Rockwell Automation
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Rockwell Automation, Inc. is one of the world's largest specialized manufacturers of automation and information solutions for industrial production.
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997. COMMISSION FILE NUMBER 1-12383

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ROCKWELL INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

<TABLE>
<S> <C>
DELAWARE 25-1797617
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)

600 ANTON BOULEVARD, SUITE 700 92626-7147
COSTA MESA, CALIFORNIA (ZIP CODE)
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES)
</TABLE>

REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (714) 424-4565 (OFFICE OF
THE SECRETARY)

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SECURITIES REGISTERED PURSUANT
TO SECTION 12(b) OF THE ACT:

<TABLE>
<CAPTION>
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED
- ----------------------------- ----------------------------------------------
<S> <C>
Common Stock, $1 Par Value New York, London and Pacific Stock Exchanges
(including the associated
Preferred Share Purchase
Rights)
</TABLE>

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SECURITIES REGISTERED PURSUANT
TO SECTION 12(g) OF THE ACT:
None

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 _

Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [ X ]

The aggregate market value of registrant's voting stock held by
non-affiliates of registrant on November 30, 1997 was approximately $9.9
billion.

204,327,733 shares of registrant's Common Stock, par value $1 per share,
were outstanding on November 30, 1997.

DOCUMENTS INCORPORATED BY REFERENCE

Certain information contained in the Proxy Statement for the Annual Meeting
of Shareowners of registrant to be held on February 4, 1998 is incorporated by
reference into Part III hereof.
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PART I
ITEM 1. BUSINESS.

Rockwell International Corporation (the Company or Rockwell), a Delaware
corporation, is a global electronics company with leadership positions in
automation, avionics and communications and semiconductor systems. The Company
was incorporated in 1996 and is the successor to the former Rockwell
International Corporation as the result of a tax-free reorganization completed
on December 6, 1996 (the Reorganization), pursuant to which the Company divested
its former Aerospace and Defense businesses (the A&D Business) to The Boeing
Company (Boeing). The predecessor corporation was incorporated in 1928. On
September 30, 1997, the Company completed the spin-off of its automotive
component systems business into an independent, separately traded, publicly held
company named Meritor Automotive, Inc. (Meritor). As used herein, the terms the
"Company" or "Rockwell" include subsidiaries and predecessors unless the context
indicates otherwise.

For purposes hereof, whenever reference is made in any Item of this Annual
Report on Form 10-K to information under specific captions in Item 7,
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS (the MD&A), or in Item 8, FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
(the Financial Statements), or to information in the Proxy Statement for the
Annual Meeting of Shareowners of the Company to be held on February 4, 1998 (the
1998 Proxy Statement), such information shall be deemed to be incorporated
therein by such reference.

The Company's business segments are engaged in research, development, and
manufacture of electronics products as follows:

Automation--industrial automation equipment and systems, including control
logic, sensors, human-machine interface devices, motors, power and
mechanical devices and software products.

Avionics & Communications--avionics products and systems and related
communications technologies primarily used in commercial and military
aircraft and defense electronic systems for command, control,
communications and intelligence.

Semiconductor Systems--system-level semiconductor chipset solutions for
personal communications electronics markets such as personal computers,
personal imaging devices, wireless communications products, network access
devices and digital information and entertainment products, as well as
electronic commerce products for call center systems and personalized
electronic commerce applications.

Financial information with respect to the Company's business segments,
including their contributions to sales and operating earnings and their
identifiable assets for the three years ended September 30, 1997, is contained
under the caption RESULTS OF OPERATIONS in the MD&A on pages 12-14 hereof, and
in Note 19 of the NOTES TO FINANCIAL STATEMENTS in the Financial Statements on
pages 34-36 hereof.

PRODUCTS

Automation. The Company's automation products include programmable
controllers, human-machine interface devices, communications networks,
programming and application software, AC/DC drives and drive systems, sensing
and motion control devices, machine vision, computer numeric control systems,
data acquisition products, standard and engineered motors, mechanical power
transmission equipment and global support services. The Company is a leader in
plant floor automation, focusing on helping customers control processes and
become more competitive through increased flexibility, improved productivity and
information flow.

Avionics & Communications. Rockwell's Avionics & Communications businesses
provide electronic equipment for flight control, cockpit display, navigation,
voice and data communication, cockpit management, radar, global positioning and
other systems for airlines, corporate aircraft, general aviation, government and
military applications, command, control and communications devices and systems
and products and systems for the land transportation market (including
electronic brake systems and integrated cab electronics).

Semiconductor Systems. The Company's Semiconductor Systems business
produces integrated circuits for customers in the PC platform, wireless
communications, office automation, network access and digital information and
entertainment industries, as well as transaction call processing systems for
customers requiring electronic commerce applications. This business is making
significant investments in mixed-signal

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computing semiconductor process, device design and communications algorithm core
technologies. Applying these core technologies, this business is expanding into
related personal communications electronics markets, such as entering the market
for wireless communications, by supplying chipsets for cellular and cordless
phones, wireless modem communications devices for laptop computers and modules
for Global Positioning Systems (GPS) receivers.

COMPETITIVE POSTURE

The Company competes with many manufacturers which, depending on the
product involved, range from large diversified enterprises, comparable to or
greater than the Company in scope and resources, to smaller companies
specializing in particular products. Factors which affect the Company's
competitive posture are its research and development efforts, the quality of its
products and services and its marketing and pricing strategies.

The Company's products are sold by its own sales force and through
distributors and agents.

GOVERNMENT CONTRACTS

Approximately 7 percent of the Company's sales is derived from United
States government contracts, almost entirely from its Avionics & Communications
business. The Avionics & Communications business supplies certain military
equipment to the United States government. In addition to normal business risks,
companies engaged in supplying military equipment to the United States
government are subject to unusual risks, including dependence on Congressional
appropriations and administrative allotment of funds, changes in governmental
procurement legislation and regulations and other policies which may reflect
military and political developments, significant changes in contract scheduling,
complexity of designs and the rapidity with which they become obsolete, constant
necessity for design improvements, intense competition for available United
States government business necessitating increases in time and investment for
design and development, difficulty of forecasting costs and schedules when
bidding on developmental and highly sophisticated technical work and other
factors characteristic of the industry. Changes are customary over the life of
United States government contracts, particularly development contracts, and
generally result in adjustments of contract prices.

Moreover, various claims (whether based on United States government or
Company audits and investigations or otherwise) have been or may be instituted
or asserted against the Company related to its United States government contract
work, including claims based on business practices and cost classifications.
Although such claims are usually resolved by detailed fact-finding and
negotiation, on those occasions when they are not so resolved, civil or criminal
legal or administrative proceedings may ensue. Depending on the circumstances
and the outcome, such proceedings could result in fines, the cancellation of or
suspension of payments under one or more United States government contracts,
suspension or debarment proceedings affecting potential further business with
the United States government, or alteration of the Company's procedures relating
to the performance or obtaining of United States government contracts.
Management of the Company believes there are no claims, audits or investigations
currently pending which will have a material adverse effect on either the
Company's business or its financial condition.

ACQUISITIONS AND DISPOSITIONS

The Company regularly considers the acquisition or development of new
businesses and reviews the prospects of its existing businesses to determine
whether any should be modified, sold or otherwise discontinued. As a result of
the Reorganization and the spin-off of Meritor, the Company has virtually no
debt, which enhances its ability to make acquisitions.

The Company acquired several businesses in fiscal 1997, at a net cost of
$115 million, including $53 million ($42 million after-tax) related to purchased
research and development.

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On November 4, 1997, the Company announced that it had entered into an
agreement to acquire the Hughes-Avicom interactive in-flight entertainment
business of Hughes Electronics Corporation. The acquisition is expected to be
completed by the end of December 1997.

In October 1996, the Company sold its Graphic Systems business to an
affiliate of Stonington Partners, Inc. for approximately $600 million. On
December 6, 1996, the Company completed the divestiture of the A&D Business to
Boeing. On September 30, 1997, the Company completed the spin-off of Meritor.
The net income (loss) from operations of the Graphic Systems business, the A&D
Business and the Automotive Business (which includes Meritor and a discontinued
product line) has been presented on the Company's consolidated statement of
income as income from discontinued operations for all periods. The assets and
liabilities of these discontinued businesses as of September 30, 1996 have been
classified on the Company's consolidated balance sheet as net assets
(liabilities) of discontinued operations.

GEOGRAPHIC INFORMATION

The Company conducts operations in the United States and in 40 foreign
countries. Selected financial information by major geographic area for the three
years ended September 30, 1997 is contained in Note 19 of the NOTES TO FINANCIAL
STATEMENTS in the Financial Statements.

The Company's principal markets outside the United States are in Australia,
Brazil, Canada, China, France, Germany, India, Italy, Japan, South Korea, the
Netherlands, Southeast Asia, Spain, Switzerland and the United Kingdom. In
addition to normal business risks, operations outside the United States are
subject to other risks including, among other factors, the political, economic
and social environments, governmental laws and regulations, and currency
revaluations and fluctuations.

RESEARCH AND DEVELOPMENT

The Company's Science Center conducts a basic research program to support
the strategies of the operating businesses and continues to provide research
services to Boeing and Meritor at agreed rates. At October 1, 1997, the Company
employed approximately 6,700 professional engineers and scientists and 2,900
supporting technical personnel.

EMPLOYEES

At October 1, 1997, the Company had approximately 45,000 employees, of whom
approximately 9,100 were employed outside the United States.

RAW MATERIALS AND SUPPLIES

Raw materials essential to the conduct of each of the Company's business
segments generally are available at competitive prices. Many items of equipment
and components used in the production of the Company's products are purchased
from others. In addition, the Avionics & Communications business generally
subcontracts major portions of systems. Although the Company has a broad base of
suppliers and subcontractors, it is dependent upon the ability of its suppliers
and subcontractors to meet performance and quality specifications and delivery
schedules.

ENVIRONMENTAL PROTECTION REQUIREMENTS

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
MATTERS in the MD&A on page 15 hereof. See also Item 3, LEGAL PROCEEDINGS, on
pages 6-8 hereof.

PATENTS, LICENSES AND TRADEMARKS

Numerous patents and patent applications are owned or licensed by the
Company and utilized in its activities and manufacturing operations. Various
claims of patent infringement have been made against the

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Company. Management believes that none of these claims will have a material
adverse effect on the consolidated financial statements of the Company. See Item
3, LEGAL PROCEEDINGS, on pages 6-8 hereof. While in the aggregate the Company's
patents and licenses are considered important in the operation of its business,
management does not consider them of such importance that loss or termination of
any one of them would materially affect the Company's business.

The Company's name, its registered trademarks "Rockwell" and "Rockwell
International" and its symbol are important to each of its business segments. In
addition, the Company owns a large number of other important trademarks
applicable to only certain of its products, such as "Collins" for navigation and
communication equipment, "Allen-Bradley" and "A-B" for electronic controls and
systems for industrial automation and "Reliance Electric" for electric motors
and mechanical power transmission products.

SEASONALITY

None of the Company's business segments is seasonal.

ITEM 2. PROPERTIES.

At October 1, 1997, the Company operated 142 plants and research and
development facilities throughout the United States and in Europe, Brazil,
Canada, India, Mexico, Australia and the Far East. It also had approximately 387
sales offices, warehouses and service centers. These facilities had an aggregate
floor space of approximately 22.8 million square feet. Of this floor space,
approximately 68.9% was owned by the Company and approximately 31.1% was leased.
At October 1, 1997, the Company had approximately 437,000 square feet of floor
space that were not in use, most of which was in owned facilities. There are no
major encumbrances (other than financing arrangements which in the aggregate are
not material) on any of the Company's plants or equipment. In the opinion of
management, the Company's properties have been well maintained, are in sound
operating condition and contain all equipment and facilities necessary to
operate at present levels. A summary of floor space of these facilities at
September 30, 1997 is as follows:

<TABLE>
<CAPTION>
OWNED LEASED
LOCATION AND SEGMENTS FACILITIES FACILITIES TOTAL
--------------------------------------------------------- -------- ---------- -----
(IN MILLIONS OF SQUARE FEET)
<S> <C> <C> <C>
United States:
Automation............................................. 9.6 3.2 12.8
Avionics & Communications.............................. 3.1 0.6 3.7
Semiconductor Systems.................................. 2.0 0.8 2.8
Europe:
Automation............................................. 0.5 1.0 1.5
Avionics & Communications.............................. 0.1 0.1 0.2
Semiconductor Systems.................................. -- -- --
South America:
Automation............................................. 0.1 0.2 0.3
Avionics & Communications.............................. -- -- --
Semiconductor Systems.................................. -- 0.1 0.1
Canada and other areas:
Automation............................................. 0.1 0.7 0.8
Avionics & Communications.............................. -- 0.1 0.1
Semiconductor Systems.................................. -- -- --
Corporate Offices (including certain research and
development facilities)................................ 0.2 0.3 0.5
---- --- ----
Total.......................................... 15.7 7.1 22.8
==== === ====
</TABLE>

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ITEM 3. LEGAL PROCEEDINGS.

Rocky Flats Plant. On January 30, 1990, a civil action was brought in the
United States District Court for the District of Colorado against the Company
and another former operator of the Rocky Flats Plant (the Plant), Golden,
Colorado, operated from 1975 through December 31, 1989 by the Company for the
Department of Energy (DOE). The action alleges the improper production, handling
and disposal of radioactive and other hazardous substances, constituting, among
other things, violations of various environmental, health and safety laws and
regulations, and misrepresentation and concealment of the facts relating
thereto. The plaintiffs, who purportedly represent two classes, sought
compensatory damages of $250 million for diminution in value of real estate and
other economic loss; the creation of a fund of $150 million to finance medical
monitoring and surveillance services; exemplary damages of $300 million; CERCLA
response costs in an undetermined amount; attorneys' fees; an injunction; and
other proper relief. On February 13, 1991, the court granted certain of the
motions of the defendants to dismiss the case. The plaintiffs subsequently filed
a new complaint, and on November 26, 1991, the court granted in part a renewed
motion to dismiss. The remaining portion of the case is pending before the
court. On October 8, 1993, the court certified separate medical monitoring and
property value classes. Effective August 1, 1996, the DOE assumed control of the
defense of the contractor defendants, including the Company, in the action.
Beginning on that date, the costs of the Company's defense, which had previously
been reimbursed to the Company by the DOE, have been and are being paid directly
by the DOE. The Company believes that it is entitled under applicable law and
its contract with the DOE to be indemnified for all costs and any liability
associated with this action.

On November 13, 1990, the Company was served with a summons and complaint
in another civil action, which the Company believes is totally without merit,
brought against the Company in the same court by James Stone, claiming to act in
the name of the United States, alleging violations of the U.S. False Claims Act
in connection with the Company's operation of the Plant (and seeking treble
damages and forfeitures) as well as a personal cause of action for alleged
wrongful termination of employment, seeking reinstatement with back pay and
other unspecified damages. On August 8, 1991, the court dismissed the personal
cause of action. On February 2, 1994, the court denied Rockwell's motion to
dismiss the complaint for lack of subject matter jurisdiction, and discovery is
proceeding. On December 6, 1995, the DOE notified the Company that it would no
longer reimburse costs incurred by the Company in defense of the action. On
November 19, 1996, the court granted the Department of Justice leave to
intervene in the case on the government's behalf. The Company is defending the
action and believes it is entitled under applicable law and its contract with
the DOE to be indemnified for all costs and any liability associated with this
action.

On January 8, 1991, the Company filed suit in the United States Claims
Court against the DOE, seeking recovery of $6.5 million of award fees to which
the Company alleges it is entitled under the terms of its contract with the DOE
for management and operation of the Plant during the period October 1, 1988
through September 30, 1989. On July 17, 1996, the government filed an amended
answer and counterclaim against the Company alleging violations of the U.S.
False Claims Act previously asserted in the civil action described in the
preceding paragraph. On March 20, 1997, the court stayed the case pending
disposition of the civil action described in the preceding paragraph. The
Company believes the government's counterclaim is without merit, and believes it
is entitled under applicable law and its contract with the DOE to be indemnified
for all costs and any liability associated with the counterclaim.

