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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)
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SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
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Title of each class
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Name of each exchange on which registered
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Common Stock, par value $.01 per share
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New York Stock Exchange
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SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:
None
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Large accelerated filer
R
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Accelerated filer
£
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Non-accelerated filer
£
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(Do not check if a smaller reporting company)
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Smaller reporting company
£
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Page No.
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PART I
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Item 1.
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Business.
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•
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integrated avionics systems, such as Pro Line Fusion
®
, which provide advanced avionics capabilities to meet the challenges of operating in the next generation global airspace. Pro Line Fusion
®
capabilities include; touch control primary flight displays, advanced flight and performance management, flight guidance and information management
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•
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integrated cabin electronics solutions, including cabin management systems with touch-screen controls, wireless connectivity, high definition video and audio, and entertainment and information content such as Airshow moving maps
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•
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communications systems and products, such as data link, high frequency (HF), very high frequency (VHF) and satellite communications systems
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•
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navigation systems and products, including landing sensors to enable fully automatic landings, radio navigation and geophysical sensors, as well as flight management systems
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•
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situational awareness and surveillance systems and products, such as synthetic and enhanced vision systems, surface surveillance and guidance solutions, head-up guidance systems, weather radar and collision avoidance systems
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•
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integrated flight controls including fly-by-wire, advanced flight guidance with auto-land capability, pilot controls, and primary and secondary electro-mechanical actuation
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•
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simulation and training systems, including full-flight simulators for crew training, visual system products, training systems and engineering services
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•
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maintenance, repair, parts, after-sales support services and aftermarket used equipment
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•
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communications systems and products designed to enable the transmission of information across the communications spectrum
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•
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navigation products and systems, including radio navigation products, global positioning system (GPS) equipment and multi-mode receivers
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•
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avionics systems for aircraft flight decks, including cockpit display products (multipurpose flat panel head-down displays, wide field of view head-up and helmet-mounted displays), flight controls, information/data processing and communications, navigation, safety and surveillance systems
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•
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precision targeting, electronic warfare and range and training systems
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•
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simulation and training systems, including visual system products, training systems and services
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•
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space wheels for satellite stabilization
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•
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maintenance, repair, parts, after-sales support services and aftermarket used equipment
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•
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voice and data communication services, such as air-to-ground GLOBALink
SM
and ground-to-ground AviNet
®
services, which enable satellite, VHF and HF transmissions between the cockpit, air traffic control, airline operation centers, reservation systems and other third parties ensuring safety and efficiency for commercial airlines and other related entities in the aviation ecosystem
|
•
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around the clock global flight support services for business aircraft operators, under the ARINCDirect
SM
brand, including flight planning and datalink, international trip support, cabin connectivity solutions and flight operations management software
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•
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airport communications and information systems designed to ease congestion and improve airport efficiency via airline agent and self-service check-in, airport operations, baggage management, boarding and access control solutions
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•
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train dispatching and information systems including solutions to support positive train control as mandated by the 2008 Railroad Safety Improvement Act
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•
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mission critical security command and control systems for nuclear power facilities with functions such as intrusion detection, access control, video and credential management and vehicle identification
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•
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global, high throughput cabin connectivity solutions enabling airlines to provide an enhanced experience for their passengers and improved operational efficiency for crews
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September 30
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||||||
(in billions)
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2016
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2015
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||||
Commercial Systems
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$
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2.2
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$
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2.1
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Government Systems:
|
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||||
Funded orders
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2.5
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2.5
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||
Unfunded orders
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0.7
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0.5
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||
Information Management Services
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0.3
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0.3
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Total backlog
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$
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5.7
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$
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5.4
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•
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ACCEL (Tianjin) Flight Simulation Co., Ltd, a joint venture with Haite Group, for the joint development and production of commercial flight simulators in China
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•
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ADARI Aviation Technology Limited, a joint venture with Aviation Data Communication Corporation Co., LTD, operates remote ground stations around China and develops certain content delivery management software
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•
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AVIC Leihua Rockwell Collins Avionics Company, a joint venture with China Leihua Electronic Technology Research Institute, a subsidiary of the Aviation Industry Corporation of China (AVIC), which provides integrated surveillance system products for the C919 aircraft in China
|
•
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Data Link Solutions LLC, a joint venture with BAE Systems, plc, for joint pursuit of the worldwide military data link market
|
•
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ESA Vision Systems LLC, a joint venture with Elbit Systems, Ltd., for joint pursuit of helmet-mounted cueing systems for the worldwide military fixed wing aircraft market
|
•
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Integrated Guidance Systems LLC, a joint venture with Honeywell International, Inc., for joint pursuit of the development of weapons guidance and navigation solutions
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•
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Quest Flight Training Limited, a joint venture with Quadrant Group, plc, which provides aircrew training services primarily for the United Kingdom Ministry of Defence
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•
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Rockwell Collins CETC Avionics Co., Ltd. a joint venture with CETC Avionics Co., Ltd. to develop and deliver products for the C919 program
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•
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in February 2016, we acquired the Matrix series projector product line from Christie Digital Systems, a global visual, audio and collaboration solutions company
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•
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in August 2015, we acquired International Communications Group, Inc. (ICG), which provides satellite-based global voice and data communication products and services for the aviation industry
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•
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in March 2015, we acquired Pacific Avionics Pty. Limited (Pacific Avionics), which provides technologies used for wireless information distribution
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•
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in December 2013, we acquired ARINC, which provides communication services, systems integration and security solutions across the aviation, airport, rail, transit and nuclear security markets
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•
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in March 2015, we divested ARINC's Aerospace Systems Engineering and Support business (ASES), which provided military aircraft integration and modifications, maintenance, logistics and support
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•
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in July 2014, we divested our satellite communication systems business formerly known as Datapath, Inc. (Datapath), which designed, manufactured and provided services for ground-based satellite communication systems (primarily for military applications)
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•
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in November 2013, we divested our Kaiser Optical Systems, Inc. (KOSI) subsidiary, which supplied spectrographic instrumentation and applied holographic technology
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(in millions)
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2016
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2015
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2014
|
||||||
Customer-funded
(1)
|
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$
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621
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$
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578
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504
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Company-funded
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224
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272
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268
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|||
Total research and development expense
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845
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850
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772
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|||
Increase in pre-production engineering costs, net
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128
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136
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162
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|||
Total research and development investment
(2)
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$
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973
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$
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986
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$
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934
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Item 1A.
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Risk Factors.
