NOTES TO FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2016 AND 2015
1. DESCRIPTION OF PLAN
This brief description of the Rockwell Collins Retirement Savings Plan (the Plan) is provided for general information purposes only. Participants should refer to the Plan document for more complete information.
General
– The Plan is a defined contribution plan sponsored by the Company. The Rockwell Collins Employee Benefit Plan Committee controls and manages the operation and administration of the Plan. The assets are held in custody with Fidelity Management Trust Company (the Trustee). The Employee Benefit Plan Committee of the Company selects the investment options available to participants. The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA).
Prior to December 31, 2015, Rockwell Collins, Inc. (the Company) maintained three defined contribution savings Plans in the U.S. for the benefit of its employees. These plans were the Rockwell Collins Retirement Savings Plan (legacy Savings Plan), the Rockwell Collins Retirement Savings Plan for Bargaining Unit Employees (legacy Union Plan) and the ARINC, Inc. Tax Deferred Savings Plan (legacy ARINC Plan). On December 31, 2015, the legacy Union and ARINC Plans merged into the legacy Savings Plan, and account balances of $439,326,982 were transferred.
As of December 31, 2015, the Plan is comprised of the following four sub-plans:
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|
•
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Salaried and Certain Hourly Employees (the Salaried sub-plan)
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|
|
•
|
Bargaining Unit Employees (the Bargaining Unit sub-plan)
|
|
|
•
|
IMS Non-Union Employees (the IMS Non-Union sub-plan)
|
|
|
•
|
IMS Union Employees (the IMS Union sub-plan)
|
Each sub-plan maintains its own existing requirements and qualifications, as described below.
Prior to December 31, 2015, the investment assets of the legacy Savings and Union Plans were held and administered by the Rockwell Collins Defined Contribution Master Trust (the Master Trust). Each of the participating plans had an interest in the net assets of the Master Trust and changes therein. The Master Trust provided segregated accounting for each plan and existed primarily to allow a single investment fund for the participants in the common stock of the Company at an administrative cost less than if each plan had a separate fund. The merger of the legacy Union and ARINC Plans into the Plan on December 31, 2015 eliminated the requirement for a Master Trust. The Master Trust was dissolved on December 31, 2015.
The Company acquired International Communications Group, Inc. (ICG) on August 6, 2015. ICG employees became eligible to participate in the Salaried sub-plan on January 1, 2016. Assets of $1,994,911 from the ICG Savings Plan were transferred into the Plan on March 28, 2016.
Eligibility
– All U.S.-based employees are eligible to participate in the Plan immediately upon hire, with the exception of high school interns.
Contributions
–
The Plan provides that eligible employees may contribute up to a maximum of 50 percent of eligible compensation, as defined for each sub-plan. Eligible participants may make pre-tax or after-tax contributions, up to Internal Revenue Code (IRC) specified limits. Pre-tax contributions by highly compensated participants are limited to 20 percent of the participant's eligible compensation for the Salaried and IMS Non-Union sub-plans and eight percent of the participant’s eligible compensation for the Bargaining Unit and IMS Union sub-plans. Participants age 50 and over are allowed to contribute an additional amount as pre-tax catch-up contributions, as specified in the IRC.
Company matching contributions are calculated each pay period. Company matching contributions for the Salaried sub-plan are equal to 62.5 percent of the first eight percent of eligible compensation contributed by participants. Company matching contributions for the IMS Non-Union sub-plan are equal to 100 percent of the first six percent of eligible compensation contributed by participants. Company matching contributions for the Bargaining Unit sub-plan are equal to 50 percent of the first six percent of eligible compensation contributed by participants. Participants in the IMS Union sub-plan are not eligible for Company matching contributions. Company matching contributions are not made on the catch-up contributions discussed above.
Participant contributions are allocated according to the investment fund elections of the participant, while Company matching contributions are made to the Rockwell Collins Stock Fund. Participants may elect to transfer all or a portion of their balances in the Rockwell Collins Stock Fund to any of the available investment funds at any time.
Newly eligible employees are automatically enrolled at a six percent contribution rate in the Salaried and IMS Non-Union sub-plans and at a one percent pre-tax contribution rate in the Bargaining Unit sub-plan. Newly eligible IMS Union employees are not automatically enrolled in the IMS Union sub-plan.
Employees in the Salaried and IMS Non-Union sub-plans with hire dates after January 1, 2016 contributing less than ten percent who have been automatically enrolled in the Plan will have their contribution rates increased by one percent each year on the anniversary of their eligibility unless they opt out of the annual increase program. Each May, employees contributing less than six percent to the Bargaining Unit sub-plan will have their contribution rates increased by one percent each year unless they opt out of the annual increase program. The IMS Union sub-plan does not automatically increase contribution percentages.
