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© 2015 Rockwell Collins All rights reserved.
Insert pictures into these angled boxes. Height should be 3.44 inches.
2nd Quarter FY 2015 Conference Call April 23, 2015
© 2015 Rockwell Collins All rights reserved.
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; 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; unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011 as modified by the Bipartisan Budget Act of 2013; 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 on the commercial aerospace industry; declining defense budgets resulting from budget deficits in the U.S. and abroad; 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; favorable 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 productivity and quality improvements and cost reduction initiatives; achievement of ARINC integration and synergy plans as well as our other 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.
© 2015 Rockwell Collins All rights reserved.
$148 $163
2Q FY14 2Q FY15
Income from Continuing Operations, net of taxes
10% increase
$1,259 $1,341
2Q FY14 2Q FY15
Sales
7% increase
3
(in millions except EPS amounts) 2nd Quarter FY 2015 Results
(1)
(1)
(1) Prior year amounts have been revised to exclude discontinued operations.
(1) $1.08
$1.22
2Q FY14 2Q FY15
EPS from Continuing Operations
13% increase
137.2 133.7
2Q FY14 2Q FY15
Diluted Average Shares Outstanding
3% decrease
© 2015 Rockwell Collins All rights reserved.
$556 $619
2Q FY14 2Q FY15
CS Sales
11% increase
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($ in millions)
Sales $53 million OEM growth: 17%
• Improved share of airline selectable equipment • Higher customer funded development program
sales • Higher OEM production rates
$13 million Aftermarket increase: 6% • Increased service and support revenues • Increased sales of used aircraft parts • Higher regulatory mandate-related sales
Operating Earnings Increase in operating earnings due to incremental earnings on higher sales volume
Commercial Systems
22.9% 22.8% Operating Margins
$127 $142
2Q FY14 2Q FY15
CS Operating Earnings
12% increase
© 2015 Rockwell Collins All rights reserved.
$554 $567
2Q FY14 2Q FY15
GS Sales
2% increase
$111 $114
2Q FY14 2Q FY15
GS Operating Earnings
3% increase
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20.0% 20.1%
($ in millions) Government Systems
Sales Sales increase $13 million: 2% • Higher hardware deliveries on rotary wing platforms • Higher KC-10 retrofit sales • Higher Joint Strike Fighter simulation and training
sales • Higher data link development program sales • Partially offset by lower deliveries of JTRS
Manpack radios, lower KC-46 and CRIIS development program sales, and the foreign currency impact of a stronger U.S. dollar
Sales by category: • Avionics increase 8% • Communication Products decrease (8)% • Surface Solutions decrease (14)% • Navigation Products increase 4% Operating Earnings Increase in operating earnings due to incremental earnings on higher sales volume, partially offset by higher investment in company-funded R&D
Operating Margins
(1)
(1)
(1) Prior year amounts have been revised to exclude discontinued operations.
© 2015 Rockwell Collins All rights reserved.
6
($ in millions)
Sales Sales increase $6 million: 4% • 10% increase in aviation related sales • Partially offset by the exit of certain government
programs
Operating Earnings Increase in operating earnings and operating margin primarily due to higher sales volume and the absence of certain licensing costs incurred in the prior year
Information Management Services
14.2% 12.1% Operating Margins
$149 $155
2Q FY14 2Q FY15
IMS Sales
4% increase
$18 $22
2Q FY14 2Q FY15
IMS Operating Earnings
22% increase
© 2015 Rockwell Collins All rights reserved.
$2,313 $2,567
2Q FY14 YTD 2Q FY15 YTD
Sales
11% increase
(1)
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($ in millions except EPS amounts) Six Month FY 2015 Results
$282 $332
2Q FY14 YTD 2Q FY15 YTD
Income from Continuing Operations, net of taxes
18% increase
(1)
$2.06 $2.48
2Q FY14 YTD 2Q FY15 YTD
EPS from Continuing Operations
20% increase
(1)
$78
$132
2Q FY14 YTD 2Q FY15 YTD
Operating Cash Flow from Continuing Operations
69% increase
(1)
(1) Prior year amounts have been revised to exclude discontinued operations.
© 2015 Rockwell Collins All rights reserved.
89 65
232 283
132 141
2Q FY14 YTD 2Q FY15 YTD
R & D Investment
Company Funded R&D
Customer Funded R&D
Increase in Pre-production Engineering, Net
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$453 $489
($ in millions) Research and Development
• Company-funded R&D increased due to
efforts associated with positioning the Government Systems business for new growth opportunities
• Customer funded R&D increased primarily
due to the following: • Higher costs for international
development programs in Commercial Systems
• Increased costs for data link development programs in Government Systems
• Higher amortization of pre-production engineering costs
• Decreased investment in pre-production
engineering programs driven by lower A350 spend
19.6% 19.0% % of Sales
© 2015 Rockwell Collins All rights reserved.
9
09/30/14 03/31/15
Cash and cash equivalents 323$ 284$
Short-term Debt (504) (785)
Long-term Debt (1,663) (1,678)
Net Debt (1,844)$ (2,179)$
Equity 1,889$ 1,953$
Debt To Total Capital 53% 56%
Debt To EBITDA (1) 1.9x 2.0x
($ in millions) Capital Structure Status
(1) See slide 12 for non-GAAP disclosures.
© 2015 Rockwell Collins All rights reserved.
10
(shares in millions) Status of Share Repurchases
0.7 million shares repurchased in fiscal year 2015 second quarter
• Cost of Purchases - $63 Million • Average Cost per Share - $86.23
$468 million authorization remaining at the end of the first quarter
135.5 132.2
2Q FY14 2Q FY15
Common Shares Outstanding
© 2015 Rockwell Collins All rights reserved.
11
Total Sales $5.2 Bil. to $5.3 Bil.
Total Segment Operating Margins 20.5% to 21.5%
Earnings Per Share $5.10 to $5.30
Cash Flow from Operations $700 Mil. To $800 Mil.
Research & Development Investment About $1 Bil.
Capital Expenditures About $200 Mil.
FY 2015 Guidance for Continuing Operations
© 2015 Rockwell Collins All rights reserved.
12
The Non-GAAP ratio of debt to EBITDA information included on slide nine 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, 2013 through September 30, 2014 and the twelve-month period from April 1, 2014 through March 31, 2015 (unaudited, in millions). All businesses reported as discontinued operations have been excluded from the debt to EBITDA calculation.
Non-GAAP Financial Information
12 months ended 9/30/14 3/31/15 Income from continuing operations before income taxes $ 882 $ 941 Interest expense 59 61 Depreciation 141 150
Amortization of intangible assets and pre-production engineering costs 84 95
Earnings before interest, taxes, depreciation and amortization (EBITDA)
$ 1,166 $ 1,247
9/30/14 3/31/15 Total debt $ 2,167 $ 2,463 Debt to EBITDA 1.9x 2.0x
© 2015 Rockwell Collins All rights reserved.
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