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•
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dependence on Congressional appropriations and administrative allotment of funds
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•
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the ability of the U.S. Government to terminate, without prior notice, partially completed government programs and contracts that were previously authorized (although we may recover certain costs if terminated for convenience)
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•
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changes in governmental procurement legislation and regulations and other policies which may reflect military and political developments, including recent U.S. Government initiatives to gain increased access to intellectual property and to limit reimbursement of internal research and development as well as bid and proposal costs
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•
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significant changes in contract scheduling or program structure, which generally result in delays or reductions in deliveries
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•
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intense competition for available U.S. Government business necessitating increases in time and investment for design and development
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•
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difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work
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•
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changes over the life of U.S. Government contracts, particularly development contracts, which generally result in adjustments of contract prices
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•
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claims based on U.S. Government work and violation of associated compliance and other requirements, which may result in fines, the cancellation or suspension of payments or suspension or debarment proceedings affecting potential further business with the U.S. Government
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•
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original equipment manufacturers' efforts to vertically integrate
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•
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customers seeking more rights in intellectual property developed in connection with their program, price concessions, extensive liability protections and other customer favorable contract terms
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•
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competitors offering lower prices and new solutions, developing new technologies or otherwise capturing more market share
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•
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reductions in demand for aircraft (for example, softness in demand for business jets) and delayed aircraft delivery schedules
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•
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bankruptcy or other significant financial difficulties of our existing and potential customers
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•
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reductions in the need for, or the deferral of, aircraft maintenance and repair services and spare parts support
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•
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retirement or storage of older generation aircraft, resulting in fewer retrofits and less demand for services for those aircraft, as well as the increased availability of used or recycled equipment on the market
|
•
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limited availability of financing for airlines or aircraft
|
•
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impact on the aviation industry due to the volatility of fuel prices
|
•
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disruptions to commercial air travel demand
|
•
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declines in revenues, profitability and cash flows from reduced orders, payment delays or other factors caused by the economic problems of our customers
|
•
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adverse impacts on our access to short-term commercial paper borrowings or other credit sources
|
•
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supply problems associated with any financial constraints faced by our suppliers
|
•
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laws, regulations and policies of non-U.S. governments relating to investments and operations, as well as U.S. laws affecting the activities of U.S. companies abroad
|
•
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regulatory requirements and potential changes, including imposition of tariffs or embargoes, export controls and other trade restrictions, anti-bribery, antitrust and data privacy requirements
|
•
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changes in government spending on defense programs, including spending declines in European countries
|
•
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uncertainties and restrictions concerning the availability of funding, credit or guarantees
|
•
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requirements of certain customers which obligate us to specified levels of in-country purchases, manufacturing or investments, known as offsets, and penalties in the event we fail to perform in accordance with the offset requirements
|
•
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impacts associated with foreign currency volatility
|
•
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uncertainties as to local laws and enforcement of contract and intellectual property rights
|
•
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rapid changes in government, economic and political policies, political or civil unrest or the threat of international boycotts or U.S. anti-boycott legislation
|
•
|
in February 2016, we acquired the Matrix series projector product line from Christie Digital Systems
|
•
|
in August 2015, we acquired ICG
|
•
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in March 2015, we acquired Pacific Avionics
|
•
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in December 2013, we acquired ARINC
|
•
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difficulty in integrating newly-acquired businesses and commencing partnership operations in an efficient and cost-effective manner and the risk that we encounter significant unanticipated costs or other problems associated with integration or commencement
|
•
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challenges in achieving strategic objectives, cost and revenue synergies and other expected benefits
|
•
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risk that our markets do not evolve as anticipated and the targeted technologies do not prove to be those needed to be successful in those markets
|
•
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risk that we assume significant liabilities that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying parties
|
•
|
loss of key employees of the acquired businesses or joint venture
|
•
|
risk of diverting the attention of senior management from our existing operations
|
•
|
risk of litigation associated with an acquisition
|
•
|
continued increases in medical costs related to current employees due to increased usage of medical benefits, medical inflation and the impact of U.S. Government health care legislation
|
•
|
continued increases in the average life span of retirees
|
•
|
material changes in legislation or market dynamics impacting medical or pension matters
|
•
|
the effect declines in the stock and bond markets have on our pension plan assets
|
•
|
reductions in the discount rate used to determine the present value of our retirement benefit obligations
|
•
|
adverse effects to future results due to the theft, destruction, loss, corruption or release of personal data, confidential information or intellectual property
|
•
|
operational or business disruptions resulting from the failure of IT or other systems and subsequent mitigation activities
|
•
|
negative publicity resulting in reputation or brand damage with our customers, suppliers, employees, shareowners and others
|
•
|
the market price of our common stock could decline
|
•
|
we could owe substantial termination fees to B/E Aerospace under certain circumstances
|
•
|
if the transaction is abandoned, our shareowners cannot be certain that we could find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms of the proposed B/E Aerospace acquisition
|
•
|
time and resources committed by our management to matters relating to the proposed transaction could otherwise have been devoted to pursuing other beneficial opportunities
|
•
|
we may experience negative reactions from the financial markets or from our customers, suppliers or employees
|
Item 1B.
|
Unresolved Staff Comments.
|
Item 2.
|
Properties.
|
Location (in thousands of square feet)
|
|
Owned
Facilities
|
|
Leased
Facilities
|
|
Total
|
|||
Commercial and Government Systems
|
|
|
|
|
|
|
|
|
|
U.S.
|
|
3,350
|
|
|
1,866
|
|
|
5,216
|
|
Europe / Africa / Middle East
|
|
330
|
|
|
233
|
|
|
563
|
|
Asia-Pacific
|
|
—
|
|
|
248
|
|
|
248
|
|
Americas, excluding U.S.
|
|
—
|
|
|
148
|
|
|
148
|
|
Total
|
|
3,680
|
|
|
2,495
|
|
|
6,175
|
|
|
|
|
|
|
|
|
|||
Information Management Services
|
|
|
|
|
|
|
|||
U.S.
|
|
39
|
|
|
549
|
|
|
588
|
|
Europe / Africa / Middle East
|
|
—
|
|
|
31
|
|
|
31
|
|
Asia-Pacific
|
|
—
|
|
|
25
|
|
|
25
|
|
Americas, excluding U.S.
|
|
—
|
|
|
1
|
|
|
1
|
|
Total
|
|
39
|
|
|
606
|
|
|
645
|
|
Combined Total
|
|
3,719
|
|
|
3,101
|
|
|
6,820
|
|
|
|
|
|
|
|
|
|||
Type of Facility (in thousands of square feet)
|
|
Owned
Facilities
|
|
Leased
Facilities
|
|
Total
|
|||
Commercial and Government Systems
|
|
|
|
|
|
|
|||
Manufacturing and service
|
|
1,274
|
|
|
986
|
|
|
2,260
|
|
Sales, engineering and general office space
|
|
2,406
|
|
|
1,509
|
|
|
3,915
|
|
|
|
|
|
|
|
|
|
|
|
Information Management Services
|
|
|
|
|
|
|
|||
Manufacturing and service
|
|
39
|
|
|
—
|
|
|
39
|
|
Sales, engineering and general office space
|
|
—
|
|
|
606
|
|
|
606
|
|
Combined Total
|
|
3,719
|
|
|
3,101
|
|
|
6,820
|
|
Item 3.
|
Legal Proceedings.
|
Item 4.
|
Mine Safety Disclosures.
|
Item 4A.
