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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
þ
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Accelerated filer
o
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Non-accelerated filer
o
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(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Emerging growth company
o
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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,
2017 |
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September 30,
2016 |
||||
ASSETS
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|
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|
||||
Current Assets:
|
|
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|
||||
Cash and cash equivalents
|
$
|
578
|
|
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$
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340
|
|
Receivables, net
|
1,644
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|
|
1,094
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|
||
Inventories, net
|
2,506
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1,939
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Other current assets
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167
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117
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Total current assets
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4,895
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3,490
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||||
Property
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1,328
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1,035
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Goodwill
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8,602
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1,919
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Customer Relationship Intangible Assets
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2,092
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467
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Other Intangible Assets
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905
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|
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200
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Deferred Income Tax Asset
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29
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|
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219
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Other Assets
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500
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369
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TOTAL ASSETS
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$
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18,351
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|
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$
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7,699
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LIABILITIES AND EQUITY
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Current Liabilities:
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Short-term debt
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$
|
511
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|
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$
|
740
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Accounts payable
|
787
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|
|
527
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|
||
Compensation and benefits
|
325
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|
|
269
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|
||
Advance payments from customers
|
349
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283
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|
||
Accrued customer incentives
|
278
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|
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246
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|
||
Product warranty costs
|
202
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|
87
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|
||
Other current liabilities
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422
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194
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|
||
Total current liabilities
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2,874
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|
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2,346
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||||
Long-term Debt, Net
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7,268
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|
|
1,374
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|
||
Retirement Benefits
|
1,523
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|
|
1,660
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Deferred Income Tax Liability
|
417
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1
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Other Liabilities
|
660
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234
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Equity:
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Common stock ($0.01 par value; shares authorized: 1,000; shares issued: June 30, 2017, 175.0; September 30, 2016, 143.8)
|
2
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1
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Additional paid-in capital
|
4,542
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|
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1,506
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Retained earnings
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3,679
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|
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3,327
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Accumulated other comprehensive loss
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(1,806
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)
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(1,898
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)
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||
Common stock in treasury, at cost (shares held: June 30, 2017, 12.6; September 30, 2016, 13.6)
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(814
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)
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(858
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)
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||
Total shareowners’ equity
|
5,603
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|
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2,078
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|
||
Noncontrolling interest
|
6
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6
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Total equity
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5,609
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2,084
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TOTAL LIABILITIES AND EQUITY
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$
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18,351
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$
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7,699
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Three Months Ended
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Nine Months Ended
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||||||||||||
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June 30
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June 30
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||||||||||||
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2017
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2016
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2017
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2016
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||||||||
Sales:
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Product sales
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$
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1,836
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$
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1,129
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$
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3,935
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$
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3,198
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Service sales
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258
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205
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694
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616
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Total sales
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2,094
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1,334
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4,629
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3,814
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Costs, expenses and other:
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Product cost of sales
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1,352
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772
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2,799
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2,223
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Service cost of sales
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172
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143
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471
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435
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Selling, general and administrative expenses
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213
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158
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514
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481
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Transaction and integration costs
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64
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—
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80
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—
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Interest expense
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77
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16
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122
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48
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Other income, net
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(5
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)
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(2
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)
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(14
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)
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(12
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)
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Total costs, expenses and other
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1,873
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1,087
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3,972
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3,175
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||||||||
Income from continuing operations before income taxes
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221
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247
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657
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639
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Income tax expense
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42
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33
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165
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120
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Income from continuing operations
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179
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214
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492
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519
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Income from discontinued operations, net of taxes
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—
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—
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—
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1
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Net income
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$
