Final col-2014-investor-conference-presentation

Accelerating growth

Rockwell Collins Investor Conference
March 6, 2014
Kelly Ortberg
Chief Executive Officer and President
© 2014 Rockwell Collins. All rights reserved.

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, 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 adverse impact of oil prices on the commercial aerospace industry; 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; 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 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 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.


2

2014 Investor Conference
Agenda
8:30 a.m.

Overview
Commercial Systems
Government Systems
Break
Information Management Services
Financial overview
Closing remarks
Panel Q&A
Break
Lunch

1:30 p.m.

Adjourn


3

A leader in communication and electronic solutions
Portfolio mix
(Pro forma FY14)

Commercial
Systems
44%

Commercial aviation and military applications including:
 

Integrated avionics

 

Navigation

 

Displays & surveillance systems

 

Information management solutions

 

Flight support services

 

Integrated mission & training solutions

 

Flight control

 

12%
Information
Management
Services

Communications

 

Government
Systems
44%

Global service & support


Commercial
56%

Defense
44%

4

Strategies to drive increased shareowner value
  Accelerate growth
‒  Market share gains on new OEM
platforms entering service
‒  Expanding international business
‒  Positioning for new defense
environment
‒  New growth platform with information
management solutions

  Expand free-cash flow
‒  Incremental margin on top-line growth
‒  Changing investment cycle with large
programs winding down

  Capital deployment with priorities on
growth and shareowner return

5

We’ve managed through dynamic markets
5-year recap
Challenges

Global recession

Our response
 
 

Increased investments in air transport
Increased balance in high end of
business aviation

 

Unprecedented
number of new
aircraft developments

 

Reshaped cost structure

 

U.S. defense
budget cycle

Rebalanced portfolio toward avionics
and leveraged commercial capabilities
Shifted focus to emerging
international markets

 

Invested through cycle and gained
market share

6

The market outlook is improving
  Air transport market is in a prolonged upcycle
  Business aviation market is bottoming out
  Bipartisan Budget Act is providing some certainty
for DoD investment
  International defense markets are growing
  Increasing demand for information management solutions


7

We’re positioned to take advantage
of market growth
  Strong customer focus drives
supplier-of-choice relationships
  Positioned on long-cycle programs
for the future
  Operating model leverages
common investments across
markets
  Reduced cost structure provides
leverage for future growth
  Expanding positions in
international markets
  Broadest portfolio of information
management offerings

8

We’re growing our international business
  Growing positions with
international OEMs and airlines

Domestic
60%

International
40%

  Expanding JVs and partnerships
to capture future growth
  Gaining share in international
defense markets
  Strong global presence in
information management
services

2013

Domestic
Domestic
50%
50%

International
International
50%
50%

2018

9

ARINC accelerates our growth
  Allows Rockwell Collins to
capture the growing service
link of the value chain
  Provides scale for incremental
growth
‒  Customer base
‒  Products and services
‒  Breadth to provide complete
solutions

  Synergistic with industry-leading
avionics business


10

5-year outlook
Last 5 Years

Next 5 Years

$7,500

$5,000

Revenue

$2,500

Mid-‐to-‐high
single digit
growth

$ -‐
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$ 8.00

$6.00

Earnings Per
Share

$4.00

$ 2.00

Double-‐digit
growth

$ -‐
2009

2010

2011

2012

2013

2014

2015

2016

2017

2018

$1,000

$750

Operating Cash
Flow

$500

$ 250

Double-‐digit growth

$ -‐
2009

2010

2011

2012


2013

2014

2015

2016

2017

2018

11

Business presentations
Kent Statler
Executive Vice President and Chief Operating Officer
Commercial Systems

Phil Jasper
Executive Vice President and Chief Operating Officer
Government Systems

Jeff Standerski
Senior Vice President

Patrick Allen
Senior Vice President and Chief Financial Officer


12

Commercial Systems

Kent Statler
Executive Vice President
and Chief Operating Officer


What we do
 

Integrated flight decks

 

Head-down and head-up
displays

 

Communication, navigation
and surveillance systems

 

