SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 11-K
ANNUAL REPORT
Pursuant to Section 15(d) of the
Securities Exchange Act of 1934
For the fiscal year ended September 30, 1998
ROCKWELL RETIREMENT SAVINGS PLAN
FOR CERTAIN EMPLOYEES
ROCKWELL INTERNATIONAL CORPORATION
600 Anton Boulevard, Suite 700
Costa Mesa, California 92628-5090
ROCKWELL RETIREMENT SAVINGS PLAN
FOR CERTAIN EMPLOYEES
INDEX
PAGE NUMBER
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FINANCIAL STATEMENTS:
INDEPENDENT AUDITORS' REPORT 1
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS,
SEPTEMBER 30, 1998 AND 1997 2
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS, FOR THE YEARS ENDED
SEPTEMBER 30, 1998 AND 1997 3
NOTES TO FINANCIAL STATEMENTS 4 - 10
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES,
SEPTEMBER 30, 1998 11
SIGNATURES S-1
EXHIBIT:
INDEPENDENT AUDITORS' CONSENT S-2
INDEPENDENT AUDITORS' REPORT
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To the Rockwell Retirement Savings Plan for Certain Employees
and to Participants therein:
We have audited the accompanying statements of net assets available for
benefits of the Rockwell Retirement Savings Plan for Certain Employees as of
September 30, 1998 and 1997, and the related statements of changes in net
assets available for benefits for the years then ended. These financial
statements are the responsibility of the Plan's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, such financial statements present fairly, in all material
respects, the net assets available for benefits of the Plan as of September
30, 1998 and 1997, and the changes in net assets available for benefits for
the years then ended in conformity with generally accepted accounting
principles.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements taken as a whole. The accompanying supplemental schedule
of assets held for investment purposes as of September 30, 1998 is presented
for the purpose of additional analysis and is not a required part of the basic
financial statements, but is supplementary information required by the
Department of Labor's Rules and Regulations for Reporting and Disclosure under
the Employee Retirement Income Security Act of 1974. This supplemental
schedule is the responsibility of the Plan's management. Such supplemental
schedule has been subjected to the auditing procedures applied in our audit of
the basic 1998 financial statements and, in our opinion, is fairly stated in
all material respects when considered in relation to the basic financial
statements taken as a whole.
/s/ DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 19, 1999
ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES
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STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
SEPTEMBER 30, 1998 AND 1997
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1998 1997
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ASSETS
Investments:
Master Defined Contribution Trust $7,076,040 $5,082,149
Loan fund 64,681 23,523
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Total investments 7,140,721 5,105,672
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Receivables - Income 20 74
---------- ----------
Total assets and net assets available
for benefits $7,140,741 $5,105,746
---------- ----------
See notes to financial statements.
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ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES
- ------------------------------------------------------
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED SEPTEMBER 30, 1998 AND 1997
- -------------------------------------------------------------------------------
1998 1997
---- ----
NET ASSETS AVAILABLE FOR
BENEFITS, BEGINNING OF YEAR $5,105,746 $2,091,408
INCOME:
Earnings from Investments:
Net (loss) earnings in Master
Defined Contribution Trust (787,603) 741,501
Dividends 0 10,955
Interest 0 8,966
Net appreciation of investments 0 34,545
---------- ----------
Total (loss) earnings from investments (787,603) 795,967
---------- ----------
Contributions:
Employer 457,798 383,317
Participants 2,580,736 2,067,566
---------- ----------
Total contributions 3,038,534 2,450,883
---------- ----------
Total income 2,250,931 3,246,850
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EXPENSES -
Payments to participants or beneficiaries 205,809 50,218
---------- ----------
NET INCOME 2,045,122 3,196,632
---------- ----------
Transfers from the Plan 10,127 182,294
---------- ----------
NET INCREASE 2,034,995 3,014,338
---------- ----------
NET ASSETS AVAILABLE FOR
BENEFITS, END OF YEAR $7,140,741 $5,105,746
========== ==========
See notes to financial statements.
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ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES
- ------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED SEPTEMBER 30, 1998 AND 1997
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1. DESCRIPTION OF THE PLAN
The following description of the Rockwell Retirement Savings Plan for
Certain Employees (the "Plan"), as in effect on September 30, 1998, is
provided for general information purposes only. Participants should refer
to the Plan document for more complete information. See footnote 6 for a
description of certain events and Plan amendments subsequent to September
30, 1998.
a. General - The Plan is a defined contribution savings plan
established by Rockwell International Corporation (the "Company").