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179
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$
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214
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$
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492
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$
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520
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||||||||
Earnings per share:
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||||||||
Basic
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||||||||
Continuing operations
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$
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1.13
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$
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1.65
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$
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3.52
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$
|
3.97
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Discontinued operations
|
—
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—
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—
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0.01
|
|
||||
Basic earnings per share
|
$
|
1.13
|
|
|
$
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1.65
|
|
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$
|
3.52
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$
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3.98
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|
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||||||||
Diluted
|
|
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||||||||
Continuing operations
|
$
|
1.12
|
|
|
$
|
1.63
|
|
|
$
|
3.48
|
|
|
$
|
3.92
|
|
Discontinued operations
|
—
|
|
|
—
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|
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—
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|
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0.01
|
|
||||
Diluted earnings per share
|
$
|
1.12
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|
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$
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1.63
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$
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3.48
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$
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3.93
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||||||||
Weighted average common shares:
|
|
|
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||||||||
Basic
|
158.2
|
|
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130.0
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139.8
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130.7
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|
||||
Diluted
|
159.9
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|
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131.5
|
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141.4
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132.3
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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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$
|
0.99
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
520
|
|
Unrealized foreign currency translation and other adjustments
|
50
|
|
|
(16
|
)
|
|
41
|
|
|
(16
|
)
|
||||
Pension and other retirement benefits adjustments (net of taxes for the three and nine months ended June 30, 2017 of $9 and $27, respectively; net of taxes for the three and nine months ended June 30, 2016 of $7 and $23, respectively)
|
15
|
|
|
14
|
|
|
47
|
|
|
40
|
|
||||
Foreign currency cash flow hedge adjustments (net of taxes for the three and nine months ended June 30, 2017 of $0 and $1, respectively; net of taxes for the three and nine months ended June 30, 2016 of $1 and $2, respectively)
|
2
|
|
|
—
|
|
|
4
|
|
|
3
|
|
||||
Comprehensive income
|
$
|
246
|
|
|
$
|
212
|
|
|
$
|
584
|
|
|
$
|
547
|
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
|
2017
|
|
2016
|
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
492
|
|
|
$
|
520
|
|
Income from discontinued operations, net of tax
|
—
|
|
|
1
|
|
||
Income from continuing operations
|
492
|
|
|
519
|
|
||
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
||||
Non-cash restructuring charges
|
—
|
|
|
6
|
|
||
Depreciation
|
118
|
|
|
107
|
|
||
Amortization of intangible assets, pre-production engineering costs and other
|
132
|
|
|
84
|
|
||
Amortization of acquired contract liability
|
(42
|
)
|
|
—
|
|
||
Amortization of inventory fair value adjustment
|
44
|
|
|
—
|
|
||
Stock-based compensation expense
|
21
|
|
|
21
|
|
||
Compensation and benefits paid in common stock
|
48
|
|
|
41
|
|
||
Deferred income taxes
|
18
|
|
|
39
|
|
||
Pension plan contributions
|
(66
|
)
|
|
(66
|
)
|
||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
|
|
|
|
||||
Receivables
|
(60
|
)
|
|
(163
|
)
|
||
Production inventory
|
(88
|
)
|
|
(73
|
)
|
||
Pre-production engineering costs
|
(108
|
)
|
|
(141
|
)
|
||
Accounts payable
|
21
|
|
|
3
|
|
||
Compensation and benefits
|
(19
|
)
|
|
(15
|
)
|
||
Advance payments from customers
|
1
|
|
|
(102
|
)
|
||
Accrued customer incentives
|
(17
|
)
|
|
13
|
|
||
Product warranty costs
|
(4
|
)
|
|
(6
|
)
|
||
Income taxes
|
(56
|
)
|
|
3
|
|
||
Other assets and liabilities
|
(19
|
)
|
|
(47
|
)
|
||
Cash Provided by Operating Activities from Continuing Operations
|
416
|
|
|
223
|
|
||
Investing Activities:
|
|
|
|
||||
Property additions
|
(165
|
)
|
|
(133
|
)
|
||
Acquisition of businesses, net of cash acquired
|
(3,429
|
)
|
|
(17
|
)
|
||
Other investing activities
|
(5
|
)
|
|
(1
|
)
|
||
Cash (Used for) Investing Activities from Continuing Operations
|
(3,599
|
)
|
|
(151
|
)
|
||
Financing Activities:
|
|
|
|
||||
Repayment of current portion of long-term debt
|
(338
|
)
|
|
—
|
|
||
Repayment of acquired long-term debt
|
(2,119
|
)
|
|
—
|
|
||
Purchases of treasury stock
|
(46
|
)
|
|
(261
|
)
|
||
Cash dividends
|
(140
|
)
|
|
(129
|
)
|
||
Increase in long-term borrowings
|
6,099
|
|
|
—
|
|
||
Increase (decrease) in short-term commercial paper borrowings, net
|
(78
|
)
|
|
364
|
|
||
Proceeds from the exercise of stock options
|
41
|
|
|
15
|
|
||
Other financing activities
|
(4
|
)
|
|
(2
|
)
|
||
Cash Provided by (Used for) Financing Activities from Continuing Operations
|
3,415
|
|
|
(13
|
)
|
||
Effect of exchange rate changes on cash and cash equivalents
|
6
|
|
|
(4
|
)
|
||
Cash Provided by Discontinued Operations
|
—
|
|
|
—
|
|
||
Net Change in Cash and Cash Equivalents
|
238
|
|
|
55
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
340
|
|
|
252
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
578
|
|
|
$
|
307
|
|
|
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, 2016
|
130.2
|
|
|
$
|
1
|
|
|
$
|
1,506
|
|
|
$
|
3,327
|
|
|
$
|
(1,898
|
)
|
|
$
|
(858
|
)
|
|
$
|
6
|
|
|
$
|
2,084
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
492
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
492
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|
—
|
|
|
—
|
|
|
92
|
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(140
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(140
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.7
|
|
|
—
|
|
|
(4
|
)
|
|
—
|
|
|
—
|
|
|
45
|
|
|
—
|
|
|
41
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.2
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
(5
|
)
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
7
|
|
|||||||
Employee savings plan
|
0.4
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
41
|
|
|||||||
B/E Aerospace business acquisition
|
31.2
|
|
|
1
|
|
|
3,014
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,015
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
21
|
|
|||||||
Treasury share repurchases
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|||||||
Balance at June 30, 2017
|
162.4
|
|
|
$
|
2
|
|
|
$
|
4,542
|
|
|
$
|
3,679
|
|
|
$
|
(1,806
|
)
|
|
$
|
(814
|
)
|
|
$
|
6
|
|
|
$
|
5,609
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
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 units
|
0.1
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(7
|
)
|
|||||||
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
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Recently Issued Accounting Standards
|
3.
|
Acquisitions, Goodwill and Intangible Assets
|
(in millions)
|
April 13, 2017
|
||
Cash and cash equivalents
|
$
|
104
|
|
Receivables, net
|
496
|
|
|
Inventories, net
(1)
|
556
|
|
|
Other current assets
|
56
|
|
|
Property
|
253
|
|
|
Intangible Assets
|
2,381
|
|
|
Other Assets
|
59
|
|
|
Total Identifiable Assets Acquired
|
3,905
|
|
|
|
|
||
Accounts payable
|
(251
|
)
|
|
Compensation and benefits
|
(75
|
)
|
|
Advance payments from customers
|
(62
|
)
|
|
Accrued customer incentives
|
(48
|
)
|
|
Product warranty costs
|
(117
|
)
|
|
Other current liabilities
(2)
|
(361
|
)
|
|
Long-term Debt, Net
|
(2,119
|
)
|
|
Retirement Benefits
|
(12
|
)
|
|
Deferred Income Tax Liability
|
(521
|
)
|
|
Other Liabilities
(2)
|
(448
|
)
|
|
Total Liabilities Assumed
|
(4,014
|
)
|
|
Net Identifiable Assets Acquired, excluding Goodwill
|
(109
|
)
|
|
Goodwill
|
6,645
|
|
|
Net Assets Acquired
|
$
|
6,536
|
|
|
Weighted Average Life (in years)
|
|
Fair Value
(in millions)
|
||
Developed technology
|
12
|
|
$
|
723
|
|
Airline customer relationships
|
10
|
|
1,450
|
|
|
OEM customer relationships
|
13
|
|
208
|
|
|
Total
|
11
|
|
$
|
2,381
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Transaction and integration costs
|
|
$
|
64
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
Interest expense
|
|
18
|
|
|
—
|
|
|
29
|
|
|
—
|
|
||||
Total Transaction, integration and financing costs
|
|
$
|
82
|
|
|
$
|
—
|
|
|
$
|
109
|
|
|
$
|
—
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Pro forma sales
|
$
|
2,219
|
|
|
$
|
2,087
|
|
|
$
|
6,182
|
|
|
$
|
5,943
|
|
Pro forma net income attributable to common shareowners from continuing operations
|
247
|
|
|
263
|
|
|
636
|
|
|
466
|
|
||||
Pro forma basic earnings per share from continuing operations
|
1.53
|
|
|
1.63
|
|
|
3.93
|
|
|
2.88
|
|
||||
Pro forma diluted earnings per share from continuing operations
|
1.52
|
|
|
1.62
|
|
|
3.89
|
|
|
2.85
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Increases/ (decreases) to pro forma net income:
|
|
|
|
|
|
|
|
||||||||
Net reduction to depreciation resulting from fixed asset adjustments
(1)
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
11
|
|
|
$
|
16
|
|
Advisory, legal and accounting service fees
(2)
|
123
|
|
|
—
|
|
|
156
|
|
|
(123
|
)
|
||||
Amortization of acquired B/E Aerospace intangible assets, net
(3)
|
(6
|
)
|
|
(36
|
)
|
|
(79
|
)
|
|
(109
|
)
|
||||
Interest expense incurred on acquisition financing, net
(4)
|
8
|
|
|
(16
|
)
|
|
(17
|
)
|
|
(49
|
)
|
||||
Long-term contract program adjustments
(5)
|
(6
|
)
|
|
(21
|
)
|
|
(59
|
)
|
|
(104
|
)
|
||||
Acquired contract liability amortization
(6)
|
3
|
|
|
30
|
|
|
62
|
|
|
109
|
|
||||
Inventory fair value adjustment amortization
(7)
|
—
|
|
|
—
|
|
|
—
|
|
|
(56
|
)
|
||||
Compensation adjustments
(8)
|
—
|
|
|
4
|
|
|
6
|
|
|
10
|
|
(in millions)
|
Interior Systems
|
|
Commercial
Systems
|
|
Government
Systems
|
|
Information Management Services
|
|
Total
|
||||||||||
Balance at September 30, 2016
|
$
|
—
|
|
|
$
|
326
|
|
|
$
|
503
|
|
|
$
|
1,090
|
|
|
$
|
1,919
|
|
B/E Aerospace acquisition
|
6,645
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
6,645
|
|
|||||
Pulse.aero acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
|||||
Foreign currency translation adjustments
|
24
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|
26
|
|
|||||
Balance at June 30, 2017
|
$
|
6,669
|
|
|
$
|
326
|
|
|
$
|
504
|
|
|
$
|
1,103
|
|
|
$
|
8,602
|
|
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||
(in millions)
|
Gross
|
|
Accum
Amort
|
|
Net
|
|
Gross
|
|
Accum
Amort
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology and patents
|
$
|
1,092
|
|
|
$
|
(242
|
)
|
|
$
|
850
|
|
|
$
|
354
|
|
|
$
|
(216
|
)
|
|
$
|
138
|
|
Backlog
|
6
|
|
|
(4
|
)
|
|
2
|
|
|
6
|
|
|
(3
|
)
|
|
3
|
|
||||||
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired
|
2,001
|
|
|
(156
|
)
|
|
1,845
|
|
|
340
|
|
|
(106
|
)
|
|
234
|
|
||||||
Up-front sales incentives
|
336
|
|
|
(89
|
)
|
|
247
|
|
|
313
|
|
|
(80
|
)
|
|
233
|
|
||||||
License agreements
|
15
|
|
|
(10
|
)
|
|
5
|
|
|
14
|
|
|
(10
|
)
|
|
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
|
|
||||||
Intangible assets
|
$
|
3,512
|
|
|
$
|
(515
|
)
|
|
$
|
2,997
|
|
|
$
|
1,096
|
|
|
$
|
(429
|
)
|
|
$
|
667
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for up-front sales incentives
|
$
|
13
|
|
|
$
|
19
|
|
|
$
|
25
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
143
|
|
Anticipated amortization expense for all other intangible assets
|
143
|
|
|
262
|
|
|
259
|
|
|
257
|
|
|
257
|
|
|
1,602
|
|
||||||
Total
|
$
|
156
|
|
|
$
|
281
|
|
|
$
|
284
|
|
|
$
|
285
|
|
|
$
|
285
|
|
|
$
|
1,745
|
|
4.
