Rockwell Collins, Inc. (NYSE: COL) today reported sales for the
third quarter of fiscal year 2018 of $2.208 billion, a 5% increase
from the same period in fiscal year 2017. Third quarter fiscal year
2018 earnings per share were $1.66 compared to $1.12 in the prior
year's third quarter. Earnings per share in the third quarter of
fiscal year 2018 includes a 23 cent charge relating to the
settlement of a contract matter and the write-down to fair value of
assets associated with an engineered components business classified
as held for sale as of June 30, 2018. In addition, earnings per
share in the third quarter of fiscal year 2018 includes a 42 cent
discrete benefit from the enactment of the Tax Cuts and Jobs
Act.
Adjusted earnings per share for the third quarter of fiscal year
2018 was $1.73 compared to $1.64 in the prior year's third quarter
(see the supplemental schedule in this press release for a
reconciliation between GAAP earnings per share and adjusted
earnings per share).
"In addition to the solid business performance for the quarter,
we have spent significant energy preparing for the upcoming merger
with United Technologies Corporation," said Rockwell Collins Chief
Executive Officer and President, Kelly Ortberg. "I'm confident that
those efforts, along with strong market conditions, will allow us
to hit the ground running at the anticipated close."
Following is a discussion of fiscal year 2018 third quarter
sales and earnings for each business segment.
Commercial Systems
Commercial Systems, which provides aviation electronics systems,
products and services to air transport, business and regional
aircraft manufacturers and airlines worldwide, achieved 2018 third
quarter results as summarized below.
(dollars in millions)
Q3 FY 18 Q3 FY 17
Inc/(Dec) Commercial Systems sales Original equipment
$ 393 $ 374 5
%
Aftermarket 273 279 (2 )% Wide-body in-flight entertainment 3
5 (40 )% Total Commercial Systems sales $ 669
$ 658 2
%
Operating earnings $ 148 $ 144 3
%
Operating margin rate 22.1 % 21.9 % 20 bps
- Original equipment sales increased due
to higher air transport narrow-body and business jet product
deliveries, partially offset by lower legacy wide-body production
rates and customer-funded development program revenues.
- Aftermarket sales decreased due to
lower used aircraft equipment sales of $22 million, partially
offset by higher service and support and regulatory mandate upgrade
activity.
- Commercial Systems operating earnings
increased $4 million and operating margin increased 20 basis points
over the prior year due to increased earnings from higher sales
volume and favorable sales mix, as higher margin equipment sales
increased and lower margin customer-funded development revenues and
used equipment sales decreased, partially offset by higher
company-funded R&D expense and higher pre-production
engineering amortization.
Interior Systems
Our Interior Systems segment was created with the acquisition of
B/E Aerospace on April 13, 2017. Interior Systems supplies a
comprehensive portfolio of cabin interior products and services to
aircraft manufacturers and airlines worldwide. Beginning in 2018,
thermal and electronic systems product lines previously included in
Interior products and services within the Interior Systems segment
are now being reported in the Government Systems segment. See the
supplemental schedule included in this press release for revised
fiscal year 2017 quarterly sales that conform to the current
presentation. Results from the third quarter of 2018 are summarized
below.
(dollars in millions)
Q3 FY 18 Q3 FY 17
Inc/(Dec) Interior Systems sales Interior products
and services $ 366 $ 352 4
%
Aircraft seating 293 295 (1
)%
Total Interior Systems sales $ 659 $ 647 2
%
Operating earnings $ 106 $ 72 47
%
Operating margin rate 16.1 % 11.1 % 500 bps
- Interior products and services sales
increased $14 million due primarily to the benefit of a full
quarter of sales in the current year, partially offset by lower
original equipment galley deliveries and the absence of oxygen
equipment retrofit deliveries in the prior year.
- Aircraft seating sales decreased $2
million due to the timing of linefit seating sales partially offset
by the benefit of a full quarter of sales in the current year.
