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Share Name | Share Symbol | Market | Type |
---|---|---|---|
Rockwell Collins, Inc. (delisted) | NYSE:COL | NYSE | Common Stock |
Price Change | % Change | Share Price | High Price | Low Price | Open Price | Shares Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.00 | 0.00% | 141.04 | 0 | 01:00:00 |
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Delaware
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52-2314475
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
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400 Collins Road NE
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Cedar Rapids, Iowa
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52498
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(Address of principal executive offices)
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(Zip Code)
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Large accelerated filer
R
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Accelerated filer
£
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Non-accelerated filer
£
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(Do not check if a smaller reporting company)
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Smaller reporting company
£
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Page No.
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PART I
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PART I.
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FINANCIAL INFORMATION
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Item 1.
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Condensed Consolidated Financial Statements
|
|
June 30,
2016 |
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September 30,
2015 |
||||
ASSETS
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|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
307
|
|
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$
|
252
|
|
Receivables, net
|
1,184
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|
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1,038
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|
||
Inventories, net
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1,975
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1,824
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|
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Other current assets
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148
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110
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|
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Total current assets
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3,614
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3,224
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||||
Property
|
999
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|
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964
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|
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Goodwill
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1,918
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1,904
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|
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Intangible Assets
|
678
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|
|
703
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||
Deferred Income Taxes
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104
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|
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165
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Other Assets
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362
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344
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TOTAL ASSETS
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$
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7,675
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$
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7,304
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LIABILITIES AND EQUITY
|
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||
Current Liabilities:
|
|
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||
Short-term debt
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$
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1,112
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|
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$
|
448
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Accounts payable
|
483
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|
|
487
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|
||
Compensation and benefits
|
258
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|
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273
|
|
||
Advance payments from customers
|
263
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|
|
365
|
|
||
Accrued customer incentives
|
245
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|
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232
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|
||
Product warranty costs
|
83
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|
|
89
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|
||
Other current liabilities
|
171
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166
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|
||
Total current liabilities
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2,615
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|
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2,060
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||
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||||
Long-term Debt, Net
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1,387
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|
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1,680
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|
||
Retirement Benefits
|
1,324
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|
|
1,466
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|
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Other Liabilities
|
235
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|
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218
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||
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Equity:
|
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Common stock ($0.01 par value; shares authorized: 1,000; shares issued: June 30, 2016, 143.8; September 30, 2015, 183.8)
|
1
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|
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2
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|
||
Additional paid-in capital
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1,495
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|
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1,519
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|
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Retained earnings
|
3,162
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|
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5,124
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|
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Accumulated other comprehensive loss
|
(1,672
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)
|
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(1,699
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)
|
||
Common stock in treasury, at cost (shares held: June 30, 2016, 13.9; September 30, 2015, 51.9)
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(878
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)
|
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(3,071
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)
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||
Total shareowners’ equity
|
2,108
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|
|
1,875
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|
||
Noncontrolling interest
|
6
|
|
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5
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||
Total equity
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2,114
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1,880
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||
TOTAL LIABILITIES AND EQUITY
|
$
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7,675
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$
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7,304
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Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
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June 30
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June 30
|
||||||||||||
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2016
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2015
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2016
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2015
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||||||||
Sales:
|
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||||||||
Product sales
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$
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1,129
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$
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1,091
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$
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3,198
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$
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3,264
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Service sales
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205
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202
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616
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596
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Total sales
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1,334
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1,293
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3,814
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3,860
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Costs, expenses and other:
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Product cost of sales
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772
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754
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2,223
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2,266
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Service cost of sales
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143
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134
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435
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416
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Selling, general and administrative expenses
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158
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157
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481
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446
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Interest expense
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16
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15
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48
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45
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Other income, net
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(2
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)
