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 SALARIED EMPLOYEES
ROCKWELL INTERNATIONAL CORPORATION
600 Anton Boulevard, Suite 700
Costa Mesa, California 92626-7147
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN FOR
SALARIED EMPLOYEES
TABLE OF CONTENTS
PAGE NUMBER
-----------
FINANCIAL STATEMENTS:
INDEPENDENT AUDITORS' REPORT 1
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS,
DECEMBER 31, 1998 AND 1997 2
STATEMENTS OF CHANGES IN NET ASSETS AVAILABLE
FOR BENEFITS, FOR THE YEARS ENDED
DECEMBER 31, 1998 AND 1997 3
NOTES TO FINANCIAL STATEMENTS 4 - 9
SUPPLEMENTAL SCHEDULES:
SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES,
DECEMBER 31, 1998 10
SCHEDULE OF LOANS OR FIXED INCOME OBLIGATIONS,
DECEMBER 31, 1998 11
SIGNATURES S-1
EXHIBIT:
INDEPENDENT AUDITORS' CONSENT S-2
INDEPENDENT AUDITORS' REPORT
- - ----------------------------
To the Allen-Bradley Savings and Investment Plan for Salaried Employees
and to Participants therein:
We have audited the accompanying financial statements of the Allen-Bradley
Savings and Investment Plan for Salaried 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 supplemental schedules are the responsibility of the
Plan's management. These supplemental schedules have been subjected to the
auditing procedures applied in our audit of the basic 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 SALARIED EMPLOYEES
- - ----------------------------------------------------------------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
DECEMBER 31, 1998 AND 1997
- - -------------------------------------------------------------------------------
1998 1997
---- ----
ASSETS
- - ------
Investments:
Master Defined Contribution Trust $ 391,745,990 $ 337,133,667
Loan fund 6,261,811 5,926,371
-------------- --------------
Total investments 398,007,801 343,060,038
-------------- --------------
Receivables:
Transfer Receivable 3,071,918,905 -
Income 2,643 333
Employee Contributions - 851,149
Employer Contributions - 405,290
-------------- --------------
Total Receivables 3,071,921,548 1,256,772
-------------- --------------
TOTAL ASSETS AND NET ASSETS
AVAILABLE FOR BENEFITS $3,469,929,349 $ 344,316,810
============== ==============
See notes to financial statements.
-2-
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN FOR SALARIED 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 $ 344,316,810 $ 279,230,030
-------------- --------------
INCOME:
Earnings from Investments:
Net earnings in Master
Defined Contribution Trust 33,344,486 33,658,889
Interest 544,118 122,130
Dividends - 355,287
Net depreciation
in fair value of investments - (137,286)
-------------- --------------
Total earnings from
investments 33,888,604 33,999,020
-------------- --------------
Contributions:
Employer 9,179,570 12,564,296
Employee 27,887,348 26,283,019
-------------- --------------
Total contributions 37,066,918 38,847,315
-------------- --------------
Total income 70,955,522 72,846,335
-------------- --------------
EXPENSES:
Payments to participants
or beneficiaries 17,093,580 15,330,226
Administrative expenses 275,974 -
-------------- -------------
Total expenses 17,369,554 15,330,226
-------------- -------------
NET INCOME 53,585,968 57,516,109
-------------- -------------
Net transfers to the Plan 3,072,026,571 7,570,671
-------------- -------------
NET INCREASE 3,125,612,539 65,086,780
-------------- -------------
NET ASSETS AVAILABLE FOR
BENEFITS, END OF YEAR $3,469,929,349 $ 344,316,810
============== =============
See notes to financial statements.
-3-
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN
FOR SALARIED EMPLOYEES
NOTES TO FINANCIAL STATEMENTS
YEARS ENDED DECEMBER 31, 1998 AND 1997
- - -------------------------------------------------------------------------------
1. DESCRIPTION OF PLAN
The following brief description of the Allen-Bradley Savings and
Investment Plan for Salaried 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
established by Allen-Bradley Company, LLC (the "Company"). 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 assets. 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 Rockwell.
- 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, corporate notes and bonds and short term investment
funds of the trustee.
- Stock Fund B (employee contributions) - invests in and holds the
common stock of Rockwell.
Other funds of the Plan include:
- Stock Fund A (employer contributions) - invests in and holds the
common stock of Rockwell.
- Stock Funds C and D - hold the common stock of The Boeing Company
("Boeing").
- Stock Funds E and F - hold the common stock of Meritor
Automotive, Inc. ("Meritor"). See footnote 5.
- Stock Funds G and H - hold the common stock of Conexant
Systems, Inc. ("Conexant"). See footnote 5.
- Loan Fund - represents outstanding participant loan balances.
Stock Funds C, D, E, F, G and H are closed to any additional employer
and 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.
