final q2 fy16 quarterly earnings presentation

© 2016 Rockwell Collins All rights reserved.

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2nd Quarter FY 2016Conference Call

April 21, 2016


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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.


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(in millions, except EPS amounts)2nd Quarter FY 2016 Results

$1,341 $1,311

2Q FY15 2Q FY16

Sales

2% decrease

$163 $172

2Q FY15 2Q FY16

Income from Continuing Operations, net of taxes

6% increase

$1.22 $1.30

2Q FY15 2Q FY16

EPS from Continuing Operations

7% increase

133.7 132.3

2Q FY15 2Q FY16

Diluted Average Shares Outstanding

1% decrease


$619 $611

2Q FY15 2Q FY16

CS Sales

1% decrease

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($ in millions)

Sales$17 million OEM decrease: (5)%

• Lower business aircraft OEM production rates

• Unfavorable airline selectable equipment mix

• Lower Airbus A330 production rates

• Partially offset by higher customer-funded

development program sales, higher deliveries in

support of the Airbus A350 and Boeing 787

production ramps, and higher Bombardier

CSeries sales in support of its entry into service

$14 million Aftermarket increase: 6%

• Higher business jet avionics retrofit and mandate

sales

• Higher inorganic sales

Operating EarningsOperating earnings and operating margin decreased

due to:

• Sales mix

• Higher inorganic SG&A costs

• Partially offset by lower company-funded R&D

expense and cost savings initiatives

Commercial Systems

22.1%22.9%Operating Margins

$142 $135

2Q FY15 2Q FY16

CS Operating Earnings

5% decrease


$567 $538

2Q FY15 2Q FY16

GS Sales

5% decrease

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20.1% 20.1%

($ in millions)

Government Systems

SalesSales decrease $29 million: (5)%

• Lower rotary wing hardware deliveries

• Lower sales from simulation and training programs

• Wind-down of an international electronic warfare

program

• Lower international targeting system deliveries

Sales by category:

• Avionics decrease (4)%

• Communication and Navigation decrease (8)%

Operating EarningsDecrease in operating earnings primarily due to lower

sales volume, partially offset by lower company-funded

R&D expense and cost savings initiatives

Operating Margins

$114 $108

2Q FY15 2Q FY16

GS Operating Earnings

5% decrease


$22

$29

2Q FY15 2Q FY16

IMS Operating Earnings

32% increase

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($ in millions)

SalesSales increase $7 million: 5%

• 8% growth in aviation-related business

Operating EarningsIncrease in operating earnings and operating margin

due to incremental earnings on the higher sales

volume as well as the favorable resolution of certain

prior year claims associated with international

business jet support services

Information Management Services

17.9%14.2%Operating Margins

$155 $162

2Q FY15 2Q FY16

IMS Sales

5% increase


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(in millions, except EPS amounts)Six Month FY 2016 Results

$2,567 $2,480

2Q FY15 YTD 2Q FY16 YTD

Sales

3% decrease

$332 $305


Income from Continuing Operations, net of taxes

8% decrease

$2.48 $2.30


EPS from Continuing Operations

7% decrease

$132

$45


Operating Cash Flow from Continuing Operations

(1)

(1) Includes a $28 million after-tax, or 21 cent earnings per share, restructuring charge primarily related to reduced headcount as a result of certain challenging market conditions, particularly in business aviation.


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$489$470

($ in millions)

Research and Development

• Company funded R&D decreased due to

lower business jet development costs in

Commercial Systems and lower software-

defined radio program development costs in

Government Systems

• Customer funded R&D increased primarily

due to higher development costs in

Commercial Systems for international regional

jet programs, partially offset by the wind-down

of an international electronic warfare program

in Government Systems

• Increased investment in pre-production

engineering driven by higher costs incurred for

a military program in Government Systems

19.0% 19.0%% of Sales

65 74

283298

141 98


R & D Investment

Company Funded R&D

Customer Funded R&D

Increase in Pre-production Engineering, Net


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09/30/15 03/31/16

Cash and cash equivalents 252$ 300$

Short-term Debt (448) (1,120)

Long-term Debt (1,680) (1,383)

Net Debt (1,876)$ (2,203)$

Equity 1,880$ 1,989$

Debt To Total Capital 53% 56%

Debt To EBITDA (1)

1.7x 2.1x

($ in millions)

Capital Structure Status

(1) See slide 12 for non-GAAP disclosures.


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(shares in millions)

Status of Share Repurchases

1.2 million shares repurchased in fiscal year

2016 second quarter

• Cost of purchases - $98 Million

• Average cost per share - $85.03

$192 million authorization remaining at the

end of the second quarter

132.2 130.4

2Q FY15 2Q FY16

Common Shares Outstanding


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Total Sales $5.3 Bil. to $5.4 Bil.

Total Segment Operating Margins About 21.0%

Earnings Per Share $5.45 to $5.65

Cash Flow from Operations $750 Mil. To $850 Mil.

Research & Development Investment About $1 Bil.

Capital Expenditures About $200 Mil.

FY 2016 Guidance


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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, 2014 through September 30, 2015 and the twelve-month period

from April 1, 2015 through March 31, 2016 (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 3/31/16

Income from continuing operations before income taxes $ 962 $ 895

Interest expense 61 63

Depreciation 152 147

Amortization of intangible assets and pre-production engineering costs 100 108

Earnings before interest, taxes, depreciation and amortization (EBITDA)

$ 1,275 $ 1,213

9/30/15 3/31/16

Total debt $ 2,128 $ 2,503

Debt to EBITDA 1.7x 2.1x


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final q2 fy16 quarterly earnings presentation

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