- Operating earnings increased $34
million and operating margin increased 500 basis points over the
prior year. Operating earnings and margin were favorably impacted
by:
- The absence of a $44 million inventory
fair value purchase accounting adjustment in the prior year
- Cost synergy savings
- Favorable foreign currency exchange
rates
- The benefit of higher sales volume
The above items were partially offset by a
$19 million increase to certain product quality reserves and an $11
million increase in intangible asset amortization expense.
Government Systems
Government Systems provides a broad range of electronic
products, systems and services to customers including the U.S.
Department of Defense, other government agencies, civil agencies,
defense contractors and ministries of defense around the world.
Beginning in 2018, the product lines referenced above previously
included in the Interior Systems segment are now being reported in
Communication and navigation within the Government Systems segment.
See the supplemental schedule included in this press release for
revised fiscal year 2017 quarterly sales that conform to the
current presentation. Results from the third quarter of 2018 are
summarized below.
(dollars in millions)
Q3 FY 18 Q3 FY 17
Inc/(Dec) Government Systems sales Avionics $ 395 $
342 15
%
Communication and navigation 289 264 9
%
Total Government Systems sales $ 684 $ 606 13
%
Operating earnings $ 130 $ 131 (1
)%
Operating margin rate 19.0 % 21.6 % (260) bps
- Avionics sales increased $53 million
due primarily to higher development program revenues, higher
deliveries for various fighter platforms, and higher simulation and
training sales.
- Communication and navigation sales
increased $25 million due to higher thermal and electronics sales
and higher test and training range sales, partially offset by lower
legacy communication product deliveries.
- Operating earnings decreased $1 million
and operating margin declined 260 basis points from the prior year
due to higher company-funded R&D expense. In addition,
increased earnings from higher sales volume was unfavorably
impacted by lower margins on higher development program revenues
and thermal and electronic systems sales.
Information Management Services
Information Management Services (IMS) provides communication
services, systems integration and security solutions across the
aviation, airport, rail and nuclear security markets. Results from
the third quarter of 2018 are summarized below.
(dollars in millions)
Q3 FY 18 Q3 FY 17
Inc/(Dec) Information Management Services sales $ 196
$ 183 7
%
Operating earnings $ 37 $ 39 (5
)%
Operating margin rate 18.9 % 21.3 % (240) bps
- IMS sales increased due to 7% growth in
aviation related revenues driven by increased usage of connectivity
services. In addition, non-aviation revenues increased 7% as higher
airport program revenues were partially offset by the completion of
nuclear security mandate revenues.
- IMS operating earnings and operating
margin declined due to the absence of the favorable resolution of
certain international business jet support services claims in the
prior year as well as an increase in the allowance for doubtful
accounts related to specific customer collection risks in the
current year, partially offset by increased earnings from higher
sales volume.
Corporate and Financial Highlights
Income TaxesThe company's effective income tax rate on GAAP
earnings was (2.2)% for the third quarter of fiscal year 2018
compared to a rate of 19.0% for the same period last year. The
lower current year effective income tax rate was primarily due to a
$70 million reduction in deferred tax liabilities as a result of
the enactment of the Tax Cuts and Jobs Act ("the Act"), including
the impact of a $387 million discretionary pension contribution
made in July of 2018. In addition, the current year effective
income tax rate was lower due to a lower U.S. Federal statutory tax
rate under the Act, as well as benefits from the jurisdictional mix
of income as a result of the B/E Aerospace acquisition.
The company's effective income tax rate on adjusted earnings was
20.7% in the third quarter of 2018, compared to 27.1% in the same
period in the prior year. See the supplemental schedule included in
this press release for a reconciliation between GAAP earnings and
adjusted earnings.
Cash FlowCash provided by operating activities was $196 million
for the first nine months of fiscal year 2018, compared to cash
provided by operating activities of $416 million in the first nine
months of fiscal year 2017. The decrease in cash provided operating
activities was due primarily to higher payments for production
inventory and other operating costs, as well as higher employee
incentive payments, partially offset by higher cash receipts from
customers and lower income tax payments.
The Company paid a dividend on its common stock of 33 cent per
share, or $54 million, in the third quarter of 2018.