|
Discontinued Operations and Divestitures
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income from discontinued operations before income taxes
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Income tax (expense) from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
5.
|
Receivables, Net
|
(in millions)
|
June 30,
2017 |
|
September 30,
2016 |
||||
Billed
|
$
|
1,211
|
|
|
$
|
748
|
|
Unbilled
|
485
|
|
|
439
|
|
||
Less progress payments
|
(44
|
)
|
|
(87
|
)
|
||
Total
|
1,652
|
|
|
1,100
|
|
||
Less allowance for doubtful accounts
|
(8
|
)
|
|
(6
|
)
|
||
Receivables, net
|
$
|
1,644
|
|
|
$
|
1,094
|
|
6.
|
Inventories, Net
|
(in millions)
|
June 30,
2017 |
|
September 30,
2016 |
||||
Finished goods
|
$
|
306
|
|
|
$
|
210
|
|
Work in process
|
340
|
|
|
236
|
|
||
Raw materials, parts and supplies
|
702
|
|
|
354
|
|
||
Less progress payments
|
(10
|
)
|
|
(1
|
)
|
||
Total
|
1,338
|
|
|
799
|
|
||
Pre-production engineering costs
|
1,168
|
|
|
1,140
|
|
||
Inventories, net
|
$
|
2,506
|
|
|
$
|
1,939
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
|
$
|
59
|
|
|
$
|
99
|
|
|
$
|
137
|
|
|
$
|
157
|
|
|
$
|
148
|
|
|
$
|
611
|
|
7.
|
Property
|
(in millions)
|
June 30,
2017 |
|
September 30, 2016
|
||||
Land
|
$
|
20
|
|
|
$
|
15
|
|
Buildings and improvements
|
569
|
|
|
468
|
|
||
Machinery and equipment
|
1,359
|
|
|
1,218
|
|
||
Information systems software and hardware
|
496
|
|
|
435
|
|
||
Furniture and fixtures
|
85
|
|
|
74
|
|
||
Capital leases
|
58
|
|
|
58
|
|
||
Construction in progress
|
229
|
|
|
183
|
|
||
Total
|
2,816
|
|
|
2,451
|
|
||
Less accumulated depreciation
|
(1,488
|
)
|
|
(1,416
|
)
|
||
Property
|
$
|
1,328
|
|
|
$
|
1,035
|
|
8.
|
Other Assets
|
(in millions)
|
June 30,
2017 |
|
September 30,
2016 |
||||
Long-term receivables
|
$
|
199
|
|
|
$
|
146
|
|
Investments in equity affiliates
|
7
|
|
|
10
|
|
||
Exchange and rental assets (net of accumulated depreciation of $105 at June 30, 2017 and $101 at September 30, 2016)
|
71
|
|
|
68
|
|
||
Other
|
223
|
|
|
145
|
|
||
Other Assets
|
$
|
500
|
|
|
$
|
369
|
|
9.
|
Debt
|
(in millions, except weighted average amounts)
|
June 30,
2017 |
|
September 30,
2016 |
||||
Short-term commercial paper borrowings outstanding
(1)
|
$
|
362
|
|
|
$
|
440
|
|
Current portion of long-term debt
|
149
|
|
|
300
|
|
||
Short-term debt
|
$
|
511
|
|
|
$
|
740
|
|
Weighted average interest rate of commercial paper borrowings
|
1.43
|
%
|
|
0.79
|
%
|
||
Weighted average maturity period of commercial paper borrowings (days)
|
12
|
|
|
15
|
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
June 30,
2017 |
|
September 30,
2016 |
||||
Fixed-rate notes due:
|
|
|
|
|
|
||||
July 2019
|
1.95%
|
|
$
|
300
|
|
|
$
|
—
|
|
July 2019
|
5.25%
|
|
300
|
|
|
300
|
|
||
November 2021
|
3.10%
|
|
250
|
|
|
250
|
|
||
March 2022
|
2.80%
|
|
1,100
|
|
|
—
|
|
||
December 2023
|
3.70%
|
|
400
|
|
|
400
|
|
||
March 2024
|
3.20%
|
|
950
|
|
|
—
|
|
||
March 2027
|
3.50%
|
|
1,300
|
|
|
—
|
|
||
December 2043
|
4.80%
|
|
400
|
|
|
400
|
|
||
April 2047
|
4.35%
|
|
1,000
|
|
|
—
|
|
||
Variable-rate term loan due:
|
|
|
|
|
|
||||
April 2020
|
1 month LIBOR + 1.25%
(1)
|
|
1,462
|
|
|
—
|
|
||
Variable-rate note due:
|
|
|
|
|
|
||||
December 2016
|
3 month LIBOR + 0.35%
|
|
—
|
|
|
300
|
|
||
Fair value swap adjustment (see Notes 14 and 15)
|
|
|
15
|
|
|
35
|
|
||
Total
|
|
|
7,477
|
|
|
1,685
|
|
||
Less unamortized debt issuance costs and discounts
|
|
|
60
|
|
|
11
|
|
||
Less current portion of long-term debt
|
|
|
149
|
|
|
300
|
|
||
Long-term Debt, Net
|
|
|
$
|
7,268
|
|
|
$
|
1,374
|
|
(1)
The Company has the option to elect a one, two, three or six-month LIBOR interest rate and has elected the one-month rate during the third quarter of 2017. The one-month LIBOR rate at June 30, 2017 was approximately 1.13 percent.
|
10.
