Rockwell Collins, Inc. (NYSE:COL) today reported fourth quarter
fiscal year 2016 earnings per share from continuing operations
increased 14% to $1.58, compared to $1.38 in the prior year. Total
sales for the fourth quarter of fiscal year 2016 were $1.45
billion, a 4% increase from the same period in fiscal year 2015.
Total segment operating margin for the fourth quarter increased 60
basis points to 22.6% and segment operating earnings increased 7%
to $326 million, compared to the same period in fiscal year
2015.
Fiscal year 2016 sales were $5.26 billion, compared to $5.24
billion in fiscal year 2015. Earnings per share from continuing
operations increased 6% to $5.50, compared to $5.19 in the prior
year. Cash provided by operating activities from continuing
operations totaled $723 million in fiscal year 2016, compared to
$749 million in fiscal year 2015. Free cash flow was $530 million
in fiscal year 2016, compared to $539 million in fiscal year
2015.
The Company announced financial guidance for its fiscal year
2017. This financial guidance is based on stand-alone expectations
for Rockwell Collins and does not contemplate the acquisition of
B/E Aerospace that was separately announced today. The Company
expects revenue between $5.3 billion and $5.4 billion and free cash
flow in the range of $600 million to $700 million. Total segment
operating margins in 2017 are expected to be about flat with 2016.
Integral to this guidance are the following assumptions for the
Company's reporting segments in comparison to fiscal year 2016:
- Government Systems sales are expected
to grow low-to-mid single-digits.
- Commercial Systems sales are expected
to be about flat.
- Information Management Services sales
are expected to be up mid-to-high single-digits.
"I'm pleased to report a strong quarter of operational
performance highlighted by double-digit earnings per share growth
and robust quarterly free cash flow generation," said Rockwell
Collins Chairman, President, and Chief Executive Officer, Kelly
Ortberg. “As we look to fiscal year 2017, we expect continued
recovery in Government Systems driven by an improved budget
environment. We also expect our Information Management Services
business will continue to grow as a result of the ongoing demand
for aircraft connectivity. Our Commercial Systems business is
expected to be flat as air transport OEM growth is being offset by
lower business jet sales and aftermarket parts recycling. We look
forward to completing the acquisition of B/E Aerospace which will
significantly enhance our long-term outlook.”
Following is a discussion of fiscal year 2016 fourth quarter
sales and earnings for each business segment.
Commercial Systems
Commercial Systems, which provides aviation electronics systems,
products and services to air transport, business and regional
aircraft manufacturers and airlines worldwide, achieved 2016 fourth
quarter results as summarized below.
(dollars in
millions)
Q4 FY16 Q4 FY15 Inc/(Dec) Commercial
Systems sales Original equipment $ 351 $ 372 (6 )% Aftermarket 251
251 — % Wide-body in-flight entertainment 8 13 (38 )%
Total Commercial Systems sales $ 610 $ 636 (4 )%
Operating earnings $ 130 $ 146 (11 )% Operating margin rate
21.3 % 23.0 %
- Original equipment sales decreased due
to lower business aircraft OEM production rates, unfavorable
customer timing for airline selectable equipment, and lower Airbus
A330 production rates. These decreases were partially offset by
higher product deliveries in support of the Airbus A350, Boeing
787, and Bombardier CSeries production rate increases, as well as
higher customer-funded development program revenues.
- Aftermarket sales were flat as higher
air transport entry-into-service spares sales were offset by lower
business jet cabin retrofit sales.
- Operating earnings and operating margin
decreased due to lower business jet sales, a $4 million charge
related to employee headcount reductions, and higher research and
development expense and amortization of pre-production engineering
costs. These unfavorable items were partially offset by cost
savings initiatives from previously announced restructuring
plans.
Government Systems
Government Systems provides a broad range of electronic
products, systems and services to customers including the U.S.
Department of Defense, other government agencies, civil agencies,
defense contractors and ministries of defense around the world.