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Executive Officers of the Company.
|
Name, Office and Position, and Principal Occupations and Employment
|
|
Age
|
|
Robert K. Ortberg
—Chairman of the Board of Directors since November 2015; Chief Executive Officer and a Director since August 2013; President since September 2012; Executive Vice President and Chief Operating Officer, Government Systems prior thereto
|
|
56
|
|
Patrick E. Allen
—Senior Vice President and Chief Financial Officer since January 2005
|
|
52
|
|
Tatum J. Buse
—Vice President, Finance and Corporate Controller since September 2013; Vice President Cost Optimization from September 2012 to September 2013; Vice President and Controller of International and Service Solutions prior thereto
|
|
42
|
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Philip J. Jasper
—Executive Vice President and Chief Operating Officer, Government Systems since September 2012; Vice President, Business Development, Government Systems prior thereto
|
|
48
|
|
Bruce M. King
—Senior Vice President, Operations since May 2011
|
|
55
|
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Jeffrey D. MacLauchlan
—Senior Vice President, Corporate Development since September 2014; Vice President, Corporate Development of Lockheed Martin Corporation prior thereto
|
|
57
|
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Colin R. Mahoney
—Senior Vice President, International and Service Solutions since February 2013; Vice President of Commercial Systems Sales, Marketing and Customer Support prior thereto
|
|
51
|
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Nan Mattai
—Senior Vice President, Engineering and Information Technology since August 2015; Senior Vice President, Engineering and Technology prior thereto
|
|
64
|
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David J. Nieuwsma
—Senior Vice President, Information Management Services since April 2016; Vice President, Strategy and Business Development from December 2012 to April 2016; Vice President and General Manager of Airborne Solutions prior thereto
|
|
52
|
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Robert J. Perna
—Senior Vice President, General Counsel and Secretary since February 2014; Senior Vice President, General Counsel from January 2014 to February 2014; Vice President, General Counsel and Secretary for AM Castle & Co. prior thereto
|
|
52
|
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Jeffrey A. Standerski
—Senior Vice President, Human Resources since April 2016; Senior Vice President, Information Management Services from December 2013 to April 2016; Vice President and General Manager, Business and Regional Systems from July 2013 to December 2013; Vice President and General Manager, Air Transport Systems prior thereto
|
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50
|
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Kent L. Statler
—Executive Vice President and Chief Operating Officer, Commercial Systems since February 2010
|
|
51
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Douglas E. Stenske
—Vice President, Treasurer and Risk Management since September 2013; Vice President, Treasurer and Financial Planning prior thereto
|
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50
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Robert A. Sturgell
—Senior Vice President, Washington Operations since April 2009
|
|
57
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|
PART II
|
|
Item 5.
|
Market for the Company's Common Equity, Related Stockholder Matters and Company Purchases of Equity Securities.
|
|
|
2016
|
|
2015
|
||||||||||||
Fiscal Quarters
|
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
First
|
|
$
|
95.11
|
|
|
$
|
82.26
|
|
|
$
|
86.60
|
|
|
$
|
72.35
|
|
Second
|
|
93.20
|
|
|
76.03
|
|
|
97.49
|
|
|
83.00
|
|
||||
Third
|
|
94.98
|
|
|
81.04
|
|
|
99.37
|
|
|
92.22
|
|
||||
Fourth
|
|
87.11
|
|
|
80.92
|
|
|
93.89
|
|
|
78.15
|
|
Fiscal Quarters
|
|
2016
|
|
2015
|
||||
First
|
|
$
|
0.33
|
|
|
$
|
0.30
|
|
Second
|
|
0.33
|
|
|
0.30
|
|
||
Third
|
|
0.33
|
|
|
0.33
|
|
||
Fourth
|
|
0.33
|
|
|
0.33
|
|
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 Approximate
Dollar Value) of
Shares that May Yet
Be Purchased Under the
Plans or Programs
(1)
|
|||||
July 1, 2016 through July 31, 2016
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
125 million
|
August 1, 2016 through August 31, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
125 million
|
|
September 1, 2016 through September 30, 2016
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
125 million
|
|
Total/Average
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Item 6.
|
Selected Financial Data.
|
|
|
Years Ended September 30
|
||||||||||||||||||
(dollars in millions, except per share amounts)
|
|
2016(a)
|
|
2015(b)
|
|
2014(c)
|
|
2013(d)
|
|
2012(e)
|
||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
|
$
|
4,474
|
|
|
$
|
4,531
|
|
Cost of sales
|
|
3,642
|
|
|
3,630
|
|
|
3,469
|
|
|
3,103
|
|
|
3,168
|
|
|||||
Selling, general and administrative expenses
|
|
638
|
|
|
606
|
|
|
594
|
|
|
495
|
|
|
530
|
|
|||||
Income from continuing operations
|
|
727
|
|
|
694
|
|
|
618
|
|
|
630
|
|
|
589
|
|
|||||
Income (loss) from discontinued operations, net of taxes
|
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|
2
|
|
|
20
|
|
|||||
Net income
|
|
728
|
|
|
686
|
|
|
604
|
|
|
632
|
|
|
609
|
|
|||||
Net income as a percent of sales
|
|
13.8
|
%
|
|
13.1
|
%
|
|
12.1
|
%
|
|
14.1
|
%
|
|
13.4
|
%
|
|||||
Diluted earnings per share from continuing operations
|
|
5.50
|
|
|
5.19
|
|
|
4.52
|
|
|
4.56
|
|
|
4.01
|
|
|||||
Statement of Financial Position Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital(f)
|
|
$
|
1,144
|
|
|
$
|
1,164
|
|
|
$
|
1,054
|
|
|
$
|
1,096
|
|
|
$
|
1,292
|
|
Property
|
|
1,035
|
|
|
964
|
|
|
919
|
|
|
773
|
|
|
773
|
|
|||||
Goodwill and intangible assets
|
|
2,586
|
|
|
2,607
|
|
|
2,551
|
|
|
1,067
|
|
|
1,071
|
|
|||||
Total assets
|
|
7,707
|
|
|
7,304
|
|
|
7,005
|
|
|
5,397
|
|
|
5,310
|
|
|||||
Short-term debt
|
|
740
|
|
|
448
|
|
|
504
|
|
|
436
|
|
|
—
|
|
|||||
Long-term debt, net
|
|
1,382
|
|
|
1,680
|
|
|
1,663
|
|
|
563
|
|
|
779
|
|
|||||
Shareowners' equity
|
|
2,078
|
|
|
1,875
|
|
|
1,884
|
|
|
1,618
|
|
|
1,259
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
|
$
|
193
|
|
|
$
|
210
|
|
|
$
|
163
|
|
|
$
|
120
|
|
|
$
|
138
|
|
Depreciation and amortization
|
|
253
|
|
|
252
|
|
|
225
|
|
|
177
|
|
|
170
|
|
|||||
Dividends per share
|
|
1.32
|
|
|
1.26
|
|
|
1.20
|
|
|
1.20
|
|
|
1.08
|
|
|||||
Stock Price:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
High
|
|
$
|
95.11
|
|
|
$
|
99.37
|
|
|
$
|
84.06
|
|
|
$
|
75.25
|
|
|
$
|
61.46
|
|
Low
|
|
76.03
|
|
|
72.35
|
|
|
65.76
|
|
|
52.24
|
|
|
46.37
|
|
(a)
|
Income from continuing operations includes a $24 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit and a $41 million income tax benefit due to the release of a valuation allowance for a U.S. capital loss carryforward. In addition, income from continuing operations includes $31 million of restructuring and asset impairment charges ($45 million before income taxes) primarily related to employee severance costs. Approximately $33 million of the pre-tax expense was recorded within cost of sales and $12 million was included within selling, general and administrative expenses.