|
Retirement Benefits
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost
|
$
|
4
|
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
28
|
|
|
32
|
|
|
1
|
|
|
1
|
|
||||
Expected return on plan assets
|
(61
|
)
|
|
(60
|
)
|
|
—
|
|
|
—
|
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
|
||||||
Prior service credit
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Net actuarial loss
|
23
|
|
|
20
|
|
|
2
|
|
|
2
|
|
||||
Net benefit expense (income)
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
$
|
3
|
|
|
$
|
3
|
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Nine Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost
|
$
|
10
|
|
|
$
|
8
|
|
|
$
|
2
|
|
|
$
|
2
|
|
Interest cost
|
83
|
|
|
95
|
|
|
4
|
|
|
4
|
|
||||
Expected return on plan assets
|
(181
|
)
|
|
(179
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Prior service credit
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Net actuarial loss
|
69
|
|
|
59
|
|
|
6
|
|
|
6
|
|
||||
Net benefit expense (income)
|
$
|
(19
|
)
|
|
$
|
(18
|
)
|
|
$
|
10
|
|
|
$
|
10
|
|
11.
|
Stock-Based Compensation and Earnings Per Share
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Stock-based compensation expense included in:
|
|
|
|
|
|
|
|
||||||||
Product cost of sales
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
6
|
|
|
$
|
6
|
|
Selling, general and administrative expenses
|
6
|
|
|
5
|
|
|
15
|
|
|
15
|
|
||||
Total
|
$
|
8
|
|
|
$
|
6
|
|
|
$
|
21
|
|
|
$
|
21
|
|
Income tax benefit
|
$
|
3
|
|
|
$
|
2
|
|
|
$
|
7
|
|
|
$
|
7
|
|
|
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, 2017
|
667.2
|
|
$
|
17.26
|
|
|
129.0
|
|
$
|
87.38
|
|
|
224.2
|
|
$
|
91.94
|
|
Nine months ended June 30, 2016
|
641.5
|
|
$
|
17.75
|
|
|
131.0
|
|
$
|
85.13
|
|
|
70.4
|
|
$
|
85.91
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
519
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Net income
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
520
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Denominator for basic earnings per share – weighted average common shares
|
158.2
|
|
|
130.0
|
|
|
139.8
|
|
|
130.7
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
1.1
|
|
|
1.0
|
|
|
1.1
|
|
|
1.1
|
|
||||
Performance shares, restricted stock and restricted stock units
|
0.6
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
||||
Dilutive potential common shares
|
1.7
|
|
|
1.5
|
|
|
1.6
|
|
|
1.6
|
|
||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
159.9
|
|
|
131.5
|
|
|
141.4
|
|
|
132.3
|
|
||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.13
|
|
|
$
|
1.65
|
|
|
$
|
3.52
|
|
|
$
|
3.97
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Basic earnings per share
|
$
|
1.13
|
|
|
$
|
1.65
|
|
|
$
|
3.52
|
|
|
$
|
3.98
|
|
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.12
|
|
|
$
|
1.63
|
|
|
$
|
3.48
|
|
|
$
|
3.92
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.12
|
|
|
$
|
1.63
|
|
|
$
|
3.48
|
|
|
$
|
3.93
|
|
12.
|
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, 2017
|
$
|
(85
|
)
|
|
$
|
(1,786
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1,873
|
)
|
Other comprehensive income before reclassifications
|
50
|
|
|
—
|
|
|
2
|
|
|
52
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
15
|
|
|
—
|
|
|
15
|
|
||||
Net current period other comprehensive income
|
50
|
|
|
15
|
|
|
2
|
|
|
67
|
|
||||
Balance at June 30, 2017
|
$
|
(35
|
)
|
|
$
|
(1,771
|
)
|
|
$
|
—
|
|
|
$
|
(1,806
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2016
|
$
|
(76
|
)
|
|
$
|
(1,818
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1,898
|
)
|
Other comprehensive income before reclassifications
|
41
|
|
|
—
|
|
|
2
|
|
|
43
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
47
|
|
|
2
|
|
|
49
|
|
||||
Net current period other comprehensive income
|
41
|
|
|
47
|
|
|
4
|
|
|
92
|
|
||||
Balance at June 30, 2017
|
$
|
(35
|
)
|
|
$
|
(1,771
|
)
|
|
$
|
—
|
|
|
$
|
(1,806
|
)
|
|
|
|
|
|
|
|
|
||||||||
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
|
)
|
13.
|
Income Taxes
|
14.
|
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, 2017
|
|
September 30, 2016
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
60
|
|
|
$
|
55
|
|
Deferred compensation plan investments
|
Level 2
|
|
23
|
|
|
—
|
|
||
Interest rate swap assets
|
Level 2
|
|
15
|
|
|
35
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
9
|
|
|
11
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(6
|
)
|
|
(13
|
)
|
||
Contingent consideration for ICG acquisition
|
Level 3
|
|
(14
|
)
|
|
(13
|
)
|
||
Contingent consideration for Pulse.aero acquisition
|
Level 3
|
|
(3
|
)
|
|
—
|
|
|
Asset (Liability)
|
||||||||||||||
|
June 30, 2017
|
|
September 30, 2016
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
578
|
|
|
$
|
578
|
|
|
$
|
340
|
|
|
$
|
340
|
|
Short-term debt
|
(511
|
)
|
|
(511
|
)
|
|
(740
|
)
|
|
(740
|
)
|
||||
Long-term debt
|
(7,253
|
)
|
|
(7,478
|
)
|
|
(1,339
|
)
|
|
(1,508
|
)
|
15.
|
Derivative Financial Instruments
|
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
9
|
|
|
$
|
11
|
|
Interest rate swaps
|
Other assets
|
|
15
|
|
|
35
|
|
||
Total
|
|
|
$
|
24
|
|
|
$
|
46
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
6
|
|
|
$
|
13
|
|
|
|
|
Amount of Gain (Loss)
|
|
Amount of Gain (Loss)
|
||||||||||||
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
Location of Gain (Loss)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Fair Value Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Interest expense
|
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
6
|
|
|
$
|
8
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain (loss) recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
2
|
|
|
—
|
|
|
2
|
|
|
(1
|
)
|
||||
Amount of loss reclassified from AOCL into income
|
Cost of sales
|
|
—
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(6
|
)
|
||||
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
|
(1
|
)
|
16.
|
Guarantees and Indemnifications
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Balance at beginning of year
|
$
|
87
|
|
|
$
|
89
|
|
Warranty costs incurred
|
(39
|
)
|
|
(32
|
)
|
||
Product warranty accrual
|
43
|
|
|
29
|
|
||
Changes in estimates for prior years
|
(6
|
)
|
|
(3
|
)
|
||
Increase from acquisitions
|
117
|
|
|
—
|
|
||
Balance at June 30, 2017
|
$
|
202
|
|
|
$
|
83
|
|
17.
|
Contractual Obligations and Other Commitments
|
|
|
Payments by Period
|
||||||||||||||||||||||||||
(in millions)
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
||||||||||||||
Non-cancelable operating leases
|
|
$
|
74
|
|
|
$
|
81
|
|
|
$
|
66
|
|
|
$
|
50
|
|
|
$
|
39
|
|
|
$
|
197
|
|
|
$
|
507
|
|
Purchase contracts
|
|
38
|
|
|
35
|
|
|
30
|
|
|
27
|
|
|
24
|
|
|
47
|
|
|
201
|
|
|||||||
Long-term debt
|
|
375
|
|
|
150
|
|
|
750
|
|
|
1,125
|
|
|
—
|
|
|
5,400
|
|
|
7,800
|
|
|||||||
Interest on long-term debt
|
|
120
|
|
|
253
|
|
|
254
|
|
|
213
|
|
|
192
|
|
|
1,926
|
|
|
2,958
|
|
|||||||
Total
|
|
$
|
607
|
|
|
$
|
519
|
|
|
$
|
1,100
|
|
|
$
|
1,415
|
|
|
$
|
255
|
|
|
$
|
7,570
|
|
|
$
|
11,466
|
|
18.
