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|
Delaware
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52-2314475
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(State or other jurisdiction
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(I.R.S. Employer
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of incorporation or organization)
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Identification No.)
|
|
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400 Collins Road NE
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|
Cedar Rapids, Iowa
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52498
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(Address of principal executive offices)
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(Zip Code)
|
|
Large accelerated filer
R
|
|
Accelerated filer
£
|
Non-accelerated filer
£
|
(Do not check if a smaller reporting company)
|
Smaller reporting company
£
|
|
|
|
|
Page No.
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|
|
|
|
PART I.
|
FINANCIAL INFORMATION:
|
|
|
|
|
|
|
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Item 1.
|
Condensed Consolidated Financial Statements:
|
|
|
|
|
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|
|
Condensed Consolidated Statement of Financial Position (Unaudited) — June 30, 2012 and September 30, 2011
|
|
|
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Condensed Consolidated Statement of Operations (Unaudited) — Three and Nine Months Ended June 30, 2012 and 2011
|
|
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Condensed Consolidated Statement of Cash Flows (Unaudited) — Nine Months Ended June 30, 2012 and 2011
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Notes to Condensed Consolidated Financial Statements (Unaudited)
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|
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Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
|
|
|
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Item 3.
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Quantitative and Qualitative Disclosures about Market Risk
|
|
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Item 4.
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Controls and Procedures
|
|
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PART II.
|
OTHER INFORMATION:
|
|
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Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
|
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Item 6.
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Exhibits
|
|
|
|
|
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Signatures
|
|
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PART I.
|
FINANCIAL INFORMATION
|
Item 1.
|
Condensed Consolidated Financial Statements
|
|
June 30,
2012 |
|
September 30,
2011 |
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
530
|
|
Receivables, net
|
967
|
|
|
969
|
|
||
Inventories, net
|
1,353
|
|
|
1,195
|
|
||
Current deferred income taxes
|
68
|
|
|
106
|
|
||
Other current assets
|
100
|
|
|
89
|
|
||
Total current assets
|
2,753
|
|
|
2,889
|
|
||
|
|
|
|
||||
Property
|
750
|
|
|
754
|
|
||
Goodwill
|
775
|
|
|
780
|
|
||
Intangible Assets
|
293
|
|
|
308
|
|
||
Long-term Deferred Income Taxes
|
355
|
|
|
448
|
|
||
Other Assets
|
222
|
|
|
210
|
|
||
TOTAL ASSETS
|
$
|
5,148
|
|
|
$
|
5,389
|
|
|
|
|
|
||||
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
||
Short-term debt
|
$
|
201
|
|
|
$
|
—
|
|
Accounts payable
|
400
|
|
|
485
|
|
||
Compensation and benefits
|
229
|
|
|
324
|
|
||
Advance payments from customers
|
274
|
|
|
269
|
|
||
Accrued customer incentives
|
155
|
|
|
128
|
|
||
Product warranty costs
|
125
|
|
|
148
|
|
||
Other current liabilities
|
101
|
|
|
141
|
|
||
Total current liabilities
|
1,485
|
|
|
1,495
|
|
||
|
|
|
|
||||
Long-term Debt, Net
|
778
|
|
|
528
|
|
||
Retirement Benefits
|
1,461
|
|
|
1,633
|
|
||
Other Liabilities
|
146
|
|
|
205
|
|
||
|
|
|
|
||||
Equity:
|
|
|
|
|
|
||
Common stock ($0.01 par value; shares authorized: 1,000; shares issued: 183.8)
|
2
|
|
|
2
|
|
||
Additional paid-in capital
|
1,453
|
|
|
1,437
|
|
||
Retained earnings
|
3,609
|
|
|
3,288
|
|
||
Accumulated other comprehensive loss
|
(1,478
|
)
|
|
(1,497
|
)
|
||
Common stock in treasury, at cost (shares held: June 30, 2012, 41.7; September
30, 2011, 30.5)
|
(2,313
|
)
|
|
(1,707
|
)
|
||
Total shareowners’ equity
|
1,273
|
|
|
1,523
|
|
||
Noncontrolling interest
|
5
|
|
|
5
|
|
||
Total equity
|
1,278
|
|
|
1,528
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
5,148
|
|
|
$
|
5,389
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Sales
|
$
|
1,205
|
|
|
$
|
1,190
|
|
|
$
|
3,460
|
|
|
$
|
3,510
|
|
|
|
|
|
|
|
|
|
||||||||
Costs, expenses and other:
|
|
|
|
|
|
|
|
|
|
||||||
Cost of sales
|
846
|
|
|
833
|
|
|
2,430
|
|
|
2,488
|
|
||||
Selling, general and administrative expenses
|
132
|
|
|
131
|
|
|
393
|
|
|
391
|
|
||||
Interest expense
|
7
|
|
|
5
|
|
|
20
|
|
|
14
|
|
||||
Other income, net
|
(10
|
)
|
|
(6
|
)
|
|
(20
|
)
|
|
(19
|
)
|
||||
Total costs, expenses and other
|
975
|
|
|
963
|
|
|
2,823
|
|
|
2,874
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations before income taxes
|
230
|
|
|
227
|
|
|
637
|
|
|
636
|
|
||||
Income tax expense
|
64
|
|
|
70
|
|
|
180
|
|
|
179
|
|
||||
Income from continuing operations
|
166
|
|
|
157
|
|
|
457
|
|
|
457
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Income from discontinued operations, net of taxes
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Net income
|
$
|
166
|
|
|
$
|
158
|
|
|
$
|
457
|
|
|
$
|
459
|
|
|
|
|
|
|
|
|
|
||||||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.16
|
|
|
$
|
1.02
|
|
|
$
|
3.12
|
|
|
$
|
2.96
|
|
Discontinued operations
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
||||
Basic earnings per share
|
$
|
1.16
|
|
|
$
|
1.03
|
|
|
$
|
3.12
|
|
|
$
|
2.97
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.14
|
|
|
$
|
1.01
|
|
|
$
|
3.09
|
|
|
$
|
2.92
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.14
|
|
|
$
|
1.01
|
|
|
$
|
3.09
|
|
|
$
|
2.93
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average common shares:
|
|
|
|
|
|
|
|
||||||||
Basic
|
143.4
|
|
|
153.8
|
|
|
146.4
|
|
|
154.6
|
|
||||
Diluted
|
145.0
|
|
|
155.9
|
|
|
147.9
|
|
|
156.6
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Cash dividends per share
|
$
|
0.30
|
|
|
$
|
0.24
|
|
|
$
|
0.78
|
|
|
$
|
0.72
|
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
|
2012
|
|
2011
|
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
457
|
|
|
$
|
459
|
|
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
||||
Depreciation
|
82
|
|
|
78
|
|
||
Amortization of intangible assets
|
29
|
|
|
28
|
|
||
Stock-based compensation expense
|
19
|
|
|
18
|
|
||
Compensation and benefits paid in common stock
|
53
|
|
|
53
|
|
||
Excess tax benefit from stock-based compensation
|
(7
|
)
|
|
(7
|
)
|
||
Deferred income taxes
|
119
|
|
|
68
|
|
||
Pension plan contributions
|
(120
|
)
|
|
(110
|
)
|
||
Changes in assets and liabilities, excluding effects of acquisitions and foreign
currency adjustments:
|
|
|
|
||||
Receivables
|
3
|
|
|
(12
|
)
|
||
Inventories
|
(200
|
)
|
|
(245
|
)
|
||
Accounts payable
|
(71
|
)
|
|
5
|
|
||
Compensation and benefits
|
(92
|
)
|
|
10
|
|
||
Advance payments from customers
|
12
|
|
|
(47
|
)
|
||
Accrued customer incentives
|
27
|
|
|
(5
|
)
|
||
Product warranty costs
|
(21
|
)
|
|
(28
|
)
|
||
Income taxes
|
(85
|
)
|
|
30
|
|
||
Other assets and liabilities
|
(13
|
)
|
|
(49
|
)
|
||
Cash Provided by Operating Activities
|
192
|
|
|
246
|
|
||
|
|
|
|
||||
Investing Activities:
|
|
|
|
|
|
||
Property additions
|
(102
|
)
|
|
(104
|
)
|
||
Proceeds from the disposition of property
|
17
|
|
|
—
|
|
||
Acquisition of businesses, net of cash acquired
|
—
|
|
|
(17
|
)
|
||
Cash provided to customer
|
—
|
|
|
(237
|
)
|
||
Collection of cash provided to customer
|
—
|
|
|
237
|
|
||
Proceeds from sale of short-term investments
|
—
|
|
|
18
|
|
||
Acquisition of intangible assets
|
(2
|
)
|
|
(3
|
)
|
||
Other investing activities
|
(4
|
)
|
|
3
|
|
||
Cash Used for Investing Activities
|
(91
|
)
|
|
(103
|
)
|
||
|
|
|
|
||||
Financing Activities:
|
|
|
|
|
|
||
Purchases of treasury stock
|
(710
|
)
|
|
(277
|
)
|
||
Cash dividends
|
(114
|
)
|
|
(112
|
)
|
||
Increase in short-term commercial paper borrowings, net
|
201
|
|
|
70
|
|
||
Decrease in short-term borrowings
|
—
|
|
|
(24
|
)
|
||
Increase in long-term borrowings
|
247
|
|
|
—
|
|
||
Proceeds from the exercise of stock options
|
17
|
|
|
19
|
|
||
Excess tax benefit from stock-based compensation
|
7
|
|
|
7
|
|
||
Cash Used for Financing Activities
|
(352
|
)
|
|
(317
|
)
|
||
|
|
|
|
||||
Effect of exchange rate changes on cash and cash equivalents
|
(14
|
)
|
|
7
|
|
||
|
|
|
|
||||
Net Change in Cash and Cash Equivalents
|
(265
|
)
|
|
(167
|
)
|
||
Cash and Cash Equivalents at Beginning of Period
|
530
|
|
|
435
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
265
|
|
|
$
|
268
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Recently Issued Accounting Standards
|
3.
