© 2015 Rockwell Collins All rights reserved. Insert pictures into these angled boxes. Height should be 3.44 inches. 1 st Quarter FY 2015 Conference Call January 23, 2015
Jul 16, 2015
© 2015 Rockwell Collins All rights reserved.
Insert pictures into these angled boxes. Height should be 3.44 inches.
1st Quarter FY 2015 Conference Call January 23, 2015
© 2015 Rockwell Collins All rights reserved.
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Safe Harbor Statement
This presentation contains statements, 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 the financial condition of our customers, 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; unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011 as modified by the Bipartisan Budget Act of 2013; the continued support for military transformation and modernization programs; potential impact of oil price volatility on the commercial aerospace industry; the impact of terrorist events on the commercial aerospace industry; declining defense budgets resulting from budget deficits in the U.S. and abroad; 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; favorable 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 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 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, 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.
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$0.98
$1.26
1Q FY14 1Q FY15
EPS from Continuing Operations
29% increase
$134
$169
1Q FY14 1Q FY15
Income from Continuing Operations, net of taxes
26% increase
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(in millions except EPS amounts) 1st Quarter FY 2015 Results
(1)
(1)
(1) Prior year amounts have been revised to exclude discontinued operations.
(1)
$1,054
$1,226
1Q FY14 1Q FY15
Sales
16% increase
($24)
($60)
1Q FY14 1Q FY15
Operating Cash Flow from Continuing Operations
(1)
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$111 $125
1Q FY14 1Q FY15
CS Operating Earnings
13% increase
$521 $568
1Q FY14 1Q FY15
CS Sales
9% increase
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($ in millions)
Sales $45 million OEM growth: 16%
• Increased air transport OEM production rates • Improved share of airline selectable
equipment • Increased customer funded development
$5 million Aftermarket increase • Increased service and support • Offset by the absence of a large delivery of
spare parts for the Boeing 787 GoldCare program
Operating Earnings $14 million increase in operating earnings
• Higher sales volume
Commercial Systems
22.0% 21.3% Operating Margins
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20.4% 20.8%
($ in millions) Government Systems
Sales Sales decline $6 million: (1)% • Lower deliveries of JTRS Manpack radios • Partially offset by higher tanker/transport and ARC-
210 hardware deliveries
Sales by category: • Avionics increase 1% • Communication Products decrease (9)% • Surface Solutions decrease (3)% • Navigation Products increase 5% Operating Earnings Increase in operating earnings and operating margin primarily due to: • Favorable product mix • Offset by higher warranty expense due to favorable
warranty adjustments in the first quarter of 2014
Operating Margins
(1)
(1)
$515 $509
1Q FY14 1Q FY15
GS Sales
1% decrease
$105 $106
1Q FY14 1Q FY15
GS Operating Earnings
1% increase
(1) Prior year amounts have been revised to exclude discontinued operations.
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($ in millions)
Sales • $131 million increase due to a full quarter
of ARINC sales
Operating Earnings Increase in operating earnings primarily due to ARINC
Information Management Services
14.1% 11.1% Operating Margins
(1)
(1) See slide 12 for non-GAAP disclosure on ARINC.
$18
$149
1Q FY14 1Q FY15
IMS Sales
$2
$21
1Q FY14 1Q FY15
IMS Operating Earnings
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$219 $231
($ in millions) Research and Development
• Customer funded R&D increased due primarily to the following:
• Higher international development programs in Commercial Systems
• Higher amortization of pre-production engineering costs
• Decreased investment in pre-production
engineering programs driven by lower A350 spend
20.8% 18.8% % of Sales
43 31
111 131
65 69
1Q FY14 1Q FY15
R & D Investment
Company Funded R&DCustomer Funded R&DIncrease in Pre-production Engineering, Net
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09/30/14 12/31/14
Cash and cash equivalents 323$ 315$
Short-term Debt (504) (831)
Long-term Debt (1,663) (1,670)
Net Debt (1,844)$ (2,186)$
Equity 1,889$ 1,870$
Debt To Total Capital 53% 57%
Debt To EBITDA (1) 1.9x 2.0x
($ in millions) Capital Structure Status
(1) See slide 11 for non-GAAP disclosures.
