE 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- EX-12 3 COMPUTATION OF RATION OF EARNINGS TO FIXED ASSETS 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- EX-27 4 FINANCIAL DATA SCHEDULE
5 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. 1,000,000 9-MOS SEP-30-1996 JUN-30-1997 379 0 1221 80 1539 4339 2107 0 8496 2152 155 0 0 216 4918 8496 5681 5760 3981 5054 0 0 20 706 266 440 95 0 0 535 2.48 2.44
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