Information management
systems

 

Flight control

 

Global customer service
and support


14

Markets we serve
Air transport OEMs

Business
and
regional
45%

Air
transport
51%

WB IFE*
4%

Business and regional OEMs

Aftermarket
40%

Aftermarket

OE
56%

WB IFE*
4%

FY13 revenue $2.2B
* Widebody in-flight entertainment

15

Overall market outlook looks positive
Air Transport

Business and Regional

  Robust backlogs

  Delivery rates are bottoming

  Historically high production

  New models entering service

  Strong aftermarket

  Aftermarket will improve with
increased aircraft utilization


16

Commercial Systems is positioned
to deliver profitable growth
  Captured positions in growing markets
  Differentiated products and services
  Accelerated profitable growth

75% of investments for captured positions behind us; 90% of revenue ahead

17

What drives our growth

Innovative
technologies


Superior
customer value

Accelerated
profitable growth

18

Innovative technologies aligned with customer needs
Empowering
user
interface
Graphical flight planning

Large format displays

Extensive
situational
awareness
Synthetic vision

Information
management
systems

Secure aircraft data
networks


Enhanced vision

Air-to-ground
connectivity

Compact
head-up display

Touch screen displays

Synthetic vision
approach to 100’

Information security

Flight path
hazard avoidance

Synchronized aircraft

19

Delivering superior customer value is
foundational to growth
Boeing
B787

Competitive
costs

B737 MAX

B777X

opportunity

New programs and expanded content

Customer
aligned goals

Deliver high
quality products
on time

Bombardier

Superior
customer
value

Global 7000/8000

Challenger family

Global
5000/6000
CSeries

New programs and expanded content

Superior
customer service

Airbus

A380


A350

Next-generation
aircraft opportunity

20

Captured standard positions deliver growth
Boeing 777X
(future opportunity)

Air transport aircraft

COMAC C919
Bombardier
CSeries

Boeing 737 MAX

Airbus 350
Boeing 787

Entr

Gulfstream
G280

Embraer
Legacy 500

y

serv
nto
i

Embraer
Legacy 450

Business and regional aircraft


ice

cc
tes a
/ra

Bombardier
Learjet 85

COMAC
ARJ21

ting
elera

Mitsubishi
MRJ

th

019
gh 2
rou

Bombardier
Global 7000

Bombardier
Global 8000

5 unannounced programs

21

New standard positions bring increased content

Widebody ~2.0X

Narrowbody ~1.5X

Business aviation ~2.0X
(light to heavy Jets)


22

Expanding our global presence
to capture future business
 

Launched JVs in China to capture

International
45%

Major share at emerging international OEMs

 

FY08

Geographically diverse customer base
provides >50% in international revenues

 

Commercial Systems

Domestic
55%

FY13

future growth
 

Domestic
48%

Systems engineering co-located with

International
52%

customers including Canada, France,
Brazil and China
 

MRO service centers strategically
positioned around the globe


FY18
Domestic
~ 40%

International
~ 60%

23

Commercial Systems continues to deliver growth

Annual revenue

High
single-digit
growth

Aftermarket

Aftermarket
High
single-digit
growth

OE

OE
Widebody
IFE
CAGR

15% decline
2013

Next 5 Years

Revenue growth rate 2X above market

24

Commercial Systems is positioned to deliver…
 

High single-digit revenue growth
through captured standard positions

 

Margin expansion with increased
volume and Lean focus

 

Increased cash flows as large
development programs wind down
–  75% investment complete
–  90% of revenue in the future

 

Share gains to fuel growth beyond
next five years


25

Government Systems

Phil Jasper
Executive Vice President
and Chief Operating Officer


What we do
  Integrated avionics for manned and unmanned aircraft
  Head-down, head-up and helmet displays
  Integrated mission and training solutions
  Networked communication
  Precise navigation and targeting