|
Environmental Matters
|
19.
|
Legal Matters
|
20.
|
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
|
|
21.
|
Business Segment Information
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales:
|
|
|
|
|
|
|
|
||||||||
Interior Systems
|
$
|
695
|
|
|
$
|
—
|
|
|
$
|
695
|
|
|
$
|
—
|
|
Commercial Systems
|
658
|
|
|
612
|
|
|
1,801
|
|
|
1,785
|
|
||||
Government Systems
|
558
|
|
|
555
|
|
|
1,598
|
|
|
1,544
|
|
||||
Information Management Services
|
183
|
|
|
167
|
|
|
535
|
|
|
485
|
|
||||
Total sales
|
$
|
2,094
|
|
|
$
|
1,334
|
|
|
$
|
4,629
|
|
|
$
|
3,814
|
|
|
|
|
|
|
|
|
|
||||||||
Segment operating earnings:
|
|
|
|
|
|
|
|
|
|
||||||
Interior Systems
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
Commercial Systems
|
144
|
|
|
141
|
|
|
401
|
|
|
401
|
|
||||
Government Systems
|
123
|
|
|
115
|
|
|
333
|
|
|
309
|
|
||||
Information Management Services
|
39
|
|
|
26
|
|
|
105
|
|
|
79
|
|
||||
Total segment operating earnings
|
386
|
|
|
282
|
|
|
919
|
|
|
789
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense
(1)
|
(77
|
)
|
|
(16
|
)
|
|
(122
|
)
|
|
(48
|
)
|
||||
Stock-based compensation
|
(8
|
)
|
|
(6
|
)
|
|
(21
|
)
|
|
(21
|
)
|
||||
General corporate, net
|
(16
|
)
|
|
(13
|
)
|
|
(39
|
)
|
|
(36
|
)
|
||||
Transaction and integration costs
(1)
|
(64
|
)
|
|
—
|
|
|
(80
|
)
|
|
—
|
|
||||
Restructuring and asset impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||
Income from continuing operations before income taxes
|
221
|
|
|
247
|
|
|
657
|
|
|
639
|
|
||||
Income tax expense
|
(42
|
)
|
|
(33
|
)
|
|
(165
|
)
|
|
(120
|
)
|
||||
Income from continuing operations
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
519
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Interior Systems sales categories:
|
|
|
|
|
|
|
|
||||||||
Interior products and services
|
$
|
400
|
|
|
$
|
—
|
|
|
$
|
400
|
|
|
$
|
—
|
|
Aircraft seating
|
295
|
|
|
—
|
|
|
295
|
|
|
—
|
|
||||
Interior Systems sales
|
695
|
|
|
—
|
|
|
695
|
|
|
—
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Commercial Systems sales categories:
|
|
|
|
|
|
|
|
|
|||||||
Air transport aviation electronics
|
405
|
|
|
370
|
|
|
1,098
|
|
|
1,052
|
|
||||
Business and regional aviation electronics
|
253
|
|
|
242
|
|
|
703
|
|
|
733
|
|
||||
Commercial Systems sales
|
658
|
|
|
612
|
|
|
1,801
|
|
|
1,785
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Government Systems sales categories:
|
|
|
|
|
|
|
|
||||||||
Avionics
|
342
|
|
|
376
|
|
|
1,028
|
|
|
1,026
|
|
||||
Communication and navigation
|
216
|
|
|
179
|
|
|
570
|
|
|
518
|
|
||||
Government Systems sales
|
558
|
|
|
555
|
|
|
1,598
|
|
|
1,544
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Information Management Services sales
|
183
|
|
|
167
|
|
|
535
|
|
|
485
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total sales
|
$
|
2,094
|
|
|
$
|
1,334
|
|
|
$
|
4,629
|
|
|
$
|
3,814
|
|
(in millions)
|
June 30, 2017
|
|
September 30, 2016
|
||||
Identifiable assets:
|
|
|
|
||||
Interior Systems
|
$
|
10,346
|
|
|
$
|
—
|
|
Commercial Systems
|
3,272
|
|
|
3,050
|
|
||
Government Systems
|
2,097
|
|
|
2,052
|
|
||
Information Management Services
|
1,903
|
|
|
1,906
|
|
||
Corporate
|
733
|
|
|
691
|
|
||
Total identifiable assets
|
$
|
18,351
|
|
|
$
|
7,699
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
OVERVIEW AND OUTLOOK
|
•
|
total sales of about $6.8 billion (From $6.7 billion to $6.8 billion)
|
•
|
total segment operating margins of 19.0 percent to 20.0 percent
(1)
|
•
|
earnings per share of $4.85 to $5.05 (From $4.50 to $4.70)
(2)
|
•
|
adjusted earnings per share of $5.95 to $6.15
(2)
|
•
|
cash provided by operating activities of $900 million to $1.0 billion, which includes an expected $50 million net increase in pre-production engineering costs included in inventory
|
•
|
capital expenditures of about $250 million
|
•
|
total research and development investment of about $1.1 billion (From $1.05 billion to $1.15 billion)
(3)
|
•
|
full year income tax rate of 24 percent to 25 percent (From 27 percent to 28 percent)
(4)
|
|
|
Year Ending
|
||||||
|
|
September 30, 2017 (estimated)
|
||||||
(dollars in millions, impact to forecasted net income; except per share amounts)
|
|
Low End of Guidance Range
|
|
High End of Guidance Range
|
||||
Forecasted net income (GAAP)
|
|
$
|
710
|
|
|
$
|
740
|
|
Estimated B/E Aerospace acquisition-related expenses
|
|
~90
|
||||||
Estimated amortization of acquisition-related intangible assets
|
|
~100
|
||||||
Estimated amortization of acquired contract liability
|
|
~(80)
|
||||||
Estimated amortization of inventory fair value adjustment
|
|
~55
|
||||||
Forecasted adjusted net income (non-GAAP)
|
|
$
|
875
|
|
|
$
|
905
|
|
|
|
|
|
|
||||
Forecasted earnings per share (GAAP)
|
|
$
|
4.85
|
|
|
$
|
5.05
|
|
Estimated B/E Aerospace acquisition-related expenses
|
|
~0.60
|
||||||
Estimated amortization of acquisition-related intangible assets
|
|
~0.70
|
||||||
Estimated amortization of acquired contract liability
|
|
~(0.55)
|
||||||
Estimated amortization of inventory fair value adjustment
|
|
~0.35
|
||||||
Forecasted adjusted earnings per share (non-GAAP)
|
|
$
|
5.95
|
|
|
$
|
6.15
|
|
RESULTS OF OPERATIONS
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total sales
|
$
|
2,094
|
|
|
$
|
1,334
|
|
|
$
|
4,629
|
|
|
$
|
3,814
|
|
Percent increase
|
57
|
%
|
|
|
|
21
|
%
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total cost of sales
|
$
|
1,524
|
|
|
$
|
915
|
|
|
$
|
3,270
|
|
|
$
|
2,658
|
|
Percent of total sales
|
72.8
|
%
|
|
68.6
|
%
|
|
70.6
|
%
|
|
69.7
|
%
|
•
|
$564 million of cost of sales from the recently acquired B/E Aerospace business
|
•
|
a $37 million increase from higher organic sales, which was favorably impacted by benefits from cost savings initiatives
|
•
|
a $7 million combined increase in employee incentive compensation costs in Commercial Systems and Government Systems
|
•
|
$564 million of cost of sales from the recently acquired B/E Aerospace business
|
•
|
an $86 million increase from higher organic sales, which was unfavorably impacted by sales mix
|
•
|
partially offset by $33 million of asset and restructuring charges recorded in the nine months ended June 30, 2016
|
•
|
further offset by benefits from cost savings initiatives and a $7 million combined decrease in company-funded R&D expense in Commercial Systems, Government Systems and Information Management Services, as detailed in the Research and Development Expense section below
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Customer-funded:
|
|
|
|
|
|
|
|
||||||||
Interior Systems
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
15
|
|
|
$
|
—
|
|
Commercial Systems
|
68
|
|
|
58
|
|
|
199
|
|
|
166
|
|
||||
Government Systems
|
103
|
|
|
98
|
|
|
316
|
|
|
284
|
|
||||
Information Management Services
|
3
|
|
|
2
|
|
|
7
|
|
|
6
|
|
||||
Total customer-funded
|
189
|
|
|
158
|
|
