CEDAR RAPIDS, Iowa--(BUSINESS WIRE)--Rockwell Collins, Inc. (NYSE: COL) today reported sales for the second quarter of fiscal year 2018 of $2.180 billion, a 62% increase from the same period in fiscal year 2017, or 5% organic growth excluding $776 million of revenue from the acquisition of B/E Aerospace. Second quarter fiscal year 2018 earnings per share was $1.43 compared to $1.27 in the prior year's second quarter. Adjusted earnings per share for the second quarter of fiscal year 2018 was $1.81 compared to $1.39 in the prior year's second quarter (see the supplemental schedule in this press release for a reconciliation between GAAP earnings per share and adjusted earnings per share).
"Our strong performance in the first half of 2018 is underscored by another quarter of robust revenue and earnings growth," said Rockwell Collins Chief Executive Officer and President, Kelly Ortberg. "Our plan for the year is playing out as we expected, with commercial aftermarket strength, higher business jet utilization, and an improved defense budget environment driving our growth and more than offsetting the anticipated completion of nuclear security mandate-related sales in our Information Management Services business."
Following is a discussion of fiscal year 2018 second 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 second quarter results as summarized below.
(dollars in millions) | Q2 FY 18 | Q2 FY 17 | Inc/(Dec) | ||||||||
Commercial Systems sales | |||||||||||
Original equipment | $ | 355 | $ | 337 | 5 | % | |||||
Aftermarket | 285 | 253 | 13 | % | |||||||
Wide-body in-flight entertainment | 4 | 4 | — | % | |||||||
Total Commercial Systems sales | $ | 644 | $ | 594 | 8 | % | |||||
Operating earnings | $ | 151 | $ | 132 | 14 | % | |||||
Operating margin rate | 23.4 | % | 22.2 | % | 120 bps | ||||||
- Original equipment sales increased due to higher business jet equipment deliveries as well as higher Boeing 737 production rates, partially offset by lower customer-funded development program revenues.
- Aftermarket sales increased due to higher spares provisioning, service and support activity, regulatory mandate upgrade activity, and used aircraft equipment sales.
- Commercial Systems operating earnings increased $19 million and operating margin increased 120 basis points over the prior year due to increased earnings from higher sales volume and favorable sales mix, as higher margin equipment and aftermarket sales increased and lower margin customer-funded development revenues 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 second quarter of 2018 are summarized below.
(dollars in millions) | Q2 FY 18 | |||
Interior Systems sales | ||||
Interior products and services | $ | 370 | ||
Aircraft seating | 331 | |||
Total Interior Systems sales | $ | 701 | ||
Operating earnings | $ | 105 | ||
Operating margin rate | 15.0 | % | ||
Interior Systems contributed $701 million of sales and $105 million of operating earnings to the second quarter of 2018. Interior Systems operating earnings for the second quarter of 2018 includes $57 million of intangible asset amortization expense partially offset by $38 million of income from the amortization of acquired contract liabilities.
On a pro-forma basis, excluding the product lines now reported in Government Systems referenced above, sales for Interior Systems increased 9% in the second quarter compared to the same period in the prior year. The increase in pro-forma sales was primarily attributable to increased original equipment deliveries of oxygen systems, galleys and galley inserts across multiple platforms, as well as the timing of linefit seating deliveries, partially offset by a decline in super first class seating sales.
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 second quarter of 2018 are summarized below.
(dollars in millions) | Q2 FY 18 | Q2 FY 17 | Inc/(Dec) | ||||||||
Government Systems sales | |||||||||||
Avionics | $ | 359 | $ | 367 | (2 | )% | |||||
Communication and navigation | 295 | 198 | 49 | % | |||||||
Total Government Systems sales | $ | 654 | $ | 565 | 16 | % | |||||
Operating earnings | $ | 131 | $ | 114 | 15 | % | |||||
Operating margin rate | 20.0 | % | 20.2 | % | (20) bps | ||||||
- Avionics sales decreased $8 million due primarily to lower simulation and training sales.
- Communication and navigation sales increased $75 million due to the B/E Aerospace acquisition mentioned above. In addition, communication and navigation sales increased 11% organically due to higher test and training range sales and higher deliveries of GPS-related products.