Conference CallIn light of the pending acquisition of
Rockwell Collins by United Technologies Corporation ("UTC"), the
Company will not hold a conference call for its quarterly results
for the third quarter of fiscal year 2018. The Company plans to
file its Form 10-Q for the third quarter with the SEC on or about
July 27, 2018.
Non-GAAP Financial InformationSee the supplemental
schedule included in this press release for a reconciliation of
non-GAAP measures including adjusted earnings per share, adjusted
income, and effective income tax rate on adjusted earnings.
Business HighlightsU.S. Air Force selected Rockwell
Collins for expanded avionics support on KC-135sRockwell
Collins was awarded multiple repair contracts by the U.S. Air Force
to support Global Air Traffic Management components on the entire
KC-135 tanker fleet.
Los Angeles County Sheriff’s Department selected UrgentLink®
for disaster communicationsRockwell Collins has deployed its
UrgentLink® disaster communications network to the Los Angeles (LA)
County area for the LA County Sheriff’s Department to provide a
countywide backup communications system for use during man-made or
natural disasters.
Australian Army extended contract with Rockwell Collins for
avionics support on CH-47F ChinooksRockwell Collins was
selected by the Australian Army to provide extended avionics
support for its fleet of CH-47F Chinook helicopters through a
performance-based logistics contract.
Rockwell Collins awarded contract from CAE to provide
training display for CC-295 full-flight simulatorRockwell
Collins was selected by CAE to provide
its Panorama™ collimated display for the CC-295
full-flight simulator that CAE will deliver in support of the Royal
Canadian Air Force’s Fixed-Wing Search and Rescue program.
Cascade Aerospace selects Rockwell Collins weather radar for
Royal Canadian Air Force C-130H fleetRockwell Collins was
selected by Cascade Aerospace to provide a modern weather radar for
the Royal Canadian Air Force C-130H fleet. The upgrade will provide
an enhanced level of weather threat detection to help RCAF pilots
perform unique search and rescue missions using the C-130.
Rockwell Collins signed agreement with Comlux to provide
complete solutions for VIP aircraftRockwell Collins and Comlux
signed a general terms agreement in which Rockwell Collins will
provide its VIP customers with a comprehensive product portfolio,
including avionics, cabin management, content and entertainment
options, seating, lighting and galley products, as well as
ARINCDirectSM connectivity and flight services.
Rockwell Collins’ expanded cabin portfolio selected for first
Airbus ACJ320neo VIP aircraftSwitzerland-based AMAC Aerospace
has selected a full suite of Rockwell Collins’ cabin products for
the world’s first Airbus ACJ320neo VIP aircraft.
TRU Simulation + Training selected Rockwell Collins to
provide integrated visual systems on its commercial full flight
simulatorsTRU Simulation + Training selected Rockwell Collins
to provide its integrated visual systems for 15 systems over the
next three years for several of TRU’s commercial full flight
simulator clients for commercial airlines and airframe
manufacturers.
About Rockwell CollinsRockwell Collins (NYSE: COL) is a
leader in aviation and high-integrity solutions for commercial and
military customers around the world. Every day we help pilots
safely and reliably navigate to the far corners of the earth; keep
warfighters aware and informed in battle; deliver millions of
messages for airlines and airports; and help passengers stay
connected and comfortable throughout their journey. As experts in
flight deck avionics, cabin electronics, cabin interiors,
information management, mission communications, and simulation and
training, we offer a comprehensive portfolio of products and
services that can transform our customers' futures. To find out
more, please visit www.rockwellcollins.com.