|
Acquisitions
|
4.
|
Discontinued Operations
|
5.
|
Receivables, Net
|
Receivables, net are summarized as follows:
|
|
|
|
||||
|
|
|
|
||||
(in millions)
|
June 30,
2012 |
|
September 30,
2011 |
||||
Billed
|
$
|
736
|
|
|
$
|
718
|
|
Unbilled
|
438
|
|
|
404
|
|
||
Less progress payments
|
(193
|
)
|
|
(143
|
)
|
||
Total
|
981
|
|
|
979
|
|
||
Less allowance for doubtful accounts
|
(14
|
)
|
|
(10
|
)
|
||
Receivables, net
|
$
|
967
|
|
|
$
|
969
|
|
6.
|
Inventories, Net
|
Anticipated annual amortization expense for pre-production engineering costs is as follows:
|
|||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
(in millions)
|
2012
|
|
2013
|
|
2014
|
|
2015
|
|
2016
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense
|
$
|
19
|
|
|
$
|
27
|
|
|
$
|
36
|
|
|
$
|
50
|
|
|
$
|
58
|
|
|
$
|
356
|
|
7.
|
Property
|
8.
|
Goodwill and Intangible Assets
|
9.
|
Other Assets
|
10.
|
Debt
|
Long-term debt and a reconciliation to the carrying amount is summarized as follows:
|
|
|
|||||
|
|
|
|
||||
(in millions)
|
June 30,
2012 |
|
September 30,
2011 |
||||
Principal amount of 2021 Notes, net of discount
|
$
|
249
|
|
|
$
|
—
|
|
Principal amount of 2019 Notes, net of discount
|
299
|
|
|
299
|
|
||
Principal amount of 2013 Notes
|
200
|
|
|
200
|
|
||
Fair value swap adjustment (Notes 16 and 17)
|
30
|
|
|
29
|
|
||
Long-term Debt, Net
|
$
|
778
|
|
|
$
|
528
|
|
11.
|
Retirement Benefits
|
The components of expense (income) for Pension Benefits for the three and nine months ended June 30, 2012 and 2011 are as follows:
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
5
|
|
|
$
|
5
|
|
Interest cost
|
38
|
|
|
40
|
|
|
115
|
|
|
119
|
|
||||
Expected return on plan assets
|
(53
|
)
|
|
(53
|
)
|
|
(160
|
)
|
|
(159
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
|
||||||
Prior service credit
|
(4
|
)
|
|
(5
|
)
|
|
(13
|
)
|
|
(14
|
)
|
||||
Net actuarial loss
|
14
|
|
|
12
|
|
|
43
|
|
|
36
|
|
||||
Net benefit income
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
The components of expense (income) for Other Retirement Benefits for the three and nine months ended June 30, 2012 and 2011 are as follows:
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Service cost
|
$
|
1
|
|
|
$
|
1
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
3
|
|
|
4
|
|
|
8
|
|
|
9
|
|
||||
Expected return on plan assets
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
(1
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
|||||||
Prior service credit
|
(2
|
)
|
|
(4
|
)
|
|
(5
|
)
|
|
(12
|
)
|
||||
Net actuarial loss
|
3
|
|
|
3
|
|
|
8
|
|
|
9
|
|
||||
Net benefit expense
|
$
|
5
|
|
|
$
|
3
|
|
|
$
|
14
|
|
|
$
|
8
|
|
12.
|
Stock-Based Compensation and Earnings Per Share
|
The computation of basic and diluted earnings per share is as follows:
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions, except per share amounts)
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
166
|
|
|
$
|
157
|
|
|
$
|
457
|
|
|
$
|
457
|
|
Income from discontinued operations, net of taxes
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
||||
Net income
|
$
|
166
|
|
|
$
|
158
|
|
|
$
|
457
|
|
|
$
|
459
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Denominator for basic earnings per share – weighted average common shares
|
143.4
|
|
|
153.8
|
|
|
146.4
|
|
|
154.6
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
1.1
|
|
|
1.5
|
|
|
1.1
|
|
|
1.5
|
|
||||
Performance shares, restricted stock and restricted stock units
|
0.5
|
|
|
0.6
|
|
|
0.4
|
|
|
0.5
|
|
||||
Dilutive potential common shares
|
1.6
|
|
|
2.1
|
|
|
1.5
|
|
|
2.0
|
|
||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
145.0
|
|
|
155.9
|
|
|
147.9
|
|
|
156.6
|
|
||||
Earnings per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.16
|
|
|
$
|
1.02
|
|
|
$
|
3.12
|
|
|
$
|
2.96
|
|
Discontinued operations
|
—
|
|
|
0.01
|
|
|
—
|
|
|
0.01
|
|
||||
Basic earnings per share
|
$
|
1.16
|
|
|
$
|
1.03
|
|
|
$
|
3.12
|
|
|
$
|
2.97
|
|
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.14
|
|
|
$
|
1.01
|
|
|
$
|
3.09
|
|
|
$
|
2.92
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.14
|
|
|
$
|
1.01
|
|
|
$
|
3.09
|
|
|
$
|
2.93
|
|
13.
|
Comprehensive Income
|
14.
|
Other Income, Net
|
15.
|
Income Taxes
|
16.
|
Fair Value Measurements
|
Level 1 -
|
quoted prices (unadjusted) in active markets for identical assets or liabilities
|
Level 2 -
|
quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument
|
Level 3 -
|
unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value
|
|
|
|
June 30, 2012
|
|
September 30, 2011
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
42
|
|
|
$
|
37
|
|
Interest rate swap assets
|
Level 2
|
|
30
|
|
|
29
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
8
|
|
|
8
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(7
|
)
|
|
(7
|
)
|
|
Asset (Liability)
|
||||||||||||||
|
June 30, 2012
|
|
September 30, 2011
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
265
|
|
|
$
|
530
|
|
|
$
|
530
|
|
Short-term debt
|
(201
|
)
|
|
(201
|
)
|
|
—
|
|
|
—
|
|
||||
Long-term debt
|
(748
|
)
|
|
(825
|
)
|
|
(499
|
)
|
|
(565
|
)
|
17.
|
Derivative Financial Instruments
|
Fair values of derivative instruments in the Condensed Consolidated Statement of Financial Position as of June 30, 2012 and September 30, 2011 are as follows:
|
|||||||||
|
|
|
|
|
|
||||
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2012 |
|
September 30,
2011 |
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
8
|
|
|
$
|
8
|
|
Interest rate swaps
|
Other assets
|
|
30
|
|
|
29
|
|
||
Total
|
|
|
$
|
38
|
|
|
$
|
37
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
June 30,
2012 |
|
September 30,
2011 |
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
7
|
|
|
$
|
7
|
|
The effect of derivative instruments on the Condensed Consolidated Statement of Operations for the three and nine months ended June 30, 2012 and 2011 is as follows:
|
|||||||||||||||||
|
|
|
|
|
|
|
|
|
|
||||||||
|
|
|
Amount of Gain (Loss)
|
|
Amount of Gain (Loss)
|
||||||||||||
|
|
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
|
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
Location of Gain (Loss)
|
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Fair Value Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
$
|
(2
|
)
|
|
$
|
2
|
|
|
$
|
(3
|
)
|
|
$
|
3
|
|
Interest rate swaps
|
Interest expense
|
|
3
|
|
|
3
|
|
|
7
|
|
|
7
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
$
|
2
|
|
|
$
|
1
|
|
|
$
|
2
|
|
|
$
|
4
|
|
Amount of gain reclassified from AOCL into income
|
Cost of sales
|
|
—
|
|
|
2
|
|
|
—
|
|
|
1
|
|
||||
|
|
|
|
|
|
|
|
|
|
||||||||
Derivatives not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
18.
|
Guarantees and Indemnifications
|
Changes in the carrying amount of accrued product warranty costs are summarized as follows:
|
|||||||
|
|
|
|
||||
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2012
|
|
2011
|
||||
Balance at beginning of year
|
$
|
148
|
|
|
$
|
183
|
|
Warranty costs incurred
|
(35
|
)
|
|
(38
|
)
|
||
Product warranty accrual
|
32
|
|
|
26
|
|
||
Changes in estimates for prior years
|
(20
|
)
|
|
(18
|
)
|
||
Foreign currency translation adjustments
|
—
|
|
|
2
|
|
||
Balance at June 30
|
$
|
125
|
|
|
$
|
155
|
|
19.
|
Environmental Matters
|
20.
|
Legal Matters and Other Uncertainties
|
21.
|
Restructuring and Asset Impairment Charges
|
22.