Hanford Nuclear Reservation. On August 6, 1990 and August 9, 1990, civil
actions were filed in the United States District Court for the Eastern District
of Washington against the Company and the present and other former operators of
the DOE's Hanford Nuclear Reservation (Hanford), Hanford, Washington. The
Company operated part of Hanford for the DOE from 1977 through June 1987. Both
actions purport to be brought on behalf of various classes of persons and
numerous individual plaintiffs who resided, worked, owned or leased real
property, or operated businesses, at or near Hanford or downwind or downriver
from Hanford, at any time since 1944. The actions allege the improper handling
and disposal of radioactive and other hazardous substances and assert various
statutory and common law claims. The relief sought includes unspecified
compensatory and punitive damages for personal injuries and for economic losses,
and various injunctive and other equitable relief.

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Other cases asserting similar claims (the follow-on claims) on behalf of
the same and similarly situated individuals and groups have been filed from time
to time since August 1990, and may continue to be filed from time to time in the
future. These actions and the follow-on claims have been (and any additional
follow-on claims that may be filed are expected to be) consolidated in the
United States District Court for the Eastern District of Washington under the
name In re Hanford Nuclear Reservation Litigation. Because the claims and
classes of claimants included in the actions described in the preceding
paragraph are so broadly defined, the follow-on claims filed as of December 5,
1997 have not altered, and possible future follow-on claims are not expected to
alter, in any material respect the scope of the litigation.

Effective October 1, 1994, the DOE assumed control of the defense of
certain of the contractor defendants (including the Company) in the In re
Hanford Nuclear Reservation Litigation. Beginning on that date, the costs of the
Company's defense, which had previously been reimbursed to the Company by the
DOE, have been and are being paid directly by the DOE. The Company believes it
is entitled under applicable law and its contracts with the DOE to be
indemnified for all costs and any liability associated with these actions.

Celeritas. 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. 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.

Russellville. On June 24, 1996, judgment was entered against the Company
in a civil action in the Circuit Court of Logan County, Kentucky on a jury
verdict awarding $8 million in compensatory and $210 million in punitive damages
for property damage. The action had been brought August 12, 1993 by owners of
flood plain real property near Russellville, Kentucky allegedly damaged by
polychlorinated biphenyls (PCBs) discharged from a plant owned and operated by
the Company's Measurement & Flow Control Division prior to its divestiture in
March 1989. The Company believes that the verdict is unsupported by the evidence
and, on January 22, 1997, filed a notice of appeal. Since the Company believes
it is not reasonably possible that the punitive damages will be sustained on
appeal, the Company has not accrued any reserve for those damages.

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 remediation and characterization efforts consistent with the
Court's ruling while simultaneously appealing that ruling. The Court deferred
any decision on the imposition of fines or penalties pending implementation of
an appropriate remediation program.

Other. In July 1995, a federal grand jury impaneled by the United States
District Court for the Central District of California began an investigation
into a July 1994 explosion at the Santa Susana Field Laboratory operated by the
Company's former Rocketdyne Division in which two scientists were killed and a
technician was injured. On April 11, 1996, pursuant to an agreement between the
Company and the United States Attorney for the Central District of California,
the Company entered a plea of guilty to two counts of unpermitted disposal of
hazardous waste and one count of unpermitted storage of hazardous waste, all of
which are felony violations of the Resource Conservation and Recovery Act, and
paid a fine of $6,500,000 to settle potential federal criminal claims arising
out of the federal government's investigation. Investigation under other U.S.
and California laws continues. While the Company has no information on the
status of these investigations, further civil sanctions could be imposed on the
current owner of the facility, Boeing North American, Inc. (BNA), for which the
Company would be required to indemnify BNA.

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On December 27, 1995, one shareowner, purporting to act derivatively on
behalf of the Company, commenced an action in the Superior Court of the State of
California for the County of Orange against 13 of the Company's directors, and
the Company as a nominal defendant, alleging principally breaches of fiduciary
duties in failing properly to manage the business of the Company in a manner to
prevent certain violations of applicable federal and state laws, including
environmental laws, by certain named and unnamed employees or agents of the
Company. The action seeks declaratory judgment, damages suffered by the Company
as a result of the alleged conduct, plaintiffs' costs and expenses and other
proper relief.

On February 27, 1996, a similar suit, making similar allegations and
seeking similar relief, was filed against the Company and the same directors,
plus Don H. Davis, Jr., by two other shareowners in the Superior Court of the
State of California for the County of Los Angeles. On August 7, 1996, the Los
Angeles action was dismissed voluntarily by the plaintiffs. On August 22, 1996,
a First Amended Consolidated Complaint was filed in the Orange County action,
adding the plaintiffs from the dismissed Los Angeles County suit as party
plaintiffs to the Orange County suit. A Second Amended Consolidated Complaint
was filed in the Orange County action on November 27, 1996. Subsequently, on
February 4, 1997, plaintiffs voluntarily dismissed the action with respect to
two of the director-defendants, Judith L. Estrin and William H. Gray, III. The
Company and the director-defendants are defending the consolidated action, and
the parties are proceeding with discovery.

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, environmental, safety
and health, intellectual property, employment and government contract matters.
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.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

No matters were submitted to a vote of security holders during the fourth
quarter of 1997.

ITEM 4a. EXECUTIVE OFFICERS OF THE COMPANY.

The name, age, positions and offices held with the Company and principal
occupations and employment during the past five years of each of the executive
officers of the Company as of December 5, 1997 are as follows:

<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE
----------------------------------------------------------------------------- ---
<S> <C>
DONALD R. BEALL--Chairman of the Board of Rockwell; Chairman of the Board and
Chief Executive Officer of Rockwell from February 1988 to September 1997... 59
DON H. DAVIS, JR.--President and Chief Executive Officer of Rockwell since
October 1997; President and Chief Operating Officer of Rockwell from July
1995 to October 1997; Executive Vice President and Chief Operating Officer
of Rockwell from January 1994 to July 1995; Senior Vice President and
President, Automation of Rockwell from June 1993 to January 1994; President
of Rockwell's Allen-Bradley subsidiary (automation) prior thereto.......... 57
W. MICHAEL BARNES--Senior Vice President, Finance & Planning and Chief
Financial Officer of Rockwell.............................................. 55
MICHAEL A. BLESS--Vice President, Corporate Development and Planning of
Rockwell since August 1997; Director, Investment Banking of Merrill Lynch &
Co., Inc. from April 1997 to August 1997; Senior Vice President of Dillon,
Read & Co. (investment banking) prior thereto.............................. 32
WILLIAM J. CALISE, JR.--Senior Vice President, General Counsel and Secretary
of Rockwell since November 1994; senior partner of Chadbourne & Parke LLP
(law firm) prior thereto................................................... 59
</TABLE>

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<TABLE>
<CAPTION>
NAME, OFFICE AND POSITION, AND PRINCIPAL OCCUPATIONS AND EMPLOYMENT AGE
----------------------------------------------------------------------------- ---
<S> <C>
JOHN D. COSGROVE--Senior Vice President of Rockwell since March 1997;
President, Avionics & Communications of Rockwell since September 1996;
President, Collins Avionics & Communications Division of Rockwell prior
thereto.................................................................... 62
DWIGHT D. DECKER--Senior Vice President of Rockwell and President, Rockwell
Semiconductor Systems and Electronic Commerce since March 1997; President,
Rockwell Semiconductor Systems from October 1995 to March 1997; President,
Telecommunications of Rockwell from June 1995 to October 1995; Vice
President/ General Manager, Digital Communications Division of Rockwell's
Telecommunications Division from January 1993 to June 1995; Vice President,
Modem Systems of Rockwell's Telecommunications Division prior thereto...... 47
WILLIAM D. FLETCHER--Senior Vice President, Technology & Business Development
of Rockwell since June 1996; Senior Vice President, International of
Rockwell from October 1995 to June 1996; President, Asia Pacific Sales
Region of Allen-Bradley from March 1995 to October 1995; President of the
Asia Pacific Region of Allen-Bradley from June 1993 to March 1995; Senior
Vice President, International Group and Motion Control Division of
Allen-Bradley from January 1992 to June 1993............................... 58
JODIE K. GLORE--Senior Vice President of Rockwell and President & Chief
Operating Officer-Rockwell Automation since October 1995; President of
Allen-Bradley from January 1994 to October 1995; Senior Vice President,
Automation Group (formerly Industrial Computer and Communication Group) of
Allen-Bradley from January 1992 to January 1994............................ 50
LAWRENCE J. KOMATZ--Vice President and Special Assistant to the Chief
Financial Officer of Rockwell since August 1997; Vice President and
Controller of Rockwell prior thereto....................................... 55
JAMES P. O'SHAUGHNESSY--Vice President and Chief Intellectual Property
Counsel of Rockwell since May 1996; partner of Foley & Lardner (law firm)
prior thereto.............................................................. 50
DENNIS J. POPOVEC--Vice President and Treasurer of Rockwell since March 1997;
Assistant Treasurer of Rockwell prior thereto.............................. 42
WOLFGANG RICHTER--Vice President and Chief Information Officer of Rockwell
since November 1997; Vice President and Chief Information Officer of
Whirlpool Corporation from June 1995 to November 1997; Vice
President--Information Systems, Whirlpool North American Appliance Group
from January 1995 to May 1997; Director of Computer Operations for
Whirlpool Europe in Milan, Italy prior thereto............................. 43
WILLIAM E. SANDERS--Vice President and Controller of Rockwell since August
1997; Assistant Controller of Rockwell from October 1996 to August 1997;
Accounting Executive, Financial Reports of Rockwell prior thereto.......... 45
WILLIAM A. SANTE, II--General Auditor of Rockwell............................ 54
JOHN R. STOCKER--Vice President, Law of Rockwell since November 1994; Vice
President and Associate General Counsel of Rockwell prior thereto.......... 56
JOEL R. STONE--Senior Vice President, Organization and Human Resources of
Rockwell since December 1996; Vice President of Compensation & Benefits of
Rockwell prior thereto..................................................... 53
CHARLES C. STOOPS, JR.--General Tax Counsel of Rockwell...................... 64
EARL S. WASHINGTON--Senior Vice President, Communications of Rockwell since
September 1995; Vice President, Advertising and Public Relations of
Rockwell from March 1994 to September 1995; Vice President, Business
Development of Rockwell from June 1993 to March 1994; Vice President of
Strategic Management for Rockwell's Defense Electronics businesses from
June 1990 to June 1993 and Vice President of Transportation Systems of
Rockwell's Defense Electronics businesses from June 1992 to June 1993...... 52
</TABLE>

There are no family relationships, as defined, between any of the above
executive officers. No officer of the Company was selected pursuant to any
arrangement or understanding between him and any person other than the Company.
All executive officers are elected annually.

9
10

PART II

ITEM 5. MARKET FOR THE COMPANY'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The principal market on which the Company's Common Stock, par value $1 per
share, is traded is the New York Stock Exchange. The Company's Common Stock is
also traded on the Pacific and London Stock Exchanges. On November 30, 1997,
there were 62,330 shareowners of record of the Company's Common Stock.

The following table sets forth the high and low trading price of the
Company's Common Stock on the New York Stock Exchange--Composite Transactions
reporting system during each quarter of the Company's fiscal years ended
September 30, 1997 and 1996:

<TABLE>
<CAPTION>
1997 1996
------------ ------------
FISCAL QUARTERS HIGH LOW HIGH LOW
------------------------------------------ ---- --- ---- ---
<S> <C> <C> <C> <C>
First..................................... 64 5/8 54 1/8 53 44
Second.................................... 70 5/8 58 7/8 63 1/4 51 1/2
Third..................................... 68 3/4 58 1/4 60 1/4 55
Fourth.................................... 66 3/8 57 9/16 57 47 1/2
</TABLE>

On December 6, 1996, each Rockwell shareowner received .042 share
(presently .084 share) of Boeing common stock for each share of Rockwell Common
Stock or Class A Common Stock, par value $1 per share, owned. At September 30,
1997, such fractional Boeing share had a value of $4.57.

Since December 9, 1996, the Company has repurchased, through open-market
purchases, 13.4 million shares of Common Stock. Shares repurchased under the
Company's stock repurchase program are to be used for employee stock option and
other benefit and compensation plans and other corporate purposes.

The following table sets forth the aggregate quarterly cash dividends per
common share (comprised of the Common Stock and, until February 23, 1997, the
date of its automatic conversion to Common Stock, Class A Common Stock) during
each of the Company's five fiscal years ended September 30, 1997:

<TABLE>
<CAPTION>
CASH DIVIDENDS PER
FISCAL YEAR COMMON SHARE
------------------------------------------------------------ -------------------
<S> <C>
1997........................................................ $1.16(1)
1996........................................................ 1.16
1995........................................................ 1.08
1994........................................................ 1.02
1993........................................................ 0.96
</TABLE>

- ---------

(1) This amount does not include dividends at the rate of $0.04 per annum earned
on each .042 share (.084 share after June 6, 1997) of Boeing common stock
received in the Reorganization for each Rockwell share. On September 30,
1997, each Rockwell shareowner also received one share of Meritor common
stock for each three shares of Rockwell Common Stock owned.

On February 5, 1997, the Company issued 400 shares of Common Stock to each
of the non-employee directors of the Company who continued in office following
the annual meeting held on that date as annual grants pursuant to the terms of
the Company's Directors Stock Plan. On May 7, 1997, the Company issued 300
shares of Common Stock to George L. Argyros in connection with his election to
the board of directors as a grant pursuant to the terms of the Directors Stock
Plan. On January 2, April 1 and July 1, 1997, the Company issued 186, 170 and
190 restricted shares of Common Stock, respectively, to John D. Nichols, a
director of the Company; these shares were issued in payment for retainer fees
otherwise payable in cash and deferred by Mr. Nichols pursuant to the terms of
the Directors Stock Plan. The issuance of all shares described above was exempt
from the registration requirements of the Securities Act of 1933 pursuant to
Section 4(2) thereof.

ITEM 6. SELECTED FINANCIAL DATA.

The following sets forth selected consolidated financial data in respect of
the Company's continuing operations. The selected consolidated financial data
have been derived from the consolidated financial

10
11

statements of the Company. The data should be read in conjunction with the MD&A
and the Financial Statements. The income statement data for the five years ended
September 30, 1997 and the related balance sheet data have been derived from the
audited consolidated financial statements of the Company.

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
INCOME STATEMENT DATA:
Sales........................................... $7,762 $7,228 $5,937 $4,193 $3,657
Operating earnings.............................. 1,029 836 745 537 466
Interest expense................................ 27 22 14 5 5
Income from continuing operations(1)............ 586 451 368 285 240
Earnings per share from continuing
operations(1)................................. 2.74 2.07 1.69 1.29 1.09
Cash dividends per share........................ 1.16 1.16 1.08 1.02 0.96
BALANCE SHEET DATA: (at end of period)
Total assets.................................... $7,971 $8,976 $8,160 $5,539 $5,310
Long-term debt.................................. 156 156 167 17 11
Shareowners' equity............................. 4,811 4,256 3,782 3,356 2,956
</TABLE>

- ---------

(1) Includes special charges of $42 million, or 20 cents per share, in 1997 and
$121 million, or 56 cents per share, in 1996 relating to the write-off of
purchased research and development in connection with acquisitions.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

OVERVIEW

With the divestiture of its Automotive, Aerospace & Defense and Graphic
Systems businesses, Rockwell today is a global market leader in three
electronics businesses, serving 17 discrete markets and deriving over 35 percent
of revenues from international business. Over the past five years, sales of
these businesses have grown at an average annual rate of 21 percent and
operating earnings, before purchased research and development and a 1996
restructuring charge, have increased at an average annual rate of 23 percent.

Rockwell's largest business, Automation, with 58 percent of total Company
sales, has grown at a 27 percent average annual rate over the past five years.
Excluding the impact of an acquisition-related charge, operating margins for
1997 of 13 percent are near an all-time high. Automation is the number one
supplier of industrial automation systems in North America and its goal is to be
number one worldwide. Future sales growth will be driven by new products,
international expansion and continued development of the Company's market
channel partners. Nearly 20 percent of Automation's 1998 sales will be from
products developed in the last two years.

The Company's Avionics & Communications business generated 22 percent of
total Company sales in 1997 and is first or second in each of its served
markets. Those markets are commercial air transport, general aviation and
government avionics, where Rockwell has market-leading products such as GPS,
data links and liquid crystal displays. Avionics & Communications expects that
strong sales growth in 1998 will be driven by increased production of new
commercial aircraft and retrofit of existing aircraft. In addition, Avionics &
Communications continues to pursue operating efficiencies to gain competitive
cost advantages and provide world-class customer service. International business
is expected to comprise almost 40 percent of Avionics & Communications sales in
1998 compared to 35 percent in 1997. In November 1997, the Company entered into
an agreement to acquire a division of Hughes Electronics Corporation,
Hughes-Avicom International, Inc., a leading supplier of airborne interactive
in-flight entertainment systems. The acquisition is expected to be completed by
December 1997.

