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 December 31, 1998
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN
FOR REPRESENTED HOURLY EMPLOYEES
ROCKWELL INTERNATIONAL CORPORATION
600 Anton Boulevard, Suite 700
Costa Mesa, California 92626-7147
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN
FOR REPRESENTED HOURLY EMPLOYEES
TABLE OF CONTENTS
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Page
INDEPENDENT AUDITORS' REPORT 1
FINANCIAL STATEMENTS AS OF AND FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997:
Statements of Net Assets Available for Benefits 2
Statements of Changes in Net Assets Available for Benefits 3
Notes to Financial Statements 4-9
SUPPLEMENTAL SCHEDULES:
Item 27a - Schedule of Assets Held for Investment Purposes 10
Item 27b - Schedule of Loans or Fixed Income Obligations 11
SIGNATURES S-1
EXHIBIT:
Independent Auditors' Consent S-2
INDEPENDENT AUDITORS' REPORT
To the Allen-Bradley Savings and Investment Plan for
Represented Hourly Employees and Participants therein:
We have audited the accompanying financial statements of the Allen-Bradley
Savings and Investment Plan for Represented Hourly Employees as of December 31,
1998 and 1997 and for the years then ended, listed in the Table of Contents.
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 December 31,
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 schedules
listed in the Table of Contents are presented for the purpose of additional
analysis and are not a required part of the basic financial statements, but are
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. These schedules are the responsibility of the Plan's
management. These schedules have been subjected to the auditing procedures
applied in our audit of the basic 1998 financial statements and, in our opinion,
are fairly stated in all material respects when considered in relation to the
basic financial statements taken as a whole, except that the supplemental
Schedule of Loans or Fixed Income Obligations does not include certain
information regarding participant loans.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 18, 1999
ALLEN-BRADLEY SAVINGS AND INVESTMENT
PLAN FOR REPRESENTED HOURLY EMPLOYEES
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
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1998 1997
INVESTMENTS:
Master Defined Contribution Trust $ 30,514,887 $ 26,127,019
Loan fund 564,219 312,791
--------------- ---------------
Total investments 31,079,106 26,439,810
--------------- ---------------
RECEIVABLES:
Contributions receivable - employer - 24,864
Contributions receivable - employee - 86,186
Income receivable 43 3
--------------- ---------------
Total receivables 43 111,053
--------------- ---------------
TOTAL ASSETS AND NET ASSETS AVAILABLE
FOR BENEFITS $ 31,079,149 $ 26,550,863
=============== ===============
See notes to financial statements.
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ALLEN-BRADLEY SAVINGS AND INVESTMENT
PLAN FOR REPRESENTED HOURLY EMPLOYEES
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- - -------------------------------------------------------------------------------
1998 1997
NET ASSETS AVAILABLE FOR BENEFITS,
BEGINNING OF YEAR $ 26,550,863 $ 21,899,860
--------------- ---------------
INCOME:
Earnings from investments:
Net earnings in Master Defined
Contribution Trust 1,985,638 1,477,284
Interest 37,670 5,242
Dividends - 645
Net depreciation in fair value
of investments - (3,911)
--------------- ---------------
Total earnings from investments 2,023,308 1,479,260
--------------- ---------------
Contributions:
Employer 1,004,399 1,060,463
Employee 3,364,866 3,469,535
--------------- ---------------
Total contributions 4,369,265 4,529,998
--------------- ---------------
Total income 6,392,573 6,009,258
EXPENSES -
Payments to participants or beneficiaries 1,850,389 1,382,282
--------------- ---------------
NET INCOME 4,542,184 4,626,976
NET TRANSFERS (FROM) TO THE PLAN (13,898) 24,027
--------------- ---------------
NET INCREASE 4,528,286 4,651,003
--------------- ---------------
NET ASSETS AVAILABLE FOR BENEFITS,
END OF YEAR $ 31,079,149 $ 26,550,863
=============== ===============
See notes to financial statements.