|
(b)
|
Income from continuing operations includes a $22 million income tax benefit from the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit and a $16 million income tax benefit related to the remeasurement of certain prior year tax positions.
|
(c)
|
Income from continuing operations includes $18 million of restructuring, pension settlement and ARINC transaction costs ($25 million before income taxes). Approximately $18 million of the pre-tax expense was recorded in selling, general and administrative expenses, $4 million was included within cost of sales, and $3 million was classified as interest expense. Income from continuing operations also includes a $9 million gain ($10 million before income taxes) resulting from the sale of the KOSI business. On December 23, 2013, we acquired ARINC for $1.405 billion. This acquisition was funded through a combination of new long-term debt and short-term commercial paper borrowings.
|
(d)
|
Net income includes a $19 million income tax benefit related to the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit. Short-term debt includes commercial paper borrowings incurred to fund a portion of our share repurchase program and also includes $200 million related to debt that matured in December 2013.
|
(e)
|
Net income includes $38 million of net restructuring and asset impairment charges ($58 million before income taxes), primarily related to employee severance costs and certain customer bankruptcy charges. Approximately $38 million of the
|
(f)
|
Working capital consists of all current assets and liabilities, including cash and short-term debt.
|
Item 7.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations.
|
OVERVIEW AND OUTLOOK
|
•
|
On December 18, 2015, the Protecting Americans from Tax Hikes Act was enacted, which permanently reinstated the Federal Research and Development Tax Credit (Federal R&D Tax Credit) retroactive to January 1, 2015. This tax credit had previously expired on December 31, 2014.
|
•
|
We released a $41 million valuation allowance for a U.S. capital loss carryforward as a result of the creation of a tax planning strategy.
|
|
|
FY16 Results
|
Total sales
|
|
$5.26 billion
|
Diluted earnings per share from continuing operations
|
|
$5.50
|
Operating cash flow from continuing operations
|
|
$723 million
|
Capital expenditures
|
|
$193 million
|
Total research and development investment
(2)
|
|
$973 million
|
|
Year Ended September 30
|
||||||||||
(dollars in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Cash Provided by Operating Activities from Continuing Operations
|
$
|
723
|
|
|
$
|
749
|
|
|
$
|
660
|
|
Less: Property Additions
|
(193
|
)
|
|
(210
|
)
|
|
(163
|
)
|
|||
Free Cash Flow
|
$
|
530
|
|
|
$
|
539
|
|
|
$
|
497
|
|
•
|
accelerate sales growth
|
•
|
expand operating margins and improve cash flow conversion
|
•
|
deploy capital with priorities on growth and shareowner return
|
RESULTS OF OPERATIONS
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
U.S.
(1) (2)
|
|
$
|
3,292
|
|
|
$
|
3,174
|
|
|
$
|
2,993
|
|
Non-U.S.
(1)
|
|
1,967
|
|
|
2,070
|
|
|
1,986
|
|
|||
Total
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
Percent increase
|
|
—
|
%
|
|
5
|
%
|
|
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Total cost of sales
|
|
$
|
3,642
|
|
|
$
|
3,630
|
|
|
$
|
3,469
|
|
Percent of total sales
|
|
69.3
|
%
|
|
69.2
|
%
|
|
69.7
|
%
|
•
|
a $45 million increase from higher sales volume, which was negatively impacted by less favorable program sales mix
|
•
|
$33 million of asset and restructuring charges recorded in 2016
|
•
|
partially offset by a $48 million reduction in company-funded R&D expense, as detailed in the Research and Development Expense section below
|
•
|
in addition, pension costs decreased $16 million
|
•
|
$91 million from inorganic sales growth attributable to ARINC
|
•
|
$18 million from higher employee incentive compensation costs
|
•
|
the remaining net increase of $52 million was driven primarily by higher organic sales volume within Commercial Systems and Information Management Services, partially offset by a corporate-level charge for employee severance recorded in 2014
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Customer-funded:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
231
|
|
|
$
|
187
|
|
|
$
|
143
|
|
Government Systems
|
|
381
|
|
|
382
|
|
|
353
|
|
|||
Information Management Services
|
|
9
|
|
|
9
|
|
|
8
|
|
|||
Total customer-funded
|
|
621
|
|
|
578
|
|
|
504
|
|
|||
Company-funded:
|
|
|
|
|
|
|
|
|
||||
Commercial Systems
|
|
143
|
|
|
182
|
|
|
193
|
|
|||
Government Systems
|
|
79
|
|
|
88
|
|
|
74
|
|
|||
Information Management Services
(1)
|
|
2
|
|
|
2
|
|
|
1
|
|
|||
Total company-funded
|
|
224
|
|
|
272
|
|
|
268
|
|
|||
Total research and development expense
|
|
$
|
845
|
|
|
$
|
850
|
|
|
$
|
772
|
|
Percent of total sales
|
|
16.1
|
%
|
|
16.2
|
%
|
|
15.5
|
%
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Selling, general and administrative expenses
|
|
$
|
638
|
|
|
$
|
606
|
|
|
$
|
594
|
|
Percent of total sales
|
|
12.1
|
%
|
|
11.6
|
%
|
|
11.9
|
%
|
•
|
$12 million of restructuring and asset impairment charges recorded in 2016
|
•
|
higher costs from further expansion in international emerging markets
|
•
|
incremental costs associated with the acquisitions of ICG and Pacific Avionics
|
•
|
$19 million of inorganic SG&A cost growth from the acquired ARINC business
|
•
|
higher international business development and bid and proposal costs
|
•
|
partially offset by the absence of $13 million of transaction costs for legal, accounting and advisory fees resulting from the ARINC acquisition, as well as the absence of a pension settlement charge in 2014
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Interest expense
|
|
$
|
64
|
|
|
$
|
61
|
|
|
$
|
59
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Other income, net
|
|
$
|
20
|
|
|
$
|
15
|
|
|
$
|
25
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Income tax expense
|
|
$
|
208
|
|
|
$
|
268
|
|
|
$
|
264
|
|
Effective income tax rate
|
|
22.2
|
%
|
|
27.9
|
%
|
|
29.9
|
%
|
(in millions, except per share amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Income from continuing operations
|
|
$
|
727
|
|
|
$
|
694
|
|
|
$
|
618
|
|
Percent of sales
|
|
13.8
|
%
|
|
13.2
|
%
|
|
12.4
|
%
|
|||
|
|
|
|
|
|
|
||||||
Income (loss) from discontinued operations, net of taxes
|
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|||
Net income
|
|
$
|
728
|
|
|
$
|
686
|
|
|
$
|
604
|
|
|