Beginning with the first quarter of fiscal year 2016, Government
Systems sales categories have been consolidated as a result of an
internal reorganization and are delineated based on the underlying
product technologies. The previously reported sales categories of
Communication products, Surface solutions and Navigation products
are now primarily consolidated into Communication and navigation.
Government Systems sales for the fourth quarter of fiscal year 2015
have been reclassified to the current year presentation.
Results from the fourth quarter of 2016 are summarized
below.
(dollars in
millions)
Q4 FY16 Q4 FY15 Inc/(Dec) Government
Systems sales Avionics $ 457 $ 400 14 % Communication and
navigation 205 181 13 % Total Government Systems
sales $ 662 $ 581 14 % Operating earnings $
168 $ 129 30 % Operating margin rate 25.4 % 22.2 %
- Avionics sales increased due to higher
fixed-wing platform revenues, simulation and training program
sales, and sales from a classified program.
- Communication and navigation sales
increased due to higher ARC-210 product sales, data links sales,
and GPS-based product revenues, partially offset by the wind-down
of an international electronic warfare program and lower
international deliveries of targeting systems.
- Operating earnings and operating margin
increased primarily due to higher sales volume, cost savings from
previously announced restructuring plans, and lower company-funded
research and development expense. In addition, favorable
development program contract adjustments were offset by unfavorable
warranty adjustments.
Information Management Services
Information Management Services (IMS) provides communication
services, systems integration and security solutions across the
aviation, airport, rail and nuclear security markets. Results from
the fourth quarter of 2016 are summarized below.
(dollars in
millions)
Q4 FY16 Q4 FY15 Inc/(Dec)
Information Management Services sales $ 173 $ 167 4 %
Operating earnings $ 28 $ 29 (3 )% Operating margin rate 16.2 %
17.4 %
- IMS sales increased due to growth in
aviation related businesses and higher non-aviation related sales
due to the timing of nuclear security program revenues. These
increases were partially offset by certain favorable adjustments
recorded in the aviation related businesses in the prior year.
- IMS operating earnings and operating
margin decreased primarily due to certain favorable adjustments
recorded in the aviation related businesses in the prior year,
partially offset by higher earnings from the higher sales
volume.
Income Taxes
The Company's effective income tax rate from continuing
operations was 29.7% for the fourth quarter of fiscal year 2016
compared to a rate of 30.8% for the same period last year. The
lower current year effective income tax rate from continuing
operations was primarily due to differences in the availability of
the Federal R&D tax credit.
Cash Flow
Cash provided by operating activities from continuing operations
was $723 million in fiscal year 2016, compared to $749 million in
fiscal year 2015. The $26 million decrease was primarily due to
unfavorable net working capital changes, partially offset by lower
income tax payments.
The company paid a dividend on its common stock of 33 cents per
share, or $43 million, in the fourth quarter of 2016.
Fiscal Year 2017 Outlook
This financial guidance is based on stand-alone expectations for
Rockwell Collins in fiscal year 2017 and does not contemplate the
acquisition of B/E Aerospace that was separately announced
today:
--
Total sales $5.3 billion to $5.4 billion
--
Total segment operating margins About 21.0%
--
Free cash flow $600 million to $700 million (1)
--
Total research & development investment $900 million to $950
million (2)
--
Full year income tax rate 28% to 29%
(1) - The Company's free cash flow expectations assume the
Company will make a $55 million discretionary contribution to the
company’s qualified defined benefit pension plan, capital
expenditures will total about $200 million, and net pre-production
engineering costs capitalized in inventory is expected to increase
about $50 million in fiscal year 2017.
(2) - Total research and development investment consists of
company and customer funded research & development expenditures
as well as the net increase in pre-production engineering costs
capitalized within inventory.
Non-GAAP Financial Information
Total segment operating margin is a non-GAAP measure and is
reconciled to the related GAAP measure, Income from continuing
operations before income taxes, in the Segment Sales and Earnings
Information schedule in this press release. Total segment operating
margin is calculated as total segment operating earnings divided by
total sales. The non-GAAP total segment operating margin
information included in this disclosure is believed to be useful to
investors' understanding and assessment of the Company's ongoing
operations.