-3-
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN
FOR REPRESENTED HOURLY EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
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1. DESCRIPTION OF PLAN
The following brief description of the Allen-Bradley Savings and
Investment Plan for Represented Hourly Employees (the "Plan") is provided
for general information purposes only. Participants should refer to the
Plan document for more complete information.
a. General - The Plan is a defined contribution savings plan covering
all permanent represented hourly employees of Allen-Bradley Company,
LLC (the "Company") who elect to participate in the Plan. The
Company is a wholly-owned subsidiary of Rockwell International
Corporation ("Rockwell"). The Savings Plan Administrative Committee
and the Plan Administrator control and manage the operation and
administration of the Plan. Wells Fargo, N. A. is the trustee of the
Plan's assets. 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 in 5% increments among any or all of the funds
below:
o Diversified Fund - Invests primarily in equity securities
other than those issued by Rockwell.
o Fixed Income Fund - Invests in fixed income securities.
o 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.
o Intermediate Term Bond Fund - Invests in U.S. Government
securities, corporate notes and bonds and short term
investment funds of the trustee.
o Stock Fund B (employee contributions) - Invests in and holds
the common stock of Rockwell.
Other funds of the Plan include:
o Stock Fund F - Holds the common stock of Meritor Automotive,
Inc. ("Meritor"). See footnote 5.
o Loan Fund - Represents outstanding participant loan balances.
o Stock Fund H - Holds the common stock of Conexant Systems,
Inc. ("Conexant"). See footnote 5.
-4-
Stock Funds F and H are closed to any additional employee
contributions. Additionally, there are special rules regarding
distribution from such funds. Any dividends received on behalf of
these funds are paid to the Guaranteed Return Fund.
b. Participation - The Plan provides that eligible employees
electing to become participants may contribute up to a maximum of 9%
of compensation, as defined in the Plan. Participant contributions
can be made either before or after U.S. federal taxation of a
participant's compensation. The maximum before-tax contribution
(Salary Reduction Contribution) is 9% for non-highly compensated
participants, and 8% for highly compensated participants. In
addition, the Company contributes out of its current or accumulated
earnings and profits, but not otherwise, an amount equal to 50% of
the total amount of participant contributions provided that such
amount shall not exceed an amount equal to 5% of compensation in
1998 and 1997, respectively, less the amount of any forfeitures as
provided by the Plan. Company contributions are made to the
Guaranteed Return Fund.
c. Investment Elections - Participants may elect to have their
participant contributions made to any of the funds indicated in Note
1.a. that are available to participant contributions in 5%
increments among any or all of these funds. Participants with units
in the Guaranteed Return Fund may annually elect to convert all or a
part of their percentage interest in an insurance contract into
units in other funds as the insurance contracts held within the
Guaranteed Return Fund expire.
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.
The crediting interest rates at December 31, 1998 for the contracts
ranged from 5.84% to 6.47% and the crediting interest rates at
December 31, 1997 ranged from 5.84% to 6.84%.
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 such respective funds 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 Plan, but have an interest therein represented by
units valued each business day. Between valuation dates,
contributions to and withdrawal payments from each fund are
converted to units by dividing the amount of such transactions by
the unit value as last determined, and the participants' accounts
are charged or credited, as the case may be, with the number of
units properly attributable to each participant.
-5-
e. Vesting - Each participant is fully vested at all times in the
portion of a participant's account which relates to the
participant's contributions and earnings thereon. Vesting in the
Company contribution portion of a participant's account plus actual
earnings thereon is based on years of credited service. A
participant is 100% vested after five years of credited service.
Partial vesting occurs at a rate of 20% per year of credited
service. Upon termination of employment, participants may receive
their account balance, to the extent vested, in the form of a lump
sum payment, installment payments or an annuity contract from a
legal reserve life insurance company. Participant before-tax
contributions can be withdrawn provided the participant has either
attained the age of 59-1/2 or is able to demonstrate financial
hardship.
f. Loans - Participants may 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 the participant's account balance) from the balance of the
participant's account. Interest is charged at a rate equal to the
prime rate plus 1%. The loans can be repaid through payroll
deductions over periods ranging from 12 to 60 months or up to 120
months for the purchase of a primary residence, or they can be
repaid in full after a minimum of 12 months. Payments of principal
and interest are credited to the participant's account. Participants
may have only one loan outstanding at a time.
g. Forfeitures - When certain terminations of participation in the Plan
occur, the nonvested portion of the participants' account represents
a forfeiture. Forfeitures reduce the Company's contributions to the
Plan. However, if the participant is reemployed and fulfills certain
requirements, as defined in the Plan document, the participant's
account will be restored by the Company.
h. Benefit Claims Payable - Distributions and withdrawals from
participants' accounts may be made as of the end of any quarter of
the Plan fiscal year. Effective October 1, 1997, the Plan changed to
daily processing of all transactions. As a result, at December 31,
1998 and 1997, there were no amounts due to participants who had
withdrawn from the Plan.
i. Priorities Upon Termination of the Plan - The Company has the
authority 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 employer contributions account will be fully vested.