11
12

Semiconductor Systems, which generated 20 percent of total Company sales in
1997, experienced explosive revenue growth through fiscal 1996. While
Semiconductor Systems faced significant competition in its personal computer
(PC) modem chipset business in 1997, and expects that trend to continue in 1998,
strategic acquisitions and major investments in new product development during
the past two years have enabled the business to lessen its dependence on PC
modems. As a result, Semiconductor Systems is now capitalizing on its strong
Digital Signal Processing (DSP) capability in non-modem product lines, including
wireless communications, personal imaging, digital infotainment and wide and
local area network access. The business also has a leadership position in the
emerging market for personalized electronic commerce products and services.
These non-modem businesses are planned to almost double sales in 1998 and are
expected to approach half of total Semiconductor Systems sales by the end of
1998. The Company also expects market growth to accelerate in its leadership PC
modem chipset business once a worldwide standard for the new 56 Kbps modem is
established in 1998.

Assuming generally favorable economic conditions, management expects 1998
earnings per share growth, before acquisition-related special charges, to be in
the high single-digit range from the $2.94 per share reported in 1997. Sales and
earnings at Automation and Avionics & Communications should be higher, but
Semiconductor Systems earnings will likely be lower due to continued uncertainty
in unit volumes and lower pricing in its modem business in 1998. Management
expects stronger performance in the second half of 1998 as ongoing major
investments in Semiconductor Systems begin paying off. The Company expects to
return to its long-term average earnings per share growth goal of 15 percent in
1999.

RESULTS OF OPERATIONS

1997 Compared to 1996

Sales increased 7 percent in 1997 to $7.8 billion from $7.2 billion in 1996
due to strong global demand and increased market share penetration at Automation
and Avionics & Communications. The composition of sales was as follows (in
billions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
U.S. Commercial.............................................................. $4.4 $4.1
International................................................................ 2.8 2.6
U. S. Government............................................................. 0.6 0.5
---- ----
Total........................................................................ $7.8 $7.2
==== ====
</TABLE>

Earnings per share from continuing operations increased 12 percent in 1997
to $2.94 per share from $2.63 per share in 1996, before acquisition-related
special charges in both years. The related income from continuing operations for
1997 increased to $628 million over comparable income of $572 million in 1996.

The special charges in 1997 were write-offs of purchased research and
development of $23 million after-tax, or 11 cents per share, in the fourth
quarter related to the completion of the acquisition of an Automation software
business and $19 million after-tax, or nine cents per share, in the third
quarter in connection with a Semiconductor Systems acquisition. The special
charge in the fourth quarter of 1996 consisted of the write-off of purchased
research and development of $121 million after-tax, or 56 cents per share,
related to a Semiconductor Systems acquisition. Including these special charges,
income from continuing operations for 1997 was $586 million, or $2.74 per share,
compared with 1996 income from continuing operations of $451 million, or $2.07
per share.

In 1996, the Company also recorded a $47 million after-tax restructuring
charge related to a decision to exit several non-strategic product lines and
costs associated with staff reductions in several businesses. This charge was
offset by a favorable settlement of prior years' income tax claims of $65
million.

Automation achieved an 11 percent increase in operating earnings in 1997,
capitalizing on strong worldwide markets and continuing cost containment
initiatives. Operating earnings, before an acquisition-related special charge in
1997 and a restructuring charge in 1996, were $598 million in 1997 compared to

12
13

$537 million in 1996. Including these charges, Automation earnings totaled $575
million in 1997 compared to 1996 earnings of $526 million.

Avionics & Communications had outstanding results in 1997 with sales
increasing 15 percent to $1.7 billion from $1.5 billion in 1996 primarily due to
improved commercial air transport markets. Operating earnings for 1997 were a
record $253 million, up 52 percent from comparable 1996 operating earnings
(before a restructuring charge) of $166 million due to the higher sales volume
and the benefits from the 1996 restructuring actions. Avionics & Communications
1996 earnings totaled $116 million, including the restructuring charge.

Semiconductor Systems operating earnings, before acquisition-related
charges in both 1997 and 1996, were 30 percent lower on sales of $1.6 billion in
both years. Operating margins declined to 15 percent in 1997 from 21 percent in
1996, due primarily to the highly competitive transition to the business' new
high-speed K56flex personal computer modem, which has accelerated price
reductions, particularly on the older V.34 modem. Semiconductor Systems
earnings, including the write-off of purchased research and development in both
years, totaled $201 million in 1997 compared to $209 million for 1996.
Semiconductor Systems operates in a volatile industry, characterized by rapid
technological advances and constantly changing customer demand patterns.
Participation in this industry requires significant investments in research and
development, frequent new product introductions and enhancements, and aggressive
pricing practices. Future sales and earnings of this business are dependent on
the continued successful development of advanced technologies and timely
introduction of new products.

Continuing Operations

Sales and Earnings by Business Segment

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------------------------
1997 1996 1995 1994 1993
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
SALES
Automation........................................ $4,494 $4,165 $3,590 $2,085 $1,716
Avionics & Communications......................... 1,689 1,470 1,461 1,409 1,396
Semiconductor Systems............................. 1,579 1,593 875 691 530
Divested business................................. -- -- 11 8 15
------ ------ ------ ------ ------
Total sales....................................... $7,762 $7,228 $5,937 $4,193 $3,657
====== ====== ====== ====== ======
OPERATING EARNINGS
Automation........................................ $ 598 $ 537 $ 481 $ 265 $ 193
Avionics & Communications......................... 253 166 182 183 220
Semiconductor Systems............................. 231 330 113 98 57
Purchased research and development................ (53) (121) -- -- --
Restructuring charge.............................. -- (76) -- -- --
Divested business................................. -- -- (31) (9) (4)
------ ------ ------ ------ ------
Operating earnings................................ 1,029 836 745 537 466
General corporate--net.............................. (79) (84) (108) (75) (80)
Interest expense.................................... (27) (22) (14) (5) (5)
Provision for income taxes.......................... (337) (279) (255) (172) (141)
------ ------ ------ ------ ------
Income from continuing operations................... $ 586 $ 451 $ 368 $ 285 $ 240
====== ====== ====== ====== ======
</TABLE>

In 1997, purchased research and development of $30 million and $23 million
relates to the acquisitions of a Semiconductor Systems business and the
remaining interest in an Automation software business, respectively. In 1996,
purchased research and development relates to the acquisition of a Semiconductor
Systems business. The restructuring charge in 1996 relates to the business
segments as follows (in millions): Automation, $11;

13
14

Avionics & Communications, $50; and Corporate, $15. The divested business is the
Semiconductor Systems Local Area Networking product line.

1996 Compared to 1995

Sales for 1996 increased nearly $1.3 billion, or 22 percent from 1995.
Semiconductor Systems achieved an 82 percent increase in sales due to strong
customer demand for its V.34 personal computer modem chipsets. Automation sales
were also up due to strong worldwide markets and the inclusion of Reliance
Electric Company (Reliance) sales for the full year compared to nine months for
1995.

Income from continuing operations, before a $121 million, or 56 cents per
share, special charge, was $572 million, or $2.63 per share, a 55 percent
increase over 1995's comparable income of $368 million, or $1.69 per share.

Automation reported a 16 percent sales increase over 1995. Although growth
in Automation's served markets continued in 1996, the rate of growth in this
industry slowed from 1995's record levels. Automation's 1996 earnings, before a
1996 restructuring charge, increased 12 percent over 1995 due to higher sales
and improved profit margins. Including the restructuring charge, Automation's
1996 earnings were $526 million.

Avionics & Communications 1996 sales were up slightly from 1995 while
earnings, before a 1996 restructuring charge, were down 9 percent. Record sales
and earnings by the business' General Aviation division were more than offset by
a charge resulting from the bankruptcy of Fokker N.V. and higher commercial air
transport research and development expenditures. Including the restructuring
charge, Avionics & Communications 1996 earnings totaled $116 million.

Semiconductor Systems earnings, before an acquisition-related special
charge, increased three-fold in 1996 due to strong demand for its V.34 personal
computer modem chipsets. For the year, Semiconductor Systems achieved an
excellent 21 percent return on sales compared to 13 percent in 1995.
Semiconductor Systems 1996 earnings, including the acquisition-related charge,
totaled $209 million.

INCOME TAXES

The Company's 1997 effective income tax rate decreased to 36.5 percent,
from 38.2 percent in 1996, due to reduced foreign income taxes and the
utilization of previously unrecognized tax credit carryforwards. Management
believes the effective income tax rate will continue to benefit from ongoing tax
planning initiatives.

DISCONTINUED OPERATIONS

Discontinued operations consist of the Automotive Business, the A&D
Business and the Graphic Systems business. Income from discontinued operations
for 1997 includes a charge of $57 million ($48 million after-tax) for
transaction and separation-related costs incurred in connection with the
spin-off of Meritor.

FINANCIAL CONDITION

Rockwell's financial condition is a major strength which provides
substantial flexibility for enhancing shareowner value. Cash provided by
operating activities totaled $766 million in 1997 compared to $979 million in
1996. With virtually no debt, the Company is well positioned for further
investments in new product development and acquisitions to bolster the product
and geographic positions of its global businesses. The Company recently
completed the $1 billion stock repurchase program announced at the time of the
Reorganization, and the Board of Directors has approved an additional $500
million repurchase program. Future stock repurchases are expected to be funded
by cash generated by operating activities and commercial paper borrowings.

A major use of cash in 1997 was for continuing investment in research and
new product development, which totaled $661 million, up 28 percent from $518
million in 1996. New product investments at Semiconductor Systems represented
almost half of the total, with increased investments in new product lines

14
15

such as wireless communications, digital infotainment and wide and local area
network access. The Company plans to continue approximately this level of
investment in new products in 1998.

The Company also invested $683 million in capital expenditures for
facilities and equipment to enhance the growth opportunities of its businesses,
obtain operating efficiencies and improve quality. The 1998 capital investment
plan is approximately $700 million.

In July 1996, Semiconductor Systems announced that, due to current and
forecasted favorable pricing in the worldwide semiconductor silicon wafer
fabrication market, it had delayed production start-up of a facility under
construction in Colorado Springs, Colorado. Based on current market demand and
favorable wafer pricing, management is uncertain as to when wafer production at
this facility will commence.

Another use of the Company's cash is the payment of dividends to
shareowners. Dividend payments in 1997 of $1.16 per share totaled $248 million,
or 39 percent of net income. Upon the spin-off of Meritor, the annual $1.16 per
share dividend was apportioned at $1.02 for Rockwell and $0.14 for Meritor. In
November 1997, the Rockwell Board of Directors declared a $0.255 per share
regular quarterly dividend ($1.02 per share annual rate) payable in December
1997.

ENVIRONMENTAL MATTERS

Federal, state and local requirements relating to the discharge of
substances into the environment, the disposal of hazardous wastes, and other
activities affecting the environment have had and will continue to have an
impact on the manufacturing operations of the Company. Thus far, compliance with
environmental requirements and resolution of environmental claims have been
accomplished without material effect on the Company's liquidity and capital
resources, competitive position, or financial statements.

The Company has been designated as a potentially responsible party at 29
Superfund sites, excluding sites as to which the Company's records disclose no
involvement or as to which the Company's potential liability has been finally
determined. Management estimates the total reasonably possible costs the Company
could incur for the remediation of Superfund sites at September 30, 1997 to be
about $18 million, of which $14 million has been accrued.

Various other lawsuits, claims, and proceedings have been asserted against
the Company alleging violations of federal, state and local environmental
protection requirements, or seeking remediation of alleged environmental
impairments, principally at previously disposed of properties. During 1997, the
Company recorded a $20 million charge for additional environmental costs
expected to be incurred at a previously owned facility. As of September 30,
1997, management has estimated the total reasonably possible costs the Company
could incur for these matters to be about $125 million. The Company has recorded
environmental accruals for these matters of $104 million, of which $37 million
relate to liabilities assumed in connection with the Reliance acquisition.

A major portion of the $37 million accrual for Reliance's environmental
obligations is recoverable from Exxon Corporation (Exxon), based on an agreement
between Exxon and Reliance whereby Exxon agreed to pay substantially all costs
related to certain environmental matters. An offsetting $15 million receivable
from Exxon was recorded at September 30, 1997. The Company believes Reliance is
entitled to indemnification from Exxon for an additional $19 million of costs,
but a receivable has not been recorded since Exxon is disputing its
indemnification obligation.

Based on its assessment, management believes that the Company's
expenditures for environmental capital investment and remediation necessary to
comply with present regulations governing environmental protection and other
expenditures 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. Management cannot assess the possible effect
of compliance with future requirements.

15
16

YEAR 2000

The Company has developed plans to address issues related to the impact on
its computer systems of the year 2000. Financial and operational systems have
been assessed and plans have been developed to address systems modification
requirements. The financial impact of making the required systems changes is not
expected to be material to the Company's consolidated financial position,
results of operations or cash flows.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The Company enters 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 gains and losses relating to these
foreign currency forward exchange contracts are deferred and included in the
measurement of the foreign currency transaction subject to the hedge. The
Company believes that any gain or loss incurred on foreign currency forward
exchange contracts is offset by the effects of currency movements on the
respective underlying hedged transactions.

Based on the Company's overall currency rate exposure at September 30,
1997, a 10% change in currency rates would not have had a material effect on the
financial position, results of operations or cash flows of the Company.

See Note 11 of the NOTES TO FINANCIAL STATEMENTS in the Financial
Statements on page 27 hereof.

CAUTIONARY STATEMENT

This Annual Report on Form 10-K 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 described above in the
discussion of the Semiconductor Systems business under Results of Operations,
1997 Compared to 1996, on pages 12-14 hereof and those detailed from time to
time in the filings of the Company with the Securities and Exchange Commission.

16
17

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

CONSOLIDATED BALANCE SHEET
(IN MILLIONS)

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
ASSETS 1997 1996
------ ------
<S> <C> <C>
CURRENT ASSETS
Cash (includes time deposits and certificates of deposit:
1997, $189; 1996, $411).................................................. $ 283 $ 663
Receivables (less allowance for doubtful accounts:
1997, $62; 1996, $84).................................................... 1,319 1,206
Inventories................................................................ 1,526 1,481
Deferred income taxes...................................................... 254 211
Other current assets....................................................... 302 285
Net assets of Automotive Business.......................................... -- 612
Net assets of Graphic Systems.............................................. -- 560
------ ------
Total current assets................................................ 3,684 5,018
------ ------
PROPERTY
Land....................................................................... 88 83
Land and leasehold improvements............................................ 70 69
Buildings.................................................................. 768 760
Machinery and equipment.................................................... 2,020 1,827
Office and data processing equipment....................................... 651 563
Construction in progress................................................... 527 380
------ ------
Total............................................................... 4,124 3,682
Less accumulated depreciation.............................................. 1,879 1,674
------ ------
Net property............................................................... 2,245 2,008
------ ------
INTANGIBLE ASSETS.......................................................... 1,789 1,762
------ ------
OTHER ASSETS............................................................... 253 188
------ ------
TOTAL............................................................... $7,971 $8,976
====== ======
</TABLE>

See notes to financial statements.

17
18

CONSOLIDATED BALANCE SHEET
(IN MILLIONS)

<TABLE>
<CAPTION>
SEPTEMBER 30,
-----------------
LIABILITIES AND SHAREOWNERS' EQUITY 1997 1996
------ ------
<S> <C> <C>
CURRENT LIABILITIES
Short-term debt............................................................ $ 66 $ 323
Accounts payable........................................................... 840 801
Accrued compensation and benefits.......................................... 436 391
Accrued income taxes....................................................... 96 155
Other current liabilities.................................................. 532 565
Net liabilities of A&D Business............................................ -- 1,309
------ ------
Total current liabilities........................................... 1,970 3,544
------ ------
LONG-TERM DEBT............................................................. 156 156
------ ------
ACCRUED RETIREMENT BENEFITS................................................ 795 764
------ ------
OTHER LIABILITIES.......................................................... 239 256
------ ------
SHAREOWNERS' EQUITY
Common Stock (shares issued: 1997, 216.4; 1996, 209.5)..................... 216 210
Class A Common Stock (shares issued: 1996, 27.9)........................... -- 28
Additional paid-in capital................................................. 901 199
Retained earnings.......................................................... 4,409 4,466
Currency translation....................................................... (103) (103)
Common Stock in treasury, at cost (shares held:
1997, 9.6; 1996, 18.9).............................................. (612) (544)
------ ------
Total shareowners' equity........................................... 4,811 4,256
------ ------
TOTAL............................................................... $7,971 $8,976
====== ======
</TABLE>

See notes to financial statements.