27

Markets we serve

Fixed Wing

Rotary Wing
Ground
20%
Forces 24%
Fixed Wing
56%

Rotary Wing
Int’l
29%
Domestic
71%

Ground Forces
FY13 revenue $2.4B

28

Market outlook
  Domestic market stabilizing
  New airborne platforms transitioning
to production
  KC-46, KC-390, dual-use helicopters
and F-35
  Fewer new platform developments drive
incremental upgrades to legacy fleets
  Shift from traditional development model
to commercial procurement
  Increased international spending on border
security and surveillance


29

Government Systems is positioned
to return to growth
 
 

Less reliance on U.S. Army ground forces
provides stability
Rest of the world (ROW) ground positioned
in growing markets

FY10
U.S. Army
Ground 20%
Fixed Wing
49%

– International targeting and ISR systems

ROW Ground
14%
Rotary Wing
17%

Annual revenue

FY10 revenue $2.9B
U.S. Army
Ground
ROW
Ground
Rotary

Fixed

FY13

(31%)
(4%)

1%
(1%)

U.S. Army
Ground 8%

US Army Grd

ROW
Ground

Fixed Wing
56%

Rotary

ROW
Ground 16%
Rotary Wing
20%

Fixed

FY13 revenue $2.4B
FY10

FY13

CAGR

30


Captured
positions

Leverage
Commercial
Systems
technology


Breadth of
mission
solutions

Return to
growth

31

Captured positions deliver growth
Incumbent programs with long service life remaining
JTRS HMS

MIDS-J

ARC-210

P-3

KC-10

International C-130

E-6
International
targeting

UH/MH-60 & 47
KC-135
CRH
USCG aircraft

ta
an

F-35 avionics
& simulation

Inc

um

dv
e a
d
gra
up
UCLASS
es
v
ri
y d
nc
be
Saab Gripen

ge

Long-range
strike

T-X

VXX

New development programs

US/NATO AWACS

CH-53K

KC-46

KC-390
AW101, 169,
189, 609

MGUE

TTNT

JPALS

International C-130

Captured programs yet to enter production

32

Leveraging Commercial Systems investments
creates differentiation
Normalized application cost

Application of commercial technology
results in decreased program costs

SOA
MH-60/47

Army
UH-60M

Army
CH-47F

USMC
VH-60

USCG
HH-60

Source: U.S. Army

  Common systems and capability developed once, used many times
  Cost of reused elements is 25% of the original investment
  Limits customer cost to missionization

33

Strong mission product portfolio
drives increased content
Networked
communication

Precision navigation
and targeting

High-integrity
computing

  Military H/U/VHF radios

  Secure GPS receivers

  Tactical data links

  Digital anti-jam receivers

  Satellite communication

  Precision weapons

  High assurance guards

  Software defined radios

  Airborne radio

  Sensor data processing

and waveforms
  Electronic warfare


navigation
  Digital targeting

  Multi-level security
microprocessors

and integration
  Image processing

34

Coupling Commercial Systems and military
technology expands platform content
Tanker
cockpit

KC-390
cockpit

E-6
products


120% increase
in shipset content

 
 
 
 

Tactical data links
Sensor integration
Image processing
Military radios

100% increase
in content

 
 
 
 

Military HF
SATCOM
Radio navigation
Tactical data links

Mission integration
provides value of $20M
per aircraft

  SATCOM
  Multi-level security
  Integrated mission
systems
  Nuclear C2

35

International revenue growth
remains strong
 

 

Government Systems
FY08

Use of Commercial Systems technology
lowers export risk

Int’l
21%
Domestic
79%

International growth accelerated through
export of captured OEM positions
FY13

 

Installed base, OEM wins and aircraft
retrofits generate:

Int’l
29%
Domestic
71%

‒  Mid single digit growth in Asia
and Europe
FY18

Int’l
35%

‒  Double digit growth in Middle East
Domestic
65%


36

to return to growth

Annual revenue

U.S. Army
Ground

ROW Grd

Rotary

(31%)
(4%)

US Army Grd
US Army Grd

ROW Grd

1%

Low single-digit
decline

ROW Grd

Low-mid
single-digit growth
Rotary

Rotary

Low-mid
single-digit growth

Fixed

FY10

(1%)