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(4
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)
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(12
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)
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(9
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)
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||||
Total costs, expenses and other
|
1,087
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1,056
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3,175
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3,164
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||||||||
Income from continuing operations before income taxes
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247
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237
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639
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696
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Income tax expense
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33
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59
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120
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186
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||||
Income from continuing operations
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214
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178
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519
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510
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Income (loss) from discontinued operations, net of taxes
|
—
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—
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1
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(8
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)
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||||||||
Net income
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$
|
214
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$
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178
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$
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520
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$
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502
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||||||||
Earnings (loss) per share:
|
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||||||||
Basic
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||||||||
Continuing operations
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$
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1.65
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$
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1.35
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$
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3.97
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$
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3.85
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Discontinued operations
|
—
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—
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0.01
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|
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(0.06
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)
|
||||
Basic earnings per share
|
$
|
1.65
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$
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1.35
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|
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$
|
3.98
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$
|
3.79
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||||||||
Diluted
|
|
|
|
|
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||||||||
Continuing operations
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.92
|
|
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$
|
3.81
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
||||
Diluted earnings per share
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.93
|
|
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$
|
3.75
|
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||||||||
Weighted average common shares:
|
|
|
|
|
|
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||||||||
Basic
|
130.0
|
|
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132.1
|
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130.7
|
|
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132.4
|
|
||||
Diluted
|
131.5
|
|
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133.6
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132.3
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133.9
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||||
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||||||||
Cash dividends per share
|
$
|
0.33
|
|
|
$
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0.33
|
|
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$
|
0.99
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$
|
0.93
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Net income
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
520
|
|
|
$
|
502
|
|
Unrealized foreign currency translation adjustments
|
(16
|
)
|
|
9
|
|
|
(16
|
)
|
|
(27
|
)
|
||||
Pension and other retirement benefits adjustments (net of taxes for the three and nine months ended June 30, 2016 of $7 and $23, respectively; net of taxes for the three and nine months ended June 30, 2015 of $7 and $20, respectively)
|
14
|
|
|
10
|
|
|
40
|
|
|
33
|
|
||||
Foreign currency cash flow hedge adjustments (net of taxes for the three and nine months ended June 30, 2016 of $1 and $2, respectively; net of taxes for the three and nine months ended June 30, 2015 of ($1) and ($2), respectively)
|
—
|
|
|
1
|
|
|
3
|
|
|
(2
|
)
|
||||
Comprehensive income
|
$
|
212
|
|
|
$
|
198
|
|
|
$
|
547
|
|
|
$
|
506
|
|
|
Nine Months Ended June 30
|
||||||
|
2016
|
|
2015
|
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
520
|
|
|
$
|
502
|
|
Income (loss) from discontinued operations, net of tax
|
1
|
|
|
(8
|
)
|
||
Income from continuing operations
|
519
|
|
|
510
|
|
||
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
||||
Non-cash restructuring charges
|
6
|
|
|
—
|
|
||
Depreciation
|
107
|
|
|
114
|
|
||
Amortization of intangible assets and pre-production engineering costs
|
83
|
|
|
75
|
|
||
Stock-based compensation expense
|
21
|
|
|
17
|
|
||
Compensation and benefits paid in common stock
|
41
|
|
|
37
|
|
||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
(12
|
)
|
||
Deferred income taxes
|
39
|
|
|
44
|
|
||
Pension plan contributions
|
(66
|
)
|
|
(66
|
)
|
||
Fair value of acquisition-related contingent consideration
|
1
|
|
|
—
|
|
||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
|
|
|
|
||||
Receivables
|
(163
|
)
|
|
(108
|
)
|
||
Production inventory
|
(73
|
)
|
|
(72
|
)
|
||
Pre-production engineering costs
|
(141
|
)
|
|
(134
|
)
|
||
Accounts payable
|
3
|
|
|
(73
|
)
|
||
Compensation and benefits
|
(15
|
)
|
|
9
|
|
||
Advance payments from customers
|
(102
|
)
|
|
12
|
|
||
Accrued customer incentives
|
13
|
|
|
32
|
|
||
Product warranty costs
|
(6
|
)
|
|
(8
|
)
|
||
Income taxes
|
3
|
|
|
28
|
|
||
Other assets and liabilities
|
(47
|
)
|
|
(64
|
)
|
||
Cash Provided by Operating Activities from Continuing Operations
|
223
|
|
|
341
|
|
||
Investing Activities:
|
|
|
|
||||
Property additions
|
(133
|
)
|
|
(155
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(17
|
)
|
|
(24
|
)
|
||
Other investing activities
|
(1
|
)
|
|
(8
|
)
|
||
Cash (Used for) Investing Activities from Continuing Operations
|
(151
|
)
|
|
(187
|
)
|
||
Financing Activities:
|
|
|
|
||||
Purchases of treasury stock
|
(261
|
)
|
|
(330
|
)
|
||
Cash dividends
|
(129
|
)
|
|
(123
|
)
|
||
Increase in short-term commercial paper borrowings, net
|
364
|
|
|
241
|
|
||
Proceeds from the exercise of stock options
|
15
|
|
|
48
|
|
||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
12
|
|
||
Other financing activities
|
(2
|
)
|
|
(1
|
)
|
||
Cash (Used for) Financing Activities from Continuing Operations
|
(13
|
)
|
|
(153
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
|
(19
|
)
|
||
Discontinued Operations:
|
|
|
|
||||
Operating activities
|
—
|
|
|
(14
|
)
|
||
Investing activities
|
—
|
|
|
3
|
|
||
Cash (Used for) Discontinued Operations
|
—
|
|
|
(11
|
)
|
||
Net Change in Cash and Cash Equivalents
|
55
|
|
|
(29
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
252
|
|
|
323
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
307
|
|
|
$
|
294
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares Outstanding
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Noncontrolling Interest
|
|
Total Equity
|
|||||||||||||||
Balance at September 30, 2015
|
131.9
|
|
|
$
|
2
|
|
|
$
|
1,519
|
|
|
$
|
5,124
|
|
|
$
|
(1,699
|
)
|
|
$
|
(3,071
|
)
|
|
$
|
5
|
|
|
$
|
1,880
|
|
Net income
|
|
|
|
|
|
|
520
|
|
|
|
|
|
|
|
|
520
|
|
|||||||||||||
Other comprehensive income
|
|
|
|
|
|
|
|
|
27
|
|
|
|
|
|
|
27
|
|
|||||||||||||
Cash dividends
|
|
|
|
|
|
|
(129
|
)
|
|
|
|
|
|
|
|
(129
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.3
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
16
|
|
|
|
|
15
|
|
|||||||||||
Vesting of performance shares and restricted stock
|
0.1
|
|
|
|
|
(12
|
)
|
|
|
|
|
|
5
|
|
|
|
|
(7
|
)
|
|||||||||||
Excess tax pools
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
—
|
|
|||||||||||||
Employee stock purchase plan
|
0.1
|
|
|
|
|
2
|
|
|
|
|
|
|
6
|
|
|
|
|
8
|
|
|||||||||||
Employee savings plan
|
0.4
|
|
|
|
|
10
|
|
|
|
|
|
|
23
|
|
|
|
|
33
|
|
|||||||||||
Stock-based compensation
|
|
|
|
|
21
|
|
|
|
|
|
|
|
|
|
|
21
|
|
|||||||||||||
Treasury share repurchases
|
(2.9
|
)
|
|
|
|
|
|
|
|
|
|
(255
|
)
|
|
|
|
(255
|
)
|
||||||||||||
Treasury share retirements
(1)
|
|
|
(1
|
)
|
|
(44
|
)
|
|
(2,353
|
)
|
|
|
|
2,398
|
|
|
|
|
—
|
|
||||||||||
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
1
|
|
|
1
|
|
|||||||||||||
Balance at June 30, 2016
|
129.9
|
|
|
$
|
1
|
|
|
$
|
1,495
|
|
|
$
|
3,162
|
|
|
$
|
(1,672
|
)
|
|
$
|
(878
|
)
|
|
$
|
6
|
|
|
$
|
2,114
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares Outstanding
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Noncontrolling Interest
|
|
Total Equity
|
|||||||||||||||
Balance at September 30, 2014
|
134.0
|
|
|
$
|
2
|
|
|
$
|
1,489
|
|
|
$
|
4,605
|
|
|
$
|
(1,366
|
)
|
|
$
|
(2,846
|
)
|
|
$
|
5
|
|
|
$
|
1,889
|
|
Net income
|
|
|
|
|
|
|
502
|
|
|
|
|
|
|
|
|
502
|
|
|||||||||||||
Other comprehensive loss
|
|
|
|
|
|
|
|
|
4
|
|
|
|
|
|
|
4
|
|
|||||||||||||
Cash dividends
|
|
|
|
|
|
|
(123
|
)
|
|
|
|
|
|
|
|
(123
|
)
|
|||||||||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
1.0
|
|
|
|
|
(13
|
)
|
|
|
|
|
|
61
|
|
|
|
|
48
|
|
|||||||||||
Vesting of performance shares and restricted stock
|
0.1
|
|
|
|
|
(10
|
)
|
|
|
|
|
|
4
|
|
|
|
|
(6
|
)
|
|||||||||||
Excess tax pools
|
|
|
|
|
12
|
|
|
|
|
|
|
|
|
|
|
12
|
|
|||||||||||||
Employee stock purchase plan
|
0.1
|
|
|
|
|
3
|
|
|
|
|
|
|
5
|
|
|
|
|
8
|
|
|||||||||||
Employee savings plan
|
0.3
|
|
|
|
|
10
|
|
|
|
|
|
|
19
|
|
|
|
|
29
|
|
|||||||||||
Stock-based compensation
|
|
|
|
|
17
|
|
|
|
|
|
|
|
|
|
|
17
|
|
|||||||||||||
Treasury share repurchases
|
(3.8
|
)
|
|
|
|
|
|
|
|
|
|
(325
|
)
|
|
|
|
(325
|
)
|
||||||||||||
Other
|
|
|
|
|
|
|
|
(1
|
)
|
|
|
|
|
|
1
|
|
|
—
|
|
|||||||||||
Balance at June 30, 2015
|
131.7
|
|
|
$
|
2
|
|
|
$
|
1,508
|
|
|
$
|
4,983
|
|
|
$
|
(1,362
|
)
|
|
$
|
(3,082
|
)
|
|
$
|
6
|
|
|
$
|
2,055
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Recently Issued Accounting Standards
|
3.