18
19

CONSOLIDATED STATEMENT OF INCOME
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
REVENUES
Sales............................................................. $7,762 $7,228 $5,937
Other income...................................................... 120 93 48
------ ------ ------
Total revenues.................................................... 7,882 7,321 5,985
------ ------ ------
COSTS AND EXPENSES
Cost of sales..................................................... 5,472 5,084 4,215
Selling, general, and administrative.............................. 1,407 1,288 1,133
Purchased research and development................................ 53 121 --
Restructuring..................................................... -- 76 --
Interest.......................................................... 27 22 14
------ ------ ------
Total costs and expenses.......................................... 6,959 6,591 5,362
------ ------ ------
Income from continuing operations before income taxes............. 923 730 623
Provision for income taxes........................................ 337 279 255
------ ------ ------
INCOME FROM CONTINUING OPERATIONS................................. 586 451 368
Income from discontinued operations............................... 58 275 374
------ ------ ------
NET INCOME........................................................ $ 644 $ 726 $ 742
====== ====== ======
EARNINGS PER SHARE:
Continuing operations........................................... $ 2.74 $ 2.07 $ 1.69
Discontinued operations......................................... 0.27 1.27 1.73
------ ------ ------
Net income...................................................... $ 3.01 $ 3.34 $ 3.42
====== ====== ======
AVERAGE OUTSTANDING SHARES........................................ 213.8 217.6 217.2
====== ====== ======
</TABLE>

See notes to financial statements.

19
20

CONSOLIDATED STATEMENT OF CASH FLOWS
(IN MILLIONS)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
-------------------------------
1997 1996 1995
------- ------- -------
<S> <C> <C> <C>
CONTINUING OPERATIONS:
OPERATING ACTIVITIES
Income from continuing operations.............................. $ 586 $ 451 $ 368
Adjustments to income from continuing operations to arrive at
cash provided by operating activities:
Depreciation................................................. 387 326 239
Amortization of intangible assets............................ 97 114 92
Deferred income taxes........................................ (6) (94) 10
Pension expense, net of contributions........................ (41) 51 25
Restructuring................................................ -- 76 --
Purchased research and development........................... 53 121 --
Changes in assets and liabilities, excluding effects of
acquisitions, divestitures, and foreign currency
adjustments:
Receivables............................................... (152) (96) (129)
Inventories............................................... (81) (216) (100)
Accounts payable.......................................... 55 94 93
Accrued income taxes...................................... (88) 37 (103)
Other assets and liabilities.............................. (44) 115 10
------- ------- -------
CASH PROVIDED BY OPERATING ACTIVITIES..................... 766 979 505
------- ------- -------
INVESTING ACTIVITIES
Property additions............................................. (683) (714) (471)
Acquisitions of businesses, net of cash acquired............... (115) (307) (1,139)
Special payment from Meritor................................... 445 -- --
Proceeds from the disposition of property and businesses....... 608 21 7
------- ------- -------
CASH PROVIDED BY (USED FOR) INVESTING ACTIVITIES.......... 255 (1,000) (1,603)
------- ------- -------
FINANCING ACTIVITIES
(Decrease) increase in short-term borrowings................... (241) 236 (206)
Payments of long-term debt..................................... (15) (25) (35)
Long-term borrowings........................................... 2 -- 27
------- ------- -------
Net (decrease) increase in debt.............................. (254) 211 (214)
Purchase of treasury stock..................................... (856) (48) (137)
Cash dividends................................................. (248) (253) (235)
Reissuance of common stock..................................... 56 42 50
------- ------- -------
CASH USED FOR FINANCING ACTIVITIES........................ (1,302) (48) (536)
------- ------- -------
CASH USED FOR CONTINUING OPERATIONS............................ (281) (69) (1,634)
Cash (Used for) Provided by Discontinued Operations............ (99) 90 1,698
------- ------- -------
(DECREASE) INCREASE IN CASH.................................... (380) 21 64
CASH AT BEGINNING OF YEAR...................................... 663 642 578
------- ------- -------
CASH AT END OF YEAR............................................ $ 283 $ 663 $ 642
======= ======= =======
</TABLE>

See notes to financial statements.

20
21

CONSOLIDATED STATEMENT OF SHAREOWNERS' EQUITY
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
----------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
COMMON STOCK
Beginning balance................................................. $ 210 $ 210 $ 210
Conversion of Class A Common Stock................................ 25 -- --
Cancellation of treasury stock (see Note 3)....................... (19) -- --
------ ------ ------
Ending balance.................................................... 216 210 210
------ ------ ------
CLASS A COMMON STOCK
Beginning balance................................................. 28 33 37
Conversion into Common Stock...................................... (28) (5) (4)
------ ------ ------
Ending balance.................................................... -- 28 33
------ ------ ------
ADDITIONAL PAID-IN CAPITAL
Beginning balance................................................. 199 187 175
Exercise of stock options......................................... 26 12 12
Divestiture of A&D Business (see Note 3).......................... 1,175 -- --
Cancellation of treasury stock (see Note 3)....................... (499) -- --
------ ------ ------
Ending balance.................................................... 901 199 187
------ ------ ------
RETAINED EARNINGS
Beginning balance................................................. 4,466 4,158 3,762
Net income........................................................ 644 726 742
Cash dividends (per share: 1997, $1.16; 1996, $1.16; 1995,
$1.08).......................................................... (248) (253) (235)
Treasury stock reissuances........................................ (230) (165) (111)
Spin-off of Meritor (see Note 3).................................. (223) -- --
------ ------ ------
Ending balance.................................................... 4,409 4,466 4,158
------ ------ ------
CURRENCY TRANSLATION
Beginning balance................................................. (103) (99) (97)
Net currency translation adjustments.............................. (72) (4) (2)
Adjustment for Meritor spin-off (see Note 3)...................... 72 -- --
------ ------ ------
Ending balance.................................................... (103) (103) (99)
------ ------ ------
TREASURY STOCK
Beginning balance................................................. (544) (707) (731)
Purchases......................................................... (856) (48) (137)
Reissuances, principally Class A Common Stock conversions......... 270 211 161
Cancellation of treasury stock (see Note 3)....................... 518 -- --
------ ------ ------
Ending balance.................................................... (612) (544) (707)
------ ------ ------
TOTAL SHAREOWNERS' EQUITY......................................... $4,811 $4,256 $3,782
====== ====== ======
</TABLE>

See notes to financial statements.

21
22

NOTES TO FINANCIAL STATEMENTS

1. FINANCIAL STATEMENT PRESENTATION

Rockwell International Corporation (the Company or Rockwell) is engaged in
research, development and manufacture of electronics products, with global
leadership positions in the automation, avionics and communications and
semiconductor systems markets. The Company was incorporated in 1996 and is the
successor to the former Rockwell International Corporation as a result of a
tax-free reorganization completed on December 6, 1996 (the Reorganization).
Pursuant to the Reorganization, the Company merged its former Aerospace &
Defense businesses (the A&D Business) with a subsidiary of The Boeing Company
(Boeing) in a transaction valued at approximately $3.2 billion, including the
assumption by Boeing of $2.3 billion of liabilities of Rockwell, principally
debt, and the issuance of $0.9 billion of Boeing stock to Rockwell shareowners
in exchange for their interest in the A&D Business.

On September 30, 1997 the Company completed the spin-off of its automotive
component systems businesses into an independent, separately traded, publicly
held company by distributing all of the issued and outstanding shares of Meritor
Automotive, Inc. (Meritor) to the Company's shareowners on the basis of one
share of Meritor Common Stock for every three shares of Company Common Stock
owned. In connection with the spin-off, Meritor made a special payment of $445
million to the Company.

Except as indicated, amounts reflected in the financial statements or
disclosed in the notes to financial statements relate to the Company's
continuing operations and prior year amounts have been reclassified to conform
with the current presentation. See Note 3 for a discussion of the Company's
discontinued operations.

2. ACCOUNTING POLICIES

Consolidation

The consolidated financial statements include the accounts of the Company
and those majority-owned subsidiaries in which the Company has control. All
significant intercompany accounts and transactions are eliminated in
consolidation.

Use of Estimates

The financial statements have been prepared in accordance with generally
accepted accounting principles which require management to make estimates and
assumptions that affect the amounts reported in the financial statements. Actual
results could differ from those estimates.

Inventories

Inventories are stated at the lower of cost (using LIFO, FIFO, or average
methods) or market (determined on the basis of estimated realizable values).

Property

Property is stated at cost. Depreciation of property is provided based on
estimated useful lives generally using accelerated and straight-line methods.
Significant renewals and betterments are capitalized and replaced units are
written off. Maintenance and repairs, as well as renewals of minor amount, are
charged to expense.

Purchased Intangibles

Goodwill and other intangible assets generally result from business
acquisitions. The Company accounts for business acquisitions by assigning the
purchase price to tangible and intangible assets and liabilities, including
research and development projects which have not yet reached technological
feasibility and have no alternative future use (purchased research and
development). Assets acquired and liabilities assumed are recorded at their fair
values; the appraised value of purchased research and development is immediately
charged to expense, and the excess of the purchase price over the amounts
assigned is recorded as goodwill.

22
23

Goodwill is amortized by the straight-line method over periods generally
ranging from 10 to 40 years. Trademarks, patents, product technology, and other
intangibles are amortized on a straight-line basis over their estimated useful
lives, ranging from 5 to 40 years.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment by assessing their net
realizable values based on undiscounted cash flows over remaining useful lives.
If impairment is indicated, the carrying amount of the asset is reduced to its
fair value.

Revenue Recognition

Sales are generally recorded as products are shipped or services are
rendered, except sales under certain contracts requiring performance over
several periods which are accounted for under the percentage-of-completion
method of accounting.

Environmental Matters

The Company records accruals for environmental matters in the accounting
period in which its responsibility is established and the cost can be reasonably
estimated. At environmental sites in which more than one potentially responsible
party has been identified, the Company records a liability for its estimated
allocable share of costs related to its involvement with the site as well as an
estimated allocable share of costs related to insolvent parties or unidentified
shares. At environmental sites in which the Company is the only responsible
party, the Company records a liability for the total estimated costs of
remediation before consideration of recovery from insurers or other third
parties. If recovery from a third party is determined to be probable, the
Company records a receivable for the estimated recovery.

Earnings Per Share

Earnings per share are based on the weighted average number of common
shares outstanding during each year. The computation does not include the
negligible dilutive effect of stock options.

New Accounting Standards

In October 1996, the American Institute of Certified Public Accountants
issued Statement of Position No. 96-1, "Environmental Remediation Liabilities,"
which is effective for 1998. The Company does not expect adoption of this
standard to have a material effect on the financial statements.

In February 1997, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards (SFAS) No. 128, "Earnings per Share," which is
effective for 1998. The adoption of this standard will not have a material
effect on the financial statements.

3. DISCONTINUED OPERATIONS

The financial statements have been restated to classify the Company's
Automotive Business (which includes Meritor and a discontinued product line) as
a discontinued operation, together with the A&D Business and Graphic Systems
business, which had previously been reported as discontinued operations, for all

23
24

periods presented. The assets and liabilities of these businesses as of
September 30, 1996, consisted of the following (in millions):

<TABLE>
<CAPTION>
AUTOMOTIVE A&D GRAPHIC
BUSINESS BUSINESS SYSTEMS
---------- -------- -------
<S> <C> <C> <C>
Receivables...................................................... $ 478 $ 738 $ 169
Inventories...................................................... 299 327 157
Other current assets............................................. 146 -- 50
Net property..................................................... 654 540 140
Prepaid pension costs............................................ 26 1,261 4
Other assets..................................................... 98 238 334
------ -------- -----
Total assets.............................................. 1,701 3,104 854
------ -------- -----
Short-term debt.................................................. 27 565 --
Accounts payable and other liabilities........................... 725 782 283
Long-term debt................................................... 5 1,597 --
Accrued retirement benefits...................................... 332 1,469 11
------ -------- -----
Total liabilities......................................... 1,089 4,413 294
------ -------- -----
Net assets (liabilities) of discontinued businesses.............. $ 612 $ (1,309) $ 560
====== ======== =====
</TABLE>

The net assets of Meritor as of the September 30, 1997 spin-off date of
$151 million (including $445 million of debt incurred to make the special
payment to Rockwell) were recorded as a decrease to equity.

Pursuant to the Reorganization, in addition to the A&D Business, Boeing
acquired certain Rockwell corporate property and pension plan assets and
liabilities relating to former employees of non-A&D businesses. Boeing also
assumed $2.2 billion of the short- and long-term domestic borrowings of the
Company. Accordingly, these amounts have been presented on the balance sheet as
net liabilities of the A&D Business at September 30, 1996. In connection with
the Reorganization, all shares of Common Stock held in treasury were canceled
and the net liabilities of the A&D Business at the date of the Reorganization of
approximately $1.2 billion were recorded as an increase to additional paid-in
capital.

In October 1996, the Graphic Systems business was sold to an affiliate of
Stonington Partners, Inc. for approximately $600 million.

Summarized results of discontinued operations are as follows (in millions):

<TABLE>
<CAPTION>
YEAR ENDED SEPTEMBER 30,
--------------------------
1997 1996 1995
------ ------ ------
<S> <C> <C> <C>
Revenues:
Automotive Business............................................... $3,342 $3,221 $3,153
A&D Business...................................................... 535 3,089 3,244
Graphic Systems................................................... -- 712 717
------ ------ ------
Total.......................................................... $3,877 $7,022 $7,114
====== ====== ======
Income before income taxes:
Automotive Business............................................... $ 121 $ 166 $ 188
A&D Business...................................................... -- 311 353
Graphic Systems................................................... -- 8 62
------ ------ ------
Total.......................................................... $ 121 $ 485 $ 603
====== ====== ======
Net income (loss):
Automotive Business............................................... $ 58 $ 104 $ 125
A&D Business...................................................... -- 178 212
Graphic Systems................................................... -- (7) 37
------ ------ ------
Total.......................................................... $ 58 $ 275 $ 374
====== ====== ======
</TABLE>

24
25

The earnings of the A&D Business for the first two months of 1997 were
entirely offset by expenses related to the transaction.

The 1997 and 1996 income of the Automotive Business includes restructuring
charges of $21 million ($15 million after-tax) and $46 million ($30 million
after-tax), respectively. The income of the Automotive Business for 1997 also
includes a charge of $57 million ($48 million after-tax) for transaction and
separation-related costs incurred in connection with the spin-off of Meritor.

The 1996 net loss of Graphic Systems includes net income from operations of
$3 million offset by a provision for loss on the sale of $10 million.

The Automotive, A&D and Graphic Systems businesses utilized certain
services which are provided for all of the Company's businesses on a centralized
basis, including payroll administration, data processing, and telecommunications
services. These businesses were also allocated costs of centrally administered
programs, including employee medical claims and property and casualty insurance.
These costs were charged to these businesses based on actual usage of these
services and programs and were $58 million, $132 million, and $177 million in
1997, 1996, and 1995, respectively.

These businesses also received other services provided by the Company,
including financial, legal, tax, corporate communications, and human resources.
For the A&D Business, the costs of these services are allowable overhead costs
on government contracts and, accordingly, have been included in the results of
operations of this business. These costs have been allocated to the A&D Business
using a variety of factors, including sales, assets, inventory, and payroll and
were $3 million, $35 million, and $32 million in 1997, 1996, and 1995,
respectively. Management believes that the methods of allocating costs to these
businesses are reasonable.

Interest expense of $40 million, $169 million and $155 million in 1997,
1996 and 1995, respectively, has been allocated to the Automotive and A&D
businesses based on the actual interest expense associated with the borrowings
assumed by Meritor and Boeing, respectively.

4. RESTRUCTURING

During 1996, the Company recorded restructuring charges of $76 million ($47
million after-tax, or 22 cents per share). The restructuring charges relate to a
decision to exit non-strategic product lines of continuing operations, as well
as the costs associated with staff reductions in the Automation and Avionics &
Communications businesses.