Fixed

FY13

Low
single-digit growth

Fixed

Next 5 Years
CAGR


37

for profitable growth
  Captured positions and strong
product portfolio deliver growth
  International growth
remains strong
  Portfolio much less reliant
on U.S. Army modernization
  Industry-leading margins through
application of Commercial Systems
technology


38

accelerating growth

39


Kelly Ortberg
Chief Executive Officer and President


Increasing demand for information enablement
Double-digit market growth:
•  Increasing fleet size
•  Increasing percentage of information-enabled aircraft
•  Increasing applications and services

84,700 (1)
active
commercial
aircraft

80%
information
enabled

33,800 (1)
active
commercial
aircraft

information-enabled
“smart aircraft”
•
•
•
•

15-20%
information
enabled

2000

2010

2020

Advanced avionics
Connectivity & services
Apps & content
Security

2030

(1) – Air transport, regional and business aviation aircraft


41

Information management provides new
platform for growth
Passenger
network

Information
management
systems

Cyber security
firewall

Secure
data network

Computers
& servers
Smart
router
Communication
radios

Information
management
services

Aviation
authorities


Information services

Satellite
communications

Rockwell Collins
network operations

eCommerce

Maintenance
services

Information enablement

Air-to-ground
communications

OEM
services

Airline/business aviation
operations
42


Jeff Standerski


Information Management Services (IMS)

Employees: 1,800
Primary locations:
  Annapolis, Maryland
  London
  Singapore

Rail/security
16%
Airports
21%

Business
aviation
22%

Airline
aviation
41%

2013


+

Flight services
Employees: 250
Primary location:
  Houston, Texas

Information
Management
Services

Domestic
55%

International
45%

2013

44

What we do
  Airline and business aviation
communications
  Air-to-ground voice and data network
  Ground-to-ground network

  Business aviation flight support services
  Airport operational efficiency systems
  Rail and security command and
control systems


45

The network
  Mission critical private network
‒ 
‒ 
‒ 
‒ 
‒ 

Global coverage
High assurance and high availability
Connects 100s of legacy airline systems
1100+ ground stations
Satellite communications service

  Revenue generated by usage and value-added applications

Air-to-ground network

Ground-to-ground
network


Community
of users
46

A day at airline and
airport operations

(Enroute)

$
$
(Preflight to take-off)

$

$

Air-to-ground
network

(Landing)

$

$

Private groundto-ground network

Airline to aircraft

$

Passenger to airline

$

Airline to airline

$

Passenger to TSA

$

Airline to customs
& immigration

Airline to flight
status displays

47

A day within business aviation flight support services
(Enroute)

(Postflight)

(Preflight to take-off)

Passenger to Internet

$

$

$

$

$
Air-to-ground
network
Trip logs

$
$
Private groundto-ground network
Flight operations management

$

Airport
information

$

Real-time
weather


$

Agent network

$
$

$

Flight following
Flight plan
upload

IMS flight operations

$

Fuel
management
48

Market outlook
Airline aviation
  Growth in air traffic and total fleet
  Increased broadband data usage
  Improved global airspace operations
(e.g., FAA NextGen)
Business aviation
  Integrated global service offerings
  Adoption of mobile devices for graphical weather,
charts and maps
  Increased passenger connectivity demands
Airports
  Integrated airport environment
  Increased data exchange between airports
and airlines
  Automated security and customs processes

49

Strong market presence around the globe

Americas

Europe, Middle East & Africa

  #1 in North American airline and

business aviation communications
market
  Leader in business aviation flight

support services
  FAA DataComm / NextGen
  Positioned in 50+ leading airports

(e.g., Dallas, Las Vegas and
Vancouver)

  Virgin Atlantic, Emirates and

South African Airways are
examples of key customers

(e.g., Heathrow, Dubai and Doha)

Asia Pacific
  Exclusive provider of airline and

business aviation communications
in China and Thailand
  Fleet-wide information management

enablement and services at
Cathay Pacific

(e.g., Tokyo, Hong Kong and Seoul)

Long-term customers. Renewal rates > 95%

50


Enhanced data /
services drive
demand


Synergies

Accelerated
revenue growth

51

Enhanced data / services drive demand
1. 