|
Business Segment Information
|
The following table summarizes sales by product category for the three and nine months ended June 30, 2012 and 2011:
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(in millions)
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Government Systems product categories:
|
|
|
|
|
|
|
|
||||||||
Avionics
|
$
|
393
|
|
|
$
|
353
|
|
|
$
|
1,082
|
|
|
$
|
1,020
|
|
Communication products
|
178
|
|
|
164
|
|
|
476
|
|
|
510
|
|
||||
Surface solutions
|
50
|
|
|
82
|
|
|
168
|
|
|
280
|
|
||||
Navigation products
|
58
|
|
|
69
|
|
|
164
|
|
|
224
|
|
||||
Government Systems sales
|
679
|
|
|
668
|
|
|
1,890
|
|
|
2,034
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Commercial Systems product categories:
|
|
|
|
|
|
|
|
|
|
||||||
Air transport aviation electronics
|
282
|
|
|
263
|
|
|
838
|
|
|
776
|
|
||||
Business and regional aviation electronics
|
244
|
|
|
259
|
|
|
732
|
|
|
700
|
|
||||
Commercial Systems sales
|
526
|
|
|
522
|
|
|
1,570
|
|
|
1,476
|
|
||||
Total sales
|
$
|
1,205
|
|
|
$
|
1,190
|
|
|
$
|
3,460
|
|
|
$
|
3,510
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
OVERVIEW AND OUTLOOK
|
|
total sales
|
about $4.80 billion (from about $4.85 billion)
|
|
diluted earnings per share from continuing operations
|
$4.40 to $4.50 (from $4.40 to $4.60)
|
|
cash provided by operating activities
|
about $600 million (from $625 million to $725 million)
|
|
capital expenditures
|
about $150 million
|
|
company and customer-funded R&D expenditures
|
about $850 million (from about $900 million), or about 18 percent of sales
|
RESULTS OF OPERATIONS
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Total sales
|
$
|
1,205
|
|
|
$
|
1,190
|
|
Percent (decrease)
|
1
|
%
|
|
|
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Total cost of sales
|
$
|
846
|
|
|
$
|
833
|
|
Percent of total sales
|
70.2
|
%
|
|
70.0
|
%
|
•
|
a $20 million increase resulted from unfavorable product mix on the higher sales volumes, as explained in the Government Systems and Commercial Systems Financial Results sections below
|
•
|
a $13 million increase was attributable to the combined impact of higher employee severance costs and higher warranty expense. The increase in warranty cost was primarily due to the absence of a favorable adjustment that was recorded in the prior year to reduce certain warranty reserves within Government Systems
|
•
|
a $12 million increase due principally to higher employee medical and retirement benefits expense
|
•
|
partially offset by a $21 million decrease to costs resulting from lower employee incentive pay and an additional $11 million reduction due to lower company funded R&D expense that is discussed below
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Selling, general and administrative expenses
|
$
|
132
|
|
|
$
|
131
|
|
Percent of total sales
|
11.0
|
%
|
|
11.0
|
%
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions, except per share amounts)
|
2012
|
|
2011
|
||||
Income from continuing operations
|
$
|
166
|
|
|
$
|
157
|
|
Percent of sales
|
13.8
|
%
|
|
13.2
|
%
|
||
|
|
|
|
||||
Income from discontinued operations, net of taxes
|
—
|
|
|
1
|
|
||
Net income
|
$
|
166
|
|
|
$
|
158
|
|
|
|
|
|
||||
Diluted earnings per share from continuing operations
|
$
|
1.14
|
|
|
$
|
1.01
|
|
Diluted earnings per share from discontinued operations
|
—
|
|
|
—
|
|
||
Diluted earnings per share
|
$
|
1.14
|
|
|
$
|
1.01
|
|
The following table presents Government Systems sales by product category:
|
|||||||
|
|
|
|
||||
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Avionics
|
$
|
393
|
|
|
$
|
353
|
|
Communication products
|
178
|
|
|
164
|
|
||
Surface solutions
|
50
|
|
|
82
|
|
||
Navigation products
|
58
|
|
|
69
|
|
||
Total
|
$
|
679
|
|
|
$
|
668
|
|
Percent (decrease)
|
2
|
%
|
|
|
|
•
|
$25 million increase resulting from the combined impact of development effort on the KC-46A, KC-10, and KC-390 tanker programs
|
•
|
$19 million increase in sales on the Saudi F-15 fighter program
|
•
|
$9 million reduction attributable to the combined impact of two programs that were terminated for convenience by the U.S. Government during 2011
|
•
|
$7 million decrease in Joint Precision Approach and Landing System program revenues as it transitions from development into production
|
•
|
$16 million decrease due to the combined impact of various items, none of which were individually significant, including: lower sales of soldier optronics products; fewer deliveries of iForce public safety vehicle systems, in accordance with our previously announced decision to discontinue further investment in this product line; and a decline in Firestorm targeting system revenues driven by delays in the timing of customer orders
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Segment operating earnings
|
$
|
148
|
|
|
$
|
141
|
|
Percent of sales
|
21.8
|
%
|
|
21.1
|
%
|
•
|
a $13 million benefit to operating earnings resulting from the reduction in company-funded R&D expense discussed in the Cost of Sales section above
|
•
|
partially offset by the absence of a $6 million favorable adjustment recorded in the prior year to reduce warranty reserves
|
•
|
a $13 million benefit to operating earnings from lower employee incentive compensation costs and a $6 million benefit to sales and earnings from a favorable program adjustment were offset by higher employee benefit costs, increased warranty expense, and an unfavorable product mix, as discussed in the Cost of Sales section above
|
The following table presents Commercial Systems sales by product category and type of product or service:
|
|||||||
|
|
|
|
||||
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Air transport aviation electronics:
|
|
|
|
||||
Original equipment
|
$
|
150
|
|
|
$
|
126
|
|
Aftermarket
|
109
|
|
|
109
|
|
||
Wide-body in-flight entertainment products and services
|
23
|
|
|
28
|
|
||
Total air transport aviation electronics
|
282
|
|
|
263
|
|
||
Business and regional aviation electronics:
|
|
|
|
|
|
||
Original equipment
|
145
|
|
|
159
|
|
||
Aftermarket
|
99
|
|
|
100
|
|
||
Total business and regional aviation electronics
|
244
|
|
|
259
|
|
||
Total
|
$
|
526
|
|
|
$
|
522
|
|
Percent increase
|
1
|
%
|
|
|
|
•
|
original equipment manufacturer (OEM) revenues increased $
24 million
, or
19 percent
. This increase is net of a $6 million reduction to sales attributable to the absence of favorable adjustments that occurred in the prior year for customer incentive reserves. The overall net increase was primarily due to higher sales to Boeing and Airbus resulting from higher aircraft production rates for the Boeing 787 and 737 platforms and Airbus A320 platform
|
•
|
Wide-body in-flight entertainment products and services decreased $
5 million
|
•
|
OEM sales decreased $
14 million
, or
9 percent
, due to the combined impact of lower sales to business jet manufacturer Hawker Beechcraft, Inc., as they temporarily shut down production in connection with their recent Chapter 11 bankruptcy filing, and lower sales to Bombardier, as a large number of deliveries occurred in the prior year when the Global aircraft entered into initial production
|
•
|
aftermarket sales decreased $
1 million
, or
1 percent
, as service and support revenue decreased slightly
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Segment operating earnings
|
$
|
105
|
|
|
$
|
107
|
|
Percent of sales
|
20.0
|
%
|
|
20.5
|
%
|
•
|
a $5 million increase in SG&A expense, principally due to the bad debt charge recorded in the current quarter and related to Hawker Beechcraft, as discussed in
Note 5 of the Condensed Consolidated Financial Statements
|
•
|
a $10 million benefit to operating earnings from lower employee incentive compensation was mostly offset by an increase in employee medical and retirement costs, as explained in the Cost of Sales section above, and a $6 million reduction to operating earnings resulting from the absence of a favorable adjustment recorded in the prior year to reduce certain customer incentive reserves
|
|
Three Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
General corporate, net
|
$
|
10
|
|
|
$
|
10
|
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Total sales
|
$
|
3,460
|
|
|
$
|
3,510
|
|
Percent (decrease)
|
(1
|
)%
|
|
|
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Total cost of sales
|
$
|
2,430
|
|
|
$
|
2,488
|
|
Percent of total sales
|
70.2
|
%
|
|
70.9
|
%
|
•
|
a $38 million decrease in cost of sales resulting from the lower sales volume, as discussed in the Government Systems and Commercial Systems Financial Results sections below
|
•
|
a $36 million reduction from lower employee incentive compensation costs
|
•
|
a $16 million reduction in company funded R&D expense, as explained below
|
•
|
partially offset by a $32 million increase to other costs, including higher employee medical and retirement benefit expenses and an increase in employee severance and warranty costs
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Selling, general and administrative expenses
|
$
|
393
|
|
|
$
|
391
|
|
Percent of total sales
|
11.4
|
%
|
|
11.1
|
%
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions, except per share amounts)
|
2012
|
|
2011
|
||||
Income from continuing operations
|
$
|
457
|
|
|
$
|
457
|
|
Percent of sales
|
13.2
|
%
|
|
13.0
|
%
|
||
|
|
|
|
||||
Income from discontinued operations, net of taxes
|
—
|
|
|
2
|
|
||
Net income
|
$
|
457
|
|
|
$
|
459
|
|
|
|
|
|
||||
Diluted earnings per share from continuing operations
|
$
|
3.09
|
|
|
$
|
2.92
|
|
Diluted earnings per share from discontinued operations
|
—
|
|
|
0.01
|
|
||
Diluted earnings per share
|
$
|
3.09
|
|
|
$
|
2.93
|
|
The following table presents Government Systems sales by product category:
|
|||||||
|
|
|
|
||||
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Avionics
|
$
|
1,082
|
|
|
$
|
1,020
|
|
Communication products
|
476
|
|
|
510
|
|
||
Surface solutions
|
168
|
|
|
280
|
|
||
Navigation products
|
164
|
|
|
224
|
|
||
Total
|
$
|
1,890
|
|
|
$
|
2,034
|
|
Percent (decrease)
|
(7
|
)%
|
|
|
|
•
|
$68 million increase resulting from the combined impact of development effort on the KC-46A, KC-10, and KC-390 tanker programs
|
•
|
$43 million increase in sales on the Saudi F-15 fighter program
|
•
|
partially offset by other reductions to revenue of $49 million, primarily attributable to decreased sales for the KC-135 Global Air Traffic Management program and lower deliveries on C-17 transport aircraft
