- Sales increase 57% year-over-year
(5% growth excluding the B/E Aerospace acquisition)
- Cash provided by operating
activities for the first nine months of 2017 improves 87%
Rockwell Collins, Inc. (NYSE: COL) today reported sales for the
third quarter of fiscal year 2017 of $2.094 billion, a 57% increase
from the same period in fiscal year 2016, or 5% growth excluding
$695 million of revenue from the acquisition of B/E Aerospace.
Third quarter fiscal year 2017 earnings per share from continuing
operations was $1.12 compared to $1.63 in the prior year. Adjusted
earnings per share for the third quarter fiscal year 2017 was $1.64
compared to $1.67 in the prior year (see the supplemental schedule
in this press release for a reconciliation between GAAP earnings
per share and adjusted earnings per share). Earnings per share and
adjusted earnings per share for the third quarter of fiscal year
2016 included a 31 cent income tax benefit from the release of a
valuation allowance related to a U.S. capital loss
carryforward. Cash provided by operating activities for the nine
months ended June 30, 2017 was $416 million, an 87% increase from
the same period in the prior year.
"This was another good quarter of operating performance
underscored by strong cash flow generation," said Rockwell Collins
Chairman, President, and Chief Executive Officer, Kelly Ortberg.
"We realized revenue growth across all of our segments, and
achieved strong operating margins across the entire business."
Ortberg continued, "I'm pleased to welcome the B/E Aerospace
team and we continue to be excited about the newly combined
company. Integration is progressing well and I'm increasingly
confident in our ability to exceed our $160 million cost synergy
target. We are making progress on revenue synergies, which will
create additional opportunities to our acquisition business
case."
Following is a discussion of fiscal year 2017 third quarter
sales and earnings for each business segment.
Interior Systems
Interior Systems, which supplies a comprehensive portfolio of
cabin interior products and services to aircraft manufacturers and
airlines worldwide, achieved 2017 third quarter results as
summarized below.
(dollars in millions) Q3 FY 17 Interior Systems sales
Interior Products and Services $ 400 Aircraft Seating 295
Total Interior Systems sales $ 695 Operating
earnings $ 80 Operating margin rate 11.5 %
B/E Aerospace, which was acquired on April 13, 2017, represents
the entirety of the Interior Systems segment and contributed $695
million of sales and $80 million of operating earnings to third
quarter of 2017. Interior Systems operating earnings for the third
quarter of 2017 includes $46 million of intangible asset
amortization expense.
On a pro-forma basis, sales for Interior Systems increased 9
percent in the third quarter compared to the same period in the
prior year. The increase in pro-forma sales was primarily
attributable to increased original equipment deliveries
for Airbus A350 galleys, Boeing 737 advanced lavatories, as
well as oxygen systems across multiple platforms.
Commercial Systems
Commercial Systems, which provides aviation electronics systems,
products and services to air transport, business and regional
aircraft manufacturers and airlines worldwide, achieved 2017 third
quarter results as summarized below.
(dollars in millions) Q3 FY 17 Q3 FY 16
Inc/(Dec) Commercial Systems sales Original equipment $ 374 $ 367 2
% Aftermarket 279 236 18 % Wide-body in-flight entertainment
5 9 (44 )% Total Commercial Systems sales $
658 $ 612 8 % Operating earnings $ 144 $ 141 2
% Operating margin rate 21.9 % 23.0 % (110) bps
- Original equipment sales increased due
to higher product deliveries in support of Airbus A350, Boeing 737,
and Bombardier CSeries rate increases, partially offset by lower
legacy wide-body and business aircraft OEM production rates.
- Aftermarket sales increased due to
higher used aircraft equipment sales of $24 million, higher
regulatory mandate upgrade sales, and higher spares
provisioning.
- Commercial Systems operating earnings
increased $3 million and operating margin declined 110 basis points
over the prior year as increased earnings from higher sales volume
were tempered by low margin used equipment sales and higher
amortization of pre-production engineering costs.
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.
Results from the third quarter of 2017 are summarized below.
(dollars in millions) Q3 FY 17 Q3 FY 16
Inc/(Dec) Government Systems sales Avionics $ 342 $ 376 (9 )%
Communication and Navigation 216 179 21
% Total Government Systems sales $ 558 $ 555 1 %
Operating earnings $ 123 $ 115 7 % Operating margin rate
22.0 % 20.7 % 130 bps
- Avionics sales decreased due to lower
deliveries for various fighter platforms as a result of production
issues, the wind-down of legacy tanker hardware deliveries, and
lower rotary wing sales, partially offset by higher development
program sales.