Airline aviation
traffic growth

2. 

More data per airline &
business aviation aircraft

3. 

More types of users –
aviation “eco-system”

Air-to-ground messages
5% CAGR since
1980

5% CAGR projected
for next 15 years

B767

10x increase in
data generated

B787

Air traffic doubles every 15 yrs
Sources: Airbus & Boeing

IMS revenue

High single digit growth
Core business
Current

Future
52

Identified synergies drive over $125M in
revenue through 2018
$50M+/year

2018
$10M/year
2015

  Service expansion through

airline channel relationships
  Flight support services

growing through combined,
complementary service
offerings in business aviation


  Airline and business aviation

communication services to
drive increased information
enablement, applications
and content

53

Creating a one-stop shop for business aviation
flight support services

Flight Services

Weather services

Integrated
solution

Connectivity
services
Regional
trip support

Connectivity
services
International
trip support

Regional
trip support

International
trip support

Revenue synergy  drive growth
1.  International trip support and weather services provided to ARINC Direct customers
2.  Regional trip support and connectivity services provided to Ascend customers
3.  Market share gain from strength of complementary portfolios

54

Leveraging communication services to deliver
enablement, applications and content

Cathay Pacific’s
eEnabled aircraft

Cabin apps & content
Passenger connectivity
Credit card transactions
Audio-video distribution

On-board system

Aircraft apps & content
Graphical weather
Electronic charts
Maintenance data

Ground-to-ground network, applications and infrastructure


55

Strong core business with identified synergies
and further expansion potential

growth in core business –
further enhanced by synergies
  High incremental margins from

more data users / usage over
existing network infrastructure
  Long-term stable cash flow

IMS revenue

  High single-digit revenue

generation from connectivity
and app subscription business

Synergies

High single-digit growth
Core business

Current


Double-digit growth

Future

56

2014 Rockwell Collins Investor Conference

Patrick Allen
and Chief Financial Officer


Over the last five years
DOD Investment Accounts
(Base + OCO Investment)

Business & Regional
Aircraft Deliveries

($ Billions)

1,800
1,600
1,400
1,200
1,000
800
600
400
200
-

$300
$250
$200
$150
$100
$50
2008 2009 2010 2011 2012 2013

Business & regional aircraft
deliveries down 40%

$2008 2009 2010 2011 2012 2013

DOD investment spend down 33%

Air Transport Aircraft Deliveries
1,400
1,200
1,000
800
600
400
200
2008

2009

2010

2011

2012

2013

Core revenues
remained flat
despite 2 of 3
markets declining

Air transport deliveries up 50%

58

We remained focused on our core performance
Focus Area

Result

Maintain profitability

  Sustained average operating margins
above 20%
  Decreased headcount ~10%
  Closed 17 facilities

Cash flow performance

Generated 126%(1) average operating
cash flow as a percent of net income
(before deferred investments)

Invested in emerging
markets

  Increased headcount in emerging
markets by 60%
  Three new joint ventures in
emerging markets

Offset market declines

Business jet market share gains offset
four years of market declines

(1) – See Non-GAAP Financial Information table at the end of this presentation.

59

While deploying our cash
Focus area

Result

Invested 20% of sales
in R&D for core growth

  Commercial Systems poised to grow
2X market
  Government Systems leverages
commercial technologies for mission
systems

Purchased ARINC

Complementary business adds $550
million of revenue growing high single
digits organically

Returned capital
to shareowners

  Maintained dividend payout ratio
  Repurchased 36 million shares

Leveraging a return to growth for company and investors


60

The market outlook is improving
  Air transport market is in a prolonged upcycle
  Business jet production is bottoming out
  More budget certainty for DoD investment accounts
  International defense markets are growing


61

R&D investments are paying off
Key investments

Pro Line Fusion

Payoff

  Pro Line Fusion on 18 commercial
platforms
  Competitive product offering
for light business jets

Air Transport investments:
  Displays
  Information management
  Communication, navigation and
surveillance systems