|
|
|
|
|
|
||||||
Diluted earnings per share from continuing operations
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
|
$
|
4.52
|
|
Diluted earnings (loss) per share from discontinued operations
|
|
0.01
|
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|||
Diluted earnings per share
|
|
$
|
5.51
|
|
|
$
|
5.13
|
|
|
$
|
4.42
|
|
|
|
|
|
|
|
|
||||||
Weighted average diluted common shares
|
|
132.1
|
|
|
133.7
|
|
|
136.7
|
|
•
|
a $60 million decrease in income tax expense primarily due to the release of a valuation allowance for a U.S. capital loss carryforward, the retroactive reinstatement of the Federal R&D Tax Credit and lower pre-tax income from continuing operations
|
•
|
a total segment operating earnings increase of $9 million as operating earnings increased $20 million in Government Systems and $12 million in Information Management Services, partially offset by a $23 million decrease in Commercial Systems
|
•
|
partially offset by $45 million of pre-tax restructuring and asset impairment charges recorded in 2016
|
•
|
a $45 million segment operating earnings increase in Commercial Systems and a $33 million segment operating earnings increase in Information Management Services
|
•
|
the absence of $16 million of transaction costs incurred in connection with the ARINC acquisition
|
•
|
partially offset by lower operating earnings of $8 million in Government Systems and the absence of a $10 million gain realized on the divestiture of KOSI in 2014
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Air transport aviation electronics:
|
|
|
|
|
|
|
||||||
Original equipment
|
|
$
|
850
|
|
|
$
|
806
|
|
|
$
|
703
|
|
Aftermarket
|
|
542
|
|
|
522
|
|
|
512
|
|
|||
Wide-body in-flight entertainment
|
|
38
|
|
|
57
|
|
|
70
|
|
|||
Total air transport aviation electronics
|
|
1,430
|
|
|
1,385
|
|
|
1,285
|
|
|||
Business and regional aviation electronics:
|
|
|
|
|
|
|
|
|
||||
Original equipment
|
|
534
|
|
|
640
|
|
|
618
|
|
|||
Aftermarket
|
|
431
|
|
|
409
|
|
|
396
|
|
|||
Total business and regional aviation electronics
|
|
965
|
|
|
1,049
|
|
|
1,014
|
|
|||
Total
|
|
$
|
2,395
|
|
|
$
|
2,434
|
|
|
$
|
2,299
|
|
Percent (decrease) increase
|
|
(2)%
|
|
|
6%
|
|
|
|
|
•
|
original equipment sales
increased
$44 million
, or
5 percent
, primarily due to higher Airbus A350 and Boeing 787 production rates, and higher customer-funded development program revenues, partially offset by lower Airbus A330 production rates and unfavorable customer timing for airline selectable equipment
|
•
|
aftermarket sales
increased
$20 million
, or
4 percent
, primarily due to inorganic sales growth from ICG and Pacific Avionics, partially offset by lower service and support activity and the absence of a large used aircraft equipment sale that occurred in the prior year
|
•
|
wide-body IFE sales
decreased
$19 million
, or
33 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$106 million
, or
17 percent
, primarily due to certain lower business aircraft OEM production rates, partially offset by higher product deliveries for the Bombardier CSeries and Embraer Legacy business jet programs and higher customer-funded development program revenues
|
•
|
aftermarket sales
increased
$22 million
, or
5 percent
, primarily due to higher regulatory mandate upgrade and flight deck retrofit activity, as well as higher simulation hardware deliveries, partially offset by lower cabin retrofit activity
|
•
|
original equipment sales
increased
$103 million
, or
15 percent
, primarily due to higher OEM production rates, improved share of airline selectable equipment and higher customer-funded development program sales
|
•
|
aftermarket sales
increased
$10 million
, or
2 percent
, primarily driven by higher sales of used aircraft parts and higher customer-funded development program sales, partially offset by lower spares provisioning for the Boeing 787 program
|
•
|
wide-body IFE sales
decreased
$13 million
, or
19 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
increased
$22 million
, or
4 percent
, primarily due to higher customer-funded development program revenues and higher product deliveries for the Embraer Legacy 500 in support of entry into service
|
•
|
aftermarket sales
increased
$13 million
, or
3 percent
, driven by higher cabin retrofit activity and higher regulatory mandate upgrades partially offset by lower spares provisioning
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Segment operating earnings
|
|
$
|
531
|
|
|
$
|
554
|
|
|
$
|
509
|
|
Percent of sales
|
|
22.2
|
%
|
|
22.8
|
%
|
|
22.1
|
%
|
•
|
operating earnings were negatively impacted by a $39 million decrease in sales and sales mix, as lower margin customer-funded development revenues increased and higher margin business jet OEM sales decreased in 2016
|
•
|
a $15 million increase in the amortization of pre-production engineering costs and intangible assets
|
•
|
a $10 million increase in SG&A costs primarily due to the acquisition and integration of Pacific Avionics and ICG
|
•
|
partially offset by a $39 million decrease in company-funded R&D expense and the favorable impact of benefits from cost savings initiatives from previously announced restructuring plans
|
•
|
the $135 million increase in sales discussed in the Commercial Systems sales section above, which resulted in an $83 million increase in cost and incremental earnings of $52 million, or 39 percent of the higher sales volume. The margin from incremental sales benefited from favorable customer-funded development program adjustments
|
•
|
partially offset by $7 million of other net decreases to operating earnings, including higher employee incentive compensation costs of $8 million
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Avionics
|
|
$
|
1,483
|
|
|
$
|
1,436
|
|
|
$
|
1,409
|
|
Communication and navigation
|
|
723
|
|
|
751
|
|
|
800
|
|
|||
Total
|
|
$
|
2,206
|
|
|
$
|
2,187
|
|
|
$
|
2,209
|
|
Percent increase (decrease)
|
|
1
|
%
|
|
(1
|
)%
|
|
|
|
•
|
an $80 million increase from higher deliveries and service revenue on various fixed wing platforms
|
•
|
an $8 million increase from higher simulation and training sales
|
•
|
partially offset by $41 million in other net decreases to revenue, including lower deliveries on various rotary wing platforms
|
•
|
a $32 million decrease due to lower international deliveries of targeting systems
|
•
|
a $28 million decrease due to the wind-down of an international electronic warfare program
|
•
|