Free cash flow is a non-GAAP measure and is reconciled to the
related GAAP measure, Cash Provided by Operating Activities from
Continuing Operations below. Free cash flow is calculated as Cash
Provided by Operating Activities from Continuing Operations less
Property Additions. The non-GAAP free cash flow information
included in this disclosure is believed to be useful to investors'
understanding and assessment of the Company's ongoing
operations.
Year EndedSeptember 30 (dollars
in millions)
2016 2015 Cash Provided by
Operating Activities from Continuing Operations $ 723 $ 749 Less:
Property Additions (193 ) (210 ) Free Cash Flow $ 530 $ 539
Conference Call and Webcast Details
Separately today, Rockwell Collins announced the acquisition of
B/E Aerospace. Due to this pending transaction, both Rockwell
Collins and B/E Aerospace have canceled their previously scheduled
earnings conference calls and webcasts. Rockwell Collins and B/E
Aerospace executives will discuss the transaction during Rockwell
Collins’ earnings webcast now scheduled Monday, October 24th at
8:30 a.m. Eastern Time. Individuals may listen to the call and view
management's supporting slide presentation on the Internet at
www.rockwellcollins.com. Listeners are encouraged to go to the
Investor Relations portion of the web site at least 15 minutes
prior to the call to download and install any necessary software.
The call will be available for replay on the Internet at
www.rockwellcollins.com.
Business Highlights
Airbus survey ranks Rockwell Collins No. 1 for avionics
supplier supportRockwell Collins was named by Airbus as its top
supplier in the Supplier-Furnished Equipment category and received
an Excellent In-Service Performance award.
Rockwell Collins and the Defense Contract Management Agency
sign agreement to streamline procurement of commercial
itemsRockwell Collins and the Defense Contract Management
Agency signed a Memorandum of Agreement that establishes an
improved process for procurement of commercial items for military
application.
Boeing 777X to feature touchscreen flight displays from
Rockwell CollinsBoeing selected Rockwell Collins to provide its
industry-leading touchscreen flight displays for all five flight
deck displays on the new Boeing 777X. The advanced touchscreen
capability will make the flight deck more intuitive for pilots and
more efficient for flight operations.
Bombardier C Series first delivery marks airline debut of
Rockwell Collins’ Pro Line Fusion®Rockwell Collins’ Pro Line
Fusion® avionics made its airline debut following first delivery of
Bombardier’s C Series to Swiss International Air Lines. The
aircraft also features Rockwell Collins’ Primary Flight Control
Computer, industry-leading MultiScan™ weather radar with predictive
windshear and dual Head-Up Display.
Rockwell Collins named to the North American Dow Jones
Sustainability Index for 2016For the eighth year in a row,
Rockwell Collins was named to the North American Dow Jones
Sustainability Index. Rockwell Collins is one of four North
American Aerospace and Defense companies recognized on this year’s
index in the Capital Goods category.
Rockwell Collins’ advanced avionics and IFE selected for 44
Shenzhen Airlines Boeing 737sRockwell Collins was selected by
China-based Shenzhen Airlines to provide its full suite of advanced
avionics and PAVES™ Broadcast overhead In-Flight Entertainment
(IFE) on 44 new airplanes, including 37 Boeing 737 MAX and seven
Next-Generation Boeing 737 aircraft.
Rockwell Collins HGS™ and EVS certified on Legacy
450/500Rockwell Collins' HGS™-3500, the industry’s first
Head-up Guidance System (HGS™) developed for mid-size and light
business aircraft and multi-spectral EVS-3000 enhanced vision
system have been certified for the Embraer Legacy 450 and Legacy
500 executive jets-the first certification for both technologies.
The systems bring revolutionary flight deck technology to the
business aviation market segment that enhance pilot situational
awareness and increase safety.