|
Acquisitions, Goodwill and Intangible Assets
|
(in millions)
|
Commercial
Systems
|
|
Government
Systems
|
|
Information Management Services
|
|
Total
|
||||||||
Balance at September 30, 2015
|
$
|
314
|
|
|
$
|
500
|
|
|
$
|
1,090
|
|
|
$
|
1,904
|
|
ICG acquisition adjustment
|
12
|
|
|
—
|
|
|
—
|
|
|
12
|
|
||||
Matrix product line acquisition
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Foreign currency translation adjustments
|
(1
|
)
|
|
(3
|
)
|
|
—
|
|
|
(4
|
)
|
||||
Balance at June 30, 2016
|
$
|
325
|
|
|
$
|
503
|
|
|
$
|
1,090
|
|
|
$
|
1,918
|
|
|
June 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||
(in millions)
|
Gross
|
|
Accum
Amort
|
|
Net
|
|
Gross
|
|
Accum
Amort
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology and patents
|
$
|
353
|
|
|
$
|
(210
|
)
|
|
$
|
143
|
|
|
$
|
346
|
|
|
$
|
(195
|
)
|
|
$
|
151
|
|
Backlog
|
6
|
|
|
(3
|
)
|
|
3
|
|
|
5
|
|
|
(2
|
)
|
|
3
|
|
||||||
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired
|
340
|
|
|
(102
|
)
|
|
238
|
|
|
338
|
|
|
(87
|
)
|
|
251
|
|
||||||
Up-front sales incentives
|
311
|
|
|
(76
|
)
|
|
235
|
|
|
301
|
|
|
(62
|
)
|
|
239
|
|
||||||
License agreements
|
14
|
|
|
(10
|
)
|
|
4
|
|
|
13
|
|
|
(9
|
)
|
|
4
|
|
||||||
Trademarks and tradenames
|
15
|
|
|
(14
|
)
|
|
1
|
|
|
15
|
|
|
(14
|
)
|
|
1
|
|
||||||
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Trademarks and tradenames
|
47
|
|
|
—
|
|
|
47
|
|
|
47
|
|
|
—
|
|
|
47
|
|
||||||
In process research and development
|
7
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Intangible assets
|
$
|
1,093
|
|
|
$
|
(415
|
)
|
|
$
|
678
|
|
|
$
|
1,072
|
|
|
$
|
(369
|
)
|
|
$
|
703
|
|
(in millions)
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for up-front sales incentives
|
$
|
19
|
|
|
$
|
17
|
|
|
$
|
21
|
|
|
$
|
25
|
|
|
$
|
26
|
|
|
$
|
141
|
|
Anticipated amortization expense for all other intangible assets
|
43
|
|
|
40
|
|
|
38
|
|
|
35
|
|
|
32
|
|
|
233
|
|
||||||
Total
|
$
|
62
|
|
|
$
|
57
|
|
|
$
|
59
|
|
|
$
|
60
|
|
|
$
|
58
|
|
|
$
|
374
|
|
4.
|
Discontinued Operations and Divestitures
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Sales
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
Income (loss) from discontinued operations before income taxes
|
—
|
|
|
—
|
|
|
2
|
|
|
(13
|
)
|
||||
Income tax benefit (expense) from discontinued operations
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
5
|
|
5.
|
Receivables, Net
|
(in millions)
|
June 30,
2016 |
|
September 30,
2015 |
||||
Billed
|
$
|
800
|
|
|
$
|
752
|
|
Unbilled
|
478
|
|
|
403
|
|
||
Less progress payments
|
(87
|
)
|
|
(110
|
)
|
||
Total
|
1,191
|
|
|
1,045
|
|
||
Less allowance for doubtful accounts
|
(7
|
)
|
|
(7
|
)
|
||
Receivables, net
|
$
|
1,184
|
|
|
$
|
1,038
|
|
6.
|
Inventories, Net
|
(in millions)
|
June 30,
2016 |
|
September 30,
2015 |
||||
Finished goods
|
$
|
236
|
|
|
$
|
216
|
|
Work in process
|
249
|
|
|
250
|
|
||
Raw materials, parts and supplies
|
376
|
|
|
353
|
|
||
Less progress payments
|
(2
|
)
|
|
(7
|
)
|
||
Total
|
859
|
|
|
812
|
|
||
Pre-production engineering costs
|
1,116
|
|
|
1,012
|
|
||
Inventories, net
|
$
|
1,975
|
|
|
$
|
1,824
|
|
(in millions)
|
2016
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
(1)
|
$
|
51
|
|
|
$
|
77
|
|
|
$
|
120
|
|
|
$
|
143
|
|
|
$
|
150
|
|
|
$
|
585
|
|
7.
|
Other Assets
|
(in millions)
|
June 30,
2016 |
|
September 30,
2015 |
||||
Long-term receivables
|
$
|
122
|
|
|
$
|
109
|
|
Investments in equity affiliates
|
10
|
|
|
13
|
|
||
Exchange and rental assets (net of accumulated depreciation of $100 at June 30, 2016 and $97 at September 30, 2015)
|
67
|
|
|
66
|
|
||
Other
|
163
|
|
|
156
|
|
||
Other assets
|
$
|
362
|
|
|
$
|
344
|
|
8.