The provision includes asset impairments of $51 million, severance and
other employee costs of $9 million, and contractual commitments and other costs
of $16 million. These actions were substantially completed by the end of 1997.

5. ACQUISITIONS OF BUSINESSES

The Company acquired several businesses in 1997 at a net cost of $115
million, including $53 million ($42 million after-tax) related to purchased
research and development.

In September 1996, the Company acquired Brooktree Corporation (Brooktree),
a designer and manufacturer of digital and mixed-signal integrated circuits for
computer graphics, multimedia, imaging, and communications applications, for
$278 million, including $121 million for purchased research and development.

Pro forma information for acquisitions in 1997 and 1996 is not presented as
the results of operations of these businesses were not material in relation to
the Company's income from continuing operations for these periods.

In January 1995, the Company completed its acquisition of Reliance Electric
Company (Reliance), a major manufacturer of industrial products and
telecommunications equipment, for $1,066 million, net of proceeds from the sale
of Reliance's telecommunications business. If Reliance had been acquired as of
the

25
26

beginning of 1995, pro forma revenues, net income and earnings per share for
that year would have been $6,314 million, $742 million, and $3.42, respectively.

These acquisitions were accounted for as purchases and, accordingly, the
results of operations of these businesses have been included in the statement of
income since their dates of acquisition.

6. INVENTORIES

Inventories are summarized as follows (in millions):

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Finished goods.............................................................. $ 414 $ 372
Work in process............................................................. 702 734
Raw materials, parts and supplies........................................... 404 378
------ ------
Total..................................................................... 1,520 1,484
Adjustment to the carrying value of certain inventories (1997, $661; 1996,
$612) to a LIFO basis..................................................... 6 (3)
------ ------
Inventories................................................................. $1,526 $1,481
====== ======
</TABLE>

7. INTANGIBLE ASSETS

Intangible assets are summarized as follows (in millions):

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Goodwill, less accumulated amortization (1997, $262; 1996, $220)............ $1,249 $1,244
Trademarks, patents, product technology, and other intangibles, less
accumulated amortization (1997, $393; 1996, $368)......................... 540 518
------ ------
Intangible assets........................................................... $1,789 $1,762
====== ======
</TABLE>

8. SHORT-TERM DEBT

Short-term debt consisted of the following (in millions):

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Short-term foreign bank borrowings.......................................... $ 64 $ 98
Commercial paper............................................................ -- 210
Current portion of long-term debt........................................... 2 15
------ ------
Short-term debt............................................................. $ 66 $ 323
====== ======
</TABLE>

Weighted average interest rates on short-term borrowings:

<TABLE>
<CAPTION>
SEPTEMBER 30,
----------------
1997 1996
------ ------
<S> <C> <C>
Short-term foreign bank borrowings.......................................... 4.7% 4.0%
Commercial paper............................................................ -- 5.4%
</TABLE>

At September 30, 1997, the Company had $2 billion of unsecured credit
facilities with various banks to support commercial paper borrowings. There were
no significant commitment fees or compensating balance requirements under these
facilities. Short-term credit facilities available to foreign subsidiaries
amounted to $315 million at September 30, 1997 and consisted of arrangements for
which there are no significant commitment fees.

26
27

9. OTHER CURRENT LIABILITIES

Other current liabilities are summarized as follows (in millions):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1996
---- ----
<S> <C> <C>
Contract reserves and advance payments....................................... $146 $128
Accrued product warranty..................................................... 113 110
Accrued taxes other than income taxes........................................ 46 49
Other........................................................................ 227 278
---- ----
Other current liabilities.................................................... $532 $565
==== ====
</TABLE>

10. LONG-TERM DEBT

Long-term debt consisted of the following (in millions):

<TABLE>
<CAPTION>
SEPTEMBER 30,
-------------
1997 1996
---- ----
<S> <C> <C>
6.8% notes, payable in 2003.................................................. $141 $139
Other obligations, principally foreign....................................... 17 32
---- ----
Total........................................................................ 158 171
Less current portion......................................................... 2 15
---- ----
Long-term debt............................................................... $156 $156
==== ====
</TABLE>

11. FINANCIAL INSTRUMENTS

The Company's financial instruments include cash, equity securities,
short-and long-term debt, and foreign currency forward exchange contracts. At
September 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 gains and losses relating to these foreign currency forward exchange
contracts are deferred and included in the measurement of the foreign currency
transaction subject to the hedge. The amount of any deferred gain or loss on
these contracts is immaterial.

The foreign currency forward exchange contracts are executed with
creditworthy banks and are denominated in currencies of major industrial
countries. The notional amount of all of the Company's outstanding foreign
currency forward exchange contracts aggregated $239 million and $919 million at
September 30, 1997 and 1996, respectively. The contracts outstanding at
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.

12. CAPITAL STOCK

At September 30, 1997, the authorized stock of the Company consisted of one
billion shares of Common Stock, with a $1 par value, and 25 million shares of
preferred stock, without par value. At September 30, 1997, 25 million shares of
Common Stock were reserved for various employee incentive plans. On February 23,
1997, all outstanding shares of Class A Common Stock were converted into Common
Stock.

27
28

Changes in outstanding common shares are summarized as follows (in
millions):

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Beginning balance...................................................... 218.5 217.0 218.6
Treasury stock purchases............................................... (13.4) (0.9) (3.5)
Other, principally stock option exercises.............................. 1.7 2.4 1.9
----- ----- -----
Ending balance......................................................... 206.8 218.5 217.0
===== ===== =====
</TABLE>

Preferred Share Purchase Rights

Each outstanding share of Common Stock provides the holder with one
Preferred Share Purchase Right (Right). The Rights will become exercisable only
if a person or group acquires, or offers to acquire, 20% or more of the Common
Stock, although the Company is authorized to reduce the 20% threshold for
triggering the Rights to not less than 10%. Upon exercise, each Right entitles
the holder to 1/100th of a share of Series A Junior Participating Preferred
Stock of the Company (Junior Preferred Stock) at a price of $250, subject to
adjustment.

Upon an acquisition of the Company, each Right (other than Rights held by
the acquiror) will generally be exercisable for $500 worth of Common Stock or
common stock of the acquiror for $250. In certain circumstances, each Right may
be exchanged by the Company for one share of Common Stock or 1/100th of a share
of Junior Preferred Stock. The Rights will expire on December 6, 2006, unless
earlier exchanged or redeemed at $0.01 per Right.

13. STOCK OPTIONS

Options to purchase Common Stock of the Company have been granted under
various incentive plans to directors, officers and other key employees at prices
equal to or above the fair market value of such stock on the dates the options
were granted. The plans provide that the option price for certain options
granted under the plans may be paid in cash, the Company's Common Stock, or a
combination thereof.

Under the 1995 Long-Term Incentives Plan, the Company may grant up to 16
million shares of Company Common Stock as non-qualified options, incentive stock
options, stock appreciation rights and restricted stock. Shares available for
future grant or payment under various incentive plans were 13 million at
September 30, 1997. Stock options expire ten years from the date they are
granted and have vesting periods which range from one to three years. None of
the incentive plans presently permits options to be granted after September 30,
2005.

Information relative to stock options is as follows (shares in thousands):

<TABLE>
<CAPTION>
1997 1996 1995
------------------ ------------------ ------------------
WTD. WTD. WTD.
AVG. AVG. AVG.
EXERCISE EXERCISE EXERCISE
SHARES PRICE SHARES PRICE SHARES PRICE
------ -------- ------ -------- ------ --------
<S> <C> <C> <C> <C> <C> <C>
Number of shares under option:
Outstanding at beginning of year.......... 10,871 $33.95 10,363 $29.71 10,336 $28.09
Granted................................... 1,592 61.28 1,840 52.89 1,776 35.78
Adjustments:
A&D and Meritor adjustments............ 2,260 -- -- -- -- --
Conversion to Meritor options.......... (141) 61.84 -- -- -- --
Exercised................................. (1,585) 27.40 (1,295) 26.68 (1,713) 26.11
Canceled or expired....................... (160) 49.29 (37) 42.17 (36) 33.63
------ ------ ------
Outstanding at end of year................ 12,837 31.67 10,871 33.95 10,363 29.71
====== ====== ======
Exercisable at end of year................ 9,607 26.32 8,594 29.84 8,601 28.48
====== ====== ======
</TABLE>

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29

In connection with the divestiture of the A&D Business and the spin-off of
Meritor, the number of options outstanding and the exercise prices of such
options were adjusted in order to preserve the value of the options that existed
as of the date of each divestiture. Additionally, in connection with the Meritor
spin-off, Rockwell options granted to Meritor employees during 1997 were
converted into Meritor options.

The following table summarizes information about stock options outstanding
at September 30, 1997 (shares in thousands; remaining life in years):

<TABLE>
<CAPTION>
OPTIONS OUTSTANDING
------------------------------- OPTIONS EXERCISABLE
WEIGHTED AVERAGE -------------------
--------------------- WTD. AVG.
REMAINING EXERCISE EXERCISE
RANGE OF EXERCISE PRICES SHARES LIFE PRICE SHARES PRICE
- -------------------------------------------------- ------ --------- -------- ------ ---------
<S> <C> <C> <C> <C> <C>
$13.79 to $18.41.................................. 785 1.8 $17.90 785 $ 17.90
$20.16 to $25.92.................................. 4,570 4.8 23.31 4,570 23.31
$27.98 to $38.48.................................. 3,805 6.7 28.78 3,566 28.73
$42.69 to $50.45.................................. 2,240 8.3 44.05 686 43.49
$53.90 to $59.49.................................. 1,437 9.2 54.90 -- --
------ -----
12,837 9,607
====== =====
</TABLE>

In 1997, the Company adopted the disclosure-only provisions of SFAS No.
123, "Accounting for Stock-Based Compensation." Accordingly, no compensation
expense has been recorded relative to the Company's stock-based compensation
plans. If the Company accounted for its stock-based plans using the fair value
method provided by SFAS No. 123, the Company's net income and earnings per share
would have been reduced to the following pro forma amounts (in millions, except
per share amounts):

<TABLE>
<CAPTION>
1997 1996
----------------- -----------------
AS PRO AS PRO
REPORTED FORMA REPORTED FORMA
-------- ----- -------- -----
<S> <C> <C> <C> <C>
Income from continuing operations........................... $ 586 $ 579 $ 451 $ 448
Income from discontinued operations......................... 58 47 275 274
------ ----- ------ -----
Net Income................................................ $ 644 $ 626 $ 726 $ 722
====== ===== ====== =====
Earnings per share:
Continuing operations..................................... $ 2.74 $2.71 $ 2.07 $2.06
Discontinued operations................................... 0.27 0.22 1.27 1.26
------ ----- ------ -----
Net Income............................................. $ 3.01 $2.93 $ 3.34 $3.32
====== ===== ====== =====
</TABLE>

The pro forma effect on net income for 1997 may not be indicative of the
pro forma effect on net income of future years.

The weighted average fair value of options granted was $15.38 and $12.83
per share in 1997 and 1996, respectively. The fair value of each option was
estimated on the date of grant or subsequent date of option adjustment using the
Black-Scholes pricing model and the following assumptions:

<TABLE>
<CAPTION>
1997 1996
------------------------------------ ------
MERITOR A&D BUSINESS
SPIN-OFF DIVESTITURE
ADJUSTMENT GRANTS ADJUSTMENT GRANTS
---------- ------ ------------ ------
<S> <C> <C> <C> <C>
Average risk-free interest rate........................ 5.88% 5.98% 5.74% 5.57%
Expected dividend yield................................ 1.87% 2.56% 2.59% 2.91%
Expected volatility.................................... 0.27 0.25 0.25 0.18
Expected life (years).................................. 5 5 5 5
</TABLE>

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30

14. RETIREMENT MEDICAL PLANS

The Company has retirement medical plans which cover most of its United
States employees and provide for the payment of medical costs of eligible
employees and dependents upon retirement.

Retirement medical expense for continuing operations consisted of the
following (in millions):

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Service cost--benefits attributed to service during the year............. $ 8 $ 8 $ 7
Interest accrued on accumulated retirement medical obligation............ 50 48 45
Amortization of plan amendments and net actuarial gains and losses....... (8) (12) (15)
--- ---- ----
Retirement medical expense............................................... $50 $ 44 $ 37
=== ==== ====
</TABLE>

The Company's retirement medical obligation at September 30, 1997 and 1996
consisted of the following (in millions):

<TABLE>
<CAPTION>
1997 1996
---- ----
<S> <C> <C>
Accumulated retirement medical obligation:
Retirees.................................................................. $499 $466
Employees eligible to retire.............................................. 62 70
Employees not eligible to retire.......................................... 132 119
---- ----
Total.................................................................. 693 655
Unamortized amounts:
Plan amendments........................................................... 54 61
Net actuarial losses...................................................... (63) (31)
---- ----
Recorded liability.......................................................... $684 $685
==== ====
Assumptions used (June 30 measurement date):
Discount rate............................................................. 7.5% 7.75%
Health care cost trend rates.............................................. 8.0%* 8.0%*
</TABLE>

* Decreasing to 5.5% after 2015.

Increasing the health care cost trend rates by one percentage point would
increase the accumulated retirement medical obligation at September 30, 1997 by
approximately $57 million and would increase retirement medical expense by
approximately $6 million.

15. RETIREMENT PENSION PLANS

The Company has pension plans which cover most of its employees and provide
for monthly pension payments to eligible employees upon retirement. Pension
benefits for salaried employees generally are based on years of credited service
and average earnings. Pension benefits for hourly employees generally are based
on specified benefit amounts and years of service. The Company's policy is to
fund its pension obligations in conformity with the funding requirements of
applicable laws and governmental regulations.

Net pension expense for continuing operations consisted of the following
(in millions):

<TABLE>
<CAPTION>
1997 1996 1995
----- ----- -----
<S> <C> <C> <C>
Service cost--benefits earned during the year........................ $ 65 $ 64 $ 51
Interest accrued on projected benefit obligation..................... 139 215 202
Assumed return on plan assets........................................ (157) (228) (211)
Initial net asset amortization....................................... (11) (22) (22)
Prior service cost amortization...................................... 9 8 7
Net actuarial loss amortization...................................... 5 26 12
----- ----- -----
Net pension expense.................................................. $ 50 $ 63 $ 39
===== ===== =====
</TABLE>

30
31

Pension plan assets are primarily equity securities, United States
Government obligations, and other fixed income investments whose values are
subject to fluctuations of the securities market. The actual return on plan
assets allocated to continuing operations was $373 million, $514 million, and
$421 million in 1997, 1996, and 1995, respectively. Differences between these
actual returns and the related assumed returns on plan assets are deferred and
considered in the determination of net pension income or expense in future
periods.

Prior to the Reorganization, pension plan obligations attributable to
United States active employees of continuing businesses and the Automotive and
Graphic Systems businesses as of January 1, 1996, and a proportionate share of
pension plan assets, were transferred from the Company's United States pension
plan to a newly-established pension plan. Pension plan assets and obligations
related to employees of the A&D Business and all retirees of the Company's
United States pension plan prior to January 1, 1996 were transferred as part of
the A&D Business pursuant to the merger agreement with Boeing.

The following table reconciles the funded status of the Company's
overfunded pension plans to amounts included in Other Assets in the balance
sheet (in millions):

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Accumulated benefit obligation, principally vested.......................... $1,591 $1,397
Effects of projected compensation increases................................. 272 240
------ ------
Projected benefit obligation................................................ 1,863 1,637
Fair value of plan assets................................................... 2,219 1,733
------ ------
Plan assets in excess of projected benefit obligation....................... 356 96
Items not yet recognized in balance sheet:
Net actuarial (gains) losses.............................................. (209) 32
Prior service cost........................................................ 25 36
Remaining initial net asset............................................... (40) (50)
------ ------
Prepaid pension costs at September 30....................................... $ 132 $ 114
====== ======
</TABLE>

<TABLE>
<CAPTION>
1997 1996
------ ------
<S> <C> <C>
Assumptions used (June 30 measurement date):
Discount rate............................................................. 7.75% 7.75%
Compensation increase rate................................................ 4.5% 4.5%
Long-term rate of return on plan assets................................... 9.5% 9.0%
</TABLE>

The Company also sponsors certain defined contribution savings plans for
eligible employees. Expense related to these plans was $50 million, $47 million,
and $35 million for 1997, 1996, and 1995, respectively.