- Operating earnings increased $17 million and operating margin declined 20 basis points over the prior year as increased earnings from higher sales volume was unfavorably impacted by lower margins on B/E Aerospace 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 second quarter of 2018 are summarized below.
(dollars in millions) | Q2 FY 18 | Q2 FY 17 | Inc/(Dec) | ||||||||
Information Management Services sales | $ | 181 | $ | 183 | (1 | )% | |||||
Operating earnings | $ | 41 | $ | 36 | 14 | % | |||||
Operating margin rate | 22.7 | % | 19.7 | % | 300 bps | ||||||
- IMS sales decreased primarily due to an 11% decline in non-aviation sales as a result of the completion of nuclear security mandate revenues. Aviation-related sales increased 3% primarily due to increased usage of connectivity services, partially offset by the absence of a bulk sale of connectivity related equipment that occurred in the prior year.
- IMS operating earnings and operating margin increased due to the favorable resolution of certain claims associated with a divested business, partially offset by the absence of the favorable resolution of certain international business jet support services claims in the prior year.
Corporate and Financial Highlights
Income Taxes
The company's effective income tax rate on GAAP
earnings was 22.5% for the second quarter of fiscal year 2018 compared
to a rate of 27.9% for the same period last year. The lower current year
effective income tax rate was primarily due to a lower U.S. Federal
statutory tax rate from the enactment of the Tax Cuts and Jobs Act ("the
Act") and benefits from the jurisdictional mix of income as a result of
the B/E Aerospace acquisition, partially offset by an increase to income
tax expense from the refinement of the provisional estimate established
in the first quarter associated with the Act.
The company's effective income tax rate on adjusted earnings was 19.1% in the second quarter of 2018, compared to 28.1% 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 Flow
Cash used for operating activities was $77 million
for the first six months of fiscal year 2018, compared to cash provided
by operating activities of $1 million in the first six months of fiscal
year 2017. The increase in cash used for 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 cents per share, or $54 million, in the second quarter of 2018.
Conference Call
In 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 second
quarter of fiscal year 2018. The Company plans to file its Form 10-Q for
the second quarter with the SEC on or about April 27, 2018.
Non-GAAP Financial Information
See 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 Highlights
Rockwell Collins recognized as Crystal Cabin Award winner
The
Crystal Cabin Award recognizes excellence in aircraft interior
innovation. Rockwell Collins won 2018 Crystal Cabin awards in the Cabin
Systems category for the Silhouette MOVE™, a revolutionary cabin divider
for all aircraft platforms, and in the Passenger Comfort Hardware
category for the Valkyrie™ bed, a business-class seating solution.
Rockwell Collins selected by BOC Aviation to provide avionics for up
to 74 new 737 MAX aircraft
BOC Aviation selected Rockwell
Collins’ advanced avionics as a baseline configuration on up to 74
Boeing 737 MAX aircraft that begin delivery later this year.
Brazilian Air Force to upgrade inspection aircraft with Rockwell
Collins’ Pro Line 21™ avionics
The Brazilian Air Force Flight
Inspection Group will be upgrading its fleet of Hawker 800XP aircraft
with Rockwell Collins’ Pro Line 21™ avionics suite.
U.S. Air Force to modernize T-1A Jayhawk trainer fleet with Rockwell
Collins avionics
The U.S. Air Force’s entire T-1A Jayhawk
trainer fleet will be upgraded with Rockwell Collins’ Pro Line
21™ avionics suite as part of a contract awarded to Field Aerospace.
U.S. Air Force Space and Missile Systems Center orders 300 additional
M-Code GPS receivers from Rockwell Collins
Rockwell Collins
received a follow-on order for 300 Military Code GPS receivers from the
U.S. Air Force Space and Missile Systems Center. The order comes after
the recent fulfillment of 770 receivers in support of the Military GPS
User Equipment program.
Rockwell Collins selected to service Brazilian Army Fennec and
Panther helicopter avionics
Rockwell Collins signed a three
year agreement with the Brazilian Army Aviation Command to service
avionics equipment for the country’s fleet of Fennec and Panther
helicopters.