partially offset by $32 million in other net increases to revenue, including increases in data link and ARC-210 radio sales
|
•
|
$81 million increase from higher deliveries on various tanker transport and rotary wing platforms
|
•
|
partially offset by $54 million in other net decreases to revenue, including lower fighter aircraft and simulation and training sales
|
•
|
$93 million decrease from lower deliveries of Joint Tactical Radio System Manpack radios
|
•
|
$39 million in other decreases from lower deliveries of Firestorm targeting systems and lower development sales for the Common Range Integrated Instrumentation System program
|
•
|
partially offset by $83 million in other net increases to revenue, including increases in data link development sales, higher Radio Navigation and ARC-210 radio sales, and higher international electronic intelligence program sales
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Segment operating earnings
|
|
$
|
477
|
|
|
$
|
457
|
|
|
$
|
465
|
|
Percent of sales
|
|
21.6
|
%
|
|
20.9
|
%
|
|
21.1
|
%
|
•
|
the $19 million increase in sales volume discussed in the Government Systems sales section above, which resulted in a $9 million increase in cost and incremental earnings of $10 million, or 53 percent of the higher sales volume. The margins on the sales increase were favorably impacted by benefits from cost savings initiatives from previously announced restructuring plans and unfavorably impacted by the absence of certain favorable development program adjustments that occurred in the prior year
|
•
|
a $9 million decrease in company-funded R&D expense
|
•
|
an $8 million decrease in pension costs
|
•
|
partially offset by a $6 million unfavorable warranty adjustment
|
•
|
a $14 million increase in company-funded R&D expense
|
•
|
an $8 million increase in employee incentive compensation costs
|
•
|
the $22 million reduction in sales volume, which resulted in a $20 million reduction in cost, and lower earnings of $2 million, favorably impacted by benefits from cost savings initiatives
|
•
|
partially offset by favorable development program adjustments
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Sales
|
|
$
|
658
|
|
|
$
|
623
|
|
|
$
|
471
|
|
Percent increase
|
|
6
|
%
|
|
32
|
%
|
|
|
|
•
|
double-digit sales growth in aviation related sales
|
•
|
higher rail related sales due to the absence of certain unfavorable contract adjustments recorded in 2014
|
•
|
partially offset by lower sales due to the exit of a certain non-aviation government program
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Segment operating earnings
|
|
$
|
107
|
|
|
$
|
95
|
|
|
$
|
62
|
|
Percent of sales
|
|
16.3
|
%
|
|
15.2
|
%
|
|
13.2
|
%
|
•
|
a $35 million increase in sales volume discussed in the Information Management Services sales section above, which resulted in a $25 million increase in cost and an increase in earnings of $10 million, or 29 percent of the higher sales volume. The margins on the sales increase were unfavorably impacted by the increase in lower margin non-aviation related sales
|
•
|
operating earnings were positively impacted in 2016 by the favorable resolution of certain prior year claims associated with international business jet support services
|
•
|
incremental earnings from the $21 million organic increase in sales discussed in the Information Management Services sales section above
|
•
|
the absence of certain licensing costs incurred in the prior year
|
•
|
partially offset by higher business development costs
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
General corporate, net
|
|
$
|
44
|
|
|
$
|
59
|
|
|
$
|
59
|
|
(in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Pension benefits
|
$
|
(24
|
)
|
|
$
|
(6
|
)
|
|
$
|
10
|
|
Other retirement benefits
|
14
|
|
|
11
|
|
|
10
|
|
|||
Net benefit (income) expense
|
$
|
(10
|
)
|
|
$
|
5
|
|
|
$
|
20
|
|
FINANCIAL CONDITION AND LIQUIDITY
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash provided by operating activities from continuing operations
|
|
$
|
723
|
|
|
$
|
749
|
|
|
$
|
660
|
|
•
|
cash receipts from customers decreased by $135 million to $5.080 billion in 2016 compared to $5.215 billion in 2015. Cash receipts from customers decreased despite sales volume growth of $15 million due to the timing of sales relative to advanced payments and the collection of receivables from customers
|
•
|
payments for employee incentive pay increased $23 million. Incentive pay is expensed in the year incurred and then paid in the first fiscal quarter of the following year. In 2016, $137 million was paid for employee incentive pay costs expensed during 2015. This compares to $114 million paid in 2015 for employee incentive costs expensed during 2014
|
•
|
the above items were partially offset by lower payments for production inventory and other operating costs which decreased $85 million to $4.017 billion in 2016 compared to $4.102 billion in 2015. Cash payments for operating costs decreased despite growth in cost of sales due to the timing of payments to suppliers
|
•
|
cash payments for income taxes decreased $52 million to $130 million in 2016, compared to $182 million in 2015. The decrease in income tax payments was primarily from the retroactive reinstatement of the Federal R&D tax credit as a result of the Protecting Americans from Tax Hikes Act, as well as lower pre-tax income from continuing operations
|
•
|
cash receipts from customers increased by $176 million to $5.215 billion in 2015 compared to $5.039 billion in 2014. The increase in cash receipts from customers was less than the sales volume increase of $265 million due to the timing of sales and collection of receivables
|
•
|
the above item was partially offset by higher payments for production inventory and other operating costs which increased $85 million to $4.102 billion in 2015 compared to $4.017 billion in 2014. The increased payments for operating costs primarily resulted from higher sales volume, partially offset by lower payroll related costs due to the timing of payroll and employee incentive payments
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash used for investing activities from continuing operations
|
|
$
|
(209
|
)
|
|
$
|
(294
|
)
|
|
$
|
(1,537
|
)
|
•
|
we paid $50 million and $24 million in 2015 for the acquisitions of ICG and Pacific Avionics, respectively
|
•
|
a $17 million decrease in cash payments for property additions to $193 million in 2016
|
•
|
the above items were partially offset by $17 million paid for the Matrix series projector product line acquisition in 2016