31
32

16. INCOME TAXES

The components of the provision for income taxes are as follows (in
millions):

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Current:
United States......................................................... $258 $329 $175
Research and experimentation credit................................... -- (65) --
Foreign............................................................... 40 54 34
State and local....................................................... 45 55 36
---- ---- ----
Total current........................................................... 343 373 245
---- ---- ----
Deferred:
United States......................................................... 13 (72) 3
Foreign............................................................... (21) (11) 10
State and local....................................................... 2 (11) (3)
---- ---- ----
Total deferred.......................................................... (6) (94) 10
---- ---- ----
Provision for income taxes.............................................. $337 $279 $255
==== ==== ====
</TABLE>

During 1996 the Company reached an agreement with the Internal Revenue
Service on its research and experimentation tax credit refund claim related to
certain prior years and recorded $65 million as a reduction of its provision for
income taxes.

Net deferred income tax benefits included in the balance sheet at September
30, 1997 and 1996 consist of the tax effects of temporary differences related to
the following (in millions):

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Accrued compensation and benefits............................................ $ 97 $ 79
Accrued product warranties................................................... 43 45
Inventory.................................................................... 30 43
Allowance for doubtful accounts.............................................. 28 31
Other--net................................................................... 56 13
----- -----
Current deferred income taxes................................................ $ 254 $ 211
===== =====
</TABLE>

Net deferred income taxes included in Other Liabilities in the balance
sheet at September 30, 1997 and 1996 consist of the tax effects of temporary
differences related to the following (in millions):

<TABLE>
<CAPTION>
1997 1996
----- -----
<S> <C> <C>
Retirement benefits.......................................................... $(239) $(192)
Property..................................................................... 158 132
Intangible assets............................................................ 102 126
Loss carryforwards........................................................... (55) (81)
Foreign tax credit carryforwards............................................. (132) (52)
Other--net................................................................... (2) 9
----- -----
Subtotal..................................................................... (168) (58)
Valuation allowance.......................................................... 187 121
----- -----
Long-term deferred income taxes.............................................. $ 19 $ 63
===== =====
</TABLE>

Management believes it is more likely than not that current and long-term
tax assets will be realized through the reduction of future taxable income.
Significant factors considered by management in its determination of the
probability of the realization of the deferred tax assets included: (a) the
historical operating results of the Company ($1.7 billion of United States
income from continuing operations before income taxes over the past three
years), (b) expectations of future earnings, and (c) the extended period of time
over which the retirement medical liability will be paid. The valuation
allowance represents the amount

32
33

of tax benefits related to net operating loss, capital loss and foreign tax
credit carryforwards that have not yet been recognized. The carryforward period
for net operating and capital losses expires between 1998 and 2004. The
carryforward period for foreign tax credits expires between 1998 and 2002.

The consolidated effective tax rate was different from the United States
statutory rate for the reasons set forth below:

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
Statutory tax rate..................................................... 35.0% 35.0% 35.0%
State and local income taxes........................................... 3.4 4.0 3.4
Foreign income taxes................................................... 0.2 1.5 3.0
Non-deductible goodwill................................................ 1.3 1.6 2.6
Purchased research and development..................................... 0.9 5.8 --
Foreign sales corporation benefit...................................... (2.4) (2.6) (3.1)
Utilization of foreign loss carryforwards.............................. (0.7) (1.0) (0.8)
Tax credits............................................................ (1.3) (8.9) (0.2)
Other.................................................................. 0.1 2.8 1.0
---- ---- ----
Effective tax rate..................................................... 36.5% 38.2% 40.9%
==== ==== ====
</TABLE>

The income tax provisions were calculated based upon the following
components of income from continuing operations before income taxes (in
millions):

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
United States income.................................................... $733 $518 $469
Foreign income.......................................................... 190 212 154
---- ---- ----
Total................................................................... $923 $730 $623
==== ==== ====
</TABLE>

No provision has been made for United States, state, or additional foreign
income taxes related to approximately $130 million of undistributed earnings of
foreign subsidiaries which have been or are intended to be permanently
reinvested.

The audit of the Company's United States income tax returns for the years
1989 through 1991 has been completed. The Company's United States income tax
returns for the years 1992 through 1994 are currently under examination. In
connection with the divestiture of the A&D Business and the Meritor spin-off,
the Company has retained all tax liabilities and the right to all tax refunds
related to United States and certain non-U.S. operations of the A&D and
Automotive businesses for periods prior to the respective divestiture dates.
Management believes that adequate provision for income taxes has been made for
all years through 1997.

17. SUPPLEMENTARY FINANCIAL STATEMENT INFORMATION

<TABLE>
<CAPTION>
1997 1996 1995
---- ---- ----
<S> <C> <C> <C>
STATEMENT OF CASH FLOWS INFORMATION (IN MILLIONS):
Income taxes paid....................................................... $459 $597 $442
Interest payments....................................................... 27 23 8
STATEMENT OF INCOME INFORMATION (IN MILLIONS):
Research and development:
Company-initiated..................................................... $661 $518 $422
Customer-funded....................................................... 96 122 125
Maintenance and repairs................................................. 181 179 117
Rental expense.......................................................... 110 112 93
</TABLE>

33
34

Income taxes paid and interest payments related to discontinued operations
were (in millions) $15 and $56 in 1997, $7 and $175 in 1996, and $6 and $146 in
1995, respectively, and are included in the determination of the cash flows of
discontinued operations.

Minimum future rental commitments under operating leases having
noncancelable lease terms in excess of one year aggregated $236 million as of
September 30, 1997 and are payable as follows (in millions): 1998, $62; 1999,
$50; 2000, $34; 2001, $24; 2002, $18; and after 2002, $48.

18. CONTINGENT LIABILITIES

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 arbitration or
litigation. The Company accrues the estimated cost of the ultimate resolution 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, and employment matters. Pursuant to the Reorganization, Rockwell
has agreed to indemnify Boeing for certain government contract and environmental
matters related to operations of the A&D Business for periods prior to the
merger. In connection with the spin-off, Meritor has agreed to indemnify the
Company for substantially all contingent liabilities related to the Automotive
Business. 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.

19. BUSINESS SEGMENT INFORMATION

The Company's business segments are engaged in research, development, and
manufacture of electronics products as follows:

Automation--industrial automation equipment and systems, including
control logic, sensors, human-machine interface devices, motors, power
and mechanical devices and software products.

Avionics & Communications--avionics products and systems and related
communications technologies primarily used in commercial and military
aircraft and defense electronic systems for command, control,
communications and intelligence.

Semiconductor Systems--system-level semiconductor chipset solutions for
personal communications electronics markets such as personal computers,
personal imaging devices, wireless communications products, network
access devices and digital information and entertainment products, as
well as electronic commerce products for call center systems and
personalized electronic commerce applications.

The divested business is the Semiconductor Systems Local Area Networking
product line.

34
35

The following tables summarize segment information (in millions):

SALES AND EARNINGS BY BUSINESS SEGMENT

<TABLE>
<CAPTION>
SALES
--------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
BUSINESS SEGMENT 1997 1996 1995
- -------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Automation.......................................................... $4,494 $4,165 $3,590
Avionics & Communications........................................... 1,689 1,470 1,461
Semiconductor Systems............................................... 1,579 1,593 875
Divested business................................................... -- -- 11
------ ------ ------
Sales............................................................... $7,762 $7,228 $5,937
====== ====== ======
</TABLE>

<TABLE>
<CAPTION>
EARNINGS
--------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
BUSINESS SEGMENT 1997 1996 1995
- -------------------------------------------------------------------- ------ ------ ------
<S> <C> <C> <C>
Automation.......................................................... $ 598 $ 537 $ 481
Avionics & Communications........................................... 253 166 182
Semiconductor Systems............................................... 231 330 113
Purchased research and development.................................. (53) (121) --
Restructuring charge................................................ -- (76) --
Divested business................................................... -- -- (31)
------ ------ ------
Operating earnings................................................ 1,029 836 745
General corporate--net.............................................. (79) (84) (108)
Interest expense.................................................... (27) (22) (14)
Provision for income taxes.......................................... (337) (279) (255)
------ ------ ------
Income from continuing operations................................... $ 586 $ 451 $ 368
====== ====== ======
</TABLE>

In 1997, purchased research and development of $30 million and $23 million
relates to the acquisitions of a Semiconductor Systems business and the
remaining interest in an Automation software business, respectively. In 1996,
purchased research and development relates to the acquisition of Brooktree, a
Semiconductor Systems business. The restructuring charge relates to the business
segments as follows (in millions): Automation, $11; Avionics & Communications,
$50; and Corporate, $15.

ASSET INFORMATION BY SEGMENT

<TABLE>
<CAPTION>
PROVISION FOR
DEPRECIATION AND
AMORTIZATION
IDENTIFIABLE ASSETS ----------------------
----------------------------
YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- ----------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Automation............................... $4,435 $4,254 $4,259 $219 $234 $192
Avionics & Communications................ 1,066 955 933 56 52 48
Semiconductor Systems.................... 1,567 1,410 743 198 144 77
Corporate................................ 903 1,185 1,090 11 10 14
Net assets of Automotive Business........ -- 612 566 -- -- --
Net assets of Graphic Systems............ -- 560 569 -- -- --
------ ------ ------ ---- ---- ----
Total.................................... $7,971 $8,976 $8,160 $484 $440 $331
====== ====== ====== ==== ==== ====
</TABLE>

Corporate identifiable assets include cash and net deferred income tax
assets.

35
36

<TABLE>
<CAPTION>
CAPITAL EXPENDITURES
--------------------------
YEAR ENDED SEPTEMBER 30,
--------------------------
BUSINESS SEGMENT 1997 1996 1995
- ----------------------------------------------------------------- ---- ---- ----
<S> <C> <C> <C>
Automation....................................................... $221 $229 $237
Avionics & Communications........................................ 72 60 49
Semiconductor Systems............................................ 350 414 176
Corporate........................................................ 40 11 9
---- ---- ----
Total............................................................ $683 $714 $471
==== ==== ====
</TABLE>

SALES, EARNINGS AND ASSETS BY GEOGRAPHIC AREA

<TABLE>
<CAPTION>
SALES EARNINGS
---------------------------- --------------------------
YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------
1997 1996 1995 1997 1996 1995
------ ------ ------ ------ ----- -----
<S> <C> <C> <C> <C> <C> <C>
United States...................... $6,851 $6,354 $5,191 $ 971 $ 916 $ 659
Europe............................. 876 879 725 45 46 34
Asia Pacific....................... 439 393 274 19 12 9
Canada............................. 328 279 239 41 35 31
Latin America...................... 179 170 119 6 24 12
Eliminations....................... (911) (847) (611) -- -- --
Purchased research and
development...................... (53) (121) --
Restructuring...................... -- (76) --
------ ------ ------ ------ ----- -----
Total.............................. $7,762 $7,228 $5,937 1,029 836 745
====== ====== ======
General corporate--net............. (79) (84) (108)
Interest expense................... (27) (22) (14)
Provision for income taxes......... (337) (279) (255)
------ ----- -----
Income from continuing
operations....................... $ 586 $ 451 $ 368
====== ===== =====
</TABLE>

United States sales include export sales to customers and international
subsidiaries of $1,850 million in 1997, $1,706 million in 1996, and $1,258
million in 1995. The 1997 export sales were to the following geographic areas:
Europe, $573 million; Asia Pacific, $919 million; Canada, $273 million; and
Latin America, $85 million.

<TABLE>
<CAPTION>
IDENTIFIABLE ASSETS
-------------------------------------------------------------
SEGMENTS CORPORATE
---------------------------- --------------------------
SEPTEMBER 30, SEPTEMBER 30,
---------------------------- --------------------------
GEOGRAPHIC AREA 1997 1996 1995 1997 1996 1995
- ------------------------------------ ------ ------ ------ ---- ------ ------
<S> <C> <C> <C> <C> <C> <C>
United States....................... $6,094 $5,628 $5,050 $719 $ 615 $ 500
Europe.............................. 522 537 518 57 129 123
Asia Pacific........................ 225 239 198 49 42 53
Canada.............................. 136 135 106 76 332 417
Latin America....................... 91 80 63 2 67 (3)
Net assets of Automotive Business... -- 612 566 -- -- --
Net assets of Graphic Systems....... -- 560 569 -- -- --
------ ------ ------ ---- ------ ------
Total............................... $7,068 $7,791 $7,070 $903 $1,185 $1,090
====== ====== ====== ==== ====== ======
</TABLE>

36
37

20. QUARTERLY FINANCIAL INFORMATION (UNAUDITED)

<TABLE>
<CAPTION>
1997 FISCAL QUARTERS
---------------------------------------
FIRST SECOND THIRD FOURTH 1997
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales......................................... $1,853 $1,899 $1,929 $2,081 $7,762
Cost of sales................................. 1,285 1,325 1,371 1,491 5,472
Income from continuing operations............. 154 155 131 146 586
Net income.................................... 179 189 167 109 644
Earnings (loss) per share:
Continuing operations....................... $ 0.70 $ 0.72 $ 0.62 $ 0.70 $ 2.74
Discontinued operations..................... 0.12 0.15 0.17 (0.17) 0.27
------ ------ ------ ------ ------
Net income............................... $ 0.82 $ 0.87 $ 0.79 $ 0.53 $ 3.01
====== ====== ====== ====== ======
</TABLE>

The full year income from continuing operations includes write-offs of
purchased research and development of $23 million, or 11 cents per share,
related to the acquisition of an Automation software business in the fourth
quarter and $19 million, or nine cents per share, in connection with the
acquisition of a Semiconductor Systems business in the third quarter.

Fourth quarter loss and full year income from discontinued operations
includes the effects of restructuring charges incurred by Meritor of $15
million, or seven cents per share, and transaction and separation-related costs
of $48 million, or 23 cents per share, related to the spin-off of Meritor.

<TABLE>
<CAPTION>
1996 FISCAL QUARTERS
---------------------------------------
FIRST SECOND THIRD FOURTH 1996
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
<S> <C> <C> <C> <C> <C>
Sales......................................... $1,630 $1,794 $1,891 $1,913 $7,228
Cost of sales................................. 1,126 1,274 1,335 1,349 5,084
Income from continuing operations............. 131 121 146 53 451
Net income.................................... 192 214 223 97 726
Earnings per share:
Continuing operations....................... $ 0.61 $ 0.55 $ 0.67 $ 0.24 $ 2.07
Discontinued operations..................... 0.28 0.43 0.35 0.21 1.27
------ ------ ------ ------ ------
Net income............................... $ 0.89 $ 0.98 $ 1.02 $ 0.45 $ 3.34
====== ====== ====== ====== ======
</TABLE>

The fourth quarter and full year income from continuing operations includes
a $121 million, or 56 cents per share, write-off of purchased research and
development in connection with the acquisition of Brooktree.

37
38

INDEPENDENT AUDITORS' REPORT

TO THE DIRECTORS AND SHAREOWNERS OF
ROCKWELL INTERNATIONAL CORPORATION:

We have audited the accompanying consolidated balance sheet of Rockwell
International Corporation and subsidiaries as of September 30, 1997 and 1996,
and the related consolidated statements of income, shareowners' equity, and cash
flows for each of the three years in the period ended September 30, 1997. Our
audit also included the financial statement schedule listed at Item 14(a)(2).
These financial statements and financial statement schedule are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements and financial statement schedule 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 consolidated financial statements present fairly, in
all material respects, the financial position of Rockwell International
Corporation and subsidiaries at September 30, 1997 and 1996, and the results of
their operations and their cash flows for each of the three years in the period
ended September 30, 1997, in conformity with generally accepted accounting
principles. Also, in our opinion, such financial statement schedule, when
considered in relation to the basic consolidated financial statements taken as a
whole, presents fairly in all material respects the information set forth
therein.

DELOITTE & TOUCHE LLP

Pittsburgh, Pennsylvania
November 5, 1997

38
39

See also the table under the caption Continuing Operations, Sales and
Earnings by Business Segment in the MD&A on page 13 hereof.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE COMPANY.

See the information under the captions ELECTION OF DIRECTORS and
INFORMATION AS TO NOMINEES FOR DIRECTORS AND CONTINUING DIRECTORS on pages 3-7
of the 1998 Proxy Statement. No nominee for director was selected pursuant to
any arrangement or understanding between the nominee and any person other than
the Company pursuant to which such person is or was to be selected as a director
or nominee. See also the information with respect to executive officers of the
Company under Item 4a of Part I hereof.