Government Systems investments:
  Utilize Fusion/AT investments
  Networked radios
  Precision targeting solutions

  Leveraged 787 win onto A350 and
737 MAX

  Deployed commercial technologies
across military platforms
  Developed solutions to address U.S.
and international markets

62

Pre-production engineering investments
are paying off
Key programs

Payoff

  A350

Pre-production
engineering program sales
($ Millions)

  CSeries
  Global 5000/6000

$800

  Global 7000/8000

$600

  737 MAX

$400

  Gulfstream 280
  Learjet 85
  Embraer 450/500
  Agusta 149
  Saab Gripen


$200
$2014

2015

2016

2017

2018

  $18 billion in revenue over
the lifecycle of these programs
  $7 billion in operating profit

63

Pre-production engineering starts to deliver

$900

$800

$700

$600

$500

$400

$300

$200

$100

$-‐

2009

2010

2011

2012

Sales

2013

2014

2015

2016

2017

2018

Commi7ed
pre-‐produc=on
engineering
spend

~75% of the spend is behind us and over 90% of the revenue is in front of us


64

Acquisition of ARINC adds platform for growth
ARINC
Sales
(1)

Long-term ARINC expectations:

$ 600

  Organic sales growth in high-single digits

10% CAGR

  Revenue synergies expand ARINC sales

$ 500

growth to double-digits

$ 400

  EBITDA margins expanding to greater than
20%(2); incremental margins of 40%-50%

$ 300

  ARINC initially increases Rockwell Collins’
cash flow by about 10% and accelerates

$ 200

thereafter

$ 100

  Capital expenditures as a percent of
sales ~6%

$ -‐
2011

2012

2013

Rockwell Collins combined business is 56% commercial and growing
(1)  Excludes sales for ARINC's Aerospace Systems Engineering and Support business, which is in the process of being divested.
(2)  See ARINC Projected Financial Information table in Rockwell Collins’ first quarter results press release dated January 21, 2014.

65

Capital deployment going forward

Invest in growth

Repay majority of
short-term debt

Continue shareowner
friendly capital
deployment


  R&D ~18-20% of sales
  Bolt-on acquisitions
  Capital expenditures ~3% of sales
  Expected to take ~2 years

  Dividend payout of 20%-25%
of net income
  Resume “normal” share repurchases
after debt pay down

66

5-year outlook

Revenue

Mid-‐to-‐high
single-‐digit
growth

2014

Earnings Per Share

2016

2017

2018

•  Expanding margins with sales growth
•  Resume share repurchases


2014

Operating Cash
Flow

2015

2016

2017

2018

•  Deferred investments decreasing
•  Pension headwinds abating


2014


2015

2015

2016

2017

•  Commercial Systems high
single-digit growth
•  Government Systems low
single-digit growth
•  Information Management Services
accelerating to double-digit growth

2018

67

accelerating growth

68

Non-GAAP Financial Information
The Non-GAAP information included in this presentation is believed to be useful to an investor's understanding and
assessment of our on-going operations. The company does not intend for the Non-GAAP information to be considered in
isolation or as a substitute for the related GAAP measures.
The following table is intended to show operating cash flows as a percent of net income for the last five years excluding
the impact of pre-production engineering investment for the last five years (unaudited, in millions):
Five Years Ending
September 30, 2013
Operating cash flows, as reported

$

3,152
548

Add: Amortization expense for pre-production engineering costs

(a)

80

Add: Increase in pre-production engineering costs, net

(b)

Operating cash flows, as adjusted

$

3,780

Income from continuing operations, as reported

$

3,002

Adjusted operating cash flows as a percent of income from continuing operations

126%

(a) Represents the net increase in pre-production engineering costs capitalized within inventory. Pre-production engineering costs capitalized
within inventory were $714 million and $166 million at September 30, 2013 and September 30, 2008, respectively.
(b) Represents the amortization expense for pre-production engineering costs of $25 million, $18 million, $15 million, $15 million and $7
million for the twelve months ended September 30, 2013, 2012, 2011, 2010 and 2009, respectively.


69

Final col-2014-investor-conference-presentation

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