Safe Harbor StatementThis press release contains
statements, including statements regarding certain projections,
business trends and the proposed acquisition of Rockwell Collins by
United Technologies that are forward-looking statements as defined
in the Private Securities Litigation Reform Act of 1995. Actual
results may differ materially from those projected as a result of
certain risks and uncertainties, including but not limited to: the
financial condition of our customers and suppliers, including
bankruptcies; the health of the global economy, including potential
deterioration in economic and financial market conditions;
adjustments to the commercial OEM production rates and the
aftermarket; the impacts of natural disasters and pandemics,
including operational disruption, potential supply shortages and
other economic impacts; cybersecurity threats, including the
potential misappropriation of assets or sensitive information,
corruption of data or operational disruption; delays related to the
award of domestic and international contracts; delays in customer
programs, including new aircraft programs entering service later
than anticipated; the continued support for military transformation
and modernization programs; potential impact of volatility in oil
prices, currency exchange rates or interest rates on the commercial
aerospace industry or our business; the impact of terrorist events,
regional conflicts, or governmental sanctions on other nations on
the commercial aerospace industry; changes in domestic and foreign
government spending, budgetary, procurement and trade policies
adverse to our businesses; market acceptance of our new and
existing technologies, products and services; reliability of and
customer satisfaction with our products and services; potential
unavailability of our mission-critical data and voice communication
networks; unfavorable outcomes on or potential cancellation or
restructuring of contracts, orders or program priorities by our
customers; recruitment and retention of qualified personnel;
regulatory restrictions on air travel due to environmental
concerns; effective negotiation of collective bargaining agreements
by us, our customers, and our suppliers; performance of our
customers and subcontractors; risks inherent in development and
fixed-price contracts, particularly the risk of cost overruns; risk
of significant reduction to air travel or aircraft capacity beyond
our forecasts; our ability to execute to internal performance plans
such as restructuring activities, productivity and quality
improvements and cost reduction initiatives; achievement of B/E
Aerospace integration and synergy plans; continuing to maintain our
planned effective tax rates; our ability to develop contract
compliant systems and products on schedule and within anticipated
cost estimates; risk of fines and penalties related to
noncompliance with laws and regulations including compliance
requirements associated with U.S. Government work, export control,
anticorruption and environmental regulations; risk of asset
impairments; our ability to win new business and convert those
orders to sales within the fiscal year in accordance with our
annual operating plan; the uncertainties of the outcome of
lawsuits, claims and legal proceedings; the ability of Rockwell
Collins and United Technologies to receive the required regulatory
approvals for the proposed acquisition of Rockwell Collins by
United Technologies (and the risk that such approvals may result in
the imposition of conditions that could adversely affect the
combined company or the expected benefits of the transaction) and
to satisfy the other conditions to the closing of the transaction
on a timely basis or at all; the occurrence of events that may give
rise to a right of one or both of the parties to terminate the
merger agreement; negative effects of the announcement or the
consummation of the transaction on the market price of United
Technologies and/or Rockwell Collins common stock and/or on their
respective businesses, financial conditions, results of operations
and financial performance; risks relating to the value of United
Technologies’s shares to be issued in the transaction, significant
transaction costs and/or unknown liabilities; the possibility that
the anticipated benefits from the proposed transaction cannot be
realized in full or at all or may take longer to realize than
expected; risks associated with third party contracts containing
consent and/or other provisions that may be triggered by the
proposed transaction; risks associated with transaction-related
litigation; the possibility that costs or difficulties related to
the integration of Rockwell Collins’ operations with those of
United Technologies will be greater than expected; the outcome of
legally required consultation with employees, their works councils
or other employee representatives; and the ability of Rockwell
Collins and the combined company to retain and hire key personnel.
There can be no assurance that the proposed acquisition will in
fact be consummated in the manner described or at all. For
additional information on identifying factors that may cause actual
results to vary materially from those stated in forward-looking
statements, see the reports of United Technologies and Rockwell
Collins on forms 10-K, 10-Q and 8-K filed with or furnished to the
SEC from time to time. These forward-looking statements are made
only as of the date hereof.