- Communication and Navigation sales
increased due to higher legacy communication product deliveries,
higher deliveries of GPS-related products, and higher test and
training range sales.
- Operating earnings and operating margin
increased due to higher sales volume and favorable sales mix,
partially offset by higher incentive compensation costs.
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 2017 are summarized below.
(dollars in millions) Q3 FY 17 Q3 FY 16
Inc/(Dec) Information Management Services sales $ 183 $ 167 10 %
Operating earnings $ 39 $ 26 50 % Operating margin rate 21.3
% 15.6 % 570 bps
- IMS sales increased due to 9 percent
growth in aviation related revenues driven by increased usage of
connectivity services. In addition, non-aviation revenues increased
10 percent due primarily to increased nuclear security mandate
revenue.
- IMS operating earnings and operating
margin increased due to higher sales volume and the favorable
resolution of certain prior claims associated with international
business jet support services.
Corporate and Financial Highlights
Income TaxesThe company's effective income tax rate on GAAP
earnings was 19.0% for the third quarter of fiscal year 2017
compared to a rate of 13.4% for the same period last year. The
prior year effective income tax rate on GAAP earnings was impacted
by the release of a $41 million valuation allowance related to a
U.S. capital loss carryforward. The current year effective income
tax rate was impacted by a lower estimated effective tax rate,
which applies to year-to-date earnings, due to 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 27.1%
in the third quarter, compared to 14.4% 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 from continuing
operations was $416 million for the first nine months of fiscal
year 2017, compared to $223 million in the first nine months of
fiscal year 2016. The increase in cash provided by operating
activities was due primarily to higher cash collections from
customers, partially offset by higher production inventory and
other operating costs, higher income tax payments and B/E Aerospace
acquisition-related expenses.
The Company paid a dividend on its common stock of 33 cents per
share, or $54 million, in the third quarter of 2017.
Fiscal Year 2017 OutlookThe following table is an updated
summary of the company's financial guidance for continuing
operations for fiscal year 2017. This guidance is based on a
preliminary purchase price allocation for the B/E Aerospace
acquisition completed on April 13, 2017, and is subject to
potential adjustments that could be material to the guidance
presented below. In addition, this guidance is based on the
weighted average common shares for fiscal year 2017, which includes
the issuance of 31.2 million shares of Rockwell Collins' common
stock on April 13, 2017 in connection with the acquisition of B/E
Aerospace. Due to the timing of the share issuance, the earnings
per share impact of the acquisition of B/E Aerospace will be
different in our annual results compared to our quarterly
results.
--
Total sales About $6.8 bil. (From $6.7 bil. to $6.8 bil.)
--
Total segment operating margins 19% to 20% (1)
--
GAAP earnings per share $4.85 to $5.05 (From $4.50 to $4.70) (2)
--
Adjusted earnings per share $5.95 to $6.15 (2)
--
Free cash flow $650 mil. to $750 mil. (3)
--
Total research and development investment About $1.1 bil. (From
$1.05 bil. to $1.15 bil.) (4)
--
Full year income tax rate on GAAP earnings 24% to 25% (From 27% to
28%)
--
Full year income tax rate on adjusted earnings 27% to 28%
(1) - Interior Systems operating margins are
projected to be in the range of 12% to 13% for fiscal year 2017.
The Interior Systems operating margin includes acquisition-related
intangible asset amortization of about 750 basis points of
operating margin impact.(2) - See the supplemental schedule
included in this press release for a reconciliation of GAAP
earnings per share and adjusted earnings per share.(3) - The
Company's free cash flow expectations assume capital expenditures
will total about $250 million and net pre-production engineering
costs capitalized in inventory is expected to increase about $50
million in fiscal year 2017. See also the supplemental schedule
included in this press release for a reconciliation of non-GAAP
measures.(4) - Total research and development investment consists
of company and customer funded research and development
expenditures as well as the net increase in pre-production
engineering costs capitalized within inventory.
Non-GAAP Financial InformationTotal segment operating
margin is a non-GAAP measure and is reconciled to the related GAAP
measure, Income from continuing operations before income taxes, in
the Segment Sales and Earnings Information schedule in this press
release. Total segment operating margin is calculated as total
segment operating earnings divided by total sales. The non-GAAP
total segment operating margin information included in this
disclosure is believed to be useful to investors' understanding by
excluding certain expenses we believe are not relevant to
investors' assessment of our operating results.
