Final col-2014-investor-conference-presentation

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Investor Relations

Published on March 6, 2014

Author: rockwell_collins

Source: slideshare.net

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. © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved.   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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 Information Management Services Patrick Allen Senior Vice President and Chief Financial Officer © 2014 Rockwell Collins. All rights reserved. 12

Commercial Systems Kent Statler Executive Vice President and Chief Operating Officer © 2014 Rockwell Collins. All rights reserved.

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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 17

What drives our growth Innovative technologies © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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) © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 25

Government Systems Phil Jasper Executive Vice President and Chief Operating Officer © 2014 Rockwell Collins. All rights reserved.

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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. FY13 CAGR 30

What drives our growth Captured positions Leverage Commercial Systems technology © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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% © 2014 Rockwell Collins. All rights reserved. 36

Government Systems is positioned 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 © 2014 Rockwell Collins. All rights reserved. 37

Government Systems is positioned 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 © 2014 Rockwell Collins. All rights reserved. 38

accelerating growth © 2014 Rockwell Collins. All rights reserved. 39

Information Management Services Kelly Ortberg Chief Executive Officer and President © 2014 Rockwell Collins. All rights reserved.

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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. Information services Satellite communications Rockwell Collins network operations eCommerce Maintenance services Information enablement Air-to-ground communications OEM services Airline/business aviation operations 42

Information Management Services Jeff Standerski Senior Vice President © 2014 Rockwell Collins. All rights reserved.

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 © 2014 Rockwell Collins. All rights reserved. + 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. $ 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 © 2014 Rockwell Collins. All rights reserved. $ 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 © 2014 Rockwell Collins. All rights reserved. 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   Positioned in 40+ leading airports (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   Positioned in 20+ leading airports (e.g., Tokyo, Hong Kong and Seoul) Long-term customers. Renewal rates > 95% © 2014 Rockwell Collins. All rights reserved. 50

What drives our growth Enhanced data / services drive demand © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved.   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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. Double-digit growth Future 56

2014 Rockwell Collins Investor Conference Patrick Allen Senior Vice President and Chief Financial Officer © 2014 Rockwell Collins. All rights reserved.

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% © 2014 Rockwell Collins. All rights reserved. 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. © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved.   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 © 2014 Rockwell Collins. All rights reserved. $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 © 2014 Rockwell Collins. All rights reserved. 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. © 2014 Rockwell Collins. All rights reserved. 65

Capital deployment going forward Invest in growth Repay majority of short-term debt Continue shareowner friendly capital deployment © 2014 Rockwell Collins. All rights reserved.   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 Double-­‐digit growth 2014 Operating Cash Flow 2015 2016 2017 2018 •  Deferred investments decreasing •  Pension headwinds abating Double-­‐digit growth 2014 © 2014 Rockwell Collins. All rights reserved. 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 © 2014 Rockwell Collins. All rights reserved. 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. © 2014 Rockwell Collins. All rights reserved. 69

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