|
Debt
|
(in millions, except weighted average amounts)
|
June 30,
2016 |
|
September 30,
2015 |
||||
Short-term commercial paper borrowings outstanding
(1)
|
$
|
812
|
|
|
$
|
448
|
|
Current portion of long-term debt
|
300
|
|
|
—
|
|
||
Short-term debt
|
$
|
1,112
|
|
|
$
|
448
|
|
Weighted average interest rate of commercial paper borrowings
|
0.77
|
%
|
|
0.52
|
%
|
||
Weighted average maturity period of commercial paper borrowings (days)
|
21
|
|
|
25
|
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
June 30,
2016 |
|
September 30,
2015 |
||||
Fixed-rate notes due:
|
|
|
|
|
|
||||
December 2043
|
4.80%
|
|
$
|
398
|
|
|
$
|
398
|
|
December 2023
|
3.70%
|
|
399
|
|
|
399
|
|
||
November 2021
|
3.10%
|
|
250
|
|
|
250
|
|
||
July 2019
|
5.25%
|
|
299
|
|
|
299
|
|
||
Variable-rate note due:
|
|
|
|
|
|
||||
December 2016
|
3 month LIBOR + 0.35%
(1)
|
|
300
|
|
|
300
|
|
||
Fair value swap adjustment (see Notes 13 and 14)
|
|
|
41
|
|
|
34
|
|
||
Total
|
|
|
1,687
|
|
|
1,680
|
|
||
Less current portion of long-term debt
|
|
|
300
|
|
|
—
|
|
||
Long-term Debt, Net
|
|
|
$
|
1,387
|
|
|
$
|
1,680
|
|
9.
|
Retirement Benefits
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Service cost
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
32
|
|
|
39
|
|
|
1
|
|
|
2
|
|
||||
Expected return on plan assets
|
(60
|
)
|
|
(61
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
|
||||||
Prior service credit
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(2
|
)
|
||||
Net actuarial loss
|
20
|
|
|
18
|
|
|
2
|
|
|
2
|
|
||||
Net benefit expense (income)
|
$
|
(6
|
)
|
|
$
|
(2
|
)
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Service cost
|
$
|
8
|
|
|
$
|
9
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
95
|
|
|
117
|
|
|
4
|
|
|
6
|
|
||||
Expected return on plan assets
|
(179
|
)
|
|
(182
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Prior service credit
|
(1
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(4
|
)
|
||||
Net actuarial loss
|
59
|
|
|
54
|
|
|
6
|
|
|
5
|
|
||||
Net benefit expense (income)
|
$
|
(18
|
)
|
|
$
|
(4
|
)
|
|
$
|
10
|
|
|
$
|
8
|
|
10.
|
Stock-Based Compensation and Earnings Per Share
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Stock-based compensation expense included in:
|
|
|
|
|
|
|
|
||||||||
Product cost of sales
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
5
|
|
Selling, general and administrative expenses
|
5
|
|
|
4
|
|
|
15
|
|
|
12
|
|
||||
Total
|
$
|
6
|
|
|
$
|
5
|
|
|
$
|
21
|
|
|
$
|
17
|
|
Income tax benefit
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
6
|
|
|
Options
|
|
Performance Shares
|
|
Restricted Stock Units
|
||||||||||||
(shares in thousands)
|
Number Issued
|
Weighted Average Fair Value
|
|
Number Issued
|
Weighted Average Fair Value
|
|
Number Issued
|
Weighted Average Fair Value
|
|||||||||
Nine months ended June 30, 2016
|
641.5
|
|
$
|
17.75
|
|
|
131.0
|
|
$
|
85.13
|
|
|
70.4
|
|
$
|
85.91
|
|
Nine months ended June 30, 2015
|
561.3
|
|
$
|
19.52
|
|
|
131.0
|
|
$
|
82.30
|
|
|
67.8
|
|
$
|
84.47
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions, except per share amounts)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
519
|
|
|
$
|
510
|
|
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
||||
Net income
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
520
|
|
|
$
|
502
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Denominator for basic earnings per share – weighted average common shares
|
130.0
|
|
|
132.1
|
|
|
130.7
|
|
|
132.4
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
1.0
|
|
|
1.0
|
|
|
1.1
|
|
|
1.0
|
|
||||
Performance shares, restricted stock and restricted stock units
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
||||
Dilutive potential common shares
|
1.5
|
|
|
1.5
|
|
|
1.6
|
|
|
1.5
|
|
||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
131.5
|
|
|
133.6
|
|
|
132.3
|
|
|
133.9
|
|
||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.65
|
|
|
$
|
1.35
|
|
|
$
|
3.97
|
|
|
$
|
3.85
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
||||
Basic earnings per share
|
$
|
1.65
|
|
|
$
|
1.35
|
|
|
$
|
3.98
|
|
|
$
|
3.79
|
|
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.92
|
|
|
$
|
3.81
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
||||
Diluted earnings per share
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.93
|
|
|
$
|
3.75
|
|
11.
|
Accumulated Other Comprehensive Loss
|
|
Foreign Exchange Translation Adjustment
|
|
Pension and Other Postretirement Adjustments
(1)
|
|
Change in the Fair Value of Effective Cash Flow Hedges
|
|
Total
|
||||||||
Balance at March 31, 2016
|
$
|
(56
|
)
|
|
$
|
(1,611
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,670
|
)
|
Other comprehensive loss before reclassifications
|
(16
|
)
|
|
—
|
|
|
—
|
|
|
(16
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
14
|
|
|
—
|
|
|
14
|
|
||||
Net current period other comprehensive income (loss)
|
(16
|
)
|
|
14
|
|
|
—
|
|
|
(2
|
)
|
||||
Balance at June 30, 2016
|
$
|
(72
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,672
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2015
|
$
|
(56
|
)
|
|
$
|
(1,637
|
)
|
|
$
|
(6
|
)
|
|
$
|
(1,699
|
)
|
Other comprehensive loss before reclassifications
|
(16
|
)
|
|
—
|
|
|
(1
|
)
|
|
(17
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
40
|
|
|
4
|
|
|
44
|
|
||||
Net current period other comprehensive income (loss)
|
(16
|
)
|
|
40
|
|
|
3
|
|
|
27
|
|
||||
Balance at June 30, 2016
|
$
|
(72
|
)
|
|
$
|
(1,597
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,672
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at March 31, 2015
|
$
|
(51
|
)
|
|
$
|
(1,325
|
)
|
|
$
|
(6
|
)
|
|
$
|
(1,382
|
)
|
Other comprehensive income before reclassifications
|
9
|
|
|
—
|
|
|
—
|
|
|
9
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
10
|
|
|
1
|
|
|
11
|
|
||||
Net current period other comprehensive income
|
9
|
|
|
10
|
|
|
1
|
|
|
20
|
|
||||
Balance at June 30, 2015
|
$
|
(42
|
)
|
|
$
|
(1,315
|
)
|
|
$
|
(5
|
)
|
|
$
|
(1,362
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2014
|
$
|
(15
|
)
|
|
$
|
(1,348
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,366
|
)
|
Other comprehensive loss before reclassifications
|
(27
|
)
|
|
—
|
|
|
(5
|
)
|
|
(32
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
33
|
|
|
3
|
|
|
36
|
|
||||
Net current period other comprehensive income (loss)
|
(27
|
)
|
|
33
|
|
|
(2
|
)
|
|
4
|
|
||||
Balance at June 30, 2015
|
$
|
(42
|
)
|
|
$
|
(1,315
|
)
|
|
$
|
(5
|
)
|
|
$
|
(1,362
|
)
|
12.