Rockwell Collins’ customer Zetta Jet accepts delivery of
first Global 6000 aircraft enabled with global high speed cabin
connectivityThe high speed cabin connectivity experience of the
future is now one step closer for Zetta Jet customers with the
delivery of the company’s first Bombardier Global 6000 aircraft
enabled with Inmarsat’s Jet ConneX (JX). Rockwell Collins is the
service provider and a value added reseller of JX connectivity as
part of its ARINCDirect offering.
Rockwell Collins awarded production contract to modernize Air
Force, Navy and Army test rangesRockwell Collins was awarded a
$31 million contract from the U.S. Department of Defense to support
production of the Common Range Integrated Instrumentation System
across Air Force, Navy and Army test ranges. The award comes
shortly after the completion of a successful Production Readiness
Review.
China Eastern to upgrade 737 fleet with Rockwell Collins
Iridium® SATCOMRockwell Collins announced that China Eastern
Airlines selected its Iridium® SATCOM aftermarket solution for its
fleet of more than 100 Boeing 737 aircraft. Installations are
currently in progress.
Rockwell Collins awarded Coptersafety contract for helicopter
visual training systemsRockwell Collins will supply visual
systems, including image generators, databases, and projectors,
plus avionics and aircraft data to Coptersafety OY, an independent
helicopter training establishment located in Helsinki, Finland. The
systems will be used at Coptersafety’s new training facility at
Vantaa Airport.
Indira Gandhi International Airport selected Rockwell Collins
to provide first mobile common use check-in platform in
IndiaPassengers using Indira Gandhi International Airport (IGI)
can now check in faster due to the implementation of Rockwell
Collins’ new ARINC vMUSE™ mobile passenger processing solution.
IGI, India's busiest airport and the largest in South Asia, is the
first airport to implement ARINC vMUSE, which gives airlines the
ability to check in travelers wherever and whenever needed.
Rockwell Collins’ HGS™ to be offered on new Embraer E-Jet E2
aircraftRockwell Collins’ dual Head-Up Guidance System (HGS™)
was selected as an option on the upcoming Embraer E-Jet E2 aircraft
line, which includes the E175-E2, E190-E2 and E195-E2.
Mexican Navy selects Rockwell Collins to deliver
Transportable Blackhawk Operations SimulatorRockwell Collins
will deliver one Transportable Blackhawk Operations Simulator
(T-BOS) and associated services to the Mexican Navy in Veracruz,
Mexico, making this delivery the seventeenth T-BOS delivered to
domestic and international customers for the UH-60M Blackhawk
helicopter.
About Rockwell Collins
Rockwell Collins is a pioneer in the development and deployment
of innovative communication and aviation electronic solutions for
both commercial and government applications. Our expertise in
flight deck avionics, cabin electronics, mission communications,
simulation and training and information management services is
delivered by a global workforce, and a service and support network
that crosses more than 150 countries. To find out more, please
visit www.rockwellcollins.com.