See also the supplemental schedule included in this press
release for a reconciliation of other non-GAAP measures including
free cash flow, adjusted earnings, and income tax rate on adjusted
earnings.
Conference Call and Webcast DetailsRockwell Collins Chairman,
President and CEO, Kelly Ortberg, and Senior Vice President and
CFO, Patrick Allen, will conduct an earnings conference call at
9:00 a.m. Eastern Time on July 28, 2017. Individuals may listen to
the call and view management's supporting slide presentation on the
Internet at www.rockwellcollins.com. Listeners are encouraged to go
to the Investor Relations portion of the web site at least 15
minutes prior to the call to download and install any necessary
software. The call will be available for replay on the Internet at
www.rockwellcollins.com.
Business Highlights
Rockwell Collins selected by Airbus for FOMAX program to
digitally connect A320 aircraft and operatorsRockwell Collins
was selected by Airbus for the flight operations and maintenance
exchanger (FOMAX) program on the Airbus A320 family of aircraft.
This solution will keep operators connected to their aircraft by
deploying the infrastructure for secure wireless connectivity.
Rockwell Collins’ Kelly Ortberg named a Highest Rated CEO by
GlassdoorRockwell Collins’ Chairman, President and CEO Kelly
Ortberg won a Glassdoor Employees’ Choice Award recognizing the 100
Highest Rated CEOs in large U.S. companies for 2017.
Rockwell Collins and Comlux Aviation sign letter of intent to
provide complete cabin solution for VIP aircraftRockwell
Collins signed a letter of intent with Comlux, a leader in services
for VIP aircraft, to provide complete cabin solutions for a number
of select VIP aircraft under a global cooperation agreement. The
deal includes Rockwell Collins’ Venue™ cabin management system, VIP
seating, divans, Nano 3X™ interior lighting and the option for
Inmarsat Jet ConneX service for Wi-Fi connectivity.
Airbus recognized Rockwell Collins as a top performer for
avionics supportRockwell Collins was named by Airbus as one of
the top performing suppliers in support of Airbus and its customer
airlines. The company received an Excellent In-Service Performance
award and was honored at a special ceremony at the Paris Air
Show.
Rockwell Collins selected by DARPA to apply cybersecurity
technology to new platformsThe Defense Advanced Research
Projects Agency (DARPA) selected Rockwell Collins to use
mathematics-based development methods to secure platforms against
cyber attack. These techniques, developed by Rockwell Collins and
its partners in DARPA’s High Assurance Cyber Military Systems
program, ensure cyber resilience by eliminating important classes
of system vulnerabilities.
Canada selected Rockwell Collins’ Android™-based Joint Fires
solutionThe Canadian Army selected Rockwell Collins’
joint-fires solution for its Digitally-Assisted Close Air Support
system to digitally link airborne platforms and ground-based Joint
Terminal Attack Controllers via an Android smartphone.
Korea Airports Corporation selected Rockwell Collins
passenger processing solution for 14 airportsKorea Airports
Corporation selected Rockwell Collins’ ARINC vMUSE common use
passenger processing solution for 14 South Korean airports.
Rockwell Collins selected by Air France-KLM to provide visual
systems for new 787 Dreamliner and five existing flight
simulatorsAir France-KLM selected Rockwell Collins to provide
its visual systems for a new Boeing 787 Dreamliner simulator and
upgrades to their existing flight training devices. The Rockwell
Collins systems include the industry-leading EP®-8100 image
generator, laser-illuminated projectors, and a Panorama™ collimated
display.
Rockwell Collins DispatchSM 100 avionics
maintenance and support program selected by Singapore
AirlinesSingapore Airlines selected Rockwell Collins’
DispatchSM 100 avionics support and asset and maintenance
management program for its Airbus A350 fleet. Under the agreement,
Rockwell Collins will provide Singapore Airlines with guaranteed
spares availability, technical support, repairs and performance
monitoring on Rockwell Collins’ comprehensive suite of avionics
systems.
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 impact of the acquisition of B/E Aerospace
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 government 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; 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
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; failure to realize the anticipated benefits of
the acquisition of B/E Aerospace, including as a result of delay in
integrating the businesses of Rockwell Collins and B/E Aerospace;
risk to the ability of the combined company to implement its
business strategy; as well as other risks and uncertainties,
including but not limited to those detailed herein and from time to
time in our Securities and Exchange Commission filings. These
forward-looking statements are made only as of the date hereof and
the company assumes no obligation to update any forward-looking
statement.