Additional InformationIn connection with the proposed
transaction, United Technologies has filed a registration statement
on Form S-4 (File No. 333-220883), which includes a prospectus of
United Technologies and a proxy statement of Rockwell Collins (the
"proxy statement/prospectus"), and each party will file other
documents regarding the proposed transaction with the SEC. The
proxy statement/prospectus was declared effective by the SEC and
was mailed to Rockwell Collins shareowners. INVESTORS AND
SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT/PROSPECTUS
(INCLUDING ALL AMENDMENTS AND SUPPLEMENTS FILED THERETO) AND OTHER
RELEVANT DOCUMENTS FILED WITH THE SEC WHEN THEY BECOME AVAILABLE,
BECAUSE THEY WILL CONTAIN IMPORTANT INFORMATION. Investors
and security holders may obtain the proxy statement/prospectus free
of charge from the SEC's website or from United Technologies or
Rockwell Collins. The documents filed by United Technologies with
the SEC may be obtained free of charge at United Technologies'
website at www.utc.com or at
the SEC's website at www.sec.gov.
These documents may also be obtained free of charge from United
Technologies by requesting them by mail at UTC Corporate Secretary,
10 Farm Springs Road, Farmington, CT, 06032, by telephone
at 1-860-728-7870 or by
email at corpsec@corphq.utc.com.
The documents filed by Rockwell Collins with the SEC may be
obtained free of charge at Rockwell Collins' website
at www.rockwellcollins.com or at the SEC's
website at www.sec.gov. These
documents may also be obtained free of charge from Rockwell Collins
by requesting them by mail at Investor Relations, 400 Collins
Road NE, Cedar Rapids, Iowa 52498, or by
telephone at 1-319-295-7575.
No Offer or SolicitationThis communication shall not
constitute an offer to sell or the solicitation of an offer to buy
any securities, nor shall there be any sale of securities in any
jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offering of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the U.S. Securities Act of 1933, as
amended.
ROCKWELL COLLINS, INC.
SEGMENT SALES AND EARNINGS
INFORMATION
(Unaudited)
(in millions, except per share
amounts)
Three Months Ended Nine Months Ended June 30 June 30
2018 2017 2018 2017
Sales: Interior Systems $
659 $ 647 $ 2,016 $ 647 Commercial Systems 669 658 1,921 1,801
Government Systems 684 606 1,911 1,646 Information Management
Services 196 183 551 535 Total sales $
2,208 $ 2,094 $ 6,399 $ 4,629
Segment operating earnings: Interior Systems $ 106 $ 72 $
305 $ 72 Commercial Systems 148 144 438 401 Government Systems 130
131 370 341 Information Management Services 37 39 107
105 Total segment operating earnings 421 386 1,220
919 Interest expense(1) (66 ) (77 ) (196 ) (122 )
Stock-based compensation (8 ) (8 ) (27 ) (21 ) General corporate,
net (18 ) (16 ) (43 ) (39 ) Impairment charges and settlement of a
contract matter(2) (31 ) — (31 ) — Transaction and integration
costs(1) (29 ) (64 ) (91 ) (80 )
Income before income taxes
269 221 832 657 Income tax benefit (expense) 6 (42 ) (40 )
(165 )
Net income $ 275 $ 179 $ 792 $
492
Diluted earnings per share $ 1.66 $ 1.12 $
4.78 $ 3.48
Weighted average diluted shares
outstanding 165.9 159.9 165.7 141.4
(1) During the three and nine months ended June 30, 2018,
the Company incurred $23 million and $64 million of transaction and
integration costs related to the B/E Aerospace acquisition,
respectively, and $6 million and $27 million of transaction costs
related to the proposed acquisition of Rockwell Collins by UTC,
respectively. During the three and nine months ended June 30,
2017, the Company incurred $64 million and $80 million of
transaction and integration costs related to the B/E Aerospace
acquisition. During this period, the Company also incurred $18
million and $29 million of bridge facility fees related to the B/E
Aerospace acquisition, respectively, which are included in Interest
expense. Therefore, total transaction, integration and financing
costs were $82 million and $109 million in the three and nine
months ended June 30, 2017, respectively.(2) During the three
months ended June 30, 2018, the Company recorded $31 million of
charges. A $22 million charge due to the settlement of a contract
matter triggered by the anticipated divestiture of the
ElectroMechanical Systems business was recorded in Cost of sales.
The $22 million charge included an impairment of $7 million and $4
million of Commercial Systems Pre-production engineering costs and
Property, net, respectively. A $9 million charge due to the planned
sale of SMR Technologies was recorded in Other income, net.