|
537
|
|
|
456
|
|
||||
Company-funded:
|
|
|
|
|
|
|
|
||||||||
Interior Systems
|
56
|
|
|
—
|
|
|
56
|
|
|
—
|
|
||||
Commercial Systems
|
37
|
|
|
36
|
|
|
94
|
|
|
97
|
|
||||
Government Systems
|
17
|
|
|
20
|
|
|
53
|
|
|
56
|
|
||||
Information Management Services
(1)
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Total company-funded
|
110
|
|
|
56
|
|
|
203
|
|
|
154
|
|
||||
Total R&D expense
|
$
|
299
|
|
|
$
|
214
|
|
|
$
|
740
|
|
|
$
|
610
|
|
Percent of total sales
|
14.3
|
%
|
|
16.0
|
%
|
|
16.0
|
%
|
|
16.0
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Selling, general and administrative expenses
|
$
|
213
|
|
|
$
|
158
|
|
|
$
|
514
|
|
|
$
|
481
|
|
Percent of total sales
|
10.2
|
%
|
|
11.8
|
%
|
|
11.1
|
%
|
|
12.6
|
%
|
•
|
$53 million of SG&A costs from the recently acquired B/E Aerospace business
|
•
|
partially offset by $12 million of restructuring and asset impairment charges recorded in the three months ended December 31, 2015 and the benefits of cost savings initiatives
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Interest expense
|
$
|
77
|
|
|
$
|
16
|
|
|
$
|
122
|
|
|
$
|
48
|
|
•
|
$44 million of incremental interest on the new debt issued to fund the B/E Aerospace acquisition
|
•
|
$18 million of fees incurred during the three months ended June 30, 2017 associated with the bridge credit agreement entered into in December 2016 pursuant to the acquisition of B/E Aerospace
|
•
|
$44 million of incremental interest on the new debt issued to fund the B/E Aerospace acquisition
|
•
|
$29 million of fees incurred during the nine months ended June 30, 2017 associated with the bridge credit agreement entered into in December 2016 pursuant to the acquisition of B/E Aerospace
|
•
|
higher interest rates on commercial paper for the nine months ended June 30, 2017 compared to the same period in the prior year
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income from continuing operations
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
519
|
|
Percent of sales
|
8.5
|
%
|
|
16.0
|
%
|
|
10.6
|
%
|
|
13.6
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations, net of taxes
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||
Net income
|
$
|
179
|
|
|
$
|
214
|
|
|
$
|
492
|
|
|
$
|
520
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share from continuing operations
|
$
|
1.12
|
|
|
$
|
1.63
|
|
|
$
|
3.48
|
|
|
$
|
3.92
|
|
Diluted earnings per share from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.12
|
|
|
$
|
1.63
|
|
|
$
|
3.48
|
|
|
$
|
3.93
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares
|
159.9
|
|
|
131.5
|
|
|
141.4
|
|
|
132.3
|
|
•
|
$82 million of pre-tax transaction, integration and financing costs associated with the acquisition of B/E Aerospace
|
•
|
$44 million of incremental interest expense on the new debt issued principally to fund the B/E Aerospace acquisition
|
•
|
a $9 million increase in income tax expense primarily due to a $41 million valuation allowance release that occurred in the three months ended June 30, 2016, partially offset by an income tax benefit due to a lower estimated annual effective tax rate, which applies to year-to-date earnings
|
•
|
partially offset by an $80 million increase in operating earnings from the recently acquired Interior Systems business, a $13 million increase in Information Management Services operating earnings, an $8 million increase in Government Systems operating earnings and a $3 million increase in Commercial Systems operating earnings
|
•
|
$109 million of pre-tax transaction, integration and financing costs associated with the acquisition of B/E Aerospace
|
•
|
a $45 million increase in income tax expense primarily due to the retroactive benefit from the reinstatement of the Federal R&D Tax Credit and a $41 million valuation allowance release that occurred in the nine months ended June 30, 2016, partially offset by an income tax benefit due to a lower estimated annual effective tax rate, which applies to year-to-date earnings
|
•
|
$44 million of incremental interest expense on the new debt issued to fund the B/E Aerospace acquisition
|
•
|
partially offset by an $80 million increase in operating earnings from the recently acquired Interior Systems business, a $26 million increase in Information Management Services operating earnings and a $24 million increase in Government Systems operating earnings
|
•
|
also offset by the absence of $45 million of pre-tax restructuring and asset impairment charges recorded in the nine months ended June 30, 2016
|
•
|
commercial aircraft seats, including an extensive line of super first class, first class, business class, economy class and regional aircraft seats
|
•
|
a full line of aircraft food and beverage preparation and storage equipment, including coffee and espresso makers, water boilers, beverage containers, refrigerators, freezers, chillers and a line of microwave, high efficiency convection and steam ovens
|
•
|
modular lavatory systems, wastewater management systems and galley systems
|
•
|
both chemical and gaseous aircraft oxygen storage, distribution and delivery systems, protective breathing equipment and a broad range of lighting products
|
•
|
business jet and general aviation interior products, including an extensive line of executive aircraft and helicopter seats, direct and indirect overhead lighting systems, exterior lighting systems, passenger and crew oxygen systems, air valve systems and high-end aircraft monuments
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Interior products and services
|
$
|
400
|
|
|
$
|
—
|
|
|
$
|
400
|
|
|
$
|
—
|
|
Aircraft seating
|
295
|
|
|
—
|
|
|
295
|
|
|
—
|
|
||||
Total
|
$
|
695
|
|
|
$
|
—
|
|
|
$
|
695
|
|
|
$
|
—
|
|
•
|
a $65 million increase in interior products and services sales, primarily due to increased original equipment deliveries of Airbus A350 galleys, Boeing 737 advanced lavatories and oxygen systems across multiple platforms
|
•
|
a $2 million increase in aircraft seating as higher deliveries of new economy, business class and business jet seats more than offset declines in super first class deliveries
|
•
|
a $177 million increase in interior products and services sales, primarily due to increased original equipment deliveries of Airbus A350 galleys, Boeing 737 advanced lavatories and oxygen systems across multiple platforms. In addition, favorable timing of cooling equipment deliveries offset reduced spares sales in the Middle East
|
•
|
partially offset by a $58 million reduction in aircraft seating driven by lower super first class deliveries to European and Middle East airlines as well as lower deliveries to business jet original equipment manufacturers
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
80
|
|
|
$
|
—
|
|
|
$
|
80
|
|
|
$
|
—
|
|
Percent of sales
|
11.5
|
%
|
|
—
|
%
|
|
11.5
|
%
|
|
—
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Air transport aviation electronics:
