Q3 2013 Rockwell Collins, Inc. Earnings Conference Call
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Q3 2013 Rockwell Collins, Inc. Earnings Conference Call

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Q3 2013 Rockwell Collins, Inc. Earnings Conference Call Q3 2013 Rockwell Collins, Inc. Earnings Conference Call Presentation Transcript

  • 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
  • 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
  • 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 $1.14 137.2 5% decrease 5% increase 3Q FY12 © 2013 Rockwell Collins All rights reserved. 3Q FY12 3Q FY13 Proprietary Information 3Q FY13 3
  • Commercial Systems ($ 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 $27 million increase in Operating Earnings Operating Margins 3Q FY12 20.0% • Higher sales g • Lower company-funded R&D 3Q FY13 23.4% © 2013 Rockwell Collins All rights reserved. Proprietary Information 4
  • Government Systems ($ 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 $19 million decrease in operating earnings • Lower sales • Partially offset by cost reduction actions 3Q FY12 3Q FY13 21.8% 21.4% © 2013 Rockwell Collins All rights reserved. Proprietary Information 5
  • 3rd Quarter YTD FY 2013 Results ($ 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 $192 61% increase 3Q FY12 YTD © 2013 Rockwell Collins All rights reserved. 3Q FY13 YTD 3Q FY12 YTD Proprietary Information 3Q FY13 YTD 6
  • Research and Development ($ 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 • $712 Increased investment in pre-production engineering programs driven by: 368 • • • Boeing 737 MAX Bombardier C-Series Airbus A350 113 3Q FY12 YTD 3Q FY13 YTD 20.6% 20.5% Increase in Pre-production Engineering, Net Customer Funded R&D Company Funded R&D © 2013 Rockwell Collins All rights reserved. Proprietary Information 7
  • Capital Structure Status ($ 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
  • 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
  • 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
  • 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
  • © 2013 Rockwell Collins All rights reserved. Proprietary Information 12