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Q1 fy16 quarterly earnings presentation
1. ยฉ 2016 Rockwell Collins
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Insert pictures into these angled boxes. Height should be 3.44 inches.
1st Quarter FY 2016
Conference Call
January 22, 2016
2. ยฉ 2016 Rockwell Collins
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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 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 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; 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; 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 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; 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.
3. ยฉ 2016 Rockwell Collins
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3
(in millions, except EPS amounts)
1st Quarter FY 2016 Results
$1,226 $1,169
1Q FY15 1Q FY16
Sales
5% decrease
$169
$133 (1)
1Q FY15 1Q FY16
Income from Continuing
Operations, net of taxes
21% decrease
$1.26
$1.00 (1)
1Q FY15 1Q FY16
EPS from Continuing Operations
21% decrease
($60)
($91)
1Q FY15 1Q FY16
Operating Cash Flow from
Continuing Operations
(1) โ Includes a $28 million after-tax, or 21 cent earnings per share, restructuring charge primarily related to headcount actions
the company is taking as a result of certain challenging market conditions, particularly in business aviation.
4. ยฉ 2016 Rockwell Collins
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($ in millions)
Sales
$18 million OEM decrease: (5)%
โข Lower business aircraft OEM production rates
โข Unfavorable airline selectable equipment mix
โข Lower Airbus A330 production rates
โข Partially offset by higher deliveries in support of
A350 and Embraer Legacy business jet
production ramp
$17 million Aftermarket increase: 8%
โข Higher head-up display retrofit sales in China
โข Higher inorganic sales from acquisitions of
Pacific Avionics and International
Communications Group (ICG)
โข Higher regulatory mandate sales
Operating Earnings
Operating earnings and operating margin flat due to:
โข Lower company-funded research and
development expense
โข Offset by higher costs from Pacific Avionics and
ICG, higher costs from further expansion in
international emerging markets, and higher sales
to lower margin customer-funded development
revenues
Commercial Systems
22.2%22.0%
Operating
Margins
$125 $125
1Q FY15 1Q FY16
CS Operating Earnings
$568 $562
1Q FY15 1Q FY16
CS Sales
1% decrease
5. ยฉ 2016 Rockwell Collins
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20.8% 19.1%
($ in millions)
Government Systems
Sales
Sales decrease $58 million: (11)%
โข Lower rotary wing hardware sales
โข Timing of deliveries for the E-6 program
โข Lower sales from simulation and training programs
โข Wind down of an international electronic warfare
program
โข Lower international targeting system sales
Sales by category:
โข Avionics decrease (10)%
โข Communication and Navigation decrease (13)%
Operating Earnings
Decrease in operating earnings and operating margin
primarily due to lower sales
Operating
Margins
$509
$451
1Q FY15 1Q FY16
GS Sales
11% decrease
$106
$86
1Q FY15 1Q FY16
GS Operating Earnings
19% decrease
6. ยฉ 2016 Rockwell Collins
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($ in millions)
Sales
Sales increase $7 million: 5%
โข 7% growth in aviation related business
Operating Earnings
Increase in operating earnings and operating margin
primarily due to incremental earnings on the higher
sales volume
Information Management Services
15.4%14.1%
Operating
Margins
$149 $156
1Q FY15 1Q FY16
IMS Sales
5% increase
$21
$24
1Q FY15 1Q FY16
IMS Operating Earnings
14% increase
7. ยฉ 2016 Rockwell Collins
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7
$231 $228
($ in millions)
Research and Development
โข Company funded R&D decreased due to
lower development expenditures for the
Embraer Legacy 450 and the Airbus A350
programs, as well as lower business jet
product line development costs
โข Customer funded R&D increased primarily
due to higher development costs for
international programs in Commercial
Systems
โข Increased investment in pre-production
engineering driven by higher costs incurred for
certain military transport programs in
Government Systems
18.8% 19.5%
% of
Sales
31 40
131
136
69
52
1Q FY15 1Q FY16
R & D Investment
Company Funded R&D
Customer Funded R&D
Increase in Pre-production Engineering, Net
8. ยฉ 2016 Rockwell Collins
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8
09/30/15 12/31/15
Cash and cash equivalents 252$ 334$
Short-term Debt (448) (1,105)
Long-term Debt (1,680) (1,370)
Net Debt (1,876)$ (2,141)$
Equity 1,880$ 1,905$
Debt To Total Capital 53% 57%
Debt To EBITDA
(1)
1.7x 2.0x
($ in millions)
Capital Structure Status
(1) See slide 11 for non-GAAP disclosures.
9. ยฉ 2016 Rockwell Collins
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9
(shares in millions)
Status of Share Repurchases
1.0 million shares repurchased in fiscal year
2016 first quarter
โข Cost of Purchases - $90 Million
โข Average Cost per Share - $87.40
$290 million authorization remaining at the
end of the first quarter
132.5 131.2
1Q FY15 1Q FY16
Common Shares Outstanding
10. ยฉ 2016 Rockwell Collins
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10
Total Sales $5.3 Bil. to $5.4 Bil.
Total Segment Operating Margins About 21.0%
Earnings Per Share
$5.45 to $5.65
(From $5.20 to $5.40)
Cash Flow from Operations
$750 Mil. To $850 Mil.
(From $700 Mil. To $800 Mil.)
Research & Development Investment About $1 Bil.
Capital Expenditures About $200 Mil.
FY 2016 Guidance
11. ยฉ 2016 Rockwell Collins
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11
The Non-GAAP ratio of debt to EBITDA information included on slide eight is believed to be useful to
investorsโ understanding and assessment of the Companyโs 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, 2014 through September 30, 2015 and the twelve-month period
from January 1, 2015 through December 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
9/30/15 12/31/15
Income from continuing operations before income taxes $ 962 $ 901
Interest expense 61 61
Depreciation 152 149
Amortization of intangible assets and pre-production engineering
costs 100 99
Earnings before interest, taxes, depreciation and amortization
(EBITDA)
$ 1,275 $ 1,210
9/30/15 12/31/15
Total debt $ 2,128 $ 2,475
Debt to EBITDA 1.7x 2.0x