ITEM 11. EXECUTIVE COMPENSATION.

See the information under the captions EXECUTIVE COMPENSATION, OPTION
GRANTS, AGGREGATED OPTION EXERCISES AND FISCAL YEAR-END VALUES and LONG-TERM
INCENTIVES PLAN on pages 10-13 and RETIREMENT PLANS on pages 17-18 of the 1998
Proxy Statement.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

See the information under the captions VOTING SECURITIES and OWNERSHIP BY
MANAGEMENT OF EQUITY SECURITIES on pages 3 and 10, respectively, of the 1998
Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The Company during 1997 had purchases of approximately $16,331,000 in the
normal course of business from The Timken Company, of which Joseph F. Toot, Jr.,
a director of the Company, is President and Chief Executive Officer. Based on
the Company's knowledge of prevailing market conditions and prices for the goods
and services involved, the Company believes that such transactions were on terms
as favorable to the Company as those which might have been obtained from
entities with which directors of the Company were not associated.

The Company has entered into an agreement with Donald R. Beall, its
Chairman of the Board, providing for his continued availability as an advisor to
the Company's management following his retirement through September 30, 1999
(subject to extension) with compensation at an annual rate of $600,000. In
addition, Mr. Beall will continue to be covered under certain medical benefit
plans, to have the use of an automobile and, subject to availability, the use of
the Company's aircraft for business travel. He also will be reimbursed for
memberships in certain clubs and will have the use of office facilities and
secretarial assistance.

39
40

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.

(a) Financial Statements, Financial Statement Schedules and Exhibits.

(1) Financial Statements (all financial statements listed below are
those of the Company and its consolidated subsidiaries).

Consolidated Balance Sheet, September 30, 1997 and 1996.

Statement of Consolidated Income, years ended September 30, 1997,
1996 and 1995.

Statement of Consolidated Cash Flows, years ended September 30, 1997,
1996 and 1995.

Statement of Consolidated Shareowners' Equity, years ended September
30, 1997, 1996 and 1995.

Notes to Financial Statements.

Independent Auditors' Report.

Sales and Earnings by Business Segment, years ended September 30,
1993 through 1997.

(2) Financial Statement Schedule for the years ended September 30, 1997,
1996 and 1995.

<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Schedule II--Valuation and Qualifying Accounts...................... S-1
</TABLE>

Schedules not filed herewith are omitted because of the absence of
conditions under which they are required or because the information
called for is shown in the financial statements or notes thereto.

(3) Exhibits.

<TABLE>
<S> <C>
3-a-1 Restated Certificate of Incorporation of the Company, as amended,
filed as Exhibit 3-a-1 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, is hereby incorporated by
reference.
3-b-1 By-Laws of the Company, filed as Exhibit 3-b-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1996, is hereby
incorporated by reference.
3-b-2 Copy of resolution of the Board of Directors of the Company, adopted
September 3, 1997, amending the By-Laws of the Company effective
October 1, 1997.
4-a-1 Rights Agreement between the Company and ChaseMellon Shareholder
Services, L.L.C., as rights agent, dated as of November 30, 1996,
filed as Exhibit 4-c to Registration Statement No. 333-17031, is
hereby incorporated by reference.
4-b-1 Indenture dated as of April 1, 1993 between Reliance and Bankers Trust
Company, as Trustee, pursuant to which the 6.8% Notes of Reliance due
April 15, 2003 have been issued, filed as Exhibit 4.7 to Registration
Statement No. 33-60066, is hereby incorporated by reference.
4-b-2 First Supplemental Indenture dated April 14, 1993 to the Indenture
listed as Exhibit 4-b-1 above, filed as Exhibit 4.1 to Current Report
on Form 8-K of Reliance dated April 19, 1993, is hereby incorporated
by reference.
4-b-3 Form of the 6.8% Notes of Reliance due April 15, 2003, filed as
Exhibit 4-8 to Registration Statement No. 33-60066, is hereby
incorporated by reference.
*10-a-1 Copy of the Company's 1979 Stock Plan for Key Employees, as amended,
filed as Exhibit 4-d-1 to Registration Statement No. 33-11946, is
hereby incorporated by reference.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.

40
41

<TABLE>
<S> <C>
*10-a-2 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1979 Stock Plan for Key Employees, as amended, for
options and stock appreciation rights granted after December 1, 1987,
filed as Exhibit 10-b-7 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1987 (File No. 1-1035), are hereby
incorporated by reference.
*10-a-3 Copy of resolution of the Board of Directors of the Company, adopted
May 7, 1980, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Option Plan for Key Employees (now the 1979 Stock Plan for Key
Employees, as amended) and the number of shares transferable under the
Company's Incentive Compensation Plan, filed as Exhibit 10-d-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1987 (File No. 1-1035), is hereby incorporated by reference.
*10-a-4 Copy of resolution of the Board of Directors of the Company, adopted
May 4, 1983, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Plan for Key Employees, as amended, filed as Exhibit 4-e-5 to
Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-a-5 Copy of resolution of the Board of Directors of the Company, adopted
February 11, 1987, adjusting the number of shares subject to
outstanding options and stock appreciation rights under the Company's
1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-e-6
to Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-b-1 Copy of the Company's 1988 Long-Term Incentives Plan, as amended
through November 30, 1994, filed as Exhibit 10-d-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
*10-b-2 Copy of resolution of the Board of Directors of the Company, adopted
November 5, 1997, increasing the number of shares authorized for
issuance under the Company's 1979 Stock Plan for Key Employees and
1988 Long-Term Incentives Plan.
*10-b-3 Forms of Stock Option Agreements under the Company's 1988 Long-Term
Incentives Plan for options granted prior to May 1, 1992, filed as
Exhibit 10-d-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1988 (File No. 1-1035), are hereby
incorporated by reference.
*10-b-4 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1988 Long-Term Incentives Plan for options and stock
appreciation rights granted prior to May 1, 1992, filed as Exhibit
10-d-3 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1988 (File
No. 1-1035), are hereby incorporated by reference.
*10-b-5 Form of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after May 1, 1992 and prior to
March 1, 1993, filed as Exhibit 28-a-1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992 (File No.
1-1035), is hereby incorporated by reference.
*10-b-6 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after March 1, 1993 and prior to
November 1, 1993, filed as Exhibit 28-a to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993, are hereby
incorporated by reference.
*10-b-7 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after November 1, 1993 and prior
to December 1, 1994, filed as Exhibit 10-d-6 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, are hereby
incorporated by reference.
*10-b-8 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after December 1, 1994, filed as
Exhibit 10-d-7 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1994, are hereby incorporated by reference.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.

41
42

<TABLE>
<S> <C>
*10-c-1 Copy of the Company's 1995 Long-Term Incentives Plan, filed as Exhibit
10-e-1 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994, is hereby incorporated by reference.
*10-c-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term
Incentives Plan, filed as Exhibit 10-e-2 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994, are hereby
incorporated by reference.
*10-c-3 Copy of resolution of the Board of Directors of the Company, adopted
September 11, 1996, amending the Company's 1995 Long-Term Incentives
Plan, filed as Exhibit 10-c-2 to Registration Statement No. 333-14969,
is hereby incorporated by reference.
*10-c-4 Form of Restricted Stock Agreement under the Company's 1995 Long-Term
Incentives Plan, filed as Exhibit 10-e to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996, is hereby
incorporated by reference.
*10-c-5 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and Don H. Davis, Jr.
*10-c-6 Copy of Restricted Stock Agreement dated December 6, 1996 between the
Company and W.M. Barnes.
*10-c-7 Copy of Restricted Stock Agreement dated December 6, 1996 between the
Company and W.J. Calise, Jr.
*10-c-8 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and D.W. Decker.
*10-c-9 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and Jodie K. Glore.
*10-c-10 Copy of resolution of the Compensation and Management Development
Committee of the Board of Directors of the Company, adopted December
3, 1997, amending the Company's 1995 Long-Term Incentives Plan.
*10-d-1 Copy of the Company's Directors Stock Plan, as amended, filed as
Exhibit B to the Company's Proxy Statement for its 1996 Annual Meeting
of Shareowners, is hereby incorporated by reference.
*10-d-2 Form of Stock Option Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10-d to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, is hereby incorporated by
reference.
*10-d-3 Form of Restricted Stock Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10-f to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996, is hereby incorporated
by reference.
*10-d-4 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William H. Gray, III, filed as Exhibit 10-a to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-5 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and J. Clayburn La Force, Jr., filed as Exhibit 10-b to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-6 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William T. McCormick, Jr., filed as Exhibit 10-c to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-7 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and Richard M. Bressler.
*10-d-8 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and John P. Nichols.
*10-d-9 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and Joseph F. Toot, Jr.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.

42
43

<TABLE>
<S> <C>
*10-d-10 Copy of resolution of the Board of Directors of the Company, adopted
February 5, 1997, amending the Company's Directors Stock Plan.
*10-e-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, amending the Company's 1988 Long-Term Incentives
Plan and 1995 Long-Term Incentives Plan, filed as Exhibit 4-g-1 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
*10-e-2 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, adjusting outstanding awards under the Company's (i)
1979 Stock Plan for Key Employees, (ii) 1988 Long-Term Incentives
Plan, (iii) 1995 Long-Term Incentives Plan and (iv) Directors Stock
Plan, filed as Exhibit 4-g-2 to Registration Statement No. 333-17055,
is hereby incorporated by reference.
*10-e-3 Copy of resolution of the Board of Directors of the Company, adopted
September 3, 1997, adjusting outstanding awards under the Company's
(i) 1979 Stock Plan for Key Employees, (ii) 1988 Long-Term Incentives
Plan, (iii) 1995 Long-Term Incentives Plan and (iv) Directors Stock
Plan.
*10-f-1 Copy of the Company's Incentive Compensation Plan, amended and
restated as of July 1, 1997.
*10-g-1 Copy of the Company's Deferred Compensation Plan, as amended effective
as of October 1, 1992, filed as Exhibit 10-g-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, is hereby
incorporated by reference.
*10-h-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, authorizing the assignment of certain compensation
and employee benefit plans to New Rockwell International Corporation,
including the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers, filed as Exhibit 4-g-3 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
*10-h-2 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers, filed as Exhibit 10-h-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1996, is hereby incorporated by reference.
*10-i-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 3, 1993, providing for the Company's Deferred Compensation
Policy for Non-Employee Directors, filed as Exhibit 10-h-1 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1994, is hereby incorporated by reference.
*10-i-2 Copy of resolutions of the Compensation Committee of the Board of
Directors of the Company, adopted July 6, 1994, modifying the
Company's Deferred Compensation Policy for Non-Employee Directors,
filed as Exhibit 10-h-2 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994, is hereby incorporated by
reference.
*10-i-3 Copy of resolutions of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, providing for its
Deferred Compensation Policy for Non-Employee Directors, filed as
Exhibit 10-i-3 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1996, is hereby incorporated by reference.
*10-j-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 2, 1994, providing for the Company's Retirement Policy for
Non-Employee Directors, filed as Exhibit 10-j-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.

43
44

<TABLE>
<S> <C>
*10-j-2 Copy of resolutions of the Board of Directors of the Company, adopted
December 6, 1995, rescinding the Company's Retirement Policy for
Non-Employee Directors (except to the extent applicable to Directors
then age 67 or older and former Directors then retired), filed as
Exhibit 10-j-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995, is hereby incorporated by reference.
*10-j-3 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's Retirement Policy for Non-Employee Directors
(applicable to Directors of the Company who were age 67 or older on
December 6, 1995 and former Directors then retired), filed as Exhibit
10-j-3 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1996, is hereby incorporated by reference.
*10-k-1 Copy of the Company's Annual Incentive Compensation Plan for Senior
Executive Officers, filed as Exhibit A to the Company's Proxy
Statement for its 1996 Annual Meeting of Shareowners, is hereby
incorporated by reference.
*10-l-1 Restricted Stock Agreement dated December 6, 1995 between the Company
and Don H. Davis, Jr., filed as Exhibit 10-l-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995, is hereby
incorporated by reference.
*10-m-1 Copy of letter dated February 1, 1995 from the Company to Judith L.
Estrin, filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, is hereby incorporated by
reference.
*10-n-1 Consulting Agreement dated as of November 25, 1997 between the Company
and Donald R. Beall.
10-o-1 Agreement and Plan of Distribution dated as of December 6, 1996, among
Rockwell International Corporation (now named Boeing North American,
Inc.), the Company (formerly named New Rockwell International
Corporation), Allen-Bradley Company, Inc., Rockwell Collins, Inc.,
Rockwell Semiconductor Systems, Inc., Rockwell Light Vehicle Systems,
Inc. and Rockwell Heavy Vehicle Systems, Inc., filed as Exhibit 10-b
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, is hereby incorporated by reference.
10-o-2 Post-Closing Covenants Agreement dated as of December 6, 1996, among
Rockwell International Corporation (now named Boeing North American,
Inc.), The Boeing Company, Boeing NA, Inc. and the Company (formerly
named New Rockwell International Corporation), filed as Exhibit 10-c
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, is hereby incorporated by reference.
10-o-3 Tax Allocation Agreement dated as of December 6, 1996, among Rockwell
International Corporation (now named Boeing North American, Inc.), the
Company (formerly named New Rockwell International Corporation) and
The Boeing Company, filed as Exhibit 10-d to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996, is hereby
incorporated by reference.
10-p-1 Distribution Agreement dated as of September 30, 1997 by and between
the Company and Meritor Automotive, Inc., filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 10, 1997, is hereby
incorporated by reference.
10-p-2 Employee Matters Agreement dated as of September 30, 1997 by and
between the Company and Meritor Automotive, Inc., filed as Exhibit 2.2
to the Company's Current Report on Form 8-K dated October 10, 1997, is
hereby incorporated by reference.
10-p-3 Tax Allocation Agreement dated as of September 30, 1997 by and between
the Company and Meritor Automotive, Inc., filed as Exhibit 2.3 to the
Company's Current Report on Form 8-K dated October 10, 1997, is hereby
incorporated by reference.
11 Computation of Earnings Per Share for the Five Years Ended September
30, 1997.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.

44
45

<TABLE>
<S> <C>
12 Computation of Ratio of Earnings to Fixed Charges for the Five Years
Ended September 30, 1997.
21 List of Subsidiaries of the Company.
23 Independent Auditors' Consent.
24 Powers of Attorney authorizing certain persons to sign this Annual
Report on Form 10-K on behalf of certain directors and officers of the
Company.
27 Financial Data Schedule for this Annual Report on Form 10-K.
</TABLE>

- ---------

* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.

- ---------
* Management contract or compensatory plan or arrangement.

45
46

SIGNATURES

PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(d) 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

By /s/ WILLIAM J. CALISE, JR.
---------------------------------------

WILLIAM J. CALISE, JR.
SENIOR VICE PRESIDENT, GENERAL
COUNSEL AND SECRETARY

Dated: December 5, 1997

PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW ON THE 5TH DAY OF DECEMBER 1997 BY THE FOLLOWING
PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED.

DONALD R. BEALL*
CHAIRMAN OF THE BOARD AND DIRECTOR

DON H. DAVIS, JR.*
PRESIDENT AND CHIEF EXECUTIVE OFFICER
(PRINCIPAL EXECUTIVE OFFICER) AND DIRECTOR

LEW ALLEN, JR*
DIRECTOR

GEORGE L. ARGYROS*
DIRECTOR

RICHARD M. BRESSLER*
DIRECTOR

JUDITH L. ESTRIN*
DIRECTOR

WILLIAM H. GRAY, III*
DIRECTOR

JAMES CLAYBURN LA FORCE, JR.*
DIRECTOR

WILLIAM T. MCCORMICK, JR.*
DIRECTOR

JOHN D. NICHOLS*
DIRECTOR

BRUCE M. ROCKWELL*
DIRECTOR

WILLIAM S. SNEATH*
DIRECTOR

JOSEPH F. TOOT, JR.*
DIRECTOR

W. MICHAEL BARNES*
SENIOR VICE PRESIDENT, FINANCE & PLANNING
AND
CHIEF FINANCIAL OFFICER (PRINCIPAL
FINANCIAL OFFICER)

WILLIAM E. SANDERS*
VICE PRESIDENT AND CONTROLLER (PRINCIPAL
ACCOUNTING OFFICER)

*By /s/ WILLIAM J. CALISE, JR.
--------------------------------------------------------------
WILLIAM J. CALISE, JR., ATTORNEY-IN-FACT**

** BY AUTHORITY OF POWERS OF ATTORNEY FILED HEREWITH.

46
47

SCHEDULE II

ROCKWELL INTERNATIONAL CORPORATION

VALUATION AND QUALIFYING ACCOUNTS

FOR THE YEARS ENDED SEPTEMBER 30, 1997, 1996 AND 1995

<TABLE>
<CAPTION>
NET (CREDIT)/
BALANCE AT CHARGE TO CHARGED BALANCE AT
BEGINNING COSTS AND TO OTHER END OF
DESCRIPTION OF YEAR(a) EXPENSES ACCOUNTS(b) DEDUCTIONS YEAR(a)
- ----------------------------------- ---------- ------------- ----------- ---------- ----------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Year ended September 30, 1997:
Allowance for doubtful
accounts...................... $ 87.0 ($7.2) $ 0.1 $ 11.4(c) $ 65.5
3.0(d)
Year ended September 30, 1996:
Allowance for doubtful
accounts...................... $ 49.9 $45.5 $ 0.2 $ 9.6(c) $ 87.0
(1.0)(d)
Year ended September 30, 1995:
Allowance for doubtful
accounts...................... $ 37.0 $14.0 $ 0.1 $ 4.7(c) $ 49.9
(3.5)(d)
</TABLE>

- ---------------

(a) Includes allowances for commercial and other long-term receivables.