The Company's Employee Benefit Plan Committee, the Plan's
Administrative Committee and the Plan Administrator control and
manage the operation and administration of the Plan. Wells Fargo,
N.A. serves as trustee for the Plan. The assets of the Plan are
managed by the trustee and several other investment managers. The
Plan is subject to the provisions of the Employee Retirement Income
Security Act of 1974.
In 1997, the Plan's investments were transferred into the Rockwell
International Corporation Master Defined Contribution Trust.
Participants in the Plan may invest in any of the following
investment funds:
- Diversified Fund - invests primarily in equity securities other
than those issued by the Company.
- Fixed Income Fund - invests in fixed income securities.
- Guaranteed Return Fund - invests in contracts with insurance
companies providing a guarantee of principal (backed by the
general assets of the insurance company) and a specified rate
of interest.
- Intermediate Term Bond Fund - invests in U.S. Government
securities.
- Stock Fund B (employee contributions) - invests in or holds the
common stock of the Company.
Other funds of the Plan include:
- Stock Fund A (company contributions) - invests in or holds the
common stock of the Company.
- Stock Funds C and D - invest in or hold the common stock of
The Boeing Company ("Boeing"). See footnote 5.
- Stock Funds E and F - invest in or hold the common stock of
Meritor Automotive, Inc. ("Meritor"). See footnote 5.
- Loan Fund - represents outstanding participant loan balances.
Stock Funds C, D, E and F are closed to any additional company or
employee contributions. Additionally, there are special rules
regarding distribution from such funds. Any dividends received on
behalf of these funds are paid to Stock Fund A or the Fixed Income
Fund.
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b. Participation - Participation in the Plan is extended to certain
employees within the Company's Collins Radio Division, certain
employees of the Company's Collins Air Transport Division and
certain employees of the Company's Semiconductor Systems business
(See footnote 6) who have been employed for 52 weeks. The Plan
provides that eligible employees electing to become participants can
contribute to the Plan, through either payroll deductions or
deferrals between 1% and 15% of their base compensation, as defined
in the Plan.
Amounts contributed by employees pursuant to payroll deductions are
included in the participants' taxable income in the period of the
contribution. Amounts contributed by employees pursuant to payroll
deferrals are excluded from the participants' taxable income until
such amounts are received by them as a distribution from the Plan.
The Plan provides that the Company, when extending the benefits of
the Plan to any employee of a component of the Company or an
affiliated company, may place such limitations as it deems
appropriate on the amount of compensation deferral contributions or
on compensation deduction contributions to comply with certain
statutory limitations.
A participant who elects compensation deduction contributions may,
upon 15 days notice, revoke such election and elect instead to make
compensation deferral contributions effective on the first payroll
payment date following the expiration of the notice period. A
participant who has elected compensation deferral contributions may,
by giving notice to the Company prior to April 1 or October 1 of any
year, revoke such election and elect instead compensation deduction
contributions effective the first payroll payment date in April or
October of that year, respectively.
c. Investment Elections - A participant may elect to have contributions
made to the Diversified Fund, the Fixed Income Fund, Stock Fund B,
the Guaranteed Return Fund or the Intermediate Term Bond Fund in
increments of 5%. Participants may change such investment elections
once each calendar quarter.
A participant may elect once each calendar quarter to have 5%
increments of his or her investment in the Diversified Fund, Fixed
Income Fund, Stock Fund B or the Intermediate Term Bond Fund
converted to units in any fund other than the Guaranteed Return
Fund. The value of such units will be determined as of the first
valuation date following such election. Such election shall have no
effect on any other election offered under the Plan.
Participants may quarterly elect to transfer a percentage of their
Stock Fund B account to the Diversified Fund, Fixed Income Fund, or
the Intermediate Term Bond Fund. The allowable annual transfer is
limited to 10% of the Stock Fund B account prior to reaching age 55,
and 50% of the Stock Fund B account thereafter.
-5-
A participant, upon attainment of age 65, may irrevocably elect to
have (i) all or a portion of the units in Stock Fund A and/or (ii)
all or a portion of the units in Stock Fund B converted to units in
any fund other than the Guaranteed Return Fund. The value of such
units will be determined on the first valuation date following such
election. All subsequent Company contributions made to such
participant's Company contributions account would be invested in the
same funds in which the participant elected to invest contributions.