The following table summarizes sales by category for the three
and nine months ended June 30, 2018 and 2017 (unaudited, in
millions):
Three Months Ended Nine Months Ended June 30 June 30
2018 2017 2018 2017 Interior Systems sales: Interior
products and services $ 366 $ 352 $ 1,092 $ 352 Aircraft seating
293 295 924 295 Total Interior Systems sales $ 659 $ 647 $ 2,016 $
647 Commercial Systems sales: Air transport aviation
electronics: Original equipment $ 262 $ 245 $ 710 $ 669 Aftermarket
138 155 444 414 Wide-body in-flight entertainment 3 5 11 15 Total
air transport aviation electronics 403 405 1,165 1,098
Business and regional aviation electronics: Original equipment 131
129 377 360 Aftermarket 135 124 379 343 Total business and regional
aviation electronics 266 253 756 703 Total Commercial Systems sales
$ 669 $ 658 $ 1,921 $ 1,801 Commercial Systems sales: Total
original equipment $ 393 $ 374 $ 1,087 $ 1,029 Total aftermarket
273 279 823 757 Wide-body in-flight entertainment 3 5 11 15 Total
Commercial Systems sales $ 669 $ 658 $ 1,921 $ 1,801
Government Systems sales: Avionics $ 395 $ 342 $ 1,087 $ 1,028
Communication and navigation 289 264 824 618 Total Government
Systems sales $ 684 $ 606 $ 1,911 $ 1,646 Information
Management Services sales $ 196 $ 183 $ 551 $ 535 Total
sales $ 2,208 $ 2,094 $ 6,399 $ 4,629
The following table summarizes total Research and Development
Investment by segment and funding type for the three and nine
months ended June 30, 2018 and 2017 (unaudited, dollars in
millions):
Three Months Ended Nine Months Ended June 30 June 30
2018 2017 2018 2017
Research and Development
Investment Customer-funded: Interior Systems $ 32 $ 15 $ 85 $
15 Commercial Systems 69 68 190 199 Government Systems 122 103 359
316 Information Management Services 2 3 5 7
Total Customer-funded 225 189 639 537
Company-funded: Interior Systems 48 55 158 55
Commercial Systems 54 37 142 94 Government Systems 24 18 66 54
Information Management Services (1)
— — — — Total Company-funded 126
110 366 203
Total Research and Development
Expense 351 299 1,005 740 Increase (Decrease) in Pre-production
Engineering Costs, Net (13 ) 4 (3 ) 28
Total
Research and Development Investment $ 338 $ 303 $
1,002 $ 768 Percent of Total Sales 15.3 % 14.5
% 15.7 % 16.6 %
(1) Research and development expenses for the Information
Management Services segment do not include costs of internally
developed software and other costs associated with the expansion
and construction of network-related assets. These costs are
capitalized as Property, net on the Summary Balance Sheet.
ROCKWELL COLLINS, INC.
SUMMARY BALANCE SHEET
(Unaudited)
(in millions)
June 30, September 30, 2018 2017
Current
Assets: Cash and cash equivalents $ 621 $ 703 Receivables, net
1,811 1,426 Inventories, net(1) 2,641 2,451 Business held for sale
66 — Other current assets 258 180 Total current assets 5,397
4,760
Property, Net 1,402 1,398
Goodwill 9,103
9,158
Customer Relationship Intangible Assets 1,358 1,525
Other Intangible Assets 553 604
Deferred Income Tax
Asset 22 21
Other Assets 524 531
TOTAL
ASSETS $ 18,359 $ 17,997
Current
Liabilities: Short-term debt $ 864 $ 479 Accounts payable 832
927 Compensation and benefits 353 385 Advance payments from
customers 325 361 Accrued customer incentives 274 287 Product
warranty costs 192 186 Other current liabilities 434 444
Total current liabilities 3,274 3,069
Long-term Debt,
Net 6,317 6,676
Retirement Benefits 1,046 1,208
Deferred Income Tax Liability 277 331
Other
Liabilities 647 663
Equity 6,798 6,050
TOTAL
LIABILITIES AND EQUITY $ 18,359 $ 17,997 (1)
Inventories, net is comprised of the following: June 30, September
30, 2018 2017
Inventories, net: Production inventory $ 1,469
$ 1,276 Pre-production engineering costs 1,172 1,175 Total
Inventories, net $ 2,641 $ 2,451
Pre-production engineering costs include costs incurred during
the development phase of a program in connection with long-term
supply arrangements that contain contractual guarantees for
reimbursement from customers. These costs are deferred in
Inventories, net to the extent of the contractual guarantees and
are amortized to customer-funded research and development expense
within cost of sales over their estimated useful lives using a
units-of-delivery method, up to 15 years.