Safe Harbor Statement
This press release contains statements, including statements
regarding certain projections, business trends, and the proposed
acquisition of B/E Aerospace 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 the financial condition of our customers and suppliers,
including bankruptcies; the health of the global economy, including
potential deterioration in economic and financial market
conditions; adjustments to the commercial OEM production rates and
the aftermarket; the impacts of natural disasters and pandemics,
including operational disruption, potential supply shortages and
other economic impacts; cybersecurity threats, including the
potential misappropriation of assets or sensitive information,
corruption of data or operational disruption; delays related to the
award of domestic and international contracts; delays in customer
programs, including new aircraft programs entering service later
than anticipated; the continued support for military transformation
and modernization programs; potential impact of volatility in oil
prices, currency exchange rates or interest rates on the commercial
aerospace industry or our business; the impact of terrorist events
on the commercial aerospace industry; changes in domestic and
foreign government spending, budgetary, procurement and trade
policies adverse to our businesses; market acceptance of our new
and existing technologies, products and services; reliability of
and customer satisfaction with our products and services; potential
unavailability of our mission-critical data and voice communication
networks; unfavorable outcomes on or potential cancellation or
restructuring of contracts, orders or program priorities by our
customers; recruitment and retention of qualified personnel;
regulatory restrictions on air travel due to environmental
concerns; effective negotiation of collective bargaining agreements
by us, our customers, and our suppliers; performance of our
customers and subcontractors; risks inherent in development and
fixed-price contracts, particularly the risk of cost overruns; risk
of significant reduction to air travel or aircraft capacity beyond
our forecasts; our ability to execute to internal performance plans
such as restructuring activities, productivity and quality
improvements and cost reduction initiatives; achievement of ARINC
integration and synergy plans as well as our other acquisition and
related integration plans; continuing to maintain our planned
effective tax rates; our ability to develop contract compliant
systems and products on schedule and within anticipated cost
estimates; risk of fines and penalties related to noncompliance
with laws and regulations including compliance requirements
associated with U.S. Government work, export control and
environmental regulations; risk of asset impairments; our ability
to win new business and convert those orders to sales within the
fiscal year in accordance with our annual operating plan; and the
uncertainties of the outcome of lawsuits, claims and legal
proceedings, risk that one or more closing conditions to the
acquisition of B/E Aerospace, including certain regulatory
approvals, may not be satisfied or waived, on a timely basis or
otherwise, including that a governmental entity may prohibit, delay
or refuse to grant approval for the consummation of the proposed
transaction, may require conditions, limitations or restrictions in
connection with such approvals or that the required approval by the
shareholders of each of B/E Aerospace and Rockwell Collins may not
be obtained; risk of unexpected costs, charges or expenses
resulting from the proposed acquisition of B/E Aerospace;
uncertainty of the expected financial performance of the combined
company following completion of the proposed acquisition of B/E
Aerospace; failure to realize the anticipated benefits of the
proposed acquisition of B/E Aerospace, including as a result of
delay in completing the proposed transaction or integrating the
businesses of Rockwell Collins and B/E Aerospace; risk to the
ability of the combined company to implement its business strategy;
risk of an occurrence of any event that could give rise to
termination of the merger agreement; risk that stockholder
litigation in connection with the proposed transaction may affect
the timing or occurrence of the contemplated merger or result in
significant costs of defense, indemnification and liability as well
as other risks and uncertainties, including but not limited to
those detailed herein and from time to time in our Securities and
Exchange Commission filings. These forward-looking statements are
made only as of the date hereof and the company assumes no
obligation to update any forward-looking statement.
No Offer or Solicitation
This communication is for informational purposes only and not
intended to and does not constitute an offer to subscribe for, buy
or sell, the solicitation of an offer to subscribe for, buy or sell
or an invitation to subscribe for, buy or sell any securities or
the solicitation of any vote or approval in any jurisdiction
pursuant to or in connection with the proposed transaction or
otherwise, nor shall there be any sale, issuance or transfer of
securities in any jurisdiction in contravention of applicable law.
No offer of securities shall be made except by means of a
prospectus meeting the requirements of Section 10 of the Securities
Act of 1933, as amended, and otherwise in accordance with
applicable law.