For those participants who do not select an investment option, their contributions are invested in the default fund, which is the State Street Target Retirement Fund closest to the date the participant turns age 65. Participants may elect to change their contribution rate or transfer all or a portion of their balances to any of the available investment funds at any time.
Salaried sub-plan eligible employees receive Company retirement contributions each pay period, which are invested in the same investment funds and the same allocations as the participant's contributions to the Salaried sub-plan. Company retirement contributions are calculated as a percentage of retirement contribution eligible compensation, based on points corresponding to age plus years and months of credited service as follows:
|
|
|
Points
|
Contribution %
|
0-34
|
0.5%
|
35-44
|
1.0%
|
45-54
|
2.0%
|
55-64
|
3.5%
|
65-74
|
5.0%
|
75 & over
|
6.0%
|
A Bargaining Unit sub-plan agreement was reached in May 2013 between the Company and the International Brotherhood of Electrical Workers locals 1362 and 1634, the International Union of Electric, Electrical, Salaried, Machine and Furniture Workers - Communications Workers of America local 86787. The contract covers a five year period from May 4, 2013 through May 4, 2018.
Participant Accounts
– Individual accounts are maintained for each participant. Each participant’s account is increased for participant and Company contributions and an allocation of Plan earnings. Each participant’s account is decreased for withdrawals, participant transaction fees, record keeping fees and an allocation of Plan losses. Allocations are based on participant earnings or account balances, as defined by the respective sub-plan documents. The benefit amount to which a participant is entitled is the vested balance in the participant’s account.
Voting rights are extended to participants in proportion to their interest in the Rockwell Collins Stock Fund. Participants’ accounts are charged or credited, as the case may be, with the number of units properly attributable to each participant.
Investments
– Participants may elect to have their contributions made to any of the investment funds in the Plan in one percent increments. Participants may change such investment elections on a daily basis. If a participant does not have an investment election on file, employee contributions and Company retirement contributions are invested in the Plan's default fund.
Investment options available to participants include various mutual funds, collective trust funds, the Rockwell Collins Small Mid (SMID) Cap Value Fund, the Rockwell Collins Stable Value Fund and the Rockwell Collins Stock Fund:
Rockwell Collins SMID Cap Value Fund
–
The Rockwell Collins SMID Cap Value Fund
is stated at fair value based on the underlying common stock investments, which are valued at the closing price reported on the active market on which the stock is traded on the last business day of the Plan year, and also includes cash.
Rockwell Collins Stable Value Fund
–
see
Note 4, Rockwell Collins Stable Value Fund,
for details.
Rockwell Collins Stock Fund
– The Rockwell Collins Stock Fund invests principally in the common stock of the Company and holds cash or liquid short-term investments to allow participants to buy or sell units in the fund without
the usual trade period for stock transactions. Typically, the Rockwell Collins Stock Fund holds one percent of its value in cash or liquid short-term investments. Participants may elect to transfer all or a portion of their balances in the Rockwell Collins Stock Fund to any of the various fund alternatives at any time.
The Plan has a payment option related to the investments in Company stock to reflect an Employee Stock Ownership Plan (ESOP) feature as defined by the IRC. This option allows the participants whose accounts hold shares in the Rockwell Collins Stock Fund to either receive the dividends paid on these shares in cash as taxable compensation, or to have the dividends reinvested in the Plan with taxes deferred. Dividend payments are automatically reinvested in the Plan unless the participant elects to receive the dividend as a taxable cash payment. Participants may change this election at any time.
Vesting
– Each participant is fully vested at all times in the portion of the participant’s account that relates to participant contributions and earnings thereon.
Salaried and Bargaining Unit Sub-Plans
– Vesting in the Company contribution portion of participant accounts, plus actual earnings thereon, is based on years of vesting service, as defined in the respective plan documents. Generally, a participant is 100 percent vested after three years of vesting service, or when the participant reaches age 55 while employed by the Company.
IMS Sub-Plans –
IMS Non-Union sub-plan participants with Company matching contributions will vest according to the following schedule:
|
|
|
|
Years of Service
|
Vesting Percentage
|
|
Less than one
|
0
|
%
|
One but less than two
|
20
|
%
|
Two but less than three
|
40
|
%
|
Three but less than four
|
60
|
%
|
Four but less than five
|
80
|
%
|
Five or more
|
100
|
%
|
A participant will also become 100 percent vested in Company matching contributions if the participant attains age 55 while still an active employee of the Company, is on continuous layoff status for at least 30 days, incurs a disability while employed by the Company, works for a Rockwell Collins division or affiliated company at the time of its divestiture or dies while actively employed by the Company, including while performing qualified military service.
