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Q3 2013 Rockwell Collins, Inc. Earnings Conference Call
- 1. Insert pictures into these angled boxes. Height should be 3.44 inches.
3rd Quarter FY 2013
Conference Call
July 19, 2013
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
- 2. Safe Harbor Statement
This presentation contains statements, including certain projections and business trends, 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, including
bankruptcies; the health of the global economy, including potential deterioration in economic and financial market conditions;
the rate of recovery of the commercial OEM production rates and the aftermarket; the impacts of natural disasters, including
operational disruption potential supply shortages and other economic impacts; cybersecurity threats including the potential
disruption,
threats,
misappropriation of assets or sensitive information, corruption of data or operational disruption; delays related to the award of
domestic and international contracts; unanticipated impacts of sequestration and other provisions of the Budget Control Act of
2011; the discontinuance of support for military transformation and modernization programs; potential adverse impact of oil
prices on the commercial aerospace industry; the impact of terrorist events on the commercial aerospace industry; declining
de e se
defense budgets resulting from budget de c ts in t e U S a d ab oad; c a ges in do est c a d foreign go e
esu t g o
deficits the U.S. and abroad; changes domestic and o e g government
e t
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; favorable
outcomes on or potential cancellation or restructuring of contracts, orders or program priorities by our customers; timing of
international contract awards; recruitment and retention of qualified personnel; regulatory restrictions on air travel due to
environmental concerns; effective negotiation of collective bargaining agreements by us and our customers; 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 our
internal performance plans such as our productivity and quality improvements and cost reduction initiatives; achievement of
our acquisition and related integration 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 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; and the uncertainties of the outcome of lawsuits, claims and legal proceedings, 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.
g
p
y
g
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
2
- 3. 3rd Quarter FY 2013 Results
($ in millions except EPS amounts)
$1,205
Sales
Net Income
$1,165
$166
3% decrease
$164
1% decrease
3Q FY12
3Q FY13
3Q FY12
3Q FY13
Diluted Average Shares Oustanding
EPS
145.0
145 0
$1.20
$1.14
137.2
5% decrease
5% increase
3Q FY12
© 2013 Rockwell Collins
All rights reserved.
3Q FY12
3Q FY13
Proprietary Information
3Q FY13
3
- 4. Commercial Systems
($ in millions)
Sales
$14 million OEM growth: 5%
$563
$526
• Increased deliveries for:
• Bombardier Global and Challenger
• Beechcraft King Air
• Partially offset by fewer deliveries for
Cessna business jets
7% increase
3Q FY12
3Q FY13
$27 million Aftermarket increase: 13%
Operating Earnings
• Higher Spare Sales
• Increased Retrofits for Airspace
Mandates
$132
$105
26% increase
$27 million increase in Operating
Earnings
Operating
Margins
3Q FY12
20.0%
• Higher sales
g
• Lower company-funded R&D
3Q FY13
23.4%
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
4
- 5. Government Systems
($ in millions)
$679
Sales
Sales decline $77 million (11%)
•
Headwind from development programs
transitioning to production
•
Reduced sales for Eurofighter and helmet
mounted displays
•
Lower satellite communication and datalink
product sales
•
Reduction in sales of GPS products
$602
11% decline
•
3Q FY12
3Q FY13
Sales by product category:
•
Avionics decrease 13%
•
Communication Products decline 14%
•
Surface Solutions increase 24%
f
•
Navigation Products decrease 21%
Operating Earnings
$148
$129
13% decline
Operating
Margins
Partially offset by increased sales:
•
JTRS Manpack radios
•
Firestorm targeting systems
o
a g
g y
$19 million decrease in operating earnings
• Lower sales
• Partially offset by cost reduction actions
3Q FY12
3Q FY13
21.8%
21.4%
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
5
- 6. 3rd Quarter YTD FY 2013 Results
($ in millions except EPS amounts)
Net Income
Sales
$3,460
$3,358
$457
3Q FY13 YTD
$457
3Q FY12 YTD
0% Change
3% decrease
3Q FY12 YTD
$3.09
$3 09
EPS
3Q FY13 YTD
Operating Cash Flow
$3.30
7% increase
$309
$192
61% increase
3Q FY12 YTD
© 2013 Rockwell Collins
All rights reserved.
3Q FY13 YTD
3Q FY12 YTD
Proprietary Information
3Q FY13 YTD
6
- 7. Research and Development
($ in millions)
R & D Investment
241
383
88
% of
Sales
S l
•
•
$690
209
Maintained R&D investment as % of
sales
Customer and company-funded R&D
declined as development programs were
completed
•
$712
Increased investment in pre-production
engineering programs driven by:
368
•
•
•
Boeing 737 MAX
Bombardier C-Series
Airbus A350
113
3Q FY12 YTD
3Q FY13 YTD
20.6%
20.5%
Increase in Pre-production Engineering, Net
Customer Funded R&D
Company Funded R&D
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
7
- 8. Capital Structure Status
($ in millions)
09/30/12
Cash
$
Short-term Debt
335
$
Equity
$ 1,264
Debt T Total C it l
D bt To T t l Capital
(1)
(444)
38%
0.7x
354
(602)
(779)
Net (Debt) / Cash
(1) See
$
-
Long-term Debt
Debt To EBITDA
06/30/13
(563)
$
(811)
$ 1,208
49%
1.1x
slide 11 for non-GAAP disclosures
© 2013 Rockwell Collins
All rights reserved.
Proprietary Information
8
- 9. Status of Share Repurchases
($ in millions)
Common Shares Outstanding
1.4 million shares repurchased in fiscal
year 2013 third quarter
142.1
135.3
• Cost of Purchases - $90 Million
• Average Cost per Share - $63.72
5%
decrease
85 million shares repurchased since
January 2002
• Cost of Purchases - $4.2 Billion
$473 million authorization remaining
at the end of Q3
3Q FY12
© 2013 Rockwell Collins
All rights reserved.
3Q FY13
Proprietary Information
9
- 10. FY 2013 Guidance
~$4.65B
(from $4.6B to $4 7B)
$4 6B
$4.7B)
Total Sales
Total Segment Operating Margin
21% to 22%
$4.55 to $4.60
(from $4.45 to $4.65)
Earnings Per Share
Cash Provided by Operating Activities
Research & Development Investment
~$950 million
~$125M
$
(from ~$140M)
Capital E pendit e
Expenditure
© 2013 Rockwell Collins
All rights reserved.
~$600M
(from $500M to $600M)
Proprietary Information
10
- 11. Non-GAAP Financial Information
The non-GAAP ratio of debt to EBITDA information included on slide eight is believed to be
useful to investors’ understanding and assessment of the Company’s total capital structure
and liquidity. The Company does not intend for the information to be considered in
isolation or as a substitute for the related GAAP measures. The table below explains the
debt to EBITDA calculation in more detail for the twelve-month period from October 1,
2011 through September 30, 2012 and the twelve-month period from July 1, 2012 through
June 30, 2013 (unaudited, in millions):
Income before income taxes
Interest expense
Depreciation
Amortization of intangible assets and pre production
pre-production
engineering costs
Earnings before interest, taxes, depreciation and amortization
(EBITDA)
Proprietary Information
56
$ 1,058
$ 1,045
6/30/13
$ 1,165
0.7x
Debt to EBITDA
57
9/30/12
$ 779
Total debt
© 2013 Rockwell Collins
All rights reserved.
12 months ended
th
d d
9/30/12
6/30/13
$ 857
$ 839
27
28
117
122
1.1x
11
- 12. © 2013 Rockwell Collins
All rights reserved.
Proprietary Information
12