|
|
|
|
|
|
|
|
||||||||
Original equipment
|
$
|
245
|
|
|
$
|
234
|
|
|
$
|
669
|
|
|
$
|
631
|
|
Aftermarket
|
155
|
|
|
127
|
|
|
414
|
|
|
391
|
|
||||
Wide-body in-flight entertainment (IFE)
|
5
|
|
|
9
|
|
|
15
|
|
|
30
|
|
||||
Total air transport aviation electronics
|
405
|
|
|
370
|
|
|
1,098
|
|
|
1,052
|
|
||||
Business and regional aviation electronics:
|
|
|
|
|
|
|
|
|
|
||||||
Original equipment
|
129
|
|
|
133
|
|
|
360
|
|
|
402
|
|
||||
Aftermarket
|
124
|
|
|
109
|
|
|
343
|
|
|
331
|
|
||||
Total business and regional aviation electronics
|
253
|
|
|
242
|
|
|
703
|
|
|
733
|
|
||||
Total
|
$
|
658
|
|
|
$
|
612
|
|
|
$
|
1,801
|
|
|
$
|
1,785
|
|
Percent increase
|
8
|
%
|
|
|
|
1
|
%
|
|
|
•
|
original equipment sales
increased
$11 million
, or
5 percent
, primarily due to higher Airbus A350 and Boeing 737 production rates, partially offset by lower legacy wide-body production rates
|
•
|
aftermarket sales
increased
$28 million
, or
22 percent
, primarily due to higher used aircraft equipment sales of $24 million, higher regulatory mandate upgrade activity and higher spares provisioning, partially offset by lower retrofit and service and support sales
|
•
|
wide-body IFE sales
decreased
$4 million
, or
44 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$4 million
, or
3 percent
, primarily due to lower business aircraft OEM production rates, partially offset by higher Bombardier CSeries production rates and Global 7000/8000 equipment deliveries in support of entry into service
|
•
|
aftermarket sales
increased
$15 million
, or
14 percent
, primarily due to higher flight deck retrofit and regulatory mandate upgrade activity, partially offset by lower simulation hardware sales
|
•
|
original equipment sales
increased
$38 million
, or
6 percent
, primarily due to higher Airbus A350 production rates, increased customer-funded development program revenues and higher Boeing 737 production rates, partially offset by lower wide-body production rates
|
•
|
aftermarket sales
increased
$23 million
, or
6 percent
, primarily due to higher used aircraft equipment sales and higher regulatory mandate upgrade activity, partially offset by lower retrofit and service and support sales
|
•
|
wide-body IFE sales
decreased
$15 million
, or
50 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$42 million
, or
10 percent
, primarily due to lower business aircraft OEM production rates, partially offset by higher product deliveries for the Bombardier CSeries program and higher customer-funded development program revenues
|
•
|
aftermarket sales
increased
$12 million
, or
4 percent
, primarily due to higher flight deck retrofit activity
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
144
|
|
|
$
|
141
|
|
|
$
|
401
|
|
|
$
|
401
|
|
Percent of sales
|
21.9
|
%
|
|
23.0
|
%
|
|
22.3
|
%
|
|
22.5
|
%
|
•
|
operating earnings were positively impacted by a $46 million increase in sales volume discussed in the Commercial Systems sales section above, however, the benefits were tempered by sales mix as lower margin used aircraft equipment sales increased and higher margin business jet OEM sales decreased
|
•
|
partially offset by a $4 million increase in amortization of pre-production engineering costs and a $3 million increase in employee incentive compensation costs
|
•
|
the benefits of a $16 million increase in sales were mostly offset by sales mix, as lower margin customer-funded development revenues and used aircraft equipment sales increased and higher margin business jet OEM sales decreased
|
•
|
SG&A costs decreased, primarily due to cost savings initiatives
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Avionics
|
$
|
342
|
|
|
$
|
376
|
|
|
$
|
1,028
|
|
|
$
|
1,026
|
|
Communication and navigation
|
216
|
|
|
179
|
|
|
570
|
|
|
518
|
|
||||
Total
|
$
|
558
|
|
|
$
|
555
|
|
|
$
|
1,598
|
|
|
$
|
1,544
|
|
Percent increase
|
1
|
%
|
|
|
|
3
|
%
|
|
|
•
|
a $15 million decrease from lower fixed wing sales, primarily due to lower deliveries for various fighter platforms as a result of production issues and the wind-down of legacy tanker hardware deliveries, partially offset by higher development program sales
|
•
|
$19 million in other net decreases to revenue, primarily due to lower sales on various rotary wing platforms
|
•
|
a $17 million increase from higher legacy communication sales
|
•
|
an $11 million increase due to higher deliveries of GPS-related products
|
•
|
$9 million in other net increases to revenue, primarily due to higher test and training range sales
|
•
|
a $24 million increase from higher simulation and training sales
|
•
|
partially offset by $10 million in lower fixed wing sales, primarily due to the wind-down of legacy tanker hardware deliveries and lower deliveries for various fighter platforms as a result of production issues, net of higher development program sales
|
•
|
in addition, $12 million in other net decreases to revenue, primarily driven by lower deliveries on various rotary wing platforms
|
•
|
a $19 million increase from higher data links sales
|
•
|
a $14 million increase from higher deliveries of GPS-related products
|
•
|
$19 million in other net increases to revenue, primarily due to higher test and training range sales and higher legacy communication sales
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
123
|
|
|
$
|
115
|
|
|
$
|
333
|
|
|
$
|
309
|
|
Percent of sales
|
22.0
|
%
|
|
20.7
|
%
|
|
20.8
|
%
|
|
20.0
|
%
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
183
|
|
|
$
|
167
|
|
|
$
|
535
|
|
|
$
|
485
|
|
Percent increase
|
10
|
%
|
|
|
|
10
|
%
|
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
39
|
|
|
$
|
26
|
|
|
$
|
105
|
|
|
$
|
79
|
|
Percent of sales
|
21.3
|
%
|
|
15.6
|
%
|
|
19.6
|
%
|
|
16.3
|
%
|
•
|
a $16 million increase in sales volume discussed in Information Management Services sales section above, which resulted in a $7 million increase in cost and an increase in earnings of $9 million, or 56 percent of the higher sales volume. The margins on the sales increase were favorably impacted by benefits from cost savings initiatives
|
•
|
operating earnings were positively impacted by the favorable resolution of certain prior year claims associated with international business jet support services
|
•
|
a $50 million increase in sales volume discussed in the Information Managements Services sales section above, which resulted in a $27 million increase in cost and an increase in earnings of $23 million, or 46 percent of the higher sales volume. The margins on the sales increase were favorably impacted by benefits from cost savings initiatives
|
•
|
operating earnings were positively impacted by the favorable resolution of certain prior year claims associated with international business jet support services
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
General corporate, net
|
$
|
16
|
|
|
$
|
13
|
|
|
$
|
39
|
|
|