Additional Information and Where to Find It
In connection with the proposed transaction, Rockwell Collins
will prepare a registration statement on Form S-4 that will include
a joint proxy statement/prospectus (the “Joint Proxy
Statement/Prospectus”) for the stockholders of B/E Aerospace and
Rockwell Collins to be filed with the SEC, and each will mail the
Joint Proxy Statement/Prospectus to their respective stockholders
and file other documents regarding the proposed transaction with
the SEC. This communication is not a substitute for any proxy
statement, registration statement, proxy statement/prospectus or
other document Rockwell Collins and/or B/E Aerospace may file with
the SEC in connection with the proposed transaction. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ CAREFULLY AND IN THEIR ENTIRETY
THE JOINT PROXY STATEMENT/PROSPECTUS WHEN IT BECOMES AVAILABLE, ANY
AMENDMENTS OR SUPPLEMENTS TO THE JOINT PROXY STATEMENT/PROSPECTUS,
AND OTHER DOCUMENTS FILED BY ROCKWELL COLLINS OR B/E AEROSPACE WITH
THE SEC IN CONNECTION WITH THE PROPOSED TRANSACTION, BECAUSE THESE
DOCUMENTS WILL CONTAIN IMPORTANT INFORMATION. The Joint Proxy
Statement/Prospectus (when available) will be mailed to
stockholders of Rockwell Collins and B/E Aerospace. Investors and
security holders will be able to obtain free copies of Joint Proxy
Statement/Prospectus and other documents filed with the SEC by
Rockwell Collins and/or B/E Aerospace through the website
maintained by the SEC at www.sec.gov. Investors and security
holders will also be able to obtain free copies of the documents
filed by Rockwell Collins with the SEC on Rockwell Collins’
internet website at http://www.rockwellcollins.com or by contacting
Rockwell Collins’ Investor Relations at Rockwell Collins, 400
Collins Rd. NE, Cedar Rapids, IA 52498 or by calling (319)
295-7575. Investors and security holders will also be able to
obtain free copies of the documents filed by B/E Aerospace with the
SEC on B/E Aerospace’s internet website at
http://www.beaerospace.com or by contacting B/E Aerospace’s
Investor Relations at B/E Aerospace, Inc., 1400 Corporate Center
Way, Wellington, FL or by calling (561) 791-5000.
Participants in the Solicitation
Rockwell Collins, B/E Aerospace, their respective directors,
executive officers and other members of its management and
employees may be deemed to be participants in the solicitation of
proxies in connection with the proposed transaction. Information
regarding the persons who may, under the rules of the SEC, be
deemed participants in the solicitation of proxies in connection
with the proposed transaction, including a description of their
direct or indirect interests, by security holdings or otherwise,
will be set forth in the Joint Proxy Statement/Prospectus and other
relevant materials when it is filed with the SEC. Information
regarding the directors and executive officers of Rockwell Collins
is contained in Rockwell Collins’ proxy statement for its 2016
annual meeting of stockholders, filed with the SEC on December 16,
2015, and Rockwell Collins’ Current Report on Form 8-K filed with
the SEC on April 29, 2016. Information regarding the directors and
executive officers of B/E Aerospace is contained in B/E Aerospace’s
proxy statement for its 2016 annual meeting of stockholders, filed
with the SEC on April 28, 2016. These documents can be obtained
free of charge from the sources indicated above.
ROCKWELL COLLINS, INC.
SEGMENT SALES AND EARNINGS
INFORMATION
(Unaudited)
(in millions, except per share
amounts)
Three MonthsEndedSeptember 30
Year EndedSeptember 30 2016 2015 2016
2015
Sales Commercial Systems $ 610 $ 636 $ 2,395 $ 2,434
Government Systems 662 581 2,206 2,187 Information Management
Services 173 167 658 623 Total sales $
1,445 $ 1,384 $ 5,259 $ 5,244
Segment operating earnings Commercial Systems $ 130 $ 146 $
531 $ 554 Government Systems 168 129 477 457 Information Management
Services 28 29 107 95 Total segment
operating earnings 326 304 1,115 1,106 Interest expense (16
) (16 ) (64 ) (61 ) Stock-based compensation (6 ) (7 ) (27 ) (24 )
General corporate, net (8 ) (15 ) (44 ) (59 ) Restructuring and
asset impairment charges — — (45 ) —
Income
from continuing operations before income taxes 296 266 935 962
Income tax expense (88 ) (82 ) (208 ) (268 )
Income from
continuing operations 208 184 727 694 Income (loss) from
discontinued operations, net of taxes (1) — — 1
(8 )
Net income $ 208 $ 184 $ 728
$ 686
Diluted earnings (loss) per
share: Continuing operations $ 1.58 $ 1.38 $ 5.50 $ 5.19
Discontinued operations — — 0.01 (0.06 )
Diluted earnings per share $ 1.58 $ 1.38 $
5.51 $ 5.13
Weighted average diluted shares
outstanding 131.5 133.2 132.1 133.7
(1) On March 10, 2015, the Company sold its Aerospace Systems
Engineering and Support business (ASES), which provides military
aircraft integration and modification services. The results of ASES
have been classified as discontinued operations. During the twelve
months of 2016, the Company recorded $2 million of income from
discontinued operations ($1 million after-tax), primarily due to
the favorable settlement of a contractual matter with a customer of
the ASES business.