Participants' contributions to the Guaranteed Return Fund are
invested in contracts with Metropolitan Life Insurance Company, New
York Life Insurance Company, John Hancock Mutual Life Insurance
Company and The Prudential Insurance Company of America with various
guaranteed annual returns to participants for the contract periods.
Such contracts guarantee the following annual returns:
Guaranteed Contract
Periods of Contributions Annual Return Expiration Date
------------------------ ------------- ---------------
April 1, 1994 - March 31, 1995 5.00% March 31, 1997
April 1, 1995 - March 31, 1996 8.00% March 31, 1998
April 1, 1996 - March 31, 1997 5.49% March 31, 1999
April 1, 1997 - March 31, 1998 6.70% March 31, 2000
April 1, 1998 - March 31, 1999 5.82% March 31, 2001
A participant with units in the Guaranteed Return Fund may
irrevocably elect, by providing a notice at least 30 days prior to
the contract expiration date, to convert his or her interest in such
contract, in 5% increments, to the Diversified Fund, Stock Fund B,
the Intermediate Term Bond Fund, the Fixed Income Fund and/or the
current Guaranteed Return Fund. Such conversion will be based on the
value of units in Stock Fund B as of the date of such expiration, or
the valuation date immediately preceding the transfer of funds,
whichever is later.
d. Unit Values - Participants do not own specific securities or other
assets in the various Funds in the Master Defined Contribution
Trust, but have an interest in the Funds therein represented by
units valued as of the end of every business day. However, voting
rights are extended to participants in proportion to their interest
in the common stock held in Stock Funds A and B, as represented by
common units. Contributions to and withdrawal payments from each
fund are converted to units by dividing the amounts of such
transactions by the unit value as last determined, and the
participants' accounts are charged or credited with the number of
units properly attributable to each participant.
e. Contributions - The Company contributes (for facilities to which
company contributions have been extended) to the Plan an amount
equal to 100% of the participants' contributions up to a maximum of
$500 per year. Company contributions are made to Stock Fund A in the
form of cash, common stock of the Company or any combination
thereof.
-6-
f. Vesting - Amounts contributed by participants are fully vested at
all times. Amounts contributed through compensation deduction
contributions may be distributed at any time. However, amounts
contributed through compensation deferral contributions may be
distributed to participants only (i) upon termination of employment,
(ii) upon attaining the age of 59-1/2 or (iii) upon demonstration by
the participant to the Administrative Committee that there is
hardship as defined in the Plan.
Units attributable to Company contributions vest when a participant
has completed five years of continuous service, except that all
units fully vest upon termination of the Plan or upon a
participant's (i) retirement, (ii) death, (iii) layoff, (iv)
termination of employment because of inability to meet Company
medical standards, (v) termination of employment in order to enter
the Armed Forces of the United States or to accept employment with
the Government of the United States, (vi) termination of employment
in connection with the divestiture of a component of the Company or
(vii) reaching age 65 while employed.
g. Benefit Claims Payable - Retiring participants who have account
balances in excess of $5,000 may elect to remain in the Plan without
any further contribution until age 70-1/2. Those retiring
participants who have account balances less than $5,000 will
receive their benefits no later than 60 days after the end of the
Plan year in which such retirement occurs. Terminated participants
will receive their vested benefits no later than 60 days after the
end of the plan year in which such termination occurs. Participants
separating from service who have not attained the age of 70-1/2 and
who have an account balance greater than $5,000 must provide written
consent to the Plan Administrator in order to receive their
distribution before reaching age 70-1/2. At September 30, 1998 and
1997, the amounts of such benefit claims payable to retired and
terminated participants were approximately $7,000 and $8,000,
respectively.
h. Forfeitures - When certain terminations of participation in the Plan
occur, the nonvested portion of a participant's account, as defined
by the Plan, represents a potential forfeiture. Such forfeitures
reduce subsequent Company contributions to the Plan. However, if
upon reemployment, the former participant fulfills certain
requirements, as defined in the Plan, the previously forfeited
nonvested portion of the participant's account will be restored
through Company contributions.
i. Loans to Participants - The Plan provides for loans to participants.
The participant may apply for and obtain a loan in an amount as
defined in the Plan (not less than $1,000 and not greater than
$50,000 or 50% of his or her vested account balance) from his or her
account balance. The loans can be repaid through payroll deductions
over a period of 12 to 60 months or up to 120 months for the
purchase of a primary residence, or they can be repaid in full at
any time that is at least 12 months following the date of the loan.