Rockwell Collins selected to streamline check-in and gate services at
eight Mexican airports
Rockwell Collins’ ARINC vMUSE™ Common
Use Passenger Processing System was selected by Grupo Aeroportuario del
Centro Norte to provide enhanced flexibility of airport resources and
passenger check-in at eight Mexican airports.
Rockwell Collins selected by Brazilian Air Force to support flight
operations
Grupo de Transporte Especial, the Special Transport
Group of the Brazilian Air Force renewed its contract for Rockwell
Collins’ ARINCDirectSM flight support services to cover
its fleet of 13 aircraft.
AIRMARK Aviation selected Rockwell Collins’ ADS-B Out solution for
its Boeing 737-300 aircraft
AIRMARK Aviation selected Rockwell
Collins’ ADS-B Out solution to upgrade four of its Boeing 737-300
aircraft, with an option to fit one more.
About Rockwell Collins
Rockwell 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 Statement
This 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 Information
In 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 Solicitation
This 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. |
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SEGMENT SALES AND EARNINGS INFORMATION |
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(Unaudited) |
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(in millions, except per share amounts) |
||||||||||||||||
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Sales: | ||||||||||||||||
Interior Systems | $ | 701 | $ | — | $ | 1,357 | $ | — | ||||||||
Commercial Systems | 644 | 594 | 1,252 | 1,143 | ||||||||||||
Government Systems | 654 | 565 | 1,227 | 1,040 | ||||||||||||
Information Management Services | 181 | 183 | 355 | 352 | ||||||||||||
Total sales | $ | 2,180 | $ | 1,342 | $ | 4,191 | $ | 2,535 | ||||||||
Segment operating earnings: | ||||||||||||||||
Interior Systems | $ | 105 | $ | — | $ | 199 | $ | — | ||||||||
Commercial Systems | 151 | 132 | 290 | 257 | ||||||||||||
Government Systems | 131 | 114 | 240 | 210 | ||||||||||||
Information Management Services | 41 | 36 | 70 | 66 | ||||||||||||
Total segment operating earnings | 428 | 282 | 799 | 533 | ||||||||||||
Interest expense(1) | (66 | ) | (25 | ) | (130 | ) | (45 | ) | ||||||||
Stock-based compensation | (10 | ) | (7 | ) | (19 | ) | (13 | ) | ||||||||
General corporate, net | (11 | ) | (12 | ) | (25 | ) | (23 | ) | ||||||||
Transaction and integration costs(1) | (35 | ) | (5 | ) | (62 | ) | (16 | ) | ||||||||
Income before income taxes | 306 | 233 | 563 | 436 | ||||||||||||
Income tax expense | (69 | ) | (65 | ) | (46 | ) | (123 | ) | ||||||||
Net income | $ | 237 | $ | 168 | $ | 517 | $ | 313 | ||||||||
Diluted earnings per share | $ | 1.43 | $ | 1.27 | $ | 3.12 | $ | 2.37 | ||||||||
Weighted average diluted shares outstanding | 165.8 | 132.4 | 165.6 | 132.1 |
(1) During the three and six months ended March 31, 2018, the Company incurred $24 million and $41 million of transaction and integration costs related to the B/E Aerospace acquisition, respectively, and $11 million and $21 million of transaction costs related to the proposed acquisition of Rockwell Collins by UTC, respectively. During the three and six months ended March 31, 2017, the Company incurred $5 million and $16 million of transaction and integration costs related to the B/E Aerospace acquisition. During this period, the Company also incurred $8 million and $11 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 $13 million and $27 million in the three and six months ended March 31, 2017, respectively. |
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The following table summarizes sales by category for the three and six months ended March 31, 2018 and 2017 (unaudited, in millions):
Three Months Ended | Six Months Ended | ||||||||||||||
