final q3 fy16 quarterly earnings presentation

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  • 2016 Rockwell Collins All rights reserved.

    Insert pictures into these angled boxes. Height should be 3.44 inches.

    3rd Quarter FY 2016 Conference Call July 25, 2016

  • 2016 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 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.

  • 2016 Rockwell Collins All rights reserved.

    $1.33

    $1.63

    3Q FY15 3Q FY16

    EPS from Continuing Operations

    23% increase

    $1,293 $1,334

    3Q FY15 3Q FY16

    Sales

    3% increase

    3

    (in millions, except EPS amounts) 3rd Quarter FY 2016 Results

    $178 $214

    3Q FY15 3Q FY16

    Income from Continuing Operations, net of taxes

    20% increase

    133.6 131.5

    3Q FY15 3Q FY16

    Diluted Average Shares Outstanding

    2% decrease

  • 2016 Rockwell Collins All rights reserved.

    4

    ($ in millions)

    Sales $6 million OEM decrease: (2)%

    Lower business aircraft OEM production rates Lower product deliveries to a Chinese regional

    aircraft manufacturer Lower Airbus A330 production rates Mostly offset by higher product deliveries in support

    of Airbus A350 and Boeing 787 production ramps, favorable customer timing for airline selectable equipment, higher product deliveries for CSeries and higher customer-funded development program revenues

    $11 million Aftermarket increase: 5%

    Higher simulation hardware deliveries Higher inorganic sales from the acquisition of

    International Communications Group Higher flight deck retrofits Partially offset by lower spares provisioning and

    lower cabin retrofits

    Operating Earnings Operating earnings and operating margin were about flat with the prior year as benefits from cost savings initiatives from previously announced restructuring plans were offset by unfavorable sales mix as lower margin customer-funded development sales increased and higher margin business jet OEM sales decreased

    Commercial Systems

    23.0% 23.1% Operating Margins

    $611 $612

    3Q FY15 3Q FY16

    CS Sales

    $141 $141

    3Q FY15 3Q FY16

    CS Operating Earnings

  • 2016 Rockwell Collins All rights reserved.

    $108 $115

    3Q FY15 3Q FY16

    GS Operating Earnings

    6% increase

    $530 $555

    3Q FY15 3Q FY16

    GS Sales

    5% increase

    5

    20.4% 20.7%

    ($ in millions) Government Systems

    Sales Sales increase $25 million: 5%

    Higher fixed-wing platform revenues Higher simulation and training sales Partially offset by lower rotary wing platform

    deliveries, the wind-down of an international electronic warfare program and lower international targeting system deliveries

    Sales by category:

    Avionics increase 11% Communication and navigation decrease (7)%

    Operating Earnings Operating earnings and operating margin increased due to higher sales volume and cost savings initiatives from previously announced restructuring plans, partially offset by unfavorable development program adjustments

    Operating Margins

  • 2016 Rockwell Collins All rights reserved.

    $23 $26

    3Q FY15 3Q FY16

    IMS Operating Earnings

    13% increase

    $152 $167

    3Q FY15 3Q FY16

    IMS Sales

    10% increase

    6

    ($ in millions)

    Sales Sales increase $15 million: 10%

    9% growth in aviation-related sales 11% increase in non-aviation sales primarily

    due to higher airport and rail program sales

    Operating Earnings Operating earnings and operating margin increased due to incremental earnings on higher sales volume

    Information Management Services

    15.6% 15.1% Operating Margins

  • 2016 Rockwell Collins All rights reserved.

    $341

    $223

    3Q FY15 YTD 3Q FY16 YTD

    Operating Cash Flow from Continuing Operations

    35% decrease

    $3.81 $3.92

    3Q FY15 YTD 3Q FY16 YTD

    EPS from Continuing Operations

    3% increase

    $510 $519

    3Q FY15 YTD 3Q FY16 YTD

    Income from Continuing Operations, net of taxes

    2% increase

    7

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

    (1)

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

    $3,860 $3,814

    3Q FY15 YTD 3Q FY16 YTD

    Sales

    1% decrease

  • 2016 Rockwell Collins All rights reserved.

    99 104

    431 456

    201 154

    3Q FY15 YTD 3Q FY16 YTD

    R & D Investment

    Company Funded R&DCustomer Funded R&DIncrease in Pre-production Engineering, Net

    8

    $731 $714

    ($ 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 certain military transport programs in Government Systems, the 737MAX and the Global 7000/8000 program, partially offset by lower spend on the CSeries program

    18.9% 18.7% % of Sales

  • 2016 Rockwell Collins All rights reserved.

    9

    09/30/15 06/30/16

    Cash and cash equivalents 252$ 307$

    Short-term Debt (448) (1,112)

    Long-term Debt (1,680) (1,387)

    Net Debt (1,876)$ (2,192)$

    Equity 1,880$ 2,114$

    Debt To Total Capital 53% 54%

    Debt To EBITDA (1) 1.7x 2.0x

    ($ in millions) Capital Structure Status

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

  • 2016 Rockwell Collins All rights reserved.

    10

    (shares in millions) Status of Share Repurchases

    0.7 million shares repurchased in fiscal year 2016 third quarter

    Cost of purchases - $67 Million Ave