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 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 Income from
discontinued operations, net of taxes — —
— 1
Net income $ 179
$ 214 $ 492 $ 520
Diluted
earnings per share: 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
Weighted average diluted shares outstanding 159.9
131.5 141.4 132.3
(1) During the three and nine months ended
June 30, 2017, the Company incurred $18 million and $29
million, respectively, of bridge facility fees related to the B/E
Aerospace acquisition. These costs are included in Interest
expense. Total transaction and integration costs (including the
bridge facility fees) related to the acquisition of B/E Aerospace
during the three and nine months ended June 30, 2017 were $82
million and $109 million, respectively.
The following table summarizes sales by category for the three
and nine months ended June 30, 2017 and 2016 (unaudited, in
millions):
Three Months Ended Nine Months Ended June 30 June 30
2017 2016 2017 2016 Interior Systems sales: Interior
products and services $ 400 $ — $ 400 $ — Aircraft seating
295 — 295 — Total
Interior Systems sales $ 695 $ — $ 695 $ —
Commercial Systems sales: Air transport aviation
electronics: Original equipment $ 245 $ 234 $ 669 $ 631 Aftermarket
155 127 414 391 Wide-body in-flight entertainment 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 Commercial Systems sales $ 658 $ 612 $
1,801 $ 1,785 Commercial Systems sales: Total
original equipment $ 374 $ 367 $ 1,029 $ 1,033 Total aftermarket
279 236 757 722 Wide-body in-flight entertainment 5
9 15 30 Total Commercial
Systems sales $ 658 $ 612 $ 1,801 $ 1,785
Government Systems Sales: Avionics $ 342 $ 376 $
1,028 $ 1,026 Communication and Navigation 216
179 570 518 Total 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
The following table summarizes total Research and Development
Investment by segment and funding type for the three and nine
months ended June 30, 2017 and 2016 (unaudited, dollars in
millions):
Three Months Ended Nine Months Ended June 30 June 30
2017 2016 2017 2016
Research and Development
Investment 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 Research and
Development Expense 299 214 740 610 Increase in Pre-production
Engineering Costs, Net 4 30 28
104
Total Research and Development
Investment $ 303 $ 244 $ 768 $ 714
Percent of Total Sales 14.5 % 18.3 % 16.6 % 18.7 %
(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.
ROCKWELL COLLINS, INC.SUMMARY
BALANCE SHEET(Unaudited)(in millions)
June 30,2017
September 30,2016
Current Assets: Cash and cash equivalents $ 578 $ 340
Receivables, net 1,644 1,094
Inventories, net(1)
2,506 1,939 Other current assets 167 117
Total current assets 4,895 3,490
Property
1,328 1,035
Goodwill 8,602 1,919
Customer Relationship
Intangible Assets 2,092 467
Other Intangible Assets 905
200
Deferred Income Tax Asset 29 219
Other
Assets(2) 500 369
TOTAL
ASSETS $ 18,351 $ 7,699
Current
Liabilities: Short-term debt $ 511 $ 740 Accounts payable 787
527 Compensation and benefits 325 269 Advance payments from
customers 349 283 Accrued customer incentives 278 246 Product
warranty costs 202 87 Other current liabilities 422
194 Total current liabilities 2,874 2,346
Long-term Debt, Net(2) 7,268 1,374
Retirement
Benefits 1,523 1,660
Deferred Income Tax Liability 417 1
Other Liabilities 660 234
Equity 5,609
2,084
TOTAL LIABILITIES AND EQUITY $ 18,351
$ 7,699 (1) Inventories, net is comprised of
the following:
June 30,2017
September 30,2016
Inventories, net: Production inventory $ 1,338 $ 799
Pre-production engineering costs 1,168 1,140
Total Inventories, net $ 2,506 $ 1,939
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.
(2) During the nine months ended June 30,
2017, the Company adopted new accounting guidance requiring debt
issuance costs to be presented on the Condensed Consolidated
Statement of Financial Position as a deduction from the carrying
amount of the related debt liability. As a result, $8 million of
debt issuance costs were reclassified from Other Assets to
Long-term Debt, Net as of September 30, 2016.