Notes Receivable from Participants
– Notes may be obtained from the balance of a participant’s account in amounts not less than $1,000 and not greater than the lesser of $50,000, reduced by the participant’s highest outstanding note receivable balance during the 12-month period before the date of the note, or 50 percent of the participant’s vested account balance, less any outstanding notes. Participants may have one outstanding note at a time. Notes are collateralized by the remaining balance in the participant’s account. Interest is charged at a rate equal to the prime rate plus one percent on the last day of the month before the note is requested. Note repayments of principal and interest are collected through payroll deductions over terms of 12, 24, 36, 48 or 60 months, or up to 120 months for the purchase of a primary residence. Payments of principal and interest are credited to the participant’s account. Notes may be paid in full at any time.
Prior to January 1, 2016, participants in the Salaried and Bargaining Unit sub-plans could have two outstanding notes. Participants with two outstanding notes on December 31, 2015 are grandfathered under the plan’s old provisions until the notes are paid in full.
Note defaults occur when a participant, who is no longer an active employee, defaults on a note or receives an actual distribution that was offset by the note amount. These are classified as distributions from the Plan.
Rollovers
– Participants may contribute amounts representing distributions from other qualified defined benefit or defined contribution plans.
Payment of Benefits
– Payment of benefits for lump sum distributions or non-hardship withdrawals may be received in Company stock or in cash. Payment of benefits for installments or hardship withdrawals must be received in cash.
Active participants may withdraw certain amounts from their account. The funds available for participants under age 59-1/2 are funds in after-tax, rollover, ESOP dividend and Company matching sources. Participants may also withdraw pre-tax sources if
they meet the requirements for a hardship withdrawal. At age 59-1/2 all vested sources may be withdrawn. Participant vested amounts are payable upon retirement, death or termination of employment.
Upon retirement or termination at or after age 55, participants may elect to receive the vested portion of their account balance (employee and Company contributions) in the form of a lump sum or in monthly or annual installment payments for up to 10 years, subject to the distribution rules of the IRC, or the balance may remain in the Plan without further contributions.
Upon termination of employment prior to reaching age 55, participants may receive the vested portion of their account balance (employee and Company contributions) in the form of a lump sum, subject to the distribution rules of the IRC, or the balance may remain in the Plan without further contributions.
Forfeited Accounts
– The non-vested portion of a participant’s account is forfeited when certain terminations described in the respective sub-plan documents occur. Forfeitures remain in the Plan and are used to reduce the Company’s contributions to the Plan or to pay administrative expenses of the Plan. The Plan contains specific break-in-service provisions that enable a participant’s account to be restored upon re-employment and fulfillment of certain requirements. At December 31, 2016 and 2015, forfeited non-vested accounts in the Plan totaled $198,214 and $38,365, respectively. During the years ended December 31, 2016 and 2015, Company contributions in the Plan were reduced by $1,413,142 and $2,490,871, respectively, from forfeited non-vested accounts.
Plan Termination
– Although the Company has not expressed any intent to terminate the Plan, the Company has the authority, subject to any applicable collective bargaining agreement, to terminate or modify the Plan, or suspend contributions to the Plan, in accordance with ERISA. In the event that the Plan is terminated, each participant’s account will be fully vested. Benefits under the Plan will be provided solely from Plan assets.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
– The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.
Use of Estimates
– The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein and disclosure of contingent assets and liabilities. Actual results could differ from those estimates.
Risks and Uncertainties
– The Plan utilizes various investment instruments. Investment securities, in general, are exposed to various risks, such as interest rate, credit and overall market volatility. Due to the level of risk associated with certain investment securities, it is reasonably possible that changes in the values of investment securities may occur and that such changes could materially affect the value of the participants' account balances and the amounts reported in the financial statements.
Investment Valuation and Income Recognition
– Plan investments are stated at fair value. Fair value of a financial instrument is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date.
Shares of mutual funds are valued at the closing price reported on the active market on which the mutual funds are traded on the last business day of the Plan year, which represents the net asset value of shares held by the Plan at year end.
The Rockwell Collins Stock Fund is stated at fair value based on the underlying Company common stock, which is valued at the closing price reported on the active market on which the stock is traded on the last business day of the Plan year, and also includes cash and money market accounts.
The fair values of collective trusts (excluding collective trusts in the Rockwell Collins Stable Value Fund) are based on net asset values (NAVs). The NAVs, as obtained from the audited financial statements of the collective trusts at year end, are used as a practical expedient to estimate fair value. Each NAV is based on underlying investments held by each collective trust. The strategy of the funds is to approximate as closely as possible, the performance of a custom benchmark index over the long term, before expenses, while providing participants the ability to purchase and redeem units on an "as of" basis. As of December 31, 2016 and 2015, the funds had a fair value of $1,051,334,435 and $984,012,426, respectively, and an unfunded commitment of $0. Funds may be redeemed immediately and no other redemption restrictions exist for these funds.