|
•
|
$30 million reduction in sales resulting from the combined impact of the completion of a program to provide transportable cellular capabilities in Afghanistan and fewer deliveries of satellite communication terminals
|
•
|
$14 million of lower Joint Tactical Radio System program revenue for the Ground Mobile Radio variant
|
•
|
partially offset by $8 million of higher sales from data links products
|
•
|
$50 million reduction attributable to the combined impact of two programs that were terminated for convenience by the U.S. Government during 2011
|
•
|
$31 million decrease resulting from the combined impact of fewer deliveries of iForce public safety vehicle systems and a reduction in Joint Precision Approach and Landing System program revenues as it transitions from development into production
|
•
|
the remaining decrease of $31 million was due to a variety of items, including fewer deliveries of soldier optronics products and a decline in military test range and training services
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Segment operating earnings
|
$
|
393
|
|
|
$
|
422
|
|
Percent of sales
|
20.8
|
%
|
|
20.7
|
%
|
•
|
the $144 million reduction in sales discussed in the Government Systems sales section above resulted in an $84 million decrease to costs and a reduction to earnings of $60 million. The gross margin of 42 percent reflects the absence of higher margin hardware sales for Navigation products that occurred last year
|
•
|
partially offset by a $41 million benefit to operating earnings resulting from the combined impact of lower company-funded R&D expense and lower employee incentive compensation costs, as explained in the Cost of Sales section above
|
•
|
the remaining variance was primarily attributable to higher employee medical and retirement benefit costs, as explained in the Cost of Sales section above
|
The following table presents Commercial Systems sales by product category and type of product or service:
|
|||||||
|
|
|
|
||||
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Air transport aviation electronics:
|
|
|
|
||||
Original equipment
|
$
|
415
|
|
|
$
|
373
|
|
Aftermarket
|
351
|
|
|
319
|
|
||
Wide-body in-flight entertainment products and services
|
72
|
|
|
84
|
|
||
Total air transport aviation electronics
|
838
|
|
|
776
|
|
||
Business and regional aviation electronics:
|
|
|
|
|
|
||
Original equipment
|
434
|
|
|
415
|
|
||
Aftermarket
|
298
|
|
|
285
|
|
||
Total business and regional aviation electronics
|
732
|
|
|
700
|
|
||
Total
|
$
|
1,570
|
|
|
$
|
1,476
|
|
Percent increase
|
6
|
%
|
|
|
|
•
|
original equipment manufacturer (OEM) revenues increased
$42 million
, or
11 percent
, primarily due to higher sales to Boeing and Airbus resulting from higher aircraft production rates across various platforms. This increase is net of a $15 million reduction to sales attributable to the absence of favorable adjustments that occurred in the prior year to reduce certain customer incentive reserves
|
•
|
aftermarket sales increased
$32 million
, or
10 percent
, primarily related to higher spare parts sales for new Boeing 787 and 747-8 aircraft
|
•
|
Wide-body in-flight entertainment products and services decreased
$12 million
|
•
|
OEM sales increased
$19 million
, or
5 percent
, primarily related to a $41 million increase in sales of avionics to Bombardier and Cessna as production rates increased for Bombardier's Global and Challenger business jets and Cessna's Citation business jet models. This was partially offset by a $22 million reduction in sales resulting from the combined impact of lower deliveries to Hawker Beechcraft and a decrease in sales to regional jet manufacturers that was primarily attributable to reduced production rates for regional jet aircraft
|
•
|
aftermarket sales increased
$13 million
, or
5 percent
, primarily due to higher sales of spare parts for Chinese regional jet aircraft and an increase in service and support revenue
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
Segment operating earnings
|
$
|
318
|
|
|
$
|
280
|
|
Percent of sales
|
20.3
|
%
|
|
19.0
|
%
|
•
|
incremental earnings from the higher sales volume totaled $63 million, at a gross margin of 67 percent. Excluding the sales impact of the prior year customer incentive adjustment explained below, the gross margin was 58 percent, which is more consistent with the gross margins typically reported for this business
|
•
|
a $14 million benefit attributable to lower employee incentive compensation costs
|
•
|
partially offset by a $15 million reduction to operating earnings due to the absence of a favorable adjustment recorded in the prior year to reduce certain customer incentive reserves. This prior year adjustment was recorded within sales
|
•
|
the remaining variance of $24 million was primarily due to the combined impact of the $5 million bad debt charge described in
Note 5 of the Condensed Consolidated Financial Statements
, higher bid and proposal costs discussed in the SG&A section above, and increases in warranty, company-funded R&D, employee medical, and retirement benefit costs as explained in the Cost of Sales section above
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(dollars in millions)
|
2012
|
|
2011
|
||||
General corporate, net
|
$
|
35
|
|
|
$
|
34
|
|
Net benefit expense (income) for pension benefits and other retirement benefits are as follows:
|
|||||||||||||||
|
|
|
|
|
|
|
|
||||||||
|
Three Months Ended
|
|
Nine Months Ended
|
||||||||||||
|
June 30
|
|
June 30
|
||||||||||||
(dollars in millions)
|
2012
|
|
2011
|
|
2012
|
|
2011
|
||||||||
Pension benefits
|
$
|
(4
|
)
|
|
$
|
(5
|
)
|
|
$
|
(10
|
)
|
|
$
|
(13
|
)
|
Other retirement benefits
|
5
|
|
|
3
|
|
|
14
|
|
|
8
|
|
||||
Net benefit expense (income)
|
$
|
1
|
|
|
$
|
(2
|
)
|
|
$
|
4
|
|
|
$
|
(5
|
)
|
FINANCIAL CONDITION AND LIQUIDITY
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2012
|
|
2011
|
||||
Cash provided by operating activities
|
$
|
192
|
|
|
$
|
246
|
|
•
|
payments for employee incentive pay increased $62 million during the nine months ended June 30, 2012 as compared to the same period last year. Incentive pay is expensed in the year it is incurred and paid in the first fiscal quarter of the following year. During the first nine months of fiscal year 2012, $133 million was paid for employee incentive pay costs incurred during 2011. During the first nine months of fiscal year 2011, $71 million was paid for employee incentive pay costs incurred during 2010
|
•
|
payments for income taxes increased $59 million to $142 million in the first nine months of 2012 compared to $83 million in the first nine months of 2011, primarily due to differences in the timing of cash tax payments resulting from the retroactive extension of the Federal R&D tax credit that benefited the prior year and the expiration of the Federal R&D tax credit that increased cash payments in the current year
|
•
|
pension plan contributions increased $10 million to $120 million during the first nine months of 2012 compared to $110 million during the same period last year
|
•
|
the above items were partially offset by lower payments for inventory and other operating costs of $69 million to $2,850 million in the first nine months of 2012 compared to $2,919 million in the first nine months of 2011. The decrease was primarily due to lower costs associated with lower sales volume in 2012 as discussed in the Results of Operations section above
|
•
|
in addition, cash receipts from customers increased $13 million to $3,448 million in the first nine months of 2012 compared to $3,435 million in the first nine months of 2011, primarily due to higher customer advances in our Government Systems business
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2012
|
|
2011
|
||||
Cash used for investing activities
|
$
|
(91
|
)
|
|
$
|
(103
|
)
|
•
|
proceeds from the disposition of property were $17 million, including $13 million from the sale of the Irvine, CA facility during the nine months ended June 30, 2012
|
•
|
during the nine months ended June 30, 2011, we paid $17 million for the acquisitions of Blue Ridge Simulation and CTA
|
•
|
offset by the absence of proceeds of $18 million received from the sale of short-term investments at a non-U.S. subsidiary
|
|
Nine Months Ended
|
||||||
|
June 30
|
||||||
(in millions)
|
2012
|
|
2011
|
||||
Cash used for financing activities
|
$
|
(352
|
)
|
|
$
|
(317
|
)
|
•
|
cash repurchases of common stock increased $433 million to $710 million for the nine months ended June 30, 2012 compared to $277 million for the nine months ended June 30, 2011
|
•
|
offset by:
|
•
|
higher net proceeds from short-term commercial paper borrowings of $131 million. For the first nine months of 2012, net proceeds from short-term commercial paper borrowings were $201 million, compared to net proceeds from short-term commercial paper borrowings of $70 million during the first nine months of 2011
|
•
|
the absence of a $24 million repayment of other short-term debt at a non-U.S. subsidiary that occurred during the nine months ended June 30, 2011
|
(dollars in millions)
|
June 30,
2012 |
|
September 30,
2011 |
||||
Cash and cash equivalents
|
$
|
265
|
|
|
$
|
530
|
|
Short-term debt
|
(201
|
)
|
|
—
|
|
||
Long-term debt, net
|
(778
|
)
|
|
(528
|
)
|
||
Net debt
(1)
|
$
|
(714
|
)
|
|
$
|
2
|
|
Total equity
(2)
|
$
|
1,278
|
|
|
$
|
1,528
|
|
Debt to total capitalization
(3)
|
43
|
%
|
|
26
|
%
|
||
Net debt to total capitalization
(4)
|
36
|
%
|
|
—
|
%
|
(1)
|
Calculated as total of short-term and long-term debt, net (Total debt), less cash and cash equivalents and short-term investments
|
(2)
|
Total equity decreased $250 million from September 30, 2011 to June 30, 2012. This reduction was primarily attributable to 13 million shares of common stock repurchased during the first nine months of the fiscal year at a cost of $702 million, partially offset by an increase resulting from net income of $457 million
|
(3)
|
Calculated as Total debt divided by the sum of Total debt plus Total equity
|
(4)
|
Calculated as Net debt divided by the sum of Net debt plus Total equity
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F1
|
|
A
|
|
Stable
|
Moody’s Investors Service
|
|
P-1
|
|
A1
|
|
Negative
|
Standard & Poor’s
|
|
A-1
|
|
A
|
|
Stable
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
CAUTIONARY STATEMENT
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 4.