(b) Collection of accounts previously written off.

(c) Uncollectible accounts written off.

(d) Consists principally of amounts relating to businesses acquired, businesses
sold and foreign currency translation adjustments.

S-1
48

================================================================================

SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

EXHIBITS

TO FORM 10-K

FOR THE FISCAL YEAR ENDED SEPTEMBER 30, 1997

------------------

ROCKWELL INTERNATIONAL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)

------------------

================================================================================
49

EXHIBIT INDEX

<TABLE>
<S> <C>
3-a-1 Restated Certificate of Incorporation of the Company, as amended,
filed as Exhibit 3-a-1 to the Company's Annual Report on Form 10-K for
the year ended September 30, 1996, is hereby incorporated by
reference.
3-b-1 By-Laws of the Company, filed as Exhibit 3-b-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1996, is hereby
incorporated by reference.
3-b-2 Copy of resolution of the Board of Directors of the Company, adopted
September 3, 1997, amending the By-Laws of the Company effective
October 1, 1997.
4-a-1 Rights Agreement between the Company and ChaseMellon Shareholder
Services, L.L.C., as rights agent, dated as of November 30, 1996,
filed as Exhibit 4-c to Registration Statement No. 333-17031, is
hereby incorporated by reference.
4-b-1 Indenture dated as of April 1, 1993 between Reliance and Bankers Trust
Company, as Trustee, pursuant to which the 6.8% Notes of Reliance due
April 15, 2003 have been issued, filed as Exhibit 4.7 to Registration
Statement No. 33-60066, is hereby incorporated by reference.
4-b-2 First Supplemental Indenture dated April 14, 1993 to the Indenture
listed as Exhibit 4-b-1 above, filed as Exhibit 4.1 to Current Report
on Form 8-K of Reliance dated April 19, 1993, is hereby incorporated
by reference.
4-b-3 Form of the 6.8% Notes of Reliance due April 15, 2003, filed as
Exhibit 4-8 to Registration Statement No. 33-60066, is hereby
incorporated by reference.
*10-a-1 Copy of the Company's 1979 Stock Plan for Key Employees, as amended,
filed as Exhibit 4-d-1 to Registration Statement No. 33-11946, is
hereby incorporated by reference.
*10-a-2 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1979 Stock Plan for Key Employees, as amended, for
options and stock appreciation rights granted after December 1, 1987,
filed as Exhibit 10-b-7 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1987 (File No. 1-1035), are hereby
incorporated by reference.
*10-a-3 Copy of resolution of the Board of Directors of the Company, adopted
May 7, 1980, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Option Plan for Key Employees (now the 1979 Stock Plan for Key
Employees, as amended) and the number of shares transferable under the
Company's Incentive Compensation Plan, filed as Exhibit 10-d-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1987 (File No. 1-1035), is hereby incorporated by reference.
*10-a-4 Copy of resolution of the Board of Directors of the Company, adopted
May 4, 1983, adjusting the number of shares subject to outstanding
options and stock appreciation rights under the Company's 1979 Stock
Plan for Key Employees, as amended, filed as Exhibit 4-e-5 to
Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-a-5 Copy of resolution of the Board of Directors of the Company, adopted
February 11, 1987, adjusting the number of shares subject to
outstanding options and stock appreciation rights under the Company's
1979 Stock Plan for Key Employees, as amended, filed as Exhibit 4-e-6
to Registration Statement No. 33-11946, is hereby incorporated by
reference.
*10-b-1 Copy of the Company's 1988 Long-Term Incentives Plan, as amended
through November 30, 1994, filed as Exhibit 10-d-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
*10-b-2 Copy of resolution of the Board of Directors of the Company, adopted
November 5, 1997, increasing the number of shares authorized for
issuance under the Company's 1979 Stock Plan for Key Employees and
1988 Long-Term Incentives Plan.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.
50

<TABLE>
<S> <C>
*10-b-3 Forms of Stock Option Agreements under the Company's 1988 Long-Term
Incentives Plan for options granted prior to May 1, 1992, filed as
Exhibit 10-d-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1988 (File No. 1-1035), are hereby
incorporated by reference.
*10-b-4 Forms of Stock Option and Stock Appreciation Rights Agreements under
the Company's 1988 Long-Term Incentives Plan for options and stock
appreciation rights granted prior to May 1, 1992, filed as Exhibit
10-d-3 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1988 (File
No. 1-1035), are hereby incorporated by reference.
*10-b-5 Form of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after May 1, 1992 and prior to
March 1, 1993, filed as Exhibit 28-a-1 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1992 (File No.
1-1035), is hereby incorporated by reference.
*10-b-6 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after March 1, 1993 and prior to
November 1, 1993, filed as Exhibit 28-a to the Company's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1993, are hereby
incorporated by reference.
*10-b-7 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after November 1, 1993 and prior
to December 1, 1994, filed as Exhibit 10-d-6 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, are hereby
incorporated by reference.
*10-b-8 Forms of Stock Option Agreement under the Company's 1988 Long-Term
Incentives Plan for options granted after December 1, 1994, filed as
Exhibit 10-d-7 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1994, are hereby incorporated by reference.
*10-c-1 Copy of the Company's 1995 Long-Term Incentives Plan, filed as Exhibit
10-e-1 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1994, is hereby incorporated by reference.
*10-c-2 Forms of Stock Option Agreement under the Company's 1995 Long-Term
Incentives Plan, filed as Exhibit 10-e-2 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1994, are hereby
incorporated by reference.
*10-c-3 Copy of resolution of the Board of Directors of the Company, adopted
September 11, 1996, amending the Company's 1995 Long-Term Incentives
Plan, filed as Exhibit 10-c-2 to Registration Statement No. 333-14969,
is hereby incorporated by reference.
*10-c-4 Form of Restricted Stock Agreement under the Company's 1995 Long-Term
Incentives Plan, filed as Exhibit 10-e to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996, is hereby
incorporated by reference.
*10-c-5 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and Don H. Davis, Jr.
*10-c-6 Copy of Restricted Stock Agreement dated December 6, 1996 between the
Company and W.M. Barnes.
*10-c-7 Copy of Restricted Stock Agreement dated December 6, 1996 between the
Company and W.J. Calise, Jr.
*10-c-8 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and D.W. Decker.
*10-c-9 Copy of Restricted Stock Agreement dated December 3, 1997 between the
Company and Jodie K. Glore.
*10-c-10 Copy of resolution of the Compensation and Management Development
Committee of the Board of Directors of the Company, adopted December
3, 1997, amending the Company's 1995 Long-Term Incentives Plan.
*10-d-1 Copy of the Company's Directors Stock Plan, as amended, filed as
Exhibit B to the Company's Proxy Statement for its 1996 Annual Meeting
of Shareowners, is hereby incorporated by reference.
</TABLE>

- ---------
* Management contract or compensatory plan or arrangement.
51

<TABLE>
<S> <C>
*10-d-2 Form of Stock Option Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10-d to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1996, is hereby incorporated by
reference.
*10-d-3 Form of Restricted Stock Agreement under the Company's Directors Stock
Plan, filed as Exhibit 10-f to the Company's Quarterly Report on Form
10-Q for the quarter ended December 31, 1996, is hereby incorporated
by reference.
*10-d-4 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William H. Gray, III, filed as Exhibit 10-a to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-5 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and J. Clayburn La Force, Jr., filed as Exhibit 10-b to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-6 Copy of Restricted Stock Agreement dated February 7, 1996 between the
Company and William T. McCormick, Jr., filed as Exhibit 10-c to the
Company's Quarterly Report on Form 10-Q for the quarter ended March
31, 1996, is hereby incorporated by reference.
*10-d-7 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and Richard M. Bressler.
*10-d-8 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and John P. Nichols.
*10-d-9 Copy of Restricted Stock Agreement dated February 5, 1997 between the
Company and Joseph F. Toot, Jr.
*10-d-10 Copy of resolution of the Board of Directors of the Company, adopted
February 5, 1997, amending the Company's Directors Stock Plan.
*10-e-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, amending the Company's 1988 Long-Term Incentives
Plan and 1995 Long-Term Incentives Plan, filed as Exhibit 4-g-1 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
*10-e-2 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, adjusting outstanding awards under the Company's (i)
1979 Stock Plan for Key Employees, (ii) 1988 Long-Term Incentives
Plan, (iii) 1995 Long-Term Incentives Plan and (iv) Directors Stock
Plan, filed as Exhibit 4-g-2 to Registration Statement No. 333-17055,
is hereby incorporated by reference.
*10-e-3 Copy of resolution of the Board of Directors of the Company, adopted
September 3, 1997, adjusting outstanding awards under the Company's
(i) 1979 Stock Plan for Key Employees, (ii) 1988 Long-Term Incentives
Plan, (iii) 1995 Long-Term Incentives Plan and (iv) Directors Stock
Plan.
*10-f-1 Copy of the Company's Incentive Compensation Plan, amended and
restated as of July 1, 1997.
*10-g-1 Copy of the Company's Deferred Compensation Plan, as amended effective
as of October 1, 1992, filed as Exhibit 10-g-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1993, is hereby
incorporated by reference.
*10-h-1 Copy of resolution of the Board of Directors of the Company, adopted
November 6, 1996, authorizing the assignment of certain compensation
and employee benefit plans to New Rockwell International Corporation,
including the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers, filed as Exhibit 4-g-3 to
Registration Statement No. 333-17055, is hereby incorporated by
reference.
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* Management contract or compensatory plan or arrangement.
52

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*10-h-2 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's (i) 1979 Stock Plan for Key Employees, (ii)
1988 Long-Term Incentives Plan, (iii) 1995 Long-Term Incentives Plan,
(iv) Directors Stock Plan, (v) Incentive Compensation Plan, (vi)
Deferred Compensation Plan and (vii) Annual Incentive Compensation
Plan for Senior Executive Officers, filed as Exhibit 10-h-2 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1996, is hereby incorporated by reference.
*10-i-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 3, 1993, providing for the Company's Deferred Compensation
Policy for Non-Employee Directors, filed as Exhibit 10-h-1 to the
Company's Annual Report on Form 10-K for the year ended September 30,
1994, is hereby incorporated by reference.
*10-i-2 Copy of resolutions of the Compensation Committee of the Board of
Directors of the Company, adopted July 6, 1994, modifying the
Company's Deferred Compensation Policy for Non-Employee Directors,
filed as Exhibit 10-h-2 to the Company's Annual Report on Form 10-K
for the year ended September 30, 1994, is hereby incorporated by
reference.
*10-i-3 Copy of resolutions of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, providing for its
Deferred Compensation Policy for Non-Employee Directors, filed as
Exhibit 10-i-3 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1996, is hereby incorporated by reference.
*10-j-1 Copy of resolutions of the Board of Directors of the Company, adopted
November 2, 1994, providing for the Company's Retirement Policy for
Non-Employee Directors, filed as Exhibit 10-j-1 to the Company's
Annual Report on Form 10-K for the year ended September 30, 1994, is
hereby incorporated by reference.
*10-j-2 Copy of resolutions of the Board of Directors of the Company, adopted
December 6, 1995, rescinding the Company's Retirement Policy for
Non-Employee Directors (except to the extent applicable to Directors
then age 67 or older and former Directors then retired), filed as
Exhibit 10-j-2 to the Company's Annual Report on Form 10-K for the
year ended September 30, 1995, is hereby incorporated by reference.
*10-j-3 Copy of resolution of the Board of Directors of New Rockwell
International Corporation, adopted December 4, 1996, assuming and
adopting the Company's Retirement Policy for Non-Employee Directors
(applicable to Directors of the Company who were age 67 or older on
December 6, 1995 and former Directors then retired), filed as Exhibit
10-j-3 to the Company's Annual Report on Form 10-K for the year ended
September 30, 1996, is hereby incorporated by reference.
*10-k-1 Copy of the Company's Annual Incentive Compensation Plan for Senior
Executive Officers, filed as Exhibit A to the Company's Proxy
Statement for its 1996 Annual Meeting of Shareowners, is hereby
incorporated by reference.
*10-l-1 Restricted Stock Agreement dated December 6, 1995 between the Company
and Don H. Davis, Jr., filed as Exhibit 10-l-1 to the Company's Annual
Report on Form 10-K for the year ended September 30, 1995, is hereby
incorporated by reference.
*10-m-1 Copy of letter dated February 1, 1995 from the Company to Judith L.
Estrin, filed as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995, is hereby incorporated by
reference.
*10-n-1 Consulting Agreement dated as of November 25, 1997 between the Company
and Donald R. Beall.
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* Management contract or compensatory plan or arrangement.
53

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10-o-1 Agreement and Plan of Distribution dated as of December 6, 1996, among
Rockwell International Corporation (now named Boeing North American,
Inc.), the Company (formerly named New Rockwell International
Corporation), Allen-Bradley Company, Inc., Rockwell Collins, Inc.,
Rockwell Semiconductor Systems, Inc., Rockwell Light Vehicle Systems,
Inc. and Rockwell Heavy Vehicle Systems, Inc., filed as Exhibit 10-b
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, is hereby incorporated by reference.
10-o-2 Post-Closing Covenants Agreement dated as of December 6, 1996, among
Rockwell International Corporation (now named Boeing North American,
Inc.), The Boeing Company, Boeing NA, Inc. and the Company (formerly
named New Rockwell International Corporation), filed as Exhibit 10-c
to the Company's Quarterly Report on Form 10-Q for the quarter ended
December 31, 1996, is hereby incorporated by reference.
10-o-3 Tax Allocation Agreement dated as of December 6, 1996, among Rockwell
International Corporation (now named Boeing North American, Inc.), the
Company (formerly named New Rockwell International Corporation) and
The Boeing Company, filed as Exhibit 10-d to the Company's Quarterly
Report on Form 10-Q for the quarter ended December 31, 1996, is hereby
incorporated by reference.
10-p-1 Distribution Agreement dated as of September 30, 1997 by and between
the Company and Meritor Automotive, Inc., filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated October 10, 1997, is hereby
incorporated by reference.
10-p-2 Employee Matters Agreement dated as of September 30, 1997 by and
between the Company and Meritor Automotive, Inc., filed as Exhibit 2.2
to the Company's Current Report on Form 8-K dated October 10, 1997, is
hereby incorporated by reference.
10-p-3 Tax Allocation Agreement dated as of September 30, 1997 by and between
the Company and Meritor Automotive, Inc., filed as Exhibit 2.3 to the
Company's Current Report on Form 8-K dated October 10, 1997, is hereby
incorporated by reference.
11 Computation of Earnings Per Share for the Five Years Ended September
30, 1997.
12 Computation of Ratio of Earnings to Fixed Charges for the Five Years
Ended September 30, 1997.
21 List of Subsidiaries of the Company.
23 Independent Auditors' Consent.
24 Powers of Attorney authorizing certain persons to sign this Annual
Report on Form 10-K on behalf of certain directors and officers of the
Company.
27 Financial Data Schedule for this Annual Report on Form 10-K.
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* Management contract or compensatory plan or arrangement.

(b) Reports on Form 8-K.

No reports on Form 8-K were filed during the last quarter of the period
covered by this Report.