Purchases and sales of securities are recorded on a trade-date basis. Interest income is recorded as earned. Dividends are recorded on the ex-dividend date. Net appreciation includes the Plan's gains and losses on investments bought and sold, as well as held, during the year.
Management fees and operating expenses charged to the Plan for investments are deducted from income earned on a daily basis and are not separately reflected. Consequently, management fees and operating expenses are reflected as a reduction of investment return for such investments.
New Accounting Pronouncements —
In May 2015, the Financial Accounting Standards Board (FASB) issued
Accounting Standard Update (“ASU”) No. 2015-07, Fair Value Measurement (Topic 820): Disclosures for Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent)
, which eliminates the requirement to categorize investments measured using the NAV practical expedient in the fair value hierarchy table. Entities are required to disclose the fair value of investments measured using the NAV practical expedient so that financial statement users can reconcile amounts reported in the fair value hierarchy table to amounts reported on the balance sheet. The new guidance was adopted in 2016 and applied retrospectively. The Plan's adoption of this standard is reflected in
Note 2, Summary of Significant Accounting Policies
and
Note 5, Fair Value Measurements
.
In July 2015, the FASB issued
ASU 2015-12, Plan Accounting: Defined Benefit Pension Plans (Topic 960), Defined Contribution Pension Plans (Topic 962), Health and Welfare Benefit Plans (Topic 965): (Part I) Fully Benefit- Responsive Investment Contracts, (Part II) Plan Investment Disclosures, (Part III) Measurement Date Practical Expedient
, which simplifies the required disclosures related to employee benefit plans. Part I eliminates the requirement to measure and disclose the fair value of fully benefit-responsive investment contracts. Contract value is the only required measure for fully benefit-responsive investment contracts. Part I has been adopted by the Plan as of January 1, 2016 and is reflected in the
Statement of Net Assets
and
Note 5, Fair Value Measurements
.
Part II eliminates the requirement to disclose individual investments which comprise 5% or more of total net assets available for benefits, as well as the net appreciation or depreciation of fair values by type. Part II also requires plans to continue to disaggregate investments that are measured using fair value by general type; however, plans are no longer required to also disaggregate investments by nature, characteristics and risks. Furthermore, the disclosure of information about fair value measurements shall be provided by general type of plan asset. Part II has been adopted by the Plan as of January 1, 2016 and is reflected in
Note 5, Fair Value Measurements
. Part III allows plans to measure investments using values from the end of the calendar month closest to the plan’s fiscal year end. Part III is not applicable to the Plan.
Notes Receivable from Participants
– Notes receivable from participants are measured at their unpaid principal balance plus any accrued but unpaid interest. No allowance for credit losses has been recorded as of December 31, 2016 or 2015.
Administrative Expenses
– Administrative expenses of the Plan are paid by the Plan, through credits from the recordkeeper for Plan investments and through quarterly fees charged to participants. Participants pay administrative costs for loan fees, overnight fees, withdrawal fees, qualified domestic relation orders and investment advisory services.
Payment of Benefits
– Benefit payments are recorded when paid. Payment requests received before the market closes on December 31 of the respective year are processed and paid on the date requested. Payment requests received after the market closes are considered to be received on the next business day. Therefore, there were no participants who had elected to withdraw from the Plan but were not paid by December 31, 2016 and 2015.
Excess Contributions Payable
– The Plan is required to return contributions received during the Plan year in excess of the IRC limits. There were no excess contributions payable during the plan years ended December 31, 2016 or 2015.
Subsequent Events
– The Plan has assessed subsequent events through June 27, 2017, the date the annual Plan report was filed with the Securities and Exchange Commission.
On January 1, 2017, the following changes took place within the Plan:
|
|
•
|
Participants in the IMS Non-Union sub-plan became participants in the Salaried sub-plan with the same definition of eligible compensation and other provisions of the Salaried sub-plan.
|
|
|
•
|
Company matching contributions prior to January 1, 2017 for IMS Non-Union participants who transferred to the Salaried sub-plan will be 20% vested after completing one year of vesting service, 40% vested after completing two years of vesting service and 100% vested after completing three years of vesting service. Company matching contributions after December 31, 2016 will be 100% vested only after completing three years of vesting service.
|
|
|
•
|
IMS Non-Union participants who transferred to the Salaried sub-plan will receive Company retirement contributions on earnings after December 31, 2016.
|
3. DEFINED CONTRIBUTION MASTER TRUST
Until December 31, 2015, assets of the legacy Savings and Union Plans, with the exception of the notes receivable from participants, were held in the Master Trust account by the Trustee. The Master Trust was dissolved on December 31, 2015, upon the merger of the legacy Union and ARINC Plans into the legacy Savings Plan. Net assets of the Master Trust were $0 at December 31, 2015.
