Transcript Slide 1

Insert pictures into these angled boxes. Height should be 3.44 inches.
1st Quarter FY 2014
Conference Call
January 21, 2014
© 2014 Rockwell Collins
All rights reserved.
Proprietary Information
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, 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 adverse impact of oil prices 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;
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 and our customers; 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 our internal performance plans such as our 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.
© 2014 Rockwell Collins
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2
1st Quarter FY 2014 Results
($ in millions except EPS amounts)
Sales
$1,062
Net Income
$1,071
$132
1% increase
$131
1% decline
1Q FY13
1Q FY14
1Q FY13
1Q FY14
Operating Cash Flow
EPS
$63
$0.96
$0.94
2% increase
($38)
1Q FY13
© 2014 Rockwell Collins
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1Q FY14
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1Q FY13
1Q FY14
3
Commercial Systems
CS Sales
($ in millions)
Sales
$19 million Aftermarket increase: 10%
• Higher air transport retrofits
• Spare parts for 787 aircraft
• Increased revenue from regulatory airspace
mandates
• Increased service and support
$521
$506(1)
3% increase
1Q FY13
1Q FY14
CS Operating Earnings
$111
$105(1)
6% increase
Operating
Margins
$4 million OEM growth: 1%
• Higher hardware delivery rates for Boeing
787 aircraft
• Partially offset by decreased deliveries at
light end of business jets
Operating Earnings
Increase in operating earnings and operating
margin primarily due to higher sales
1Q FY13
1Q FY14
20.8%
21.3%
(1) Certain prior year amounts have been reclassified to the newly created
Information Management Services segment.
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4
Government Systems
($ in millions)
GS Sales
$546
$532
3% decline
1Q FY13
1Q FY14
Sales by product category:
• Avionics increase 1%
• Communication Products decrease 11%
• Surface Solutions increase 16%
• Navigation Products decrease 19%
GS Operating Earnings
$107
Sales
Sales decline $14 million (3%)
• Lower satellite communication and secure
communication product sales
• Lower KC-46, KC-10 and CRIIS development
program sales
• Lower DAGR deliveries
• Partially offset by increased sales:
• Firestorm targeting systems
• E-6B aircraft upgrade
• International hardware programs
• JTRS Manpack hardware deliveries
$101
6% decline
Operating Earnings
Decrease in operating earnings and operating
margin primarily due to lower sales
Operating
Margins
1Q FY13
1Q FY14
19.6%
19.0%
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5
Information Management Services
($ in millions)
IMS Sales
$18
Sales
• $6 million inorganic sales from ARINC
• $2 million organic sales growth
$10
80% increase
1Q FY13
1Q FY14
IMS Operating Earnings
$1
Operating
Margins
100% increase
1Q FY13
10.0%
Operating Earnings
Increase in operating earnings and operating
margin due to the acquisition of ARINC
$2
1Q FY14
11.1%
We completed the acquisition of ARINC on December 23, 2013. 1Q FY 14
sales and earnings reflect a partial week of results for ARINC. Remaining
activity relates to the Rockwell Collins’ flight services business that was
previously included in Commercial Systems.
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6
Research and Development
($ in millions)
R & D Investment
$227
71
$219
65
120
111
36
43
1Q FY13
1Q FY14
•
Company-funded R&D declined as
Commercial Systems development programs
were completed
•
Customer funded R&D declined due to
development programs winding down in
Government Systems
•
Increased investment in pre-production
engineering programs driven by:
• Boeing 737MAX
• Bombardier C-Series
• Global 7000/8000
Company Funded R&D
Customer Funded R&D
Increase in Pre-production Engineering, Net
% of
Sales
21.4%
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20.4%
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7
Capital Structure Status
($ in millions)
Cash
9/30/13
12/31/13
$
$
391
439
Short-term Debt
(436)
(917)
Long-term Debt
(563)
(1,658)
(608)
$ (2,136)
Net (Debt) / Cash
$
Equity
$
Debt To Total Capital
Debt To EBITDA
(1) See
(1)
1,623
38%
0.9x
$
1,730
60%
2.4x
slide 12 for non-GAAP disclosures
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8
Status of Share Repurchases
(shares in millions)
Common Shares Outstanding
0.2 million shares repurchased in fiscal year
2014 first quarter
136.8
135.3
• Cost of Purchases - $17 Million
• Average Cost per Share - $71.48
1% decrease
86 million shares repurchased since January
2002
• Cost of Purchases - $4.3 Billion
$395 million authorization remaining at the
end of Q1
1Q FY13
© 2014 Rockwell Collins
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1Q FY14
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9
Projected FY 2014 ARINC Results
($ in millions)
The Non-GAAP financial projections 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 recently completed 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, are
expected to have on the projected financial results for ARINC during the Company's fiscal year 2014. The ASES
business is treated as discontinued operations and is therefore excluded from the table (unaudited, in millions).
Sales (midpoint of range for ARINC FY 2014 projection)
Income before income taxes
Depreciation and amortization expense
Interest expense
EBITDA
ARINC
Business
$
415
Corporate
Costs
$
-
$
$
$
$
Transaction and integration costs
5
EBITDA, adjusted
$
Total EBITDA, adjusted as a percentage of sales
© 2014 Rockwell Collins
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40
45
85
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90
(45)
25
(20)
15
$
(5)
Total
415
(5)
45
25
65
20
$
85
20%
10
FY 2014 Guidance
$4.95 Bil. to $5.05 Bil.
(from $4.5 Bil. to $4.6 Bil.)
Total Sales
Total Segment Operating Margins
$4.35 to $4.55
(from $4.30 to $4.50)
Earnings Per Share
Cash Provided by Operating Activities
Research & Development Investment
$600 Mil. to $700 Mil.
(from $550 Mil. to $650 Mil.)
About $950 Mil.
About $160 Mil.
(from about $140 Mil.)
Capital Expenditures
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20% to 21%
(from 21% to 22%)
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11
Non-GAAP Financial Information
The Non-GAAP ratio of debt to EBITDA information included on slide eight 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, 2012 through September 30, 2013 and the twelve-month period
from January 1, 2013 through December 31, 2013 (unaudited, in millions):
12 months ended
Income from continuing operations before income taxes
Interest expense
Depreciation
Amortization of intangible assets and pre-production engineering
costs
Earnings before interest, taxes, depreciation and amortization
(EBITDA)
9/30/13
12/31/13
$
$
868
28
34
124
126
56
56
$ 1,076
$ 1,076
9/30/13
Total debt
Debt to EBITDA
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860
12/31/13
$ 999
$ 2,575
0.9x
2.4x
12
© 2014 Rockwell Collins
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13