|
Controls and Procedures
|
PART II.
|
OTHER INFORMATION
|
Item 2.
|
Unregistered Sales of Equity Securities and Use of Proceeds
|
Period
|
|
Total Number
of Shares
Purchased
|
|
Average Price
Paid per Share
|
|
Total Number of
Shares
Purchased as
Part of Publicly
Announced
Plans or
Programs
|
|
Maximum Number
(or Appropriate
Dollar Value) of
Shares that May Yet
Be Purchased Under
the Plans or
Programs
1
|
|||||
April 1, 2012 through April 30, 2012
|
|
1,150,000
|
|
|
$
|
56.37
|
|
|
1,150,000
|
|
|
$
|
641 million
|
May 1, 2012 through May 31, 2012
|
|
1,930,000
|
|
|
52.60
|
|
|
1,930,000
|
|
|
|
540 million
|
|
June 1, 2012 through June 30, 2012
|
|
750,000
|
|
|
50.10
|
|
|
750,000
|
|
|
|
502 million
|
|
Total
|
|
3,830,000
|
|
|
$
|
53.24
|
|
|
3,830,000
|
|
|
|
|
(1)
|
On September 14, 2011, our Board authorized the repurchase of an additional $700 million of our common stock. On July 23, 2012 our Board authorized the repurchase of an additional $500 million of our common stock, as reflected in the table above. These authorizations have no stated expiration.
|
Item 6.
|
Exhibits
|
(a)
|
Exhibits
|
|
|
ROCKWELL COLLINS, INC.
|
|
|
|
(Registrant)
|
|
|
|
|
|
Date:
|
July 24, 2012
|
By
|
/s/ Marsha A. Schulte
|
|
|
|
Marsha A. Schulte
|
|
|
|
Vice President, Finance and Controller
|
|
|
|
(Principal Accounting Officer and an Authorized Officer)
|
|
|
|
|
|
|
|
|
|
|
|
|
(i)
|
Initial Award. Subject to the provisions of Section 4(h)(v), each newly elected Non-Employee Director shall, as soon as practicable after initially becoming a member of the Board of Directors, be granted an Award of a number of Restricted Stock Units determined by dividing (A) the sum of (i) $100,000 (or such other amount determined by the Board of Directors) and (ii) $110,000 (or such other amount determined by the Board of Directors) multiplied by a fraction where the numerator is the number of days until the next Annual Meeting of Shareowners and the denominator is 365 by (B) the Fair Market Value on the date of such initial appointment and rounding up to the next highest whole number, with terms and conditions including restrictions as determined by the Board of Directors or the Committee. The restrictions on the Restricted Stock Units shall lapse and it is intended that the Restricted Stock Units shall be payable only upon permissible payment events under Section 409A or in a manner that meets the requirements of an exemption from Section 409A, as set forth in the applicable Award Agreement.
|
(ii)
|
Annual Award. Subject to the provisions of Section 4(h)(v), immediately following each Annual Meeting of Shareowners, each Non-Employee Director who is elected a director at, or who was previously elected and continues as a director after, that Annual Meeting shall be granted an Award of a number of Restricted Stock Units determined by dividing $110,000 (or such other amount determined by the Board of Directors) by the Fair Market Value on the date of the Annual Meeting and rounding up to the next highest whole number, with terms and conditions including restrictions as determined by the Board of Directors or the Committee. The restrictions on the Restricted Stock Units shall lapse and it is intended that the Restricted Stock Units shall be payable only upon permissible payment events under Section 409A or in a manner that meets the requirements of an exemption from Section 409A, as set forth in the applicable Award Agreement.
|
1.000
|
409A Change of Control
means a “Change of Control Event” as defined in Treasury Regulation Section 1.409A-3(i)(5)(i) and as set forth in Treasury Regulation Section 1.409A-3(i)(5)(v)-(vii), applying the default rules and percentages set forth in such Treasury Regulations.
|
1.005
|
Actuarial Equivalent
means equal value based on Interest Rate and, as applicable, Mortality Assumptions. The calculations for specific purposes are as described below. For all purposes, actuarial equivalence shall be determined as of the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under
Section 2.040, a 409A Change of Control.
|
(a)
|
For a lump sum calculated upon Retirement the calculation will reflect the immediate benefit payable.
|
(b)
|
For a lump sum calculated upon Separation from Service other than a Layoff-Slide the calculation will reflect the normal age 65 retirement benefit (as defined in the Company Pension Plan).
|
(c)
|
For a lump sum calculated upon a Layoff-Slide the calculation will reflect the retirement benefit payable at age 55 (as defined in the Company Pension Plan), as determined reflecting any additional age and/or service that would be earned by age 55 under those provisions.
|
(d)
|
For annual installment payments, the calculation will reflect the immediate benefit payable converted to a period-certain annuity.
|
(e)
|
For purposes of Section 2.025(e), a level benefit shall be determined that is the actuarial equivalent of:
|
(i)
|
the benefit determined under Section 2.025 and payable without reduction for the benefit that would be payable under the Certain Salaried Sub-Plan until the later of (i) the earliest Annuity Starting Date under the Certain Salaried Sub-Plan (assuming that the Participant has terminated employment as of the earliest date identified in clause (ii)) or (ii) the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under Section 2.040, a 409A Change of Control, plus
|
(ii)
|
the benefit payable under Section 2.025 reduced as of the later of (i) the earliest Annuity Starting Date under the Certain Salaried Sub-Plan (assuming that the Participant has terminated employment as of the earliest date identified in clause (ii)) or (ii) the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under Section 2.040, a 409A Change of Control by the amount of the benefit that would be payable under the Certain Salaried Sub-Plan if the Annuity Starting Date was equal to such date and the same optional form of payment was elected.
|
(a)
|
any company incorporated under the laws of one of the United States of America of which the Company owns, directly or indirectly, eighty percent (80%) or more of the combined voting power of all classes of stock or eighty percent (80%) or more of the total value of the shares of all classes of stock (all within the meaning of Code Section 1563);
|
(b)
|
any partnership or other business entity organized under such laws, of which the Company owns, directly or indirectly, eighty percent (80%) or more of the voting power or eighty percent (80%) or more of the total value (all within the meaning of Code Section 414(c)); and
|
(c)
|
any other company deemed to be an Affiliate by the Board of Directors.
|
1.015
|
Benefit Limitation
means the limitations on benefits payable from Defined Benefit Plans which are imposed by Section 415 of the Code.
|
1.025
|
Certain Salaried Sub-Plan
means the Certain Salaried Plan (Sub-Plan No. 003) to the Company Pension Plan.
|
(a)
|
The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (z) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (c) of this Section 1.030; or
|
(b)
|
Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Company's shareowners, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or
|
(c)
|
Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Company Transaction”), in each case, unless, following such Company Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Company Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company's assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Company Transaction of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or of such corporation resulting from such Company Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Company Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Company Transaction and (3) at least a majority of the members of the board of directors of the corporation resulting from such Company Transaction were members of the Incumbent Board at the time of the execution of the initial agreement, or of the action of the Board of Directors, providing for such Company Transaction; or
|
(d)
|
Approval by the Company's shareowners of a complete liquidation or dissolution of the Company.
|
1.035
|
Code
means the Internal Revenue Code of 1986, as amended.
|
1.040
|
Committee
means the Compensation Committee of the Board of Directors.
|
1.045
|
Company
means Rockwell Collins, Inc., a Delaware corporation.
|
1.050
|
Company Officer
means an employee who, effective July 23, 2007 attains a Salary Grade of M0 or M1, or who prior to July 23, 2007 but after June 30, 2006 attained a Salary Grade of M9 or M0 or who prior to July 1, 2006 attained a Salary Grade of 23 or higher.
|
1.060
|
Compensation Limit
means the limitation imposed by Section 401(a)(17) of the Code on the amount of compensation which can be considered in determining the amount of a participant's benefit under the Company Pension Plan.
|
1.065
|
Corporate Pilot
means any Participant in the Company Pension Plan whose primary duty as an employee is the operation of aircraft as a pilot or co-pilot for at least one year immediately preceding the earliest of (i) Retirement, (ii) termination, if at the time of termination the Participant is Retirement eligible, or (iii) Layoff, if the Participant is or will become Retirement eligible while on Layoff status.
|
1.070
|
Defined Benefit Plan
has the same meaning given that term in Section 3(35) of ERISA.