Each of the participating plans had an interest in the net assets of the Master Trust and changes therein. The Trustee maintained supporting records for the purpose of allocating the net assets and net gain or loss of the investment accounts to each of the participating plans.
The Master Trust investments were valued at fair value at the end of each day.
The net earnings or loss of the accounts for each day were allocated by the Trustee to each participating plan's investment funds based on the relationship of the interest of each plan to the total of the interests of all participating plans. In 2015, the Plan interest in net investment income of the Rockwell Collins Defined Contribution Master Trust included $60,517,232 of interest and dividends.
4. ROCKWELL COLLINS STABLE VALUE FUND
The values of the assets held in the Rockwell Collins Stable Value Fund are represented at contract value. Each investment contract held in the fund is fully benefit-responsive for participant-initiated transactions. The underlying investments include:
|
|
•
|
Constant duration synthetic GIC investment contracts (GICs) that “wrap” underlying units of bank collective trusts. The bank collective trusts invest in high quality fixed income securities that are managed to closely match the characteristics and performance of certain fixed income indices. There are no known commitments or restrictions on the collective trusts. The Plan Sponsor has no plans to liquidate these funds. Each constant duration synthetic GIC investment contract has a contract value interest crediting rate that is reset each quarter, based on a pre-determined formula.
|
|
|
•
|
Fixed maturity synthetic GICs that “wrap” high quality fixed income assets that are intended to be held to their stated maturity. Each fixed maturity synthetic GIC investment contract has a contract value interest crediting rate that is reset each quarter, based on a pre-determined formula.
|
As of December 31, 2016 and 2015, the Rockwell Collins Stable Value Fund had a contract value of $274,219,760 and $255,645,858, respectively, and an unfunded commitment of $0. No events are probable of occurring that might limit the ability of the Plan to transact at contract value with the contract issuers and that also limit the ability of the Plan to transact at contract value with the participants.
5. FAIR VALUE MEASUREMENTS
The FASB’s standard related to fair value measurements defines fair value, establishes a framework for measuring fair value and expands the related disclosure requirements. The standard indicates, among other things, that a fair value measurement assumes that the transaction to sell an asset or transfer a liability occurs in the principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability. The standard established a valuation hierarchy for disclosure of the inputs to valuation techniques used to measure fair value. This hierarchy prioritizes the inputs into three broad levels as follows:
Level 1 - quoted prices (unadjusted) in active markets for identical assets or liabilities
Level 2 - quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument
Level 3 - unobservable inputs based on the Plan's own assumptions used to measure assets and liabilities at fair value
Asset Valuation Techniques -
Shares of mutual funds held are categorized as Level 1. They are valued at closing quoted market prices on the active market on which the mutual funds are traded on the last business day of the Plan year.
Shares of the Rockwell Collins Stock Fund are categorized as Level 1. They are valued based on the underlying Company common stock, which is valued at closing quoted market prices on the active market on which the stock is traded on the last business day of the Plan year. The interest-bearing cash underlying investment is categorized as Level 2.
The Rockwell Collins SMID Cap Value Fund is valued at the fair market value of its underlying investments. The common stock underlying investments are categorized as Level 1 and are valued at closing quoted market prices on the active market on which the stock is traded on the last business day of the Plan year. The interest-bearing cash underlying investment is categorized as Level 2.
Collective trust investments are measured at net asset value. See
Note 2, Summary of Significant Accounting Policies
for more information about these investments and the new accounting standard that removes them from classification within the fair value hierarchy.