-4-
b. Participation - The Plan provides that eligible employees electing
to become participants may contribute up to a maximum of 14% of
compensation, as defined in the Plan document. Participant
contributions can be made either before or after U.S. federal
taxation of a participant's compensation. However, a participant's
contribution on a before-tax basis is limited to 9% of the
participant's base compensation for non-highly compensated
participants and to 8% for highly compensated participants. In
addition, in 1997 the Company was required to contribute out of its
current or accumulated earnings and profits, but not otherwise, a
variable amount equal to 50% to 100% of the total amount of
participant contributions provided that such amount did not exceed an
amount equal to 6% of a participant's compensation, less the amount
of any forfeitures as provided by the Plan. The percentage match was
determined based on consolidated net sales growth of Rockwell
Automation, a business unit of Rockwell which includes the operations
of the Company. Effective January 1, 1998, Rockwell contributes an
amount equal to 50% of the first 6% of eligible compensation
contributed by participants. Company contributions are made in the
form of cash or common stock of Rockwell or any combination thereof
to Rockwell Stock Fund A.
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 this fund 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 various funds, but have an interest therein represented
by units valued as of each business day. However, voting rights are
extended to participants in proportion to their interest in Rockwell
Common Stock held in Stock Fund A and Stock Fund B, as represented by
common units. Participants' accounts are charged or credited, as the
case may be, with the number of units properly attributable to each
participant.
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. 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. Vesting in the
Company contribution portion of participant accounts plus actual
-5-
earnings thereon is based on years of credited service. A participant
is 100 percent vested after five years of credited service. Partial
vesting occurs at a rate of 20% per year of credited service.
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 - A participant 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 outstanding loan at a time.
g. Forfeitures - When certain terminations of participation in the Plan
occur, the nonvested portion of the participant's account represents
a forfeiture, as defined in the Plan. Forfeitures remain in the Plan
and subsequently are used to reduce the Company's contributions to
the Plan document. However, if the participant is reemployed and
fulfills certain requirements, as defined in the Plan, the
participant's account will be restored.
h. Benefit Claims Payable - Distributions and withdrawals from
participants' accounts may be made at any time. 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 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 for
administrative services provided by external service vendors, are
paid from Plan assets.
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 Master Trust investments are valued at fair value at the end of each
day. If available, quoted market prices are used to value investments at
fair value. 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:
1998 1997
---- ----
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
============= ==============
The Plan's interest in the total Master Trust, based on the percentage
held of the Master Trust net assets, was approximately 11% and 9% at
December 31, 1998 and 1997, respectively. 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.
-7-
Prior to the transfer of assets to the Master Trust in 1997, income of
$477,417 and net depreciation of $137,286 occurred in the various equity
funds.
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
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 Funds E
and F, consisting of Meritor Common Stock, have been added to the plan.
Participants may elect to transfer all or a portion of their account
balances in Meritor Stock Fund E and Stock Fund F to other investment
funds within this Plan. Special rules apply on which funds are available
for transfer.
Effective January 1, 1998, participants may elect to transfer all or a
portion of their account balances in Boeing Stock Funds C and D to other
investment funds within this Plan. Special rules apply on which funds are
available for transfer.
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 by Stock Funds A and B as
of the distribution date. The Conexant shares were received on January 4,
1999 by Conexant Stock Funds G and H, which were 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 distribution 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
balances in Conexant Stock Fund G and Stock Fund H to other investment
funds within this 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.
-8-
6. SUBSEQUENT EVENTS
Effective January 1, 1999, the Plan was renamed the Rockwell International
Corporation Salaried Retirement Savings Plan.
Effective on January 1, 1999, the Rockwell International Corporation
Savings Plan ("RIC Plan"), including all of its Plan assets, was merged
into the Plan. As a result, the Plan had a transfer receivable of
$3,071,918,905 due from the RIC Plan at December 31, 1998.
In addition, effective January 1, 1999, certain participants of the
Reliance Electric Company Savings and Investment Plan transferred into the
Plan. The account balances related to these participants transferred
during April, 1999.
In January 1999, Rockwell approved a series of changes to the Plan that
became effective on April 1, 1999. These changes include increasing to 16
percent the maximum percentage of employee compensation eligible to be
contributed to the Plan, 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.
-9-
ALLEN-BRADLEY SAVINGS AND INVESTMENT PLAN FOR SALARIED EMPLOYEES
- - ----------------------------------------------------------------
ITEM 27(a) - 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 of interest, maturity date, Current
or similar party par or maturity value Cost Value
------------------- --------------------------- ---- -------
* Wells Fargo, N.A. Master Defined Contribution
Trust $311,634,148 $391,745,990
* Participant Loans Participant Loans; Prime rate
plus 1% due 12 to 120 months
from date of loan 6,261,811 6,261,811
------------ ------------
Total Investments $317,895,959 $398,007,801
============ =============
*Party-in-interest
-10-
ALLEN-BRADLEY EMPLOYEE SAVINGS PLAN FOR SALARIED 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 $237,126 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 SALARIED 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.
333-17031 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 June 18, 1999, appearing in this Annual Report on Form 11-K of the
Allen-Bradley Savings and Investment Plan for Salaried Employees for the year
ended December 31, 1998.
Deloitte & Touche LLP
Pittsburgh, Pennsylvania
June 29, 1999
S-2