March 31 | March 31 | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Interior Systems sales: | |||||||||||||||
Interior products and services | $ | 370 | $ | — | $ | 726 | $ | — | |||||||
Aircraft seating | 331 | — | 631 | — | |||||||||||
Total Interior Systems sales | $ | 701 | $ | — | $ | 1,357 | $ | — | |||||||
Commercial Systems sales: | |||||||||||||||
Air transport aviation electronics: | |||||||||||||||
Original equipment | $ | 226 | $ | 224 | $ | 448 | $ | 424 | |||||||
Aftermarket | 152 | 136 | 306 | 259 | |||||||||||
Wide-body in-flight entertainment | 4 | 4 | 8 | 10 | |||||||||||
Total air transport aviation electronics | 382 | 364 | 762 | 693 | |||||||||||
Business and regional aviation electronics: | |||||||||||||||
Original equipment | 129 | 113 | 246 | 231 | |||||||||||
Aftermarket | 133 | 117 | 244 | 219 | |||||||||||
Total business and regional aviation electronics | 262 | 230 | 490 | 450 | |||||||||||
Total Commercial Systems sales | $ | 644 | $ | 594 | $ | 1,252 | $ | 1,143 | |||||||
Commercial Systems sales: | |||||||||||||||
Total original equipment | $ | 355 | $ | 337 | $ | 694 | $ | 655 | |||||||
Total aftermarket | 285 | 253 | 550 | 478 | |||||||||||
Wide-body in-flight entertainment | 4 | 4 | 8 | 10 | |||||||||||
Total Commercial Systems sales | $ | 644 | $ | 594 | $ | 1,252 | $ | 1,143 | |||||||
Government Systems sales: | |||||||||||||||
Avionics | $ | 359 | $ | 367 | $ | 692 | $ | 686 | |||||||
Communication and navigation | 295 | 198 | 535 | 354 | |||||||||||
Total Government Systems sales | $ | 654 | $ | 565 | $ | 1,227 | $ | 1,040 | |||||||
Information Management Services sales | $ | 181 | $ | 183 | $ | 355 | $ | 352 | |||||||
Total sales | $ | 2,180 | $ | 1,342 | $ | 4,191 | $ | 2,535 | |||||||
The following table summarizes total Research and Development Investment by segment and funding type for the three and six months ended March 31, 2018 and 2017 (unaudited, dollars in millions):
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
2018 | 2017 | 2018 | 2017 | |||||||||||||
Research and Development Investment | ||||||||||||||||
Customer-funded: | ||||||||||||||||
Interior Systems | $ | 26 | $ | — | $ | 53 | $ | — | ||||||||
Commercial Systems | 63 | 66 | 121 | 131 | ||||||||||||
Government Systems | 128 | 115 | 237 | 213 | ||||||||||||
Information Management Services | 1 | 2 | 3 | 4 | ||||||||||||
Total Customer-funded | 218 | 183 | 414 | 348 | ||||||||||||
Company-funded: | ||||||||||||||||
Interior Systems | 60 | — | 110 | — | ||||||||||||
Commercial Systems | 48 | 30 | 88 | 57 | ||||||||||||
Government Systems | 23 | 18 | 42 | 36 | ||||||||||||
Information Management Services (1) | — | — | — | — | ||||||||||||
Total Company-funded | 131 | 48 | 240 | 93 | ||||||||||||
Total Research and Development Expense | 349 | 231 | 654 | 441 | ||||||||||||
Increase in Pre-production Engineering Costs, Net | (3 | ) | 24 | 10 | 24 | |||||||||||
Total Research and Development Investment | $ | 346 | $ | 255 | $ | 664 | $ | 465 | ||||||||
Percent of Total Sales | 15.9 | % | 19.0 | % | 15.8 | % | 18.3 | % |
(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 on the Summary Balance Sheet. |
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ROCKWELL COLLINS, INC. |
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SUMMARY BALANCE SHEET |
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(Unaudited) |
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(in millions) |
||||||
March 31, | September 30, | |||||
2018 | 2017 | |||||
Current Assets: | ||||||
Cash and cash equivalents | $ | 668 | $ | 703 | ||
Receivables, net | 1,640 | 1,426 | ||||
Inventories, net(1) | 2,633 | 2,451 | ||||
Other current assets | 202 | 180 | ||||
Total current assets | 5,143 | 4,760 | ||||
Property | 1,408 | 1,398 | ||||
Goodwill | 9,195 | 9,158 | ||||