Interest is charged at a rate equal to the prime rate being charged
by at least 75% of the largest 30 United States banks plus one
percent. Payments of principal and interest are credited to the
participant's account. Also, participants may have only one
outstanding loan at a time.
j. Plan Termination - The Company has the right to suspend
contributions to the Plan or to terminate or modify the Plan from
time to time. In the event that the Plan is terminated or
contributions by the Company are discontinued, each participant's
Company contributions account will be fully vested. Benefits under
the Plan will be provided solely from the Plan assets.
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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Valuation of Investments - Investment in the Master Defined
Contribution Trust is stated at fair value. See footnote 3.
b. Expenses - Plan expenses are paid either by the Company or the Plan,
as provided in the Plan document.
c. Use of Estimates - Estimates and assumptions made by the Plan's
management affect the reported amount of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of increases and
decreases to the Plan during the reporting period. Actual results
could differ from those estimates.
3. MASTER DEFINED CONTRIBUTION TRUST
At September 30, 1998, all of the Plan's investment assets, except for
participant loans, were held in a Master Defined Contribution Trust
account at Wells Fargo, N.A. Use of the Master Defined Contribution Trust
permits the commingling of the trust assets of a number of benefit plans
of the Company and its subsidiaries for investment and administrative
purposes. Although assets are commingled in the Master Defined
Contribution Trust, Wells Fargo, N.A. maintains supporting records for the
purpose of allocating the net gain of the investment accounts to the
various participating trusts.
The investment accounts of the Master Defined Contribution Trust are
valued at fair value at the end of each day. The net gain of the accounts
for each day is allocated by the trustee to each participating trust based
on the relationship of the interest of each trust to the total of the
interests of all participating trusts.
The Master Defined Contribution Trust investments are valued at fair
value. If available, quoted market prices are used to value investments.
If quoted market prices are not available, the fair value of investments
is estimated primarily by independent investment brokerage firms and
insurance companies. The funds held by the Master Defined Contribution
Trust are discussed in footnote 1.
-8-
The net assets of the Master Defined Contribution Trust at September 30,
1998 and 1997 are summarized as follows:
1998 1997
---- ----
Assets:
Cash and equivalents $ 71,023,916 $ 148,232,864
U.S. Government securities 23,916,935 31,851,948
Corporate bonds and debentures 129,644,537 27,784,696
Corporate stocks 2,245,643,131 3,466,197,079
Guaranteed investment contracts 405,234,445 481,114,790
Accrued income 4,029,010 2,291,917
-------------- --------------
Total assets $2,879,491,974 $4,157,473,294
-------------- --------------
Liabilities -
Sales pending settlement 90,419 -
-------------- --------------
Net assets available for benefits $2,879,401,555 $4,157,473,294
-------------- --------------
The net (loss) earnings of the Master Defined Contribution Trust for the
years ended September 30, 1998 and 1997 is summarized as follows:
1998 1997
---- ----
Interest $ 40,204,080 $ 32,806,392
Dividends 388,556,689 10,041,267
Net (depreciation) appreciation:
U.S. Government securities 890,243 355,501
Corporate bonds and debentures (532,338) 361,370
Common and preferred stocks (1,243,868,960) 237,067,777
-------------- --------------
Net (loss) earnings $ (814,750,286) $ 280,632,307
-------------- --------------
The Plan's interest in the total Master Defined Contribution Trust as a
percentage of net assets of the Master Defined Contribution Trust was less
than 1% at both September 30, 1998 and 1997.
Prior to the transfer of assets to the Master Defined Contribution Trust
in 1997, income of $19,921 and net appreciation of $34,545 occurred in
various equity funds.
4. TAX STATUS
The Company believes that the Plan, as in effect on September 30, 1998,
was designed and operated in compliance with the applicable requirements
of the Internal Revenue Code and that, therefore, the Plan qualified under
Section 401(a) and the related trust was tax-exempt as of September 30,
1998. Therefore, no provision for income taxes is included in the Plan's
financial statements.
5. PLAN AMENDMENTS
Effective December 6, 1996, Stock Funds C and D were added to the Plan.