A financial asset's or liability’s classification within the hierarchy is determined based on the lowest level input that is significant to the fair value measurement. The fair value of the Plan assets as of December 31, 2016 and 2015 was as follows:
Fair Value Measurements
at December 31, 2016, using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant other
|
|
Significant
|
|
|
|
|
|
Quoted prices in
|
|
observable
|
|
unobservable
|
|
NAV as a
|
|
|
|
active markets
|
|
inputs
|
|
inputs
|
|
practical
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
expedient
|
|
Total
|
Mutual funds
|
$
|
1,468,017,974
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
1,468,017,974
|
|
Rockwell Collins Stock Fund
|
|
|
|
|
|
|
|
|
|
Common stock
|
481,232,816
|
|
|
—
|
|
|
—
|
|
|
|
|
481,232,816
|
|
Interest-bearing cash
|
—
|
|
|
3,636,520
|
|
|
—
|
|
|
|
|
3,636,520
|
|
Rockwell Collins SMID Cap Value Fund
|
|
|
|
|
|
|
|
|
|
Common stock
|
154,058,631
|
|
|
—
|
|
|
—
|
|
|
|
|
154,058,631
|
|
Interest-bearing cash
|
—
|
|
|
15,169,670
|
|
|
—
|
|
|
|
|
15,169,670
|
|
Total assets in the fair value hierarchy
|
$
|
2,103,309,421
|
|
|
$
|
18,806,190
|
|
|
$
|
—
|
|
|
|
|
$
|
2,122,115,611
|
|
Investments measured at net asset value
|
|
|
|
|
|
|
1,051,334,435
|
|
|
1,051,334,435
|
|
Investments at fair value
|
$
|
2,103,309,421
|
|
|
$
|
18,806,190
|
|
|
$
|
—
|
|
|
$
|
1,051,334,435
|
|
|
$
|
3,173,450,046
|
|
Fair Value Measurements
at December 31, 2015, using
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Significant other
|
|
Significant
|
|
|
|
|
|
Quoted prices in
|
|
observable
|
|
unobservable
|
|
NAV as a
|
|
|
|
active markets
|
|
inputs
|
|
inputs
|
|
practical
|
|
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
expedient
|
|
Total
|
Mutual funds
|
$
|
1,350,991,373
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
|
|
$
|
1,350,991,373
|
|
Rockwell Collins Stock Fund
|
|
|
|
|
|
|
|
|
|
Common stock
|
490,510,059
|
|
|
—
|
|
|
—
|
|
|
|
|
490,510,059
|
|
Interest-bearing cash
|
—
|
|
|
3,453,675
|
|
|
—
|
|
|
|
|
3,453,675
|
|
Rockwell Collins SMID Cap Value Fund
|
|
|
|
|
|
|
|
|
|
Common stock
|
149,280,883
|
|
|
—
|
|
|
—
|
|
|
|
|
149,280,883
|
|
Interest-bearing cash
|
—
|
|
|
12,921,036
|
|
|
—
|
|
|
|
|
12,921,036
|
|
Total assets in the fair value hierarchy
|
$
|
1,990,782,315
|
|
|
$
|
16,374,711
|
|
|
$
|
—
|
|
|
|
|
$
|
2,007,157,026
|
|
Investments measured at net asset value
|
|
|
|
|
|
|
984,012,426
|
|
|
984,012,426
|
|
Investments at fair value
|
$
|
1,990,782,315
|
|
|
$
|
16,374,711
|
|
|
$
|
—
|
|
|
$
|
984,012,426
|
|
|
$
|
2,991,169,452
|
|
The availability of observable market data is monitored to assess the appropriate classification of financial instruments within the fair value hierarchy. Changes in economic conditions or model-based valuation techniques may require the transfer of financial instruments from one fair value level to another. In such instances, the transfer is reported at the beginning of the reporting period. We evaluate the significance of transfers between levels based upon the nature of the financial instrument and size of the transfer relative to total net assets available for benefits. There were no investments held by the Plan or the Master Trust that changed levels during the years ended December 31, 2016 and 2015, respectively.
6. FEDERAL INCOME TAX STATUS
The Internal Revenue Service (the IRS) has determined and informed the Company by a letter dated November 17, 2014, that the Plan and related trust are designed in accordance with the applicable sections of the IRC. A new determination letter request was submitted to the IRS on February 1, 2016, and is still under review. On May 27, 2016, the Company filed an application (the Application) for the Plan, for a compliance statement from the IRS under the Voluntary Correction Program (VCP), with respect to certain operational errors discovered by the Company. The Application is still under review by the IRS. The Company believes that the Plan is currently designed and being operated in compliance with the applicable requirements of the IRC and the Plan's trust is currently tax-exempt. As a result, no provision for income taxes has been included in the Plan's financial statements.
Accounting principles generally accepted in the United States of America require Plan management to evaluate tax positions taken by the Plan and recognize a tax liability (or asset) if the Plan has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The Plan Administrator has analyzed the tax positions taken by the Plan, and has concluded that as of December 31, 2016, there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Plan is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress.
7. EXEMPT PARTY-IN-INTEREST TRANSACTIONS
At December 31, 2016, the Plan held Company common stock with a market value of $484,869,336. At December 31, 2015, the Master Trust held Company common stock with a market value of $493,963,734. During the year ended December 31, 2016, the Plan recorded dividend income from the Company of $6,980,953. During the year ended December 31, 2015, the Master Trust recorded dividend income from the Company of $6,871,734.
Certain Plan investments were managed by the Trustee and these transactions qualify as exempt party-in-interest transactions. Fees paid by the Plan for investment management services are included as a reduction of the return earned on each investment fund.