Benefits under the Plan will be provided solely from the Plan
assets.
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 fees and expenses, including fees and expenses
connected with the provision of administrative services by external
service providers, are paid by the Company.
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.
-6-
3. MASTER DEFINED CONTRIBUTION TRUST
At December 31, 1998 and 1997, with the exception of the participant loan
fund, all of the Plan's investment assets were held in a Master Defined
Contribution Trust ("Master Trust"), at Wells Fargo, N.A. Use of the
Master Trust permits the commingling of the trust assets of a number of
benefit plans of Rockwell and its subsidiaries for investment and
administrative purposes. Although assets are commingled in the Master
Trust, Wells Fargo, N.A. maintains supporting records for the purpose of
allocating the net gain of the investment accounts to the various
participating plans.
The investment accounts of the Master Trust are valued at fair value at
the end of each day. If available, quoted market prices are used to value
investments. In instances wherein 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 Trust are discussed in footnote 1.
The net gain or loss of the accounts for each day is allocated by the
trustee to each participating plan based on the relationship of the
interest of each plan to the total of the interests of all participating
plans.
The net assets of the Master Trust at December 31, 1998 and 1997 are
summarized as follows:
1998 1997
Assets:
Cash and equivalents $ 74,351,351 $ 151,789,487
U.S. Government securities 20,395,583 52,855,764
Corporate bonds and debentures 135,081,333 16,296,122
Corporate stocks 2,852,241,039 3,225,666,216
Guaranteed investment contracts 406,115,361 446,246,073
Accrued income 4,125,316 2,117,905
---------------- -----------------
Total assets and net assets
available for benefits $ 3,492,309,983 $ 3,894,971,567
================ =================
The net investment (loss) earnings of the Master Trust for the years
ended December 31, 1998 and 1997 is summarized as follows:
Interest $ 38,579,864 $ 36,452,298
Dividends 58,366,753 22,897,520
Net appreciation (depreciation):
U.S. Government securities 407,560 (412,594)
Corporate bonds and debentures (625,459) 301,248
Common stocks (103,309,401) (54,950,172)
---------------- -----------------
Net investment (loss) earnings $ (6,580,683) $ 4,288,300
================ =================
-7-
The Plan's interest in the total Master Trust, based on the percentage
held of the Master Trust net assets, was less than 1% at both December 31,
1998 and 1997. While the Plan participates in the Master Trust, the
portfolio of investments is not ratable between the various participating
plans. As a result, those plans with smaller participation in the common
stock funds recognized less net depreciation in 1998 and 1997.
Prior to the transfer of assets to the Master Trust in 1997, income of
$5,887 and net depreciation of $3,911 was earned on plan investments.
4. TAX STATUS
The Plan obtained its latest determination letter in 1996, in which the
Internal Revenue Service stated that the Plan, as then designed, was in
compliance with the applicable requirements of the Internal Revenue Code.
The Plan has been amended since receiving the determination letter. The
Company believes that the Plan currently is designed and being operated in
compliance with the applicable requirements of the Internal Revenue Code
and that, therefore, the Plan continues to qualify under Section 401(a)
and the related trust continues to be tax-exempt as of December 31, 1998.
Therefore, no provision for income taxes is included in the Plan's
financial statements.
5. CHANGES IN THE PLAN
Effective January 1, 1997:
o Participants have the opportunity to change their investment options
for ongoing employee contributions, once every calendar quarter.
o Participants have the ability to invest employee contributions in 5%
increments among five investment funds.
o Participants have the ability to transfer current account balances,
once every calendar quarter on a limited basis.
o There is a new installment payment (distribution) option for
retirees.
o There is an optional deferral of distribution to age 70 1/2 for
terminated employees if the account balance is greater than $5,000.
On September 30, 1997, Rockwell spun-off its Automotive business into an
independent, publicly held company, Meritor Automotive, Inc. ("Meritor")
and distributed all of the outstanding shares of common stock of Meritor
to holders of Rockwell Common Stock. As a result of this transaction,
participants of the Plan received one share of Meritor Common Stock for
every three shares of Rockwell Common Stock which they held as of the
transaction date. Also, effective September 30, 1997, Meritor Stock Fund
F, consisting of Meritor Common Stock, has been added to the Plan.