|
1.075
|
Delinkage Date
means January 1, 2009 or such other date as is permitted under Section 409A and is approved by the Chief Executive Officer, Chief Financial Officer, Senior Vice President, Human Resources or General Counsel of the Company.
|
1.080
|
Electronics Salaried Sub-Plan
means the Electronics Salaried Plan (Sub-Plan No. 028) to the Company Pension Plan.
|
1.085
|
Employee
means any person who is employed by the Company or by an Affiliate, including, to the extent permitted by Section 406 of the Code, any United States citizen regularly employed by a foreign Affiliate of the Company.
|
1.090
|
ERISA
means the Employee Retirement Income Security Act of 1974, as amended.
|
1.095
|
Highly Compensated Employee
means a participant in or retiree under the Company Pension Plan whose compensation would otherwise be considered under such Plan in determining his benefits thereunder in excess of the Compensation Limit.
|
1.100
|
Interest Rate
means the average 30-Year Treasury Rate as published by the Internal Revenue Service in the October preceding the year of the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under Section 2.040, a 409A Change of Control.
|
1.105
|
Layoff
shall have the meaning ascribed to the term “Layoff” in the Company Pension Plan.
|
1.110
|
Layoff-Slide
means the Separation from Service by a Participant resulting from a reduction in force, for a Participant who has attained age 50 but not attained age 55 at the time of such Separation from
|
1.115
|
Mortality Assumptions
means the FAS 87 mortality assumptions used for the Company's Net Periodic Benefit Costs in the Company's fiscal year during which the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under Section 2.040, a 409A Change of Control occurs.
|
1.120
|
Participant
means any participant in the Company Pension Plan whose benefits payable therefrom are restricted by the Benefit Limitation or the Compensation Limit. Employees who were hired on or before September 30, 2006 who (1) are Corporate Pilots, (2) are Company Officers hired on or after January 1, 1993 but eligible for the pre-1993 formula under the Company Pension Plan, or (3) are participants in the Company Pension Plan who deferred compensation under the Rockwell Collins Deferred Compensation Plan and attained 85 points under the Rule of 85 after December 31, 2004, are also eligible to participate in this Plan. Notwithstanding any other provision of this Plan or the Company Pension Plan to the contrary, no Employee or other person, individual or entity shall become a Participant in this Plan after the earlier of (a) September 30, 2006 or (b) the day on which a Change of Control occurs.
|
1.125
|
Plan
means this Amended and Restated Rockwell Collins 2005 Non-Qualified Pension Plan.
|
1.130
|
Plan Administrator
means the person serving as the Plan Administrator of the Company Pension Plan.
|
1.135
|
Pre-2005 Plan
means the Rockwell Collins Non-Qualified Pension Plan and its predecessor, the Rockwell International Corporation Non-Qualified Pension Plan.
|
1.140
|
Retirement
means “separation from service” from the Company and all of its Affiliates, within the meaning of Section 409A, on or after attainment of age 55 other than for reason of death.
|
1.145
|
Rule of 85
means, with respect to a Participant in the Electronics Salaried or Certain Salaried Sub-Plans of the Company Pension Plan attainment of at least age 55 but not more than age 62 with a sum of age (in years and months) and Credited Service (as defined in the Company Pension Plan) (in years and months) total 85 or more on or before the date of Separation from Service or Retirement. For purposes of determining eligibility, years and months of service with the Company after September 30, 2006 shall also be considered.
|
1.150
|
Section 409A
means Section 409A of the Code and any regulations or other guidance issued thereunder.
|
1.155
|
Securities Exchange Act
means the Securities Exchange Act of 1934, as amended.
|
1.160
|
Separation from Service
means a “separation from service” from the Company and all of its Affiliates, within the meaning of Section 409A, other than for reasons of Retirement or death.
|
1.165
|
Specified Employee
has the meaning set forth in Section 409A, as determined each year in accordance with procedures established by the Company.
|
1.170
|
Third Party Administrator
means an independent third party selected by the Trustee and approved
|
1.175
|
Trust
means the master trust established by agreement between the Company and the Trustee, which will be a grantor trust.
|
1.180
|
Trustee
means Wells Fargo Bank, N.A., or any successor trustee of the Trust described in Article V of this Plan.
|
2.000
|
Effective as of the close of business on September 30, 2006, and notwithstanding any other provision in this Plan (or in the Company Pension Plan) to the contrary, individuals who first become Employees after September 30, 2006 will not be eligible to become Participants in this Plan. No benefits shall be accrued under this Plan after September 30, 2006, except pursuant to the Rule of 85.
|
2.005
|
This Plan has been established by the Company as a non-qualified pension plan for benefits earned and vested on and after January 1, 2005 for those employees of the Company and its Affiliates whose retirement benefits under the Company Pension Plan are, in the determination of those benefits, reduced by reason of application of the Compensation Limit and/or the Benefit Limitation for benefits earned and vested on and after January 1, 2005. The Plan also provides enhanced benefits to (a) Corporate Pilots, (b) Company Officers hired on or after January 1, 1993 but eligible for the pre-1993 formula under the Company Pension Plan, and (c) Participants in the Company Pension Plan who deferred compensation under the Rockwell Collins Deferred Compensation Plan and attained 85 points under the Rule of 85 after December 31, 2004. The Company shall pay from its general assets or from the Trust, as the case may be, to each Participant, or to the beneficiary, surviving spouse or joint annuitant of the Participant, a benefit which is equal to the amount of such reduction or enhancement and reduction or enhancement for benefits payable under the Pre-2005 Plan.
|
2.010
|
In the case of a Participant in the Company Pension Plan who deferred compensation under the Rockwell Collins Deferred Compensation Plan and attained 85 points under the Rule of 85 after December 31, 2004, the amount of the Participant's benefits under the Company Pension Plan, to the extent reduced because of the Participant's election to defer compensation under the Company's Deferred Compensation Plan, shall instead be provided under this Plan.
|
2.015
|
If the monthly benefit for which a Participant would have been otherwise eligible at retirement under the Company Pension Plan is reduced because of application of the Compensation Limit, the amount of such reduction shall instead be provided under this Plan. For purposes of determining the benefit payable under this Plan, a Participant's Average Annual Earnings shall mean the highest amount that can be determined by averaging the Participant's Earnings (as defined in the Company Pension Plan, but including amounts that would otherwise be “Earnings” under the Company Pension Plan but for the Participant's election to defer such amounts to the Rockwell Collins Deferred Compensation Plan) for any five (5) calendar years within the ten (10) calendar years (or lesser period, if applicable) of active employment which immediately precede the earliest of the dates on which the Participant retires, dies, terminates or commences an approved absence for disability or the date of the Company Pension Plan freeze (September 30, 2006) in accordance with the Company Pension Plan. In
|
2.020
|
In the case of a Participant who first becomes an Employee on or after January 1, 1993 and, prior to the earlier of his Retirement from the Company or September 30, 2006 becomes a Company Officer, the monthly benefit payable to such Participant from this Plan shall be calculated pursuant to the same formula as is set forth in Article IV [Normal Retirement Benefit for Pre-1993 Participant] of the Certain Salaried or Electronics Salaried Sub-Plans of the Company Pension Plan for participants in that plan who were first employed by the Company prior to January 1, 1993, as applicable.
|
2.025
|
In the case of a
Corporate Pilot
, the following provisions shall apply effective as of January 1, 1989 and shall supplement benefits earned by a Corporate Pilot under the Certain Salaried Sub-Plan.
|
(a)
|
Normal Retirement Benefit - At any time after attaining age 58, a Corporate Pilot may retire and receive a normal retirement benefit as hereinafter provided based upon Earnings and Credited Service, as determined in Article IV of the Certain Salaried Sub-Plan, to his Retirement date. The normal retirement benefit to which a Corporate Pilot shall be entitled shall equal the highest amount as determined under the applicable sub-section 4.030(b), (c) or (d) of the Certain Salaried Sub-Plan by (1) substituting all references to age 62 with age 58, (2) substituting all references to age 55 with age 50, and (3) substituting the percentage of the Social Security Earnings Limit Offset used in sub-sections 4.030(b)(2) and 4.030(c)(2) of the Certain Salaried Sub-Plan as follows:
|
(i)
|
For a Corporate Pilot whose date of birth is before 1938, the reduction shall be 0.390% of his Social Security Earnings Limit;
|
(ii)
|
For a Corporate Pilot whose date of birth is on or after January 1, 1938, and before January 1, 1955, the reduction shall be 0.365% of his Social Security Earnings Limit; and
|
(iii)
|
For a Corporate Pilot whose date of birth is on or after January 1, 1955, the reduction shall be 0.340% of his Social Security Earnings Limit.
|
(b)
|
Early Retirement Benefit - At any time after attaining age 50, a Corporate Pilot may retire and receive a reduced early retirement benefit. The early retirement benefit to which a
|
(c)
|
Supplemental Allowance - Any Corporate Pilot who retires under this Article II shall be deemed to be eligible for the supplemental allowance described in sub-section 4.030(f) [Supplemental Allowance upon Early Retirement] of the Certain Salaried Sub-Plan if, at the time benefits become payable hereunder, he is eligible to elect to commence his retirement benefit prior to the age as of which old age benefits first become payable under the Federal Social Security Act (as in effect at the date of Retirement), and at the time of such termination he satisfies either (i) or (ii) below:
|
(i)
|
has completed 15 or more years of Vesting Service and has attained age 58
|
(ii)
|
has completed 30 or more years of Vesting Service and has attained age 50
|
(d)
|
Early Retirement under Rule of 85 - Any Corporate Pilot who has attained age 50 and whose Credited Service plus his age total a minimum of 85 shall be deemed to be eligible to receive retirement income, payable in accordance with sub-section 4.030(g) of the Certain Salaried Sub-Plan, by substituting the percentage of the Social Security Earnings Limit Offset used in sub-sections 4.030(g)(1)(C), 4.030(g)(2)(A)(ii) and 4.030(g)(2)(C)(i) as follows:
|
(i)
|
For a Corporate Pilot whose date of birth is before 1938, the reduction shall be 0.390% of his Social Security Earnings Limit;
|
(ii)
|
For a Corporate Pilot whose date of birth is on or after January 1, 1938, and before January 1, 1955, the reduction shall be 0.365% of his Social Security Earnings Limit; and
|
(iii)
|
For a Corporate Pilot whose date of birth is on or after January 1, 1955, the reduction shall be 0.340% of his Social Security Earnings Limit.