8. RECONCILIATION OF FINANCIAL STATEMENTS TO FORM 5500
For the year ended December 31, 2016, the following is a reconciliation of the decrease in net assets per the financial statements to the Form 5500:
|
|
|
|
|
|
2016
|
Investment income per the financial statements
|
$
|
227,491,467
|
|
Adjustment from contract value to fair value for fully benefit-responsive stable value fund, current year
|
—
|
|
Adjustment from contract value to fair value for fully benefit-responsive stable value fund, prior year
|
(279,755
|
)
|
Investment income per the Form 5500
|
$
|
227,211,712
|
|
The following is a reconciliation of net assets available for benefits per the financial statements to the Form 5500 as of December 31, 2015:
|
|
|
|
|
|
2015
|
Net assets available for benefits per the financial statements
|
$
|
3,289,591,375
|
|
Adjustment from contract value to fair value for fully benefit-responsive stable value fund
|
279,755
|
|
Net assets per the Form 5500
|
$
|
3,289,871,130
|
|
ROCKWELL COLLINS RETIREMENT SAVINGS PLAN
EIN#: 52-2314475, PLAN #: 002
FORM 5500, SCHEDULE H, PART IV, LINE 4i
SCHEDULE OF ASSETS (HELD AT END OF YEAR) AS OF DECEMBER 31, 2016
|
|
|
|
|
Identity of Issue
|
Description of Investment
|
Current Value
|
|
Fidelity Capital & Income *
|
Mutual fund
|
89,490,835
|
|
Fidelity Strategic Real Return *
|
Mutual fund
|
10,727,704
|
|
Fidelity Extended Market Index Fund Premium Class *
|
Mutual fund
|
71,248,921
|
|
Vanguard FTSE All-World
|
Mutual fund
|
51,824,756
|
|
Loomis Small-Cap Growth N
|
Mutual fund
|
105,899,718
|
|
Vanguard Institutional Index Plus
|
Mutual fund
|
321,324,577
|
|
Vanguard Prime-Cap Admiral
|
Mutual fund
|
347,996,649
|
|
MFS International Value R6
|
Mutual fund
|
117,468,293
|
|
MFS Value R6
|
Mutual fund
|
121,580,531
|
|
Vanguard Total BD Market Index
|
Mutual fund
|
230,455,990
|
|
Fidelity Diversified International *
|
Collective trust
|
60,260,061
|
|
Fidelity Blue Chip Growth *
|
Collective trust
|
117,807,509
|
|
Fidelity Mid-Cap *
|
Collective trust
|
170,148,117
|
|
State Street Target Retirement 2060
|
Collective trust
|
796,536
|
|
State Street Target Retirement Income
|
Collective trust
|
25,666,454
|
|
State Street Target Retirement 2015
|
Collective trust
|
42,464,517
|
|
State Street Target Retirement 2020
|
Collective trust
|
130,395,307
|
|
State Street Target Retirement 2025
|
Collective trust
|
136,343,151
|
|
State Street Target Retirement 2030
|
Collective trust
|
134,158,036
|
|
State Street Target Retirement 2035
|
Collective trust
|
70,149,527
|
|
State Street Target Retirement 2040
|
Collective trust
|
74,015,591
|
|
State Street Target Retirement 2045
|
Collective trust
|
40,840,707
|
|
State Street Target Retirement 2050
|
Collective trust
|
38,954,249
|
|
State Street Target Retirement 2055
|
Collective trust
|
9,334,673
|
|
Rockwell Collins SMID Cap Value Fund:
|
|
|
Aaron's, Inc.
|
Common stock
|
4,039,020
|
|
Aircastle Ltd.
|
Common stock
|
1,236,092
|
|
Anixter International, Inc.
|
Common stock
|
859,049
|
|
Avis Budget Group, Inc.
|
Common stock
|
1,548,410
|
|
Axalta Coating Systems Ltd.
|
Common stock
|
4,161,981
|
|
B&G Foods, Inc.
|
Common stock
|
3,338,962
|
|
BankUnited, Inc.
|
Common stock
|
4,715,810
|
|
BOK Financial Corp.
|
Common stock
|
3,470,325
|
|
Borgwarner, Inc.
|
Common stock
|
4,076,282
|
|
Boston Scientific Corp.
|
Common stock
|
3,589,023
|
|
Broadridge Financial Solutions, Inc.
|
Common stock
|
795,534
|
|
Brown & Brown, Inc.
|
Common stock
|
2,671,637
|
|
Cimarex Energy Co.
|
Common stock
|
5,813,123
|
|
Colfax Corp.
|
Common stock
|
2,459,876
|
|
Colony Capital, Inc. (Cl A)
|
Common stock
|
1,365,275
|
|
CommScope Holding Co., Inc.
|
Common stock
|
2,836,388
|
|
Coty, Inc. (CI A)
|
Common stock
|
1,526,962
|
|
(Continued on next page)
|
|
|
|
|
|
Identity of Issue
|
Description of Investment
|
Current Value
|
|
CubeSmart
|
Common stock
|
1,323,777
|
|
Dover Corp.