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(shares in millions) Status of Share Repurchases
2.2 million shares repurchased in fiscal year 2015 first quarter
• Cost of Purchases - $174 Million • Average Cost per Share - $80.45
$531 million authorization remaining at the end of the first quarter
135.3 132.5
1Q FY14 1Q FY15
Common Shares Outstanding
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Total Sales $5.2 Bil. to $5.3 Bil.
Total Segment Operating Margins 20.5% to 21.5%
Earnings Per Share $5.10 to $5.30 (From $4.90 to $5.10)
Cash Flow from Operations $700 Mil. To $800 Mil. (From $675 Mil. to $775 Mil.)
Research & Development Investment About $1 Bil. (From about $950 Mil.)
Capital Expenditures About $200 Mil.
FY 2015 Guidance for Continuing Operations
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The Non-GAAP ratio of debt to EBITDA information included on slide nine is believed to be useful to investors’ understanding and assessment of the Company’s total capital structure and liquidity. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the debt to EBITDA calculation in more detail for the twelve-month period from October 1, 2013 through September 30, 2014 and the twelve-month period from January 1, 2014 through December 31, 2014 (unaudited, in millions). All businesses reported as discontinued operations have been excluded from the debt to EBITDA calculation.
Non-GAAP Financial Information
12 months ended 9/30/14 12/31/14 Income from continuing operations before income taxes $ 882 $ 916 Interest expense 59 62 Depreciation 141 147
Amortization of intangible assets and pre-production engineering costs 84 96
Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 1,166 $ 1,221 9/30/14 12/31/14 Total debt $ 2,167 $ 2,501 Debt to EBITDA 1.9x 2.0x
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($ in millions)
First Quarter 2015 ARINC Results
Three months ended December 31, 2014ARINC
Corporate Costs(a) Total
Sales 137$ -$ 137$
Income before income taxes 20$ (8)$ 12$ Depreciation and amortization expense 12 - 12 Interest expense - 8 8
EBITDA 32 - 32
Transaction and integration costs - - -
EBITDA, adjusted 32$ -$ 32$
Total EBITDA, adjusted as a percentage of sales 23.4%
The Non-GAAP financial information included in the table below for earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA are believed to be useful to an investor's understanding and assessment of the ARINC acquisition. The Company does not intend for the Non-GAAP information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the impact that certain non-cash depreciation and amortization charges, and certain transaction and integration expenses, had on the financial results for ARINC during the three months ended December 31, 2014. The ASES business is treated as discontinued operations and is therefore excluded from the table (unaudited, in millions).
(a) The Company’s definition of segment operating earnings excludes certain items, including interest and other general corporate expenses not allocated to business segments. Corporate costs for the three months ended December 31, 2014 include $8 million of interest expense primarily from the incremental interest on the debt issued in December 2013 to finance the acquisition.
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($ in millions) 2014 ARINC Results
Twelve months ended September 30, 2014(b)
ARINCCorporate Costs(a) Total
Sales 421$ -$ 421$
Income before income taxes 56$ (45)$ 11$ Depreciation and amortization expense 33 - 33 Interest expense - 29 29
EBITDA 89 (16) 73
Transaction and integration costs 1 14 15
EBITDA, adjusted 90$ (2)$ 88$
Total EBITDA, adjusted as a percentage of sales 20.9%
The Non-GAAP financial information included in the table below for earnings before interest, taxes, depreciation and amortization (EBITDA) and adjusted EBITDA are believed to be useful to an investor's understanding and assessment of the ARINC acquisition. The Company does not intend for the Non-GAAP information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the impact that certain non-cash depreciation and amortization charges, and certain transaction and integration expenses, had on the financial results for ARINC during the twelve months ended September 30, 2014. The ASES business is treated as discontinued operations and is therefore excluded from the table (unaudited, in millions).
(a)The Company’s definition of segment operating earnings excludes certain items, including interest and other general corporate expenses not allocated to business segments. Corporate costs for the twelve months ended September 30, 2014 include $14 million of deal related transaction and integration costs (primarily consisting of legal, accounting and advisory fees) and $29 million of interest expense primarily from the incremental interest on the debt issued in December 2013 to finance the acquisition. The remaining corporate costs of $2 million represent selling, general and administrative expenses related to ARINC that were incurred at the corporate level. (b)The Company acquired ARINC on December 23, 2013. Results for ARINC reflected in the table above are for periods subsequent to the completion of the acquisition.
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