The following table summarizes sales by category for the three
and twelve months ended September 30, 2016 and 2015
(unaudited, in millions):
Three MonthsEndedSeptember 30
Year EndedSeptember 30 2016 2015 2016
2015 Commercial Systems sales: Air transport aviation electronics:
Original equipment $ 219 $ 209 $ 850 $ 806 Aftermarket 151 133 542
522 Wide-body in-flight entertainment 8 13 38
57 Total air transport aviation electronics 378 355
1,430 1,385 Business and regional aviation
electronics: Original equipment 132 163 534 640 Aftermarket 100
118 431 409 Total business and regional
aviation electronics 232 281 965 1,049 Total
Commercial Systems sales $ 610 $ 636 $ 2,395 $
2,434 Commercial Systems sales: Total original equipment $
351 $ 372 $ 1,384 $ 1,446 Total aftermarket 251 251 973 931
Wide-body in-flight entertainment 8 13 38 57
Total Commercial Systems sales $ 610 $ 636 $ 2,395
$ 2,434 Government Systems Sales: Avionics $ 457 $
400 $ 1,483 $ 1,436 Communication and navigation 205 181
723 751 Total Government Systems Sales $ 662 $
581 $ 2,206 $ 2,187 Information Management
Services sales $ 173 $ 167 $ 658 $ 623
Total sales $ 1,445 $ 1,384 $ 5,259 $ 5,244
The following table summarizes total Research and Development
Investment by segment and funding type for the three and twelve
months ended September 30, 2016 and 2015 (unaudited, dollars
in millions):
Three MonthsEndedSeptember 30
Year EndedSeptember 30 2016 2015 2016
2015
Research and Development Investment Customer-funded:
Commercial Systems $ 65 $ 56 $ 231 $ 187 Government Systems 97 89
381 382 Information Management Services 3 2 9
9 Total Customer-funded 165 147 621 578
Company-funded: Commercial Systems 46 44 143 182
Government Systems 23 26 79 88 Information Management Services (1)
1 1 2 2 Total Company-funded 70
71 224 272
Total Research and Development
Expense 235 218 845 850 Increase in Pre-production
Engineering Costs, Net 24 37 128 136
Total Research and Development Investment $ 259 $ 255
$ 973 $ 986 Percent of Total Sales 17.9
% 18.4 % 18.5 % 18.8 %
(1) Research and development expenses for the Information
Management Services segment do not include costs of internally
developed software and other costs associated with the expansion
and construction of network-related assets. These costs are
capitalized as Property on the Summary Balance Sheet.
ROCKWELL COLLINS, INC.
SUMMARY BALANCE SHEET
(Unaudited)
(in millions)
September 30 2016 2015
Assets Cash and
cash equivalents $ 340 $ 252 Receivables, net 1,094 1,038
Inventories, net (1) 1,939 1,824 Other current assets 117
110 Total current assets 3,490 3,224 Property 1,035
964 Goodwill 1,919 1,904 Intangible assets 667 703 Deferred income
taxes 219 165 Other assets 377 344
Total assets $
7,707 $ 7,304
Liabilities and equity
Short-term debt $ 740 $ 448 Accounts payable 527 487 Compensation
and benefits 269 273 Advance payments from customers 283 365
Accrued customer incentives 246 232 Product warranty costs 87 89
Other current liabilities 194 166 Total current liabilities
2,346 2,060 Long-term debt, net 1,382 1,680 Retirement
benefits 1,660 1,466 Other liabilities 235 218 Equity 2,084
1,880
Total liabilities and equity $ 7,707 $ 7,304
(1) Inventories, net is comprised of the following:
September 30,2016
September 30,2015
Inventories, net: Production inventory $ 799 $ 812
Pre-production engineering costs 1,140 1,012 Total
Inventories, net $ 1,939 $ 1,824
Pre-production engineering costs include costs incurred during
the development phase of a program in connection with long-term
supply arrangements that contain contractual guarantees for
reimbursement from customers. These costs are deferred in
Inventories, net to the extent of the contractual guarantees and
are amortized to customer-funded research and development expense
within cost of sales over their estimated useful lives using a
units-of-delivery method, up to 15 years.