Customer Relationship Intangible Assets | 1,420 | 1,525 | ||||
Other Intangible Assets | 572 | 604 | ||||
Deferred Income Tax Asset | 21 | 21 | ||||
Other Assets | 541 | 531 | ||||
TOTAL ASSETS | $ | 18,300 | $ | 17,997 | ||
Current Liabilities: | ||||||
Short-term debt | $ | 908 | $ | 479 | ||
Accounts payable | 799 | 927 | ||||
Compensation and benefits | 316 | 385 | ||||
Advance payments from customers | 329 | 361 | ||||
Accrued customer incentives | 236 | 287 | ||||
Product warranty costs | 190 | 186 | ||||
Other current liabilities | 415 | 444 | ||||
Total current liabilities | 3,193 | 3,069 | ||||
Long-term Debt, Net | 6,456 | 6,676 | ||||
Retirement Benefits | 1,098 | 1,208 | ||||
Deferred Income Tax Liability | 231 | 331 | ||||
Other Liabilities | 682 | 663 | ||||
Equity | 6,640 | 6,050 | ||||
TOTAL LIABILITIES AND EQUITY | $ | 18,300 | $ | 17,997 | ||
(1) Inventories, net is comprised of the following: | ||||||
March 31, | September 30, | |||||
2018 | 2017 | |||||
Inventories, net: | ||||||
Production inventory | $ | 1,448 | $ | 1,276 | ||
Pre-production engineering costs | 1,185 | 1,175 | ||||
Total Inventories, net | $ | 2,633 | $ | 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. |
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CONDENSED CASH FLOW INFORMATION |
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(Unaudited, in millions) |
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Six Months Ended | ||||||||
March 31 | ||||||||
2018 | 2017 | |||||||
Operating Activities: | ||||||||
Net income | $ | 517 | $ | 313 | ||||
Adjustments to arrive at cash provided by (used for) operating activities: | ||||||||
Depreciation | 103 | 75 | ||||||
Amortization of intangible assets, pre-production engineering costs and other | 188 | 50 | ||||||
Amortization of acquired contract liability | (68 | ) | — | |||||
Stock-based compensation expense | 19 | 13 | ||||||
Compensation and benefits paid in common stock | 27 | 33 | ||||||
Deferred income taxes | (97 | ) | 15 | |||||
Pension plan contributions | (61 | ) | (63 | ) | ||||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments: | ||||||||
Receivables | (214 | ) | (52 | ) | ||||
Production inventory | (172 | ) | (67 | ) | ||||
Pre-production engineering costs | (48 | ) | (76 | ) | ||||
Accounts payable | (117 | ) | (28 | ) | ||||
Compensation and benefits | (72 | ) | (71 | ) | ||||
Advance payments from customers | (35 | ) | (16 | ) | ||||
Accrued customer incentives | (50 | ) | (29 | ) | ||||
Product warranty costs | 1 | (6 | ) | |||||
Income taxes | 63 | (36 | ) | |||||
Other assets and liabilities | (61 | ) | (54 | ) | ||||
Cash Provided by (Used for) Operating Activities | (77 | ) | 1 | |||||
Investing Activities: | ||||||||
Property additions | (128 | ) | (90 | ) | ||||
Acquisition of business, net of cash acquired | — | (11 | ) | |||||
Other investing activities | 5 | (1 | ) | |||||
Cash (Used for) Investing Activities | (123 | ) | (102 | ) | ||||
Financing Activities: | ||||||||
Repayment of long-term debt, including current portion | (214 | ) | (300 | ) | ||||
Purchases of treasury stock(1) | (11 | ) | (5 | ) | ||||
Cash dividends | (108 | ) | (86 | ) | ||||
Increase in short-term commercial paper borrowings, net | 429 | 415 | ||||||
Proceeds from the exercise of stock options | 57 | 27 | ||||||
Other financing activities | (2 | ) | (1 | ) | ||||
Cash Provided by Financing Activities | 151 | 50 | ||||||
Effect of exchange rate changes on cash and cash equivalents | 14 | (8 | ) | |||||
Net Change in Cash and Cash Equivalents | (35 | ) | (59 | ) | ||||
Cash and Cash Equivalents at Beginning of Period | 703 | 340 | ||||||
Cash and Cash Equivalents at End of Period | $ | 668 | $ | 281 | ||||
(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 six months ended March 31, 2018 and March 31, 2017.