ROCKWELL COLLINS, INC.
CONDENSED CASH FLOW INFORMATION
(Unaudited, in millions)
Nine Months Ended June 30 2018 2017
Operating
Activities: Net income $ 792 $ 492 Adjustments to arrive at
cash provided by operating activities: Depreciation 153 118
Amortization of intangible assets, pre-production engineering costs
and other 284 132 Amortization of acquired contract liability (100
) (42 ) Amortization of inventory fair value adjustment — 44
Non-cash impairment charges and settlement of a contract matter 31
— Stock-based compensation expense 27 21 Compensation and benefits
paid in common stock 43 48 Deferred income taxes (60 ) 18 Pension
plan contributions (77 ) (66 ) Changes in assets and liabilities,
excluding effects of acquisitions and foreign currency adjustments:
Receivables (393 ) (60 ) Production inventory (216 ) (88 )
Pre-production engineering costs (65 ) (108 ) Accounts payable (76
) 21 Compensation and benefits (31 ) (19 ) Advance payments from
customers (35 ) 1 Accrued customer incentives (12 ) (17 ) Product
warranty costs 6 (4 ) Income taxes (7 ) (56 ) Other assets and
liabilities (68 ) (19 )
Cash Provided by Operating
Activities 196 416
Investing Activities:
Property additions (190 ) (165 ) Acquisition of business, net of
cash acquired — (3,429 ) Other investing activities 4 (5 )
Cash (Used for) Investing Activities (186 ) (3,599 )
Financing Activities: Repayment of long-term debt, including
current portion (351 ) (338 ) Repayment of acquired long-term debt
— (2,119 ) Purchases of treasury stock(1) (11 ) (46 ) Cash
dividends (162 ) (140 ) Increase in long-term borrowings — 6,099
Increase (decrease) in short-term commercial paper borrowings, net
385 (78 ) Proceeds from the exercise of stock options 60 41 Other
financing activities (4 ) (4 )
Cash Provided by (Used for)
Financing Activities (83 ) 3,415 Effect of exchange rate
changes on cash and cash equivalents (9 ) 6
Net Change in
Cash and Cash Equivalents (82 ) 238
Cash and Cash
Equivalents at Beginning of Period 703 340
Cash and Cash Equivalents at End of Period $ 621 $
578
(1) Includes net settlement of
employee tax withholding upon vesting of share-based payment
awards.
ROCKWELL COLLINS, INC.NON-GAAP
FINANCIAL INFORMATION(Unaudited)(in millions, except
per share amounts)
Adjusted earnings per share is a non-GAAP metric and is believed
to be useful to investors' understanding and assessment of our
ongoing operations and performance of the B/E Aerospace
acquisition, which occurred on April 13, 2017. Adjusted earnings
per share excludes certain one-time and non-cash expenses that we
believe are not indicative of our ongoing operating results. The
Company believes these measures are important indicators of the
Company's operations for purposes of period-to-period comparison of
our operating results. The non-GAAP information is not intended to
be considered in isolation or as a substitute for the related GAAP
measures.
A reconciliation between GAAP earnings per share and adjusted
earnings per share is presented below for the three and nine months
ended June 30, 2018 and June 30, 2017.