Participants may elect to transfer all or a portion of their account
balance in Meritor Stock Fund F to other investment funds within this
Plan. Special rules apply on which funds are available for transfer.
Effective October 1, 1997, the Plan moved from monthly valuations to daily
valuation. Most transactions are processed on the date received, provided
they are received prior to the close of the New York Stock Exchange.
-8-
On December 31, 1998, Rockwell spun-off its Semiconductor Systems business
into an independent, publicly held company, Conexant Systems, Inc.
("Conexant"), and distributed all of the outstanding shares of common
stock of Conexant to holders of Rockwell common stock. As a result of this
distribution, the Plan received one share of Conexant common stock for
every two shares of Rockwell common stock held as of the distribution
date. The Conexant shares were received on January 4, 1999 by Conexant
Stock Fund H, which was established as of the December 31, 1998
distribution date. Upon distribution, the value of each Conexant share was
approximately $16.75, which was twice the amount of the approximate $8.37
decline in the value of each Rockwell share at that same time. As such,
based on the distributing allocation of the shares (one Conexant share for
every two Rockwell shares held), the distribution of Conexant shares had
no impact on Plan participant account balances. Participants may elect to
transfer all or a portion of their account balance in Conexant Stock Fund
H to other investment funds within the Plan. Special rules apply on which
funds are available for transfer.
Participants should refer to the Plan document for more complete
information regarding changes in the Plan.
6. SUBSEQUENT EVENTS
In January 1999, Rockwell approved a series of changes to the Plan that
became 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 for more
information on these changes.
Effective January 1, 1999, the Plan was renamed the Rockwell Employee
Savings and Investment Plan for Represented Hourly Employees.
* * * * * *
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ALLEN-BRADLEY SAVINGS AND INVESTMENT
PLAN FOR REPRESENTED HOURLY EMPLOYEES
Item 27a SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES
DECEMBER 31, 1998
- - ---------------------------------------------------------------------------------------------------------------
Column A Column B Column C Column D Column E
Description of Investment,
Identity of Issuer, Including Collateral, Rate
Borrower, Lessor or of Interest, Maturity Date, Current
Similar Party Par or Maturity Value Cost Value
* Wells Fargo, N.A. Master Defined Contribution
Trust $ 26,373,718 $ 30,514,887
* Participant loans Participant Loans; prime plus
1%, due 12 to 120 months
from date of loan 564,219 564,219
--------------- ----------------
Total investments $ 26,937,937 $ 31,079,106
=============== ================
* Party-in-interest
-10-
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN
FOR REPRESENTED HOURLY EMPLOYEES
DECEMBER 31, 1998
Schedule 27b - Schedule of Loans or Fixed Income Obligations
g) Detailed
Description
of Loan,
Including
Dates of
Making and
Maturity,
Interest
Rate, Type
and Value of
Collateral,
Amount Received During Reporting Year Description Amount Overdue
------------------------------------- and Terms of --------------
Renegotiation
b) Identity and c) Original f) Unpaid of Loan, if
Address of Amount of Balance at any, and Other
a) Obligor Loan d) Principal e) Interest End of Year Material Items h) Principal i) Interest
- - ----- --------------- ------------ ------------ ----------- -------------- ----------------- ------------ -----------
* Various Not Not Not Not Various $22,194 Not
Participants available* available* available* available* Participant available*
Loans
<FN>
Not available*: The Plan's recordkeeper has indicated that this information is not currently available.
Note: The participant loans included in this schedule are over 90 days past due. Each identified participant has been notified
that this past due status, if not corrected by bringing the loan to a current status within 60 days, will result in the loan
being defaulted and the loan amount being found to be taxable as a deemed distribution.
</FN>
-11-
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.
ALLEN-BRADLEY SAVINGS AND INVESTMENT
PLAN FOR REPRESENTED HOURLY EMPLOYEES
By /s/ Alfred J. Spigarelli
----------------------------------
Alfred J. Spigarelli
Plan Administrator
Date: June 29, 1999
S-1
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in Registration Statement No.
333-17405 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 June 18, 1999, appearing in this Annual Report on Form 11-K of the
Allen-Bradley Savings and Investment Plan for Represented Hourly Employees for
the year ended December 31, 1998.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 29, 1999
S-2