Three Months Ended | Six Months Ended | ||||||||||||||
March 31 | March 31 | ||||||||||||||
2018 | 2017 | 2018 | 2017 | ||||||||||||
Earnings per share (GAAP) | $ | 1.43 | $ | 1.27 | $ | 3.12 | $ | 2.37 | |||||||
B/E Aerospace acquisition-related expenses | 0.11 | 0.07 | 0.18 | 0.14 | |||||||||||
United Technologies transaction expenses | 0.05 | 0.09 | |||||||||||||
Amortization of acquisition-related intangible assets | 0.32 | 0.05 | 0.64 | 0.10 | |||||||||||
Amortization of B/E Aerospace acquired contract liability | (0.21 | ) | (0.37 | ) | |||||||||||
Discrete income tax impact from Tax Cuts and Jobs Act | 0.11 | (0.26 | ) | ||||||||||||
Adjusted earnings per share | $ | 1.81 | $ | 1.39 | $ | 3.40 | $ | 2.61 | |||||||
The below tables reconcile pre- and post-tax income on a GAAP basis with pre- and post-tax adjusted income for the three and six months ended March 31, 2018 and March 31, 2017.
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
March 31, 2018 | March 31, 2018 | ||||||||||||||||||||||||||||||
Pre- | Tax | Tax | Pre- | Tax | Tax | ||||||||||||||||||||||||||
(dollars in millions) | tax | Expense | Net | Rate | tax | Expense | Net | Rate | |||||||||||||||||||||||
Income (GAAP) | $ | 306 | $ | 69 | $ | 237 | 22.5 | % | $ | 563 | $ | 46 | $ | 517 | 8.2 | % | |||||||||||||||
B/E Aerospace acquisition-related expenses | 24 | 6 | 18 | 41 | 11 | 30 | |||||||||||||||||||||||||
United Technologies transaction expenses | 11 | 3 | 8 | 21 | 6 | 15 | |||||||||||||||||||||||||
Amortization of acquisition-related intangible assets | 68 | 15 | 53 | 136 | 30 | 106 | |||||||||||||||||||||||||
Amortization of B/E Aerospace acquired contract liability | (38 | ) | (3 | ) | (35 | ) | (68 | ) | (6 | ) | (62 | ) | |||||||||||||||||||
Discrete income tax impact from Tax Cuts and Jobs Act | (19 | ) | 19 | 43 | (43 | ) | |||||||||||||||||||||||||
Adjusted income | $ | 371 | $ | 71 | $ | 300 | 19.1 | % | $ | 693 | $ | 130 | $ | 563 | 18.8 | % | |||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||||
March 31, 2017 | March 31, 2017 | ||||||||||||||||||||||||||||||
Pre- | Tax | Tax | Pre- | Tax | Tax | ||||||||||||||||||||||||||
(dollars in millions) | tax | Expense | Net | Rate | tax | Expense | Net | Rate | |||||||||||||||||||||||
Income (GAAP) | $ | 233 | $ | 65 | $ | 168 | 27.9 | % | $ | 436 | $ | 123 | $ | 313 | 28.2 | % | |||||||||||||||
B/E Aerospace acquisition-related expenses | 13 | 4 | 9 | 27 | 8 | 19 | |||||||||||||||||||||||||
Amortization of acquisition-related intangible assets | 10 | 3 | 7 | 19 | 6 | 13 | |||||||||||||||||||||||||
Adjusted income | $ | 256 | $ | 72 | $ | 184 | 28.1 | % | $ | 482 | $ | 137 | $ | 345 | 28.4 | % | |||||||||||||||
ROCKWELL COLLINS, INC.
SUPPLEMENTAL INFORMATION
(Unaudited)
(in
millions)
With the acquisition of B/E Aerospace in the third quarter of 2017, the Interior Systems segment was formed. Beginning in 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 |