|
Common stock
|
1,216,489
|
|
Edgewell Personal Care Co.
|
Common stock
|
1,348,855
|
|
Endurance Specialty Holdings Ltd.
|
Common stock
|
3,109,722
|
|
Enstar Group Ltd.
|
Common stock
|
987,314
|
|
First Horizon National Corp.
|
Common stock
|
2,400,680
|
|
First Republic Bank
|
Common stock
|
2,877,348
|
|
Flowers Foods, Inc.
|
Common stock
|
2,704,817
|
|
Fortis, Inc.
|
Common stock
|
791,269
|
|
Goodyear Tire & Rubber Co.
|
Common stock
|
1,809,291
|
|
Hanesbrands, Inc.
|
Common stock
|
2,342,265
|
|
Hub Group, Inc.
|
Common stock
|
5,021,713
|
|
iStar, Inc.
|
Common stock
|
2,177,306
|
|
Jones Lang Lasalle, Inc.
|
Common stock
|
1,663,523
|
|
Juniper Networks, Inc.
|
Common stock
|
3,495,056
|
|
Keysight Technologies, Inc.
|
Common stock
|
1,249,341
|
|
Kirby Corp.
|
Common stock
|
2,849,791
|
|
Lifepoint Health, Inc.
|
Common stock
|
3,760,842
|
|
Linear Technology Corp.
|
Common stock
|
3,140,258
|
|
Mid-America Apartment Communities, Inc.
|
Common stock
|
1,889,758
|
|
Molson Coors Brewing Co. (Cl B)
|
Common stock
|
2,705,510
|
|
Nationstar Mortgage Holdings, Inc.
|
Common stock
|
3,726,049
|
|
Navigators Group, Inc.
|
Common stock
|
2,305,427
|
|
Newell Brands, Inc.
|
Common stock
|
2,498,927
|
|
NVR, Inc.
|
Common stock
|
2,772,209
|
|
Orthofix International N.V.
|
Common stock
|
1,722,964
|
|
Parker Hannifin Corp.
|
Common stock
|
1,193,220
|
|
Popular, Inc.
|
Common stock
|
2,627,842
|
|
Post Holdings, Inc.
|
Common stock
|
4,032,202
|
|
Red Rock Resorts, Inc.
|
Common stock
|
2,479,452
|
|
Reinsurance Group of America
|
Common stock
|
2,492,566
|
|
SPX Flow, Inc.
|
Common stock
|
1,302,373
|
|
Staples, Inc.
|
Common stock
|
2,363,552
|
|
SVB Financial Group
|
Common stock
|
1,932,033
|
|
Tegna, Inc.
|
Common stock
|
2,745,086
|
|
Treehouse Foods, Inc.
|
Common stock
|
1,376,663
|
|
UGI Corp.
|
Common stock
|
3,505,997
|
|
Universal American Corp.
|
Common stock
|
1,828,492
|
|
Vantiv, Inc.
|
Common stock
|
3,076,809
|
|
Whirlpool Corp.
|
Common stock
|
2,838,520
|
|
Willis Towers Watson PLC
|
Common stock
|
7,297,181
|
|
XL Group Ltd.
|
Common stock
|
2,572,393
|
|
Fidelity (STIF) *
|
Interest-bearing cash
|
15,169,670
|
|
Rockwell Collins Stable Value Fund:
|
|
|
Fidelity (STIF) (100-31-TPLX) *
|
Interest-bearing cash
|
11,748,895
|
|
Voya
|
Collective trust
|
59,650,353
|
|
Transamerica Premier Life
|
Collective trust
|
54,390,216
|
|
American General Life
|
Collective trust
|
24,729,255
|
|
|
|
|
|
|
|
Identity of Issue
|
Description of Investment
|
Current Value
|
|
RGA Reinsurance Company
|
Collective trust
|
40,880,314
|
|
Bank of Tokyo - Mitsubishi
|
Collective trust
|
40,865,505
|
|
American General (1635893)
|
Fixed income security
|
41,955,222
|
|
Rockwell Collins Stock Fund *
|
|
|
Rockwell Collins, Inc.
|
Common stock
|
481,232,816
|
|
Fidelity Instl Cash US Govt Fund
|
Interest-bearing cash
|
3,636,520
|
|
Participant loans *
|
Interest rates ranging from 4.25% to 9.25%, due from 2017 to 2026
|
35,238,904
|
|
Assets held at December 31, 2016
|
|
$
|
3,482,908,710
|
|
* Denotes a party-in-interest to the Plan.
Cost information is not required for participant-directed investments and therefore is not included.
See accompanying Independent Auditor's Report.