|
Income Taxes
|
13.
|
Fair Value Measurements
|
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 Company’s own assumptions used to measure assets and liabilities at fair value
|
|
|
|
June 30, 2016
|
|
September 30, 2015
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
52
|
|
|
$
|
50
|
|
Interest rate swap assets
|
Level 2
|
|
41
|
|
|
34
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
13
|
|
|
7
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(13
|
)
|
|
(11
|
)
|
||
Contingent consideration for ICG acquisition
|
Level 3
|
|
(13
|
)
|
|
(12
|
)
|
(in millions)
|
Fair Value
Asset (Liability)
|
||
Balance at September 30, 2015
|
$
|
(12
|
)
|
Fair value adjustment
(1)
|
(1
|
)
|
|
Balance at June 30, 2016
|
$
|
(13
|
)
|
|
Asset (Liability)
|
||||||||||||||
|
June 30, 2016
|
|
September 30, 2015
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
307
|
|
|
$
|
307
|
|
|
$
|
252
|
|
|
$
|
252
|
|
Short-term debt
|
(1,112
|
)
|
|
(1,112
|
)
|
|
(448
|
)
|
|
(448
|
)
|
||||
Long-term debt
|
(1,346
|
)
|
|
(1,506
|
)
|
|
(1,646
|
)
|
|
(1,750
|
)
|
14.
|
Derivative Financial Instruments
|
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2016 |
|
September 30, 2015
|
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
13
|
|
|
$
|
7
|
|
Interest rate swaps
|
Other assets
|
|
41
|
|
|
34
|
|
||
Total
|
|
|
$
|
54
|
|
|
$
|
41
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2016 |
|
September 30, 2015
|
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
13
|
|
|
$
|
11
|
|
|
|
|
Amount of Gain (Loss)
|
|
Amount of Gain (Loss)
|
||||||||||||
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
Location of Gain (Loss)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Fair Value Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Interest expense
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
8
|
|
|
$
|
8
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
|
|
|
|
||||||||
Amount of loss recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(8
|
)
|
||||
Amount of loss reclassified from AOCL into income
|
Cost of sales
|
|
(1
|
)
|
|
(1
|
)
|
|
(6
|
)
|
|
(4
|
)
|
||||
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
|
(5
|
)
|
15.
|
Guarantees and Indemnifications
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2016
|
|
2015
|
||||
Balance at beginning of year
|
$
|
89
|
|
|
$
|
104
|
|
Warranty costs incurred
|
(31
|
)
|
|
(34
|
)
|
||
Product warranty accrual
|
29
|
|
|
33
|
|
||
Changes in estimates for prior years
|
(3
|
)
|
|
(7
|
)
|
||
Foreign currency translation adjustments and other
|
(1
|
)
|
|
(2
|
)
|
||
Balance at June 30, 2016
|
$
|
83
|
|
|
$
|
94
|
|
16.
|
Environmental Matters
|
17.
|
Legal Matters
|
18.
|
Restructuring and Asset Impairment Charges
|
(in millions)
|
Cost of Sales
|
|
Selling, General and Administrative Expenses
|
|
Total
|
||||||
Employee separation costs
|
$
|
31
|
|
|
$
|
8
|
|
|
$
|
39
|
|
Asset impairment charges
|
2
|
|
|
4
|
|
|
6
|
|
|||
Restructuring and asset impairment charges
|
$
|
33
|
|
|
$
|
12
|
|
|
$
|
45
|
|
19.
|
Business Segment Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Sales:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
$
|
612
|
|
|
$
|
611
|
|
|
$
|
1,785
|
|
|
$
|
1,798
|
|
Government Systems
|
555
|
|
|
530
|
|
|
1,544
|
|
|
1,606
|
|
||||
Information Management Services
|
167
|
|
|
152
|
|
|
485
|
|
|
456
|
|
||||
Total sales
|
$
|
1,334
|
|
|
$
|
1,293
|
|
|
$
|
3,814
|
|
|
$
|
3,860
|
|
|
|
|
|
|
|
|
|
||||||||
Segment operating earnings:
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Systems
|
$
|
141
|
|
|
$
|
141
|
|
|
$
|
401
|
|
|
$
|
408
|
|
Government Systems
|
115
|
|
|
108
|
|
|
309
|
|
|
328
|
|
||||
Information Management Services
|
26
|
|
|
23
|
|
|
79
|
|
|
66
|
|
||||
Total segment operating earnings
|
282
|
|
|
272
|
|
|
789
|
|
|
802
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense
|
(16
|
)
|
|
(15
|
)
|
|
(48
|
)
|
|
(45
|
)
|
||||
Stock-based compensation
|
(6
|
)
|
|
(5
|
)
|
|
(21
|
)
|
|
(17
|
)
|
||||
General corporate, net
|
(13
|
)
|
|
(15
|
)
|
|
(36
|
)
|
|
(44
|
)
|
||||
Restructuring and asset impairment charges
|
—
|
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations before income taxes
|
247
|
|
|
237
|
|
|
639
|
|
|
696
|
|
||||
Income tax expense
|
(33
|
)
|
|
(59
|
)
|
|
(120
|
)
|
|
(186
|
)
|
||||
Income from continuing operations
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
519
|
|
|
$
|
510
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Commercial Systems sales categories:
|
|
|
|
|
|
|
|
|
|||||||
Air transport aviation electronics
|
$
|
370
|
|
|
$
|
337
|
|
|
$
|
1,052
|
|
|
$
|
1,030
|
|
Business and regional aviation electronics
|
242
|
|
|
274
|
|
|
733
|
|
|
768
|
|
||||
Commercial Systems sales
|
612
|
|
|
611
|
|
|
1,785
|
|
|
1,798
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Government Systems sales categories:
|
|
|
|
|
|
|
|
||||||||
Avionics
|
376
|
|
|
338
|
|
|
1,026
|
|
|
1,036
|
|
||||
Communication and navigation
|
179
|
|
|
192
|
|
|
518
|
|
|
570
|
|
||||
Government Systems sales
|
555
|
|
|
530
|
|
|
1,544
|
|
|
1,606
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Information Management Services sales
|
167
|
|
|
152
|
|
|
485
|
|
|
456
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total sales
|
$
|
1,334
|
|
|
$
|
1,293
|
|
|
$
|
3,814
|
|
|
$
|
3,860
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
OVERVIEW AND OUTLOOK
|
•
|
Commercial Systems 2016 revenue is expected to be down about one percent when compared to 2015 (from low-single digit growth)
|
•
|
Government Systems 2016 revenue is expected to be up low-single digits when compared to 2015
|
•
|
Information Management Services sales are expected to grow mid to high-single digits when compared to 2015
|
•
|
total sales of about $5.3 billion (from $5.3 billion to $5.4 billion)
|
•
|
diluted earnings per share in the range of $5.50 to $5.55 (from $5.45 to $5.65)
|
•
|
cash provided by operating activities of about $750 million (from $750 million to $850 million), which includes an expected $125 million net increase in pre-production engineering costs included in inventory (from $100 million)
|
•
|
capital expenditures of about $200 million
|
•
|
total research and development investment of about $1 billion