ROCKWELL COLLINS, INC.CONDENSED
CASH FLOW INFORMATION(Unaudited, in millions)
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
ROCKWELL COLLINS, INC.NON-GAAP
FINANCIAL INFORMATION(Unaudited)(in millions, except
per share amounts)
Free cash flow is a non-GAAP measure and is reconciled to the
related GAAP measure, Cash Provided by Operating Activities from
Continuing Operations below. Free cash flow is calculated as Cash
Provided by Operating Activities from Continuing Operations less
Property Additions. The non-GAAP free cash flow information
included in this disclosure is believed to be useful to investors’
understanding and assessment of the Company’s ongoing
operations.
Nine Months Ended June 30 (dollars in millions) 2017
2016 Cash Provided by Operating Activities from Continuing
Operations $ 416 $ 223 Less: Property Additions (165 )
(133 ) Free Cash Flow $ 251 $ 90
The adjusted net income and adjusted earnings per share non-GAAP
metrics are believed to be useful to investors' understanding and
assessment of our on-going operations and performance of the B/E
Aerospace acquisition, which occurred on April 13, 2017. We believe
adjusted net income and adjusted earnings per share excludes
certain one-time and non-cash expenses not indicative of our
on-going operating results. The Company does not intend for the
non-GAAP information to be considered in isolation or as a
substitute for the related GAAP measures. Adjusted earnings per
share is based on a preliminary purchase price allocation and is
subject to potential adjustments that could be material to the
guidance presented below. In addition, adjusted earnings per share
is based on the weighted average shares for fiscal year 2017, which
includes the issuance of 31.2 million shares of Rockwell Collins
common stock on April 13, 2017 in connection with the B/E Aerospace
acquisition. Due to the timing of the share issuance, the earnings
per share impact of the acquisition of B/E Aerospace will be
different in our annual results compared to our quarterly
results.
Year Ending
September 30, 2017(estimated)
(dollars in millions, impact to forecasted net income; except per
share amounts)
Low End ofGuidanceRange
High End ofGuidanceRange
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
$ 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 $ 5.95
$ 6.15
A reconciliation between GAAP earnings per share and adjusted
earnings per share is presented below for results in all fiscal
quarters in 2017 and 2016.
Three Months Ended
December 31,2016
March 31,2017
June 30,2017
Earnings per share from continuing operations (GAAP) $ 1.10 $ 1.27
$ 1.12 B/E Aerospace acquisition-related expenses 0.07 0.07 0.34
Amortization of acquisition-related intangible assets 0.05 0.05
0.24 Amortization of B/E Aerospace acquired contract liability — —
(0.25 ) Amortization of B/E Aerospace inventory fair value
adjustment — — 0.19
Adjusted earnings per share from continuing operations $ 1.22
$ 1.39 $ 1.64 Three
Months Ended
Dec 31,2015
Mar 31,2016 Jun 30,2016 Sep 30,2016
Full Year 2016
Earnings per share from continuing operations (GAAP) $ 1.00 $ 1.30
$ 1.63 $ 1.58 $ 5.50 Amortization of acquisition-related intangible
assets 0.05 0.06 0.04
0.05 0.20 Adjusted earnings per share
from continuing operations $ 1.05 $ 1.36 $ 1.67
$ 1.63 $ 5.70
The below tables reconcile pre- and post-tax income from
continuing operations on a GAAP basis with pre- and post-tax
adjusted income from continuing operations for the three and nine
months ended June 30, 2017 and June 30, 2016.
Three Months Ended Nine Months Ended June 30, 2017
June 30, 2017 (dollars in millions)
Pre-tax
TaxExpense
Net
TaxRate
Pre-tax
TaxExpense
Net
TaxRate
Income from continuing operations (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 from continuing operations $ 361 $ 98
$ 263 27.1 % $ 843 $ 235 $ 608 27.9 %
Three Months Ended Nine Months Ended June 30, 2016 June 30,
2016 (dollars in millions)
Pre-tax
TaxExpense
Net
TaxRate
Pre-tax
TaxExpense
Net
TaxRate
Income from continuing operations (GAAP) $ 247 $ 33 $ 214 13.4 % $
639 $ 120 $ 519 18.8 % Amortization of acquisition-related
intangible assets 10 4 6
32 12 20 Adjusted income
from continuing operations $ 257 $ 37 $ 220
14.4 % $ 671 $ 132 $ 539 19.7 %
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version on businesswire.com: http://www.businesswire.com/news/home/20170728005089/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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