These stock funds consist of the common stock of Boeing received by the
Plan as a result of the divestiture by the Company of its former Aerospace
and Defense businesses (the "A & D Business") to Boeing on December 6,
1996. As of the transaction date, Stock Funds C and D received .042 shares
of Boeing common stock for each share of Company
-9-
common stock held by Stock Funds A and B, respectively. Participants who
were employed in the Company's former A&D Business continue to retain
their account balance with the Plan; however, participant contributions to
the Plan by such former employees were suspended as of the transaction
date. Such participants continue to retain all rights in their account
balances with the Plan, and they are eligible to participate in a similar
plan with Boeing.
On September 30, 1997, the Company spun-off its Automotive business into
an independent, separately traded, publicly held company, Meritor
Automotive, Inc. ("Meritor"), and distributed all of the outstanding
shares of common stock of Meritor to holders of Company common stock. As a
result of this distribution, the Plan received one share of Meritor common
stock for every three shares of Company common stock held by Stock Funds A
and B as of the distribution date. Also effective September 30, 1997,
Meritor Stock Funds E and F were established to receive the Meritor stock
distributed in respect of the Company stock held for participants by the
Plan and are included as part of the Master Defined Contribution Trust.
6. SUBSEQUENT EVENTS
On December 31, 1998, the Company spun-off its Semiconductor Systems
business into an independent, separately traded, publicly held company,
Conexant Systems, Inc. ("Conexant"), and distributed all of the
outstanding shares of common stock of Conexant to holders of Company
common stock. As a result of this distribution, the Plan received one
share of Conexant common stock for every two shares of Company common
stock held by Stock Funds A and B as of the distribution date. Also
effective December 31, 1998, Conexant Stock Funds G and H were established
to receive the Conexant stock distributed in respect of the Company stock
held for participants by the Plan and are included as part of the Master
Defined Contribution Trust. In connection with this spin-off, the account
balances of the Conexant participants of the Plan are planned to be
transferred into a Conexant savings plan in April 1999. In addition, the
non-represented hourly Collins employee group known as the Cedar Rapids
Off-site participants were transferred into the Allen-Bradley Savings and
Investment Plan for Hourly Employees which was re-named the Rockwell
Non-Represented Hourly Retirement Savings Plan. The related plan assets
for this group are planned to be transferred into the new Plan in April
1999. As a result, effective on April 1, 1999, represented hourly
employees of the Company's Collins Radio Division will remain in the Plan
as the sole participant group.
Effective January 1, 1999, the Plan changed its year end from September 30
to December 31.
In January 1999, the Company approved a series of changes to the Plan that
will become effective on April 1, 1999. These changes include increasing
the investment opportunities available under the Plan and adding
flexibility to certain participant transactions such as investment of
future participant contributions, fund transfers, participant loans etc.,
and providing an ongoing investment education program to Plan
participants. Participants should refer to the Summary Plan Descriptions
mailed to participants in March 1999 for more information on these
changes.
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ROCKWELL RETIREMENT SAVINGS PLAN FOR CERTAIN EMPLOYEES
- ------------------------------------------------------
ITEM 27(a) - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
SEPTEMBER 30, 1998
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Column A Column B Column C Column D Column E
Description of investment
Identity of issuer, including collateral, rate
borrower, lessor of interest, maturity date, Current
or similar party par or maturity value Cost Value
------------------- --------------------------- ---- -------
* Wells Fargo, N.A. Master Defined Contribution
Trust $6,996,789 $7,076,040
* Wells Fargo, N.A. Participant Loans; 7% to 11.5%
due 12 to 120 months from
date of loan 64,681 64,681
---------- ----------
Total Investments $7,061,470 $7,140,721
---------- ----------
*Party-in-interest
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Plan
Administrator has duly caused this annual report to be signed by the
undersigned, hereunto duly authorized.
ROCKWELL RETIREMENT SAVINGS PLAN
FOR CERTAIN EMPLOYEES
By /s/ Alfred J. Spigarelli
----------------------------
Alfred J. Spigarelli
Plan Administrator
Date: March 26, 1999
S-1
INDEPENDENT AUDITORS' CONSENT
- -----------------------------
We consent to the incorporation by reference in Registration Statement No.
333-17031 of Rockwell International Corporation on Form S-8, and the
Prospectus dated March 10, 1999 with respect to the Securities covered
thereby, of our report dated March 19, 1999, appearing in this Annual Report
on Form 11-K of the Rockwell Retirement Savings Plan for Certain Employees for
the year ended September 30, 1998.
DELOITTE & TOUCHE LLP
Pittsburgh, Pennsylvania
March 26, 1999
S-2