(2)
|
RESULTS OF OPERATIONS
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Total sales
|
$
|
1,334
|
|
|
$
|
1,293
|
|
|
$
|
3,814
|
|
|
$
|
3,860
|
|
Percent increase (decrease)
|
3
|
%
|
|
|
|
(1
|
)%
|
|
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Total cost of sales
|
$
|
915
|
|
|
$
|
888
|
|
|
$
|
2,658
|
|
|
$
|
2,682
|
|
Percent of total sales
|
68.6
|
%
|
|
68.7
|
%
|
|
69.7
|
%
|
|
69.5
|
%
|
•
|
a $34 million increase from higher sales volume across all three operating segments
|
•
|
partially offset by a $5 million decrease in employee incentive compensation and pension costs
|
•
|
a $47 million reduction in company-funded R&D expense, as detailed below
|
•
|
a $10 million decrease in pension costs
|
•
|
a $4 million reduction from lower sales volume, which was negatively impacted by less favorable program sales mix
|
•
|
partially offset by $33 million of restructuring and asset impairment charges recorded in the three months ended December 31, 2015
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Customer-funded:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
$
|
58
|
|
|
$
|
47
|
|
|
$
|
166
|
|
|
$
|
131
|
|
Government Systems
|
98
|
|
|
98
|
|
|
284
|
|
|
293
|
|
||||
Information Management Services
|
2
|
|
|
3
|
|
|
6
|
|
|
7
|
|
||||
Total customer-funded
|
158
|
|
|
148
|
|
|
456
|
|
|
431
|
|
||||
Company-funded:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
36
|
|
|
40
|
|
|
97
|
|
|
138
|
|
||||
Government Systems
|
20
|
|
|
20
|
|
|
56
|
|
|
62
|
|
||||
Information Management Services
(1)
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
||||
Total company-funded
|
56
|
|
|
60
|
|
|
154
|
|
|
201
|
|
||||
Total R&D expense
|
$
|
214
|
|
|
$
|
208
|
|
|
$
|
610
|
|
|
$
|
632
|
|
Percent of total sales
|
16.0
|
%
|
|
16.1
|
%
|
|
16.0
|
%
|
|
16.4
|
%
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Selling, general and administrative expenses
|
$
|
158
|
|
|
$
|
157
|
|
|
$
|
481
|
|
|
$
|
446
|
|
Percent of total sales
|
11.8
|
%
|
|
12.1
|
%
|
|
12.6
|
%
|
|
11.6
|
%
|
•
|
higher costs from further expansion in international emerging markets
|
•
|
incremental costs associated with the acquisition of International Communications Group (ICG)
|
•
|
partially offset by cost savings initiatives from previously announced restructuring plans
|
•
|
$12 million of restructuring and asset impairment charges recorded in the three months ended December 31, 2015
|
•
|
higher costs from further expansion in international emerging markets
|
•
|
incremental costs associated with the acquisitions of ICG and Pacific Avionics
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Interest expense
|
$
|
16
|
|
|
$
|
15
|
|
|
$
|
48
|
|
|
$
|
45
|
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions, except per share amounts)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Income from continuing operations
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
519
|
|
|
$
|
510
|
|
Percent of sales
|
16.0
|
%
|
|
13.8
|
%
|
|
13.6
|
%
|
|
13.2
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
||||
Net income
|
$
|
214
|
|
|
$
|
178
|
|
|
$
|
520
|
|
|
$
|
502
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share from continuing operations
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.92
|
|
|
$
|
3.81
|
|
Diluted earnings (loss) per share from discontinued operations
|
—
|
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
||||
Diluted earnings per share
|
$
|
1.63
|
|
|
$
|
1.33
|
|
|
$
|
3.93
|
|
|
$
|
3.75
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares
|
131.5
|
|
|
133.6
|
|
|
132.3
|
|
|
133.9
|
|
•
|
a $26 million decrease in income tax expense, primarily due to the release of a valuation allowance for a capital loss carryforward due to the creation of a tax planning strategy, partially offset by favorable adjustments recorded in the prior year related to the remeasurement of certain tax positions
|
•
|
a $10 million increase in total segment operating earnings, as operating earnings increased $7 million in Government Systems and $3 million in Information Management Services
|
•
|
a $66 million decrease in income tax expense primarily due to the release of a valuation allowance for a capital loss carryforward, the retroactive reinstatement of the Federal R&D Tax Credit and lower pre-tax income from continuing operations
|
•
|
partially offset by $45 million of pre-tax restructuring and asset impairment charges recorded in the three months ended December 31, 2015
|
•
|
in addition, total segment operating earnings decreased $13 million as operating earnings decreased $19 million in Government Systems and $7 million in Commercial Systems, partially offset by a $13 million increase in Information Management Services
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Air transport aviation electronics:
|
|
|
|
|
|
|
|
||||||||
Original equipment
|
$
|
234
|
|
|
$
|
202
|
|
|
$
|
631
|
|
|
$
|
597
|
|
Aftermarket
|
127
|
|
|
122
|
|
|
391
|
|
|
389
|
|
||||
Wide-body in-flight entertainment (IFE)
|
9
|
|
|
13
|
|
|
30
|
|
|
44
|
|
||||
Total air transport aviation electronics
|
370
|
|
|
337
|
|
|
1,052
|
|
|
1,030
|
|
||||
Business and regional aviation electronics:
|
|
|
|
|
|
|
|
|
|
||||||
Original equipment
|
133
|
|
|
171
|
|
|
402
|
|
|
477
|
|
||||
Aftermarket
|
109
|
|
|
103
|
|
|
331
|
|
|
291
|
|
||||
Total business and regional aviation electronics
|
242
|
|
|
274
|
|
|
733
|
|
|
768
|
|
||||
Total
|
$
|
612
|
|
|
$
|
611
|
|
|
$
|
1,785
|
|
|
$
|
1,798
|
|
Percent increase (decrease)
|
—
|
%
|
|
|
|
(1
|
)%
|
|
|
•
|
original equipment sales
increased
$32 million
, or
16 percent
, primarily due to higher Boeing 787 and Airbus A350 production rates, favorable customer timing for airline selectable equipment and higher customer-funded development program revenues, partially offset by lower Airbus A330 production rates
|
•
|
aftermarket sales
increased
$5 million
, or
4 percent
, primarily due to inorganic sales growth from ICG, as well as higher simulation hardware deliveries, partially offset by lower spares provisioning
|
•
|
wide-body IFE sales
decreased
$4 million
, or
31 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$38 million
, or
22 percent