|
(e)
|
The benefit provided under this Section 2.025 shall be the Actuarial Equivalent of the benefit otherwise payable under this Section 2.025 reduced by the Actuarial Equivalent of the benefit payable to the Corporate Pilot under the Certain Salaried Sub-Plan. All non-qualified pension benefits for Corporate Pilots are considered earned and vested after December 31, 2004 and are therefore payable under this Plan and not the Pre-2005 Plan.
|
2.030
|
Subject to the provisions of Section 2.040, for Retirement distributions that commence prior to the Delinkage Date, any benefit payable under this Plan shall be paid to or in respect of the Participant in the same manner and at the same time and form that benefits become payable under the Company Pension Plan.
|
2.035
|
For distributions that commence on and after the Delinkage Date, the distribution provisions of the Company Pension Plan shall have no application to this Plan. Effective for distributions that commence on and after the Delinkage Date, distribution to a Participant of his or her accrued benefit hereunder shall only be made upon the earliest of the Participant's Separation from Service, Retirement, death or, if the Participant has elected a distribution under Section 2.040, a 409A Change
|
(a)
|
Any lump sum distribution under this Plan shall be the Actuarial Equivalent of the benefit otherwise payable under the Plan.
|
(b)
|
Effective for distributions commencing on or after the Delinkage Date, a Participant may make a one-time, irrevocable election to have his or her accrued benefit (including the value of any supplemental allowance determined under Section 2.025(c)) under this Plan paid in (1) no more than ten (10) equal annual installments commencing upon Retirement that are the Actuarial Equivalent of the Participant's accrued benefit under this Plan, or (2) the form of an annuity described in Exhibit A to this Plan. Such election shall only apply to accrued benefits commencing upon Retirement and only if the Actuarial Equivalent lump sum of the Participant's accrued benefit upon Retirement is greater than the amount specified under Section 402(g)(1)(B) of the Code. A Participant may elect any of the forms of annuities or installments without the consent of such election by the Participant's spouse. Any such election to receive installments or an annuity shall be made no later than December 31st immediately preceding the Delinkage Date. Except as otherwise provided in Section 6.005, such election shall be irrevocable.
|
2.040
|
Effective as of the Delinkage Date, notwithstanding any other provision of this Plan to the contrary, a Participant (including, for purposes of this Section 2.040, a retiree who is currently receiving benefits under this Plan) may elect to have the benefits due hereunder paid as an Actuarial Equivalent lump sum in the event of the occurrence of a 409A Change of Control, subject to the following:
|
(a)
|
To be effective, the election must be made in writing and filed with the Committee no later than the December 31st immediately preceding the Delinkage Date.
|
(b)
|
Subject to Section 6.005, such election shall be irrevocable.
|
(c)
|
Lump sum payments to be made under this Section 2.040 to Participants or, in the case of the Participant's death, to the Participant's beneficiary shall be made within forty-five (45) days following the 409A Change of Control.
|
(d)
|
Notwithstanding the foregoing, if the Participant does not file a timely written or electronic election in accordance with Section 2.040(a) to receive or not receive his or her accrued benefit under the Plan in a lump sum upon a 409A Change of Control, then such Participant's accrued benefit under the Plan will automatically be paid in a lump sum upon a 409A Change of Control.
|
(e)
|
For purposes of calculating the amount of the lump-sum distribution under this Plan, Participants who have attained age 50 but not attained age 55 at the time of a 409A Change of Control, shall be treated as if they were separated from service by reason of Layoff-Slide. For purposes of calculating the amount of the lump sum distribution under this Plan, Participants, who are age 55 or older at the time of a 409A Change of Control, shall be treated as if they were separated from service by reason of Retirement.
|
2.045
|
Effective as of the Delinkage Date, with respect to distributions which are payable to a Participant or, in the event of the Participant's death, to his beneficiary:
|
(a)
|
Subject to Section 6.010, any lump sum payments shall be paid within the sixty (60) day period following the close of the calendar year which includes the Participant's Separation from Service, Retirement or, if applicable, death.
|
(b)
|
Subject to Section 6.010, each annual installment payable shall be paid within the sixty (60) day period following the close of each calendar year during the payment period, commencing with the calendar year following the year which includes the Participant's Retirement or, if applicable, death.
|
2.050
|
Effective as of the Delinkage Date, notwithstanding any other provision of the Plan to the contrary, in the event that a Participant dies prior to commencement of distribution of his accrued benefit under the Plan, the Participant's accrued benefit under this Plan shall be paid in a lump sum to his designated beneficiary within the sixty (60) day period following the close of the calendar year which includes the Participant's death. For purposes of this Section 2.050, the Participant's accrued benefit shall be the present value of the accrued benefit payable in the form of a preretirement death benefit under the Company Pension Plan without regard to the Benefit Limitation and Compensation Limit, reduced by the present value of the accrued benefit payable in the form of the preretirement death benefit pursuant to the Company Pension Plan. The beneficiary of such preretirement death benefit shall be designated as follows:
|
(a)
|
A Participant who is unmarried on the date of such beneficiary designation may designate any person or persons as his beneficiary or beneficiaries (both principal as well as contingent) to whom distribution under this Plan shall be made in the event of his death prior to distribution of his accrued benefit under the Plan. In the absence of such designation, the succession of beneficiaries, as specified in Section 8.020 of the Company Pension Plan shall be controlling.
|
(b)
|
Notwithstanding any other provision of this Plan, in the event that a Participant is married or is legally separated on the date of his death and the Participant dies prior to commencement of distribution of benefits under this Plan, the Participant's surviving spouse shall be the beneficiary of the Participant's benefit under this Plan.
|
2.055
|
Notwithstanding any other provision of this Plan to the contrary, if the Participant dies after commencement of distribution of his accrued benefit under the Plan (or, if applicable, prior to the completion of installment payments), such benefit will be paid in the form elected pursuant to Section 2.035.
|
2.060
|
Notwithstanding any other provision of this Plan to the contrary, in the event that a Participant Separates from Service prior to the Delinkage Date and prior to distribution of benefits under the Plan, any benefit payable under this Plan shall be paid to or in respect of the Participant in an Actuarial Equivalent lump sum within the sixty (60) day period following the close of the calendar year immediately preceding the Delinkage Date.
|
3.000
|
Any person claiming a right to participate in this Plan, claiming a benefit under this Plan or requesting information under this Plan shall present the claim or request in writing to the Company's Vice President, Total Remuneration (or such other person as shall be designated by the Committee), who shall respond in writing within ninety (90) days following the receipt of the request. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the
|
3.005
|
If the claim or request is denied, the written notice of denial shall state:
|
(a)
|
the reasons for denial and specific references to pertinent Plan provisions on which the denial is based;
|
(b)
|
a description of any additional material or information required and an explanation of why it is necessary; and
|
(c)
|
an explanation of this Plan's claim review procedure.
|
3.010
|
A claimant whose claim is denied (or his duly authorized representative) may, within sixty (60) days after receipt of denial of the claim: (a) submit a written request for review to the Committee (or its delegate); (b) review pertinent documents; and (c) submit issues and comments in writing.
|
3.015
|
A decision on a request for review shall normally be made within sixty (60) days after the date of such request. If an extension of time is required for a hearing or other special circumstances, the claimant shall be notified and the time limit shall be extended by an additional sixty (60) days. The decision shall be in writing and shall be final and binding on all parties concerned.
|
4.000
|
The Board of Directors shall have the power to amend, suspend or terminate this Plan at any time, except that no such action shall adversely affect rights with respect to any benefit without the consent of the person affected. Notwithstanding the foregoing, except as otherwise permitted by Section 409A, in the event of any termination of the Plan, any benefit payable under the Plan shall continue to be paid in accordance with the terms of the Plan in effect on the date of Plan termination.
|
4.005
|
This Plan shall be interpreted and administered by the Committee. All interpretations and decisions by the Committee in connection with the administration of the Plan shall be final, conclusive and binding on all Participants and any beneficiary or other person claiming under or through any Participant, in the absence of clear and convincing evidence that the Committee acted arbitrarily and capriciously; provided, that interpretations by the Plan Administrator of those provisions of the Company Pension Plan which are also applicable to this Plan shall be binding on the Committee.
|
(a)
|
pay all reasonable administrative expenses and fees of the Third-Party Administrator;
|
(b)
|
indemnify the Third-Party Administrator against any costs, expenses and liabilities including, without limitation, attorney's fees and expenses arising in connection with the performance of such administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the said administrator or its employees or agents;
|
(c)
|
supply full and timely information to the Third-Party Administrator on all matters relating to the Plan, the Trust, the Participants and any surviving spouses and contingent annuitants, the benefits of the Participants, the date of circumstances of the Retirement, death or Separation from Service of the Participants, and such other pertinent information as the Third-Party Administrator may reasonably require; and
|
(d)
|
upon and after a Change of Control, the Third Party Administrator may not be terminated by the Company and may only be terminated (and a replacement appointed) by the Trustee, but only with the approval of the Ex-CEO (as defined in Section 1.170).