Three Months Ended Nine Months Ended June 30 June 30
2018 2017 2018 2017 Earnings per share (GAAP) $ 1.66
$ 1.12 $ 4.78 $ 3.48 B/E Aerospace acquisition-related expenses
0.10 0.34 0.28 0.52 United Technologies transaction expenses 0.03 —
0.12 — Amortization of acquisition-related intangible assets 0.31
0.24 0.94 0.35 Amortization of B/E Aerospace acquired contract
liability (0.18 ) (0.25 ) (0.55 ) (0.27 ) Amortization of B/E
Aerospace inventory fair value — 0.19 — 0.22 Impairment charges and
settlement of a contract matter 0.23 — 0.23 — Discrete income tax
impact from Tax Cuts and Jobs Act and pension contribution (0.42 )
— (0.67 ) — Adjusted earnings per share $ 1.73
$ 1.64 $ 5.13 $ 4.30
The below tables reconcile pre- and post-tax income on a GAAP
basis with pre- and post-tax adjusted income for the three and nine
months ended June 30, 2018 and June 30, 2017.
Three Months Ended Nine Months Ended June 30, 2018
June 30, 2018 Pre- Tax Tax Pre- Tax
Tax (dollars in millions) tax Expense Net Rate tax
Expense Net Rate Income (GAAP) $ 269 $ (6 ) $ 275 (2.2 )% $ 832 $
40 $ 792 4.8 % B/E Aerospace acquisition-related expenses 23 6 17
64 17 47 United Technologies transaction expenses 6 1 5 27 7 20
Amortization of acquisition-related intangible assets 65 15 50 201
45 156 Amortization of B/E Aerospace acquired contract liability
(32 ) (3 ) (29 ) (100 ) (9 ) (91 ) Impairment charges and
settlement of a contract matter 31 (7 ) 38 31 (7 ) 38 Discrete
income tax impact from Tax Cuts and Jobs Act and pension
contribution — 69 (69 ) — 112 (112 )
Adjusted income $ 362 $ 75 $ 287 20.7 % $
1,055 $ 205 $ 850 19.4 % Three
Months Ended Nine Months Ended June 30, 2017 June 30, 2017
Pre- Tax Tax Pre- Tax Tax
(dollars in millions) tax Expense Net Rate tax Expense Net Rate
Income (GAAP) $ 221 $ 42 $ 179 19.0 % $ 657 $ 165 $ 492 25.1 % B/E
Aerospace acquisition-related expenses 82 28 54 109 35 74
Amortization of acquisition-related intangible assets 56 18 38 75
25 50 Amortization of acquired contract liability (42 ) (3 ) (39 )
(42 ) (3 ) (39 ) Amortization of inventory fair value adjustment 44
13 31 44 13 31 Adjusted
income $ 361 $ 98 $ 263 27.1 % $ 843 $
235 $ 608 27.9 %
With the acquisition of B/E Aerospace in the third quarter of
2017, the Interior Systems segment was formed. Beginning in
calendar year 2018, two B/E Aerospace product lines previously
included in the Interior Systems segment are now being reported in
the Government Systems segment. To further enhance comparability
and analysis, the following table provides the revised presentation
of Interior Systems and Government Systems segment sales, by
quarter, for the year ended September 30, 2017.
Three Months Ended Dec. 31, Mar. 31,
Jun. 30, Sept. 30, Full Year 2016 2017 2017 2017 2017
Interior Systems sales: Interior products and services $ — $ — $
352 $ 365 $ 717 Aircraft seating — — 295 290
585 Total Interior Systems sales $ — $ — $ 647
$ 655 $ 1,302 Government Systems sales:
Avionics $ 319 $ 367 $ 342 $ 444 $ 1,472 Communication and
navigation 156 198 264 294 912 Total
Government Systems sales $ 475 $ 565 $ 606 $
738 $ 2,384
View source
version on businesswire.com: https://www.businesswire.com/news/home/20180727005029/en/
Rockwell Collins, Inc.Media Contact:Pam Tvrdy,
319-295-0591pam.tvrdy@rockwellcollins.comorInvestor Contact:Adam
Palmer, 319-295-7575investorrelations@rockwellcollins.com
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