, primarily due to lower business aircraft OEM production rates and lower product deliveries to a Chinese regional aircraft manufacturer, partially offset by higher product deliveries for the Bombardier CSeries program in support of entry into service
|
•
|
aftermarket sales
increased
$6 million
, or
6 percent
, primarily due to higher simulation hardware deliveries and flight deck retrofit activity, partially offset by lower cabin retrofit activity
|
•
|
original equipment sales
increased
$34 million
, or 6 percent, primarily due to higher Boeing 787 and Airbus A350 production rates, and higher customer-funded development program revenues, partially offset by lower Airbus A330 production rates and unfavorable customer timing for airline selectable equipment
|
•
|
aftermarket sales
increased
$2 million
, or
1 percent
, primarily due to inorganic sales growth from ICG and Pacific Avionics, partially offset by lower regulatory mandate upgrade and service and support activity, as well as the absence of a large used aircraft equipment sale that occurred in the prior year
|
•
|
wide-body IFE sales
decreased
$14 million
, or
32 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$75 million
, or
16 percent
, primarily due to lower business aircraft OEM production rates, partially offset by higher product deliveries for the Bombardier CSeries and Embraer Legacy business jet programs and higher customer-funded development program revenues
|
•
|
aftermarket sales
increased
$40 million
, or
14 percent
, primarily due to higher regulatory mandate upgrade and flight deck retrofit activity, higher simulation hardware deliveries and increased sales of used aircraft parts
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Segment operating earnings
|
$
|
141
|
|
|
$
|
141
|
|
|
$
|
401
|
|
|
$
|
408
|
|
Percent of sales
|
23.0
|
%
|
|
23.1
|
%
|
|
22.5
|
%
|
|
22.7
|
%
|
•
|
operating earnings were negatively impacted by sales mix, as lower margin customer-funded development revenues increased and higher margin business jet OEM sales decreased in the three months ended June 30, 2016 compared to the same period in the prior year
|
•
|
offset by the benefit of cost savings initiatives from previously announced restructuring plans
|
•
|
operating earnings were negatively impacted by sales mix, as lower margin customer-funded development revenues increased and higher margin business jet OEM sales decreased in the nine months ended June 30, 2016 compared to the same period in the prior year
|
•
|
a $13 million increase in SG&A costs resulting from the acquisition and integration of Pacific Avionics and ICG
|
•
|
partially offset by a $41 million decrease in company-funded R&D expense and the benefit of cost savings initiatives from previously announced restructuring plans
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Avionics
|
$
|
376
|
|
|
$
|
338
|
|
|
$
|
1,026
|
|
|
$
|
1,036
|
|
Communication and navigation
|
179
|
|
|
192
|
|
|
518
|
|
|
570
|
|
||||
Total
|
$
|
555
|
|
|
$
|
530
|
|
|
$
|
1,544
|
|
|
$
|
1,606
|
|
Percent increase (decrease)
|
5
|
%
|
|
|
|
(4
|
)%
|
|
|
•
|
a $31 million increase from higher deliveries on various fixed wing platforms
|
•
|
a $13 million increase from higher simulation and training sales
|
•
|
partially offset by an $11 million decrease from lower sales on various rotary wing platforms
|
•
|
a $7 million decrease due to unfavorable program adjustments, including an unfavorable $5 million adjustment for an international electronic warfare program
|
•
|
a $6 million decrease from lower international deliveries of targeting systems
|
•
|
a $49 million decrease from lower deliveries on various rotary wing platforms
|
•
|
a $15 million decrease from lower simulation and training sales
|
•
|
partially offset by a $43 million increase from higher deliveries on various fixed wing programs
|
•
|
a $24 million decrease due to the wind-down of an international electronic warfare program
|
•
|
a $22 million decrease due to lower international deliveries of targeting systems
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Segment operating earnings
|
$
|
115
|
|
|
$
|
108
|
|
|
$
|
309
|
|
|
$
|
328
|
|
Percent of sales
|
20.7
|
%
|
|
20.4
|
%
|
|
20.0
|
%
|
|
20.4
|
%
|
•
|
the $25 million increase in sales volume discussed in the Government Systems sales section above, which includes $7 million of unfavorable development program adjustments, and less favorable program sales mix
|
•
|
the benefit of cost savings initiatives from previously announced restructuring plans
|
•
|
the $62 million reduction in sales volume discussed in the Government Systems sales section above
|
•
|
unfavorable development program adjustments in the current year and favorable program adjustments in the prior year
|
•
|
partially offset by increased earnings due to the benefit of cost savings initiatives from previously announced restructuring plans
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Sales
|
$
|
167
|
|
|
$
|
152
|
|
|
$
|
485
|
|
|
$
|
456
|
|
Percent increase
|
10
|
%
|
|
|
|
6
|
%
|
|
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Segment operating earnings
|
$
|
26
|
|
|
$
|
23
|
|
|
$
|
79
|
|
|
$
|
66
|
|
Percent of sales
|
15.6
|
%
|
|
15.1
|
%
|
|
16.3
|
%
|
|
14.5
|
%
|
•
|
a $15 million increase in sales volume discussed in the Information Management Services sales section above, which resulted in a $10 million increase in cost and an increase in earnings of $5 million, or 33 percent of the higher sales volume. The margins on the sales increase were unfavorably impacted by the increase in lower margin non-aviation related sales
|
•
|
partially offset by higher SG&A costs from further expansion in international emerging markets
|
•
|
a $29 million increase in sales volume discussed in the Information Management Services sales section above, which resulted in an $18 million increase in cost and an increase in earnings of $11 million, or 38 percent of the higher sales volume
|
•
|
operating earnings were positively impacted in the nine months ended June 30, 2016 by the favorable resolution of certain prior year claims associated with international business jet support services
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
General corporate, net
|
$
|
13
|
|
|
$
|
15
|
|
|
$
|
36
|
|
|
$
|
44
|
|
|