|
4.010
|
This Plan is an unfunded employee benefit plan primarily for providing benefits to an identified group of management or highly compensated employees of the Company and is also an excess benefit plan (as defined by Section 3(36) of ERISA). This Plan is intended to be unfunded for tax purposes and for purposes of Title I of ERISA. Participants and their beneficiaries, estates, heirs, successors and assigns shall have no legal or equitable rights, interest or claims in any property or assets of the Company or its Affiliates. Any and all of the assets of the Company and its Affiliates shall be, and remain, the general, unpledged, unrestricted assets of the Company and its Affiliates. The Company's and any Affiliate's sole obligation under this Plan shall be merely that of an unfunded and unsecured promise of the Company or such Affiliate to pay money in the future.
|
4.015
|
Neither a Participant nor any other person shall have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate or convey, in advance of actual receipt, any interest he may have hereunder. A Participant's rights to benefits described herein are and shall be nonassignable and nontransferable prior to actual distribution as provided by this Plan. Any such attempted assignment or transfer shall be ineffective with respect to the Company and with respect to any Affiliate, and the Company's and any Affiliate's sole obligation shall be to distribute benefits to Participants, their beneficiaries or estates as appropriate. No part of any Participant's benefits hereunder shall, prior to actual payment as provided by this Plan, be subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, nor shall any such benefits be transferable by operation of law in the event of a Participant's or any other persons bankruptcy or insolvency, except as otherwise required by law.
|
4.020
|
This Plan shall not be deemed to constitute a contract of employment between the Company or any of its Affiliates and any Participant, and no Participant, beneficiary or estate shall have any right or claim against the Company or any of its Affiliate under this Plan except as may otherwise be specifically provided in this Plan. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company or any Affiliate or to interfere with the right of the Company or any Affiliate to discipline, discharge or change the status of a Participant at any time.
|
4.025
|
A Participant will cooperate with the Committee by furnishing any and all information requested by the Committee or its delegates in order to facilitate proper administration (including distributions to and in respect of Participants) of this Plan and by taking such other action as may be reasonably
|
4.030
|
Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the laws of the State of Iowa. In the event that any provision of this Plan shall be held illegal or invalid for any reason, said illegality or invalidity shall not affect the remaining provisions of this Plan, which shall be construed and enforced as if such illegal or invalid provision were not included in this Plan. The provisions of this Plan shall bind and obligate the Company and its Affiliates and their successors, including, but not limited to, any corporate or other business entity which shall, whether by merger, consolidation, purchase or otherwise, acquire all or substantially all of the business and assets of the Company or its Affiliates and their successors of any such company or other business entity.
|
4.035
|
All words used in this Plan in the masculine gender shall be construed as if used in the feminine gender where appropriate. All words used in this Plan in the singular or plural shall be construed as if used in the plural or singular where appropriate.
|
5.000
|
Establishment of the Trust
. The Company shall establish the Trust (which may be referred to herein as a “Rabbi Trust”). The Trust shall become irrevocable upon a Change of Control (to the extent not then irrevocable). Notwithstanding any other provision of this Plan to the contrary, the Trust shall not become irrevocable or funded with respect to this Plan upon the occurrence of an event described in Section 1.030(d). After the Trust has become irrevocable with respect to the Plan, except as otherwise provided in Section 12 of the Trust, the Trust shall remain irrevocable with respect to the Plan until all benefits due under this Plan and benefits and account balances due to any participants and beneficiaries under any other plan covered by the Trust have been paid in full. Upon establishment of the Trust, the Company shall provide for funding of the Trust in accordance with the terms of the Trust.
|
5.005
|
Interrelationship of the Plan and the Trust
. The provisions of the Plan and any Participant's Participation Agreement Form will govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust will govern the rights of the Company and its Affiliates, Participants and the creditors of the Company and its Affiliates to the assets transferred to the Trust. The Company and each of its Affiliates employing any Participant will at all times remain liable to carry out their obligations under the Plan.
|
5.010
|
Distributions From the Trust
. The Company's and each of its Affiliate's obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution will reduce their obligations under this Plan.
|
5.015
|
Rabbi Trust
. The Rabbi Trust shall:
|
(a)
|
be a non-qualified grantor trust which satisfies in all material respects the requirement of Revenue Procedure 92-64, 1992-2 CB 122 (or any successor Revenue Procedure or other applicable authority);
|
(b)
|
be irrevocable upon a 409A Change of Control, to the extent not then irrevocable (other than an event described in Section 1.030(d)); and
|
(c)
|
provide that any successor trustee shall be a bank trust department or other party that may be
|
6.000
|
Section 409A Generally
. This Plan is intended to comply with Section 409A. Notwithstanding any other provision of this Plan to the contrary, the Company makes no representation that this Plan or any benefit payable under this Plan will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Plan.
|
6.005
|
Changes in Elections
. Effective as of the Delinkage Date, notwithstanding any other provision of this Plan to the contrary, once an election is made pursuant to this Plan it shall be irrevocable unless all of the following conditions are met:
|
(a)
|
the election to change the time or form of payment, including a payment that is to be made upon a fixed date or schedule of dates, will not become effective until the date that is one year after the date on which the election to make the change is made (
i.e.
, the election must be made at least one year prior to Retirement or, if applicable, a Change of Control); and
|
(b)
|
except with respect to any payment to be made upon the death of a Participant, the form of payment, as changed, will defer payment of the Participant's accrued benefit until at least five (5) years later than the date that payment of such Participant's accrued benefit would otherwise have been made under this Plan.
|
6.010
|
Six Month Wait for Specified Employees
. Effective as of the Delinkage Date, notwithstanding any other provision of this Plan to the contrary, to the extent that any accrued benefit payable under the Plan constitute an amount payable upon Separation from Service or Retirement to any Participant under the Plan who is deemed to be a Specified Employee, then such amount will not be paid during the six (6) month period following such Separation from Service or Retirement. If the provisions of this Section 6.010 apply to a Participant who incurs a Separation from Service or Retirement, within the first six (6) months of the calendar year, then such amount will be paid within the first sixty (60) days following the close of the calendar year which includes the Participant's Separation from Service or Retirement. If the provisions of this Section 6.010 apply to a Participant who incurs a Separation from Service or Retirement within the last six (6) months of the calendar year, then such amount will be paid within the first sixty (60) days after June 30th of the calendar year following the year in which includes the Participant's Separation from Service or Retirement. Interest will not accrue with respect to payments delayed under this provision.
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(a)
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Participants Without a Spouse
. The form of annuity payable to a Participant who does not have a spouse, and who does not otherwise elect shall be paid in the form of a single life annuity with monthly installments for the Participant's life.
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(b)
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Participants With a Spouse
. The forms of annuities available to participant who is married on his annuity starting date will be a single life annuity with monthly installments for the Participant's life and joint annuities with 60%, 75% or 100% continuation options. The monthly payments to a Participant shall be reduced by five percent (5%) if the Participant selects the (60%) continuation option, by percent (10%) if the Participant selects the seventy‑five percent (75%) continuation option, or by fifteen percent (15%) if the Participant selects the one hundred percent (100%) continuation option. The amount of the monthly benefit payable to such surviving spouse shall equal the percentage selected of the reduced monthly benefit payable to such Participant.
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•
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Granted Restricted Stock Units under our 2006 Long-Term Incentives Plan (the “Plan”) with a value equal to
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◦
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$100,000 plus
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◦
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$110,000 multiplied by a fraction where the numerator is the number of days until the next Annual Meeting of Shareowners and the denominator is 365.
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•
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$100,000 payable in equal quarterly installments at the beginning of each quarter.
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•
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At each Annual Meeting of Shareowners, granted Restricted Stock Units under the Plan with a value of $110,000.
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•
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Audit - $10,000
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•
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Compensation - $10,000
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•
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Nominating and Governance - $5,000
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•
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Technology - $5,000
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•
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All chair fees are payable in equal quarterly installments at the beginning of each quarter.
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•
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Each Audit Committee member, other than the Chair, receives $5,000, which is payable in equal quarterly installments at the beginning of each quarter.
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•
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Prior to the start of each calendar year, a non-employee director may elect to defer all or a portion of his or her cash fees by electing to receive Restricted Stock Units in lieu thereof.
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1.
|
I have reviewed the quarterly report on Form 10-Q for the quarter ended
June 30, 2012
of Rockwell Collins, Inc.;
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2.
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Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
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3.
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Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
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4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
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Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
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5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
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Date: July 24, 2012
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/s/ Clayton M. Jones
|
|
Clayton M. Jones
|
|
Chairman, President and
|
|
Chief Executive Officer
|
1.
|
I have reviewed the quarterly report on Form 10-Q for the quarter ended
June 30, 2012
of Rockwell Collins, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: July 24, 2012
|
/s/ Patrick E. Allen
|
|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
|
(1)
|
The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: July 24, 2012
|
/s/ Clayton M. Jones
|
|
Clayton M. Jones
|
|
Chairman, President and
|
|
Chief Executive Officer
|
(1)
|
The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: July 24, 2012
|
/s/ Patrick E. Allen
|
|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
|