$
|
36
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Pension benefits
|
$
|
(6
|
)
|
|
$
|
(6
|
)
|
|
$
|
(19
|
)
|
|
$
|
(18
|
)
|
Other retirement benefits
|
3
|
|
|
3
|
|
|
10
|
|
|
10
|
|
||||
Net benefit (income)
|
$
|
(3
|
)
|
|
$
|
(3
|
)
|
|
$
|
(9
|
)
|
|
$
|
(8
|
)
|
FINANCIAL CONDITION AND LIQUIDITY
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash provided by operating activities from continuing operations
|
$
|
416
|
|
|
$
|
223
|
|
•
|
higher cash receipts from customers, which increased by $1.035 billion to $4.579 billion in the nine months ended
June 30, 2017
compared to $3.544 billion in the nine months ended June 30, 2016, primarily due to cash receipts of the recently acquired B/E Aerospace business. The increase in cash receipts from customers was more than the sales volume increase of $815 million due to the timing of sales relative to the collection of receivables from customers
|
•
|
the above item was partially offset by higher payments for production inventory and other operating costs, which increased $654 million to $3.694 billion for the nine months ended June 30, 2017, compared to $3.040 billion during the nine months ended June 30, 2016, primarily due to cash payments of the recently acquired B/E Aerospace business
|
•
|
also offset by cash payments for income taxes, which increased $126 million to $202 million during the nine months ended
June 30, 2017
, compared to $76 million during the same period in the prior year. The increase 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 in the three months ended December 31, 2015, as well as pre-tax income associated with the recently acquired B/E Aerospace business
|
•
|
further offset by payments for transaction costs associated with the B/E Aerospace acquisition of $80 million during the nine months ended
June 30, 2017
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash (used for) investing activities from continuing operations
|
$
|
(3,599
|
)
|
|
$
|
(151
|
)
|
•
|
$3.417 billion in cash consideration paid, net of cash acquired, related to the April 2017 acquisition of B/E Aerospace
|
•
|
a $32 million increase in cash payments for property additions for the nine months ended
June 30, 2017
, compared to the same period in the prior year
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash provided by (used for) financing activities from continuing operations
|
$
|
3,415
|
|
|
$
|
(13
|
)
|
•
|
$3.980 billion related to financing of the April 2017 B/E Aerospace acquisition. $6.099 billion in net proceeds from the issuance of long-term debt were principally used to repay $2.119 billion of assumed B/E Aerospace debt, finance the cash portion of the B/E Aerospace purchase price, pay related transaction fees and expenses and repay approximately $300 million of the Company's outstanding commercial paper borrowings
|
•
|
a decrease in cash repurchases of common stock of $215 million to $46 million during the nine months ended
June 30, 2017
, compared to $261 million repurchased during the same period in the prior year
|
•
|
partially offset by a $442 million decrease in the net proceeds from short-term commercial paper borrowings and repayment of $338 million of long-term debt
|
(in millions)
|
June 30,
2017 |
|
September 30,
2016 |
||||
Cash and cash equivalents
|
$
|
578
|
|
|
$
|
340
|
|
|
|
|
|
||||
Short-term debt
|
(511
|
)
|
|
(740
|
)
|
||
Long-term debt, net
|
(7,268
|
)
|
|
(1,374
|
)
|
||
Total debt
|
$
|
(7,779
|
)
|
|
$
|
(2,114
|
)
|
Total equity
|
$
|
5,609
|
|
|
$
|
2,084
|
|
Debt to total capitalization
(1)
|
58
|
%
|
|
50
|
%
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F2
|
|
BBB
|
|
Stable
|
Moody’s Investors Service
|
|
P-2
|
|
Baa2
|
|
Stable
|
Standard & Poor’s
|
|
A-2
|
|
BBB
|
|
Stable
|
|
|
Payments by Period
|
||||||||||||||||||
(in millions)
|
|
Total
|
|
2017
|
|
2018 - 2019
|
|
2020 - 2021
|
|
Thereafter
|
||||||||||
Long-term debt
|
|
$
|
7,800
|
|
|
$
|
375
|
|
|
$
|
900
|
|
|
$
|
1,125
|
|
|
$
|
5,400
|
|
Interest on long-term debt
|
|
2,958
|
|
|
120
|
|
|
507
|
|
|
405
|
|
|
1,926
|
|
|||||
Non-cancelable operating leases
|
|
507
|
|
|
74
|
|
|
147
|
|
|
89
|
|
|
197
|
|
|||||
Non-cancelable capital leases, including interest
|
|
76
|
|
|
6
|
|
|
11
|
|
|
11
|
|
|
48
|
|
|||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase orders
|
|
1,841
|
|
|
1,490
|
|
|
286
|
|
|
58
|
|
|
7
|
|
|||||
Purchase contracts
|
|
201
|
|
|
38
|
|
|
65
|
|
|
51
|
|
|
47
|
|
|||||
Total
|
|
$
|
13,383
|
|
|
$
|
2,103
|
|
|
$
|
1,916
|
|
|
$
|
1,739
|
|
|
$
|
7,625
|
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
CAUTIONARY STATEMENT
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
|
|
June 30, 2017
|
||||||||
(in millions)
|
|
Interest Rate
|
|
Carrying Value
|
|
Fair Value
|
||||
$1,000 Notes due 2047
|
|
4.35%
|
|
$
|
1,000
|
|
|
$
|
1,043
|
|
$400 Notes due 2043
|
|
4.80%
|
|
400
|
|
|
442
|
|
||
$1,300 Notes due 2027
|
|
3.50%
|
|
1,300
|
|
|
1,319
|
|
||
$950 Notes due 2024
|
|
3.20%
|
|
950
|
|
|
960
|
|
||
$400 Notes due 2023
|
|
3.70%
|
|
400
|
|
|
417
|
|
||
$1,100 Notes due 2022
|
|
2.80%
|
|
1,100
|
|
|
1,109
|
|
||
$250 Notes due 2021
|
|
3.10%
|
|
250
|
|
|
256
|
|
||
$1,500 Term Loan due 2020
|
|
1 month LIBOR + 1.25%
|
|
1,462
|
|
|
1,462
|
|
||
$300 Notes due 2019
|
|
5.25%
|
|
300
|
|
|
319
|
|
||
$300 Notes due 2019
|
|
1.95%
|
|
300
|
|
|
300
|
|
Item 4.
|
Controls and Procedures.
|
•
|
the diversion of management's attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management's attention to the merger
|
•
|
managing a larger combined company
|
•
|
maintaining employee morale and retaining key management and other employees
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process
|
•
|
retaining existing business and operational relationships and attracting new business and operational relationships
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations
|
•
|
coordinating geographically separate organizations
|
•
|
unanticipated issues in integrating information technology, communications and other systems
|
•
|
unforeseen expenses or delays associated with the merger.
|
•
|
consolidating with or merging into any other corporation or conveying or transferring all or substantially all its properties and assets
|
•
|
incurring secured debt
|
•
|
entering into sale and leaseback transactions
|
•
|
designating subsidiaries as restricted or unrestricted
|
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, 2017 through April 30, 2017
|
|
200,000
|
|
|
$
|
105.12
|
|
|
200,000
|
|
|
$
|
104
|
million
|
May 1, 2017 through May 31, 2017
|
|
180,000
|
|
|
103.42
|
|
|
180,000
|
|
|
85
|
million
|
||
June 1, 2017 through June 30, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
285
|
million
|
||
Total/Average
|
|
380,000
|
|
|
$
|
104.32
|
|
|
380,000
|
|
|
|
|
|
|
|
|
|
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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