Three Months Ended June 30
|
|
Nine Months Ended June 30
|
||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
Pension benefits
|
$
|
(6
|
)
|
|
$
|
(2
|
)
|
|
$
|
(18
|
)
|
|
$
|
(4
|
)
|
Other retirement benefits
|
3
|
|
|
3
|
|
|
10
|
|
|
8
|
|
||||
Net benefit expense (income)
|
$
|
(3
|
)
|
|
$
|
1
|
|
|
$
|
(8
|
)
|
|
$
|
4
|
|
FINANCIAL CONDITION AND LIQUIDITY
|
|
Nine Months Ended June 30
|
||||||
(in millions)
|
2016
|
|
2015
|
||||
Cash provided by operating activities from continuing operations
|
$
|
223
|
|
|
$
|
341
|
|
•
|
cash receipts from customers decreased by $220 million to $3.544 billion in the nine months ended June 30, 2016, compared to $3.764 billion in the nine months ended June 30, 2015. The decrease in cash receipts from customers was more than the sales volume
decrease
of
$46 million
due to the timing of sales relative to advanced payments and collection of receivables from customers
|
•
|
payments for employee incentive pay increased $23 million. Incentive pay is expensed in the year incurred and then paid in the first fiscal quarter of the following year. In the nine months ended June 30, 2016, $137 million was paid for employee incentive pay costs expensed during 2015. This compares to $114 million paid during the nine months ended June 30, 2015 for employee incentive pay costs expensed during 2014
|
•
|
the above items were partially offset by lower payments for production inventory and other operating costs which decreased $77 million to $3.040 billion for the nine months ended June 30, 2016, compared to $3.117 billion during the nine months ended June 30, 2015. The decreased payments for operating costs primarily resulted from lower sales volume and the timing of payments to suppliers
|
•
|
cash payments for income taxes decreased $48 million to $76 million during the nine months ended June 30, 2016, compared to $124 million during the same period in the prior year. The decrease in cash used for income tax payments was primarily from the retroactive reinstatement of the Federal R&D tax credit as a result of the Protecting Americans from Tax Hikes Act, as well as lower pre-tax income from continuing operations
|
|
Nine Months Ended June 30
|
||||||
(in millions)
|
2016
|
|
2015
|
||||
Cash (used for) investing activities from continuing operations
|
$
|
(151
|
)
|
|
$
|
(187
|
)
|
•
|
we paid $24 million for the March 2015 acquisition of Pacific Avionics
|
•
|
a $22 million decrease in cash payments for property additions for the nine months ended
June 30, 2016
, compared to the same period in the prior year
|
•
|
the above items were partially offset by $17 million paid for the Matrix series projector product line acquisition in February 2016
|
|
Nine Months Ended June 30
|
||||||
(in millions)
|
2016
|
|
2015
|
||||
Cash (used for) financing activities from continuing operations
|
$
|
(13
|
)
|
|
$
|
(153
|
)
|
•
|
net proceeds from short-term commercial paper borrowings increased $123 million
|
•
|
cash repurchases of common stock decreased $69 million to $261 million during the nine months ended
June 30, 2016
, compared to $330 million repurchased during the same period in the prior year
|
•
|
partially offset by a decrease in proceeds received from the exercise of stock options of $33 million
|
•
|
also, cash dividend payments increased $6 million. During the nine months ended June 30, 2016, $129 million of cash dividend payments were made to shareowners, compared to $123 million during the same period last year. The increase was primarily due to a 10 percent increase in our quarterly cash dividend paid on common stock to $0.33 per share, which was effective beginning with dividends paid in June 2015
|
(in millions)
|
June 30,
2016 |
|
September 30,
2015 |
||||
Cash and cash equivalents
|
$
|
307
|
|
|
$
|
252
|
|
|
|
|
|
||||
Short-term debt
|
(1,112
|
)
|
|
(448
|
)
|
||
Long-term debt, net
|
(1,387
|
)
|
|
(1,680
|
)
|
||
Total debt
|
$
|
(2,499
|
)
|
|
$
|
(2,128
|
)
|
Total equity
|
$
|
2,114
|
|
|
$
|
1,880
|
|
Debt to total capitalization
(1)
|
54
|
%
|
|
53
|
%
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F2
|
|
A-
|
|
Stable
|
Moody’s Investors Service
|
|
P-2
|
|
A3
|
|
Stable
|
Standard & Poor’s
|
|
A-2
|
|
A-
|
|
Stable
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
CAUTIONARY STATEMENT
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
|
|
June 30, 2016
|
||||||||
(in millions)
|
|
Interest Rate
|
|
Carrying Value
|
|
Fair Value
|
||||
$400 Notes due 2043
|
|
4.80%
|
|
$
|
398
|
|
|
$
|
475
|
|
$400 Notes due 2023
|
|
3.70%
|
|
399
|
|
|
433
|
|
||
$250 Notes due 2021
|
|
3.10%
|
|
250
|
|
|
264
|
|
||
$300 Notes due 2019
|
|
5.25%
|
|
299
|
|
|
334
|
|
||
$300 Notes due 2016
|
|
3 month LIBOR plus 0.35%
|
|
300
|
|
|
300
|
|
Item 4.
|
Controls and Procedures.
|
Period
|
Total Number of Shares Purchased
|
Average Price Paid per Share
|
Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs
|
Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs
(1)
|
||||||
April 1, 2016 through April 30, 2016
|
399,851
|
|
$
|
91.60
|
|
399,851
|
|
$
|
155
|
million
|
May 1, 2016 through May 31, 2016
|
338,516
|
|
$
|
89.66
|
|
338,516
|
|
$
|
125
|
million
|
June 1, 2016 through June 30, 2016
|
—
|
|
$
|
—
|
|
—
|
|
$
|
125
|
million
|
Total/Average
|
738,367
|
|
$
|
90.71
|
|
738,367
|
|
|
Item 6.
|
|
Exhibits
|
|
|
|
|
|
|
|
(a) Exhibits
|
|
Exhibit
Number
|
|
Description
|
|
31.1
|
|
|
Section 302 Certification of Chief Executive Officer.
|
|
|
|
|
31.2
|
|
|
Section 302 Certification of Chief Financial Officer.
|
|
|
|
|
32.1
|
|
|
Section 906 Certification of Chief Executive Officer.
|
|
|
|
|
32.2
|
|
|
Section 906 Certification of Chief Financial Officer.
|
|
|
|
|
* 10-n-2
|
|
|
Schedule identifying executives of the Company who are party to a Change of Control Agreement.
|
|
|
|
|
101.INS
|
|
|
XBRL Instance Document.
|
|
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema.
|
|
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
|
|
|
|
|
|
|
|
|
|
|
|
|
ROCKWELL COLLINS, INC.
|
|
|
|
By
|
/s/ Tatum J. Buse
|
|
|
|
Tatum J. Buse Vice President, Finance and Controller Principal Accounting Officer and an Authorized Officer
|
1 Year Rockwell Collins Chart |
1 Month Rockwell Collins Chart |
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