|
•
|
we paid $1.405 billion in 2014 for the acquisition of ARINC
|
•
|
the above item was partially offset by a $47 million increase to cash payments made for property additions to $210 million in 2015
|
•
|
in addition, we paid $50 million and $24 million in 2015 for the acquisitions of ICG and Pacific Avionics, respectively
|
•
|
also, we received $23 million in proceeds from the divestiture of our KOSI business in 2014
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Cash provided by (used for) financing activities from continuing operations
|
|
$
|
(422
|
)
|
|
$
|
(492
|
)
|
|
$
|
827
|
|
•
|
cash repurchases of common stock decreased $69 million to $261 million in 2016 , compared to $330 million in 2015
|
•
|
net repayments of short-term commercial paper borrowings decreased $48 million to $8 million in 2016, compared to $56 million in 2015
|
•
|
partially offset by a decrease in proceeds received from the exercise of stock options of $28 million
|
•
|
also, cash dividend payments increased $5 million. During 2016, $172 million of cash dividend payments were made to shareowners, compared to $167 million 2015. The increase was primarily due to a 10 percent increase in our quarterly cash dividend paid on common stock to $0.33 per share, which was effective beginning with dividends paid in June 2015
|
•
|
the absence of proceeds from the December 2013 issuance of long-term debt of $1.089 billion. A portion of these proceeds were used to finance the acquisition of ARINC and the remainder was used to refinance $200 million of long-term debt that matured in December 2013
|
•
|
net proceeds from short-term commercial paper borrowings decreased $325 million. During 2015, net repayments of short-term commercial paper borrowings were $56 million, compared to net proceeds of $269 million during 2014. The incrementally higher proceeds in the prior year were used primarily to finance the acquisition of ARINC
|
•
|
cash repurchases of common stock increased $119 million to $330 million during 2015, compared to $211 million in 2014
|
(in millions, except per share amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Amount of share repurchases
|
|
$
|
255
|
|
|
$
|
325
|
|
|
$
|
206
|
|
Number of shares repurchased
|
|
2.9
|
|
|
3.8
|
|
|
2.7
|
|
|||
Weighted average price per share
|
|
$
|
87.30
|
|
|
$
|
85.32
|
|
|
$
|
76.84
|
|
|
September 30
|
||||||
(in millions)
|
2016
|
|
2015
|
||||
Cash and cash equivalents
|
$
|
340
|
|
|
$
|
252
|
|
|
|
|
|
||||
Short-term debt
|
(740
|
)
|
|
(448
|
)
|
||
Long-term debt, net
|
(1,382
|
)
|
|
(1,680
|
)
|
||
Total Debt
|
$
|
(2,122
|
)
|
|
$
|
(2,128
|
)
|
Total equity
|
$
|
2,084
|
|
|
$
|
1,880
|
|
Debt to total capitalization
(1)
|
50
|
%
|
|
53
|
%
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F2
|
|
A-
|
|
Stable
|
Moody’s Investors Service
|
|
P-2
|
|
A3
|
|
Stable
|
Standard & Poor’s
|
|
A-2
|
|
A-
|
|
Stable
|
|
|
Payments Due by Period
|
||||||||||||||||||
(in millions)
|
|
Total
|
|
Less than
1 Year
|
|
1 - 3
Years
|
|
4 - 5
Years
|
|
Thereafter
|
||||||||||
Long-term debt
|
|
$
|
1,650
|
|
|
$
|
300
|
|
|
$
|
300
|
|
|
$
|
—
|
|
|
$
|
1,050
|
|
Interest on long-term debt
|
|
731
|
|
|
58
|
|
|
116
|
|
|
84
|
|
|
473
|
|
|||||
Non-cancelable operating leases
|
|
316
|
|
|
63
|
|
|
91
|
|
|
49
|
|
|
113
|
|
|||||
Non-cancelable capital leases, including interest
|
|
76
|
|
|
6
|
|
|
11
|
|
|
11
|
|
|
48
|
|
|||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase orders
|
|
1,244
|
|
|
952
|
|
|
244
|
|
|
37
|
|
|
11
|
|
|||||
Purchase contracts
|
|
188
|
|
|
34
|
|
|
61
|
|
|
53
|
|
|
40
|
|
|||||
Total
|
|
$
|
4,205
|
|
|
$
|
1,413
|
|
|
$
|
823
|
|
|
$
|
234
|
|
|
$
|
1,735
|
|
|
|
Amount of Commitment Expiration by Period
|
||||||||||||||||||
(in millions)
|
|
Total
Amount
Committed
|
|
Less than
1 Year
|
|
1 - 3
Years
|
|
4 - 5
Years
|
|
Thereafter
|
||||||||||
Letters of credit
(1)
|
|
$
|
239
|
|
|
$
|
185
|
|
|
$
|
52
|
|
|
$
|
—
|
|
|
$
|
2
|
|
RECENTLY ISSUED ACCOUNTING STANDARDS
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
|
|
September 30
|
||||||
(in millions)
|
|
2016
|
|
2015
|
||||
Pre-production engineering costs
|
|
$
|
1,140
|
|
|
$
|
1,012
|
|
Up-front sales incentives
|
|
233
|
|
|
239
|
|
||
Total Program Investments
|
|
$
|
1,373
|
|
|
$
|
1,251
|
|
•
|
changes in market conditions may affect product sales under a program. In particular, the commercial aerospace market has been historically cyclical and subject to downturns during periods of weak economic conditions, which could be prompted or exacerbated by political or other U.S. or international events
|
•
|
bankruptcy or other significant financial difficulties of our customers
|
•
|
our ability to produce products could be impacted by the performance of subcontractors, the availability of specialized materials and other production risks
|
(in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Amortization of pre-production engineering
|
$
|
49
|
|
|
$
|
47
|
|
|
$
|
36
|
|
Amortization of up-front sales incentives
|
18
|
|
|
15
|
|
|
12
|
|
|||
Total amortization of Program Investments
|
$
|
67
|
|
|
$
|
62
|
|
|
$
|
48
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
(1)
|
$
|
60
|
|
|
$
|
102
|
|
|
$
|
137
|
|
|
$
|
154
|
|
|
$
|
139
|
|
|
$
|
521
|
|
Anticipated amortization expense for up-front sales incentives
|
16
|
|
|
19
|
|
|
24
|
|
|
26
|
|
|
26
|
|
|
122
|
|
||||||
Total anticipated amortization for Program Investments
|
$
|
76
|
|
|
$
|
121
|
|
|
$
|
161
|
|
|
$
|
180
|
|
|
$
|
165
|
|
|
$
|
643
|
|
|
|
Change in Assumption (in millions)
|
||
Assumption
|
|
25 Basis Point Increase
|
|
25 Basis Point Decrease
|
Pension obligation discount rate
|
|
$121 pension projected benefit obligation decrease
|
|
$124 pension projected benefit obligation increase
|
Pension obligation discount rate
|
|
$1 pension expense increase
|
|
$1 pension expense decrease
|
Expected long-term rate of return on plan assets
|
|
$7 pension expense decrease
|
|
$7 pension expense increase
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
|
|
September 30, 2016
|
||||||||
(in millions)
|
|
Interest Rate
|
|
Carrying Value
|
|
Fair Value
|
||||
$400 Notes due 2043
|
|
4.80%
|
|
$
|
398
|
|
|
$
|
474
|
|
$400 Notes due 2023
|
|
3.70%
|
|
399
|
|
|
439
|
|
||
$250 Notes due 2021
|
|
3.10%
|
|
250
|
|
|
263
|
|
||
$300 Notes due 2019
|
|
5.25%
|
|
300
|
|
|
332
|
|
||
$300 Notes due 2016
|
|
3 month LIBOR plus 0.35%
|
|
300
|
|
|
300
|
|
Item 8.
|
Financial Statements and Supplementary Data.