ROCKWELL COLLINS, INC.
CASH FLOW INFORMATION
(Unaudited, in millions)
Year EndedSeptember 30 2016 2015 (1)
Operating Activities: Net income $ 728 $ 686 Income (loss)
from discontinued operations, net of tax 1 (8 ) Income from
continuing operations 727 694 Adjustments to arrive at cash
provided by operating activities: Depreciation 144 152 Amortization
of intangible assets and pre-production engineering costs 109 100
Stock-based compensation expense 27 24 Compensation and benefits
paid in common stock 59 50 Excess tax benefit from stock-based
compensation (2) — (13 ) Deferred income taxes 48 50 Pension plan
contributions (69 ) (69 ) Fair value of acquisition-related
contingent consideration 1 — Changes in assets and liabilities,
excluding effects of acquisitions and foreign currency adjustments:
Receivables (91 ) (46 ) Production inventory (18 ) (23 )
Pre-production engineering costs (177 ) (183 ) Accounts payable 38
(29 ) Compensation and benefits (4 ) 24 Advance payments from
customers (82 ) 16 Accrued customer incentives 14 30 Product
warranty costs (2 ) (14 ) Income taxes 25 50 Other assets and
liabilities (26 ) (64 )
Cash Provided by Operating Activities
from Continuing Operations 723 749
Investing
Activities: Property additions (193 ) (210 ) Acquisition of
businesses, net of cash acquired (17 ) (74 ) Other investing
activities 1 (10 )
Cash (Used for) Investing Activities
from Continuing Operations (209 ) (294 )
Financing
Activities: Purchases of treasury stock (261 ) (330 ) Cash
dividends (172 ) (167 ) Increase (decrease) in short-term
commercial paper borrowings, net (8 ) (56 ) Proceeds from the
exercise of stock options 21 49 Excess tax benefit from stock-based
compensation (2) — 13 Other financing activities (2 ) (1 )
Cash
(Used for) Financing Activities from Continuing Operations (422
) (492 ) Effect of exchange rate changes on cash and cash
equivalents (4 ) (23 )
Discontinued Operations: Operating
activities — (14 ) Investing activities — 3
Cash
(Used for) Discontinued Operations — (11 )
Net Change
in Cash and Cash Equivalents 88 (71 )
Cash and Cash
Equivalents at Beginning of Period 252 323
Cash and Cash Equivalents at End of Period $ 340 $
252
(1) On March 10, 2015, the Company sold its Aerospace Systems
Engineering and Support (ASES) business, which provides military
aircraft integration and modification services. The results of ASES
have been classified as discontinued operations.
(2) The Company adopted the new standard on accounting for
share-based payments during the three months ended March 31, 2016,
which requires excess tax benefits from stock-based compensation to
be classified within operating cash flow. The Company elected to
adopt the new standard prospectively as of the beginning of 2016,
therefore prior periods have not been adjusted.
View source
version on businesswire.com: http://www.businesswire.com/news/home/20161023005023/en/
Rockwell Collins, Inc.Media:Pam Tvrdy,
319-295-0591pam.tvrdy@rockwellcollins.comorInvestors:Ryan Miller,
319-295-7575investorrelations@rockwellcollins.com
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