|
/s/ ROBERT K. ORTBERG
|
|
/s/ PATRICK E. ALLEN
|
Robert K. Ortberg
Chairman, President and
Chief Executive Officer
|
|
Patrick E. Allen
Senior Vice President and
Chief Financial Officer
|
|
September 30
|
||||||
|
2016
|
|
2015
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
340
|
|
|
$
|
252
|
|
Receivables, net
|
1,094
|
|
|
1,038
|
|
||
Inventories, net
|
1,939
|
|
|
1,824
|
|
||
Other current assets
|
117
|
|
|
110
|
|
||
Total current assets
|
3,490
|
|
|
3,224
|
|
||
|
|
|
|
||||
Property
|
1,035
|
|
|
964
|
|
||
Goodwill
|
1,919
|
|
|
1,904
|
|
||
Intangible Assets
|
667
|
|
|
703
|
|
||
Deferred Income Taxes
|
219
|
|
|
165
|
|
||
Other Assets
|
377
|
|
|
344
|
|
||
TOTAL ASSETS
|
$
|
7,707
|
|
|
$
|
7,304
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
||
Short-term debt
|
$
|
740
|
|
|
$
|
448
|
|
Accounts payable
|
527
|
|
|
487
|
|
||
Compensation and benefits
|
269
|
|
|
273
|
|
||
Advance payments from customers
|
283
|
|
|
365
|
|
||
Accrued customer incentives
|
246
|
|
|
232
|
|
||
Product warranty costs
|
87
|
|
|
89
|
|
||
Other current liabilities
|
194
|
|
|
166
|
|
||
Total current liabilities
|
2,346
|
|
|
2,060
|
|
||
|
|
|
|
||||
Long-term Debt, Net
|
1,382
|
|
|
1,680
|
|
||
Retirement Benefits
|
1,660
|
|
|
1,466
|
|
||
Other Liabilities
|
235
|
|
|
218
|
|
||
|
|
|
|
||||
Equity:
|
|
|
|
|
|
||
Common stock ($0.01 par value; shares authorized: 1,000; shares issued: September 30, 2016, 143.8; September 30, 2015, 183.8)
|
1
|
|
|
2
|
|
||
Additional paid-in capital
|
1,506
|
|
|
1,519
|
|
||
Retained earnings
|
3,327
|
|
|
5,124
|
|
||
Accumulated other comprehensive loss
|
(1,898
|
)
|
|
(1,699
|
)
|
||
Common stock in treasury, at cost (shares held: September 30, 2016, 13.6; September
30, 2015, 51.9)
|
(858
|
)
|
|
(3,071
|
)
|
||
Total shareowners’ equity
|
2,078
|
|
|
1,875
|
|
||
Noncontrolling interest
|
6
|
|
|
5
|
|
||
Total equity
|
2,084
|
|
|
1,880
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
7,707
|
|
|
$
|
7,304
|
|
|
Year Ended September 30
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Sales
|
|
|
|
|
|
||||||
Product sales
|
$
|
4,411
|
|
|
$
|
4,438
|
|
|
$
|
4,309
|
|
Service sales
|
848
|
|
|
806
|
|
|
670
|
|
|||
Total sales
|
5,259
|
|
|
5,244
|
|
|
4,979
|
|
|||
|
|
|
|
|
|
||||||
Costs, expenses and other:
|
|
|
|
|
|
|
|
||||
Product cost of sales
|
3,045
|
|
|
3,064
|
|
|
3,001
|
|
|||
Service cost of sales
|
597
|
|
|
566
|
|
|
468
|
|
|||
Selling, general and administrative expenses
|
638
|
|
|
606
|
|
|
594
|
|
|||
Interest expense
|
64
|
|
|
61
|
|
|
59
|
|
|||
Other income, net
|
(20
|
)
|
|
(15
|
)
|
|
(25
|
)
|
|||
Total costs, expenses and other
|
4,324
|
|
|
4,282
|
|
|
4,097
|
|
|||
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
935
|
|
|
962
|
|
|
882
|
|
|||
Income tax expense
|
208
|
|
|
268
|
|
|
264
|
|
|||
Income from continuing operations
|
727
|
|
|
694
|
|
|
618
|
|
|||
|
|
|
|
|
|
||||||
Income (loss) from discontinued operations, net of taxes
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|||
|
|
|
|
|
|
||||||
Net income
|
$
|
728
|
|
|
$
|
686
|
|
|
$
|
604
|
|
|
|
|
|
|
|
||||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
||||
Basic
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
5.57
|
|
|
$
|
5.25
|
|
|
$
|
4.57
|
|
Discontinued operations
|
0.01
|
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|||
Basic earnings per share
|
$
|
5.58
|
|
|
$
|
5.19
|
|
|
$
|
4.47
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
5.50
|
|
|
$
|
5.19
|
|
|
$
|
4.52
|
|
Discontinued operations
|
0.01
|
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|||
Diluted earnings per share
|
$
|
5.51
|
|
|
$
|
5.13
|
|
|
$
|
4.42
|
|
|
|
|
|
|
|
||||||
Weighted average common shares:
|
|
|
|
|
|
||||||
Basic
|
130.5
|
|
|
132.3
|
|
|
135.1
|
|
|||
Diluted
|
132.1
|
|
|
133.7
|
|
|
136.7
|
|
|||
|
|
|
|
|
|
||||||
Cash dividends per share
|
$
|
1.32
|
|
|
$
|
1.26
|
|
|
$
|
1.20
|
|
|
Year Ended September 30
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Net income
|
$
|
728
|
|
|
$
|
686
|
|
|
$
|
604
|
|
Unrealized foreign currency translation adjustments
|
(20
|
)
|
|
(41
|
)
|
|
(27
|
)
|
|||
Pension and other retirement benefits adjustments (net of taxes: 2016, $102; 2015, $169; 2014, $29)
|
(181
|
)
|
|
(289
|
)
|
|
(55
|
)
|
|||
Foreign currency cash flow hedge adjustments (net of taxes: 2016, $1; 2015, $(1); 2014, $1)
|
2
|
|
|
(3
|
)
|
|
3
|
|
|||
Comprehensive income
|
$
|
529
|
|
|
$
|
353
|
|
|
$
|
525
|
|
|
Year Ended September 30
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
728
|
|
|
$
|
686
|
|
|
$
|
604
|
|
Income (loss) from discontinued operations, net of tax
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|||
Income from continuing operations
|
727
|
|
|
694
|
|
|
618
|
|
|||
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash restructuring charges
|
6
|
|
|
—
|
|
|
9
|
|
|||
Gain on sale of business
|
—
|
|
|
—
|
|
|
(10
|
)
|
|||
Depreciation
|
144
|
|
|
152
|
|
|
141
|
|
|||
Amortization of intangible assets and pre-production engineering costs
|
109
|
|
|
100
|
|
|
84
|
|
|||
Stock-based compensation expense
|
27
|
|
|
24
|
|
|
24
|
|
|||
Compensation and benefits paid in common stock
|
59
|
|
|
50
|
|
|
50
|
|
|||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
(13
|
)
|
|
(6
|
)
|
|||
Deferred income taxes
|
48
|
|
|
50
|
|
|
113
|
|
|||
Pension plan contributions
|
(69
|
)
|
|
(69
|
)
|
|
(75
|
)
|
|||
Fair value of acquisition-related contingent consideration
|
1
|
|
|
—
|
|
|
—
|
|
|||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
|
|
|
|
|
|
||||||
Receivables
|
(91
|
)
|
|
(46
|
)
|
|
67
|
|
|||
Production inventory
|
(18
|
)
|
|
(23
|
)
|
|
(84
|
)
|
|||
Pre-production engineering costs
|
(177
|
)
|
|
(183
|
)
|
|
(198
|
)
|
|||
Accounts payable
|
38
|
|
|
(29
|
)
|
|
23
|
|
|||
Compensation and benefits
|
(4
|
)
|
|
24
|
|
|
(60
|
)
|
|||
Advance payments from customers
|
(82
|
)
|
|
16
|
|
|
(11
|
)
|
|||
Accrued customer incentives
|
14
|
|
|
30
|
|
|
18
|
|
|||
Product warranty costs
|
(2
|
)
|
|
(14
|
)
|
|
(14
|
)
|
|||
Income taxes
|
25
|
|
|
50
|
|
|
(21
|
)
|
|||
Other assets and liabilities
|
(32
|
)
|
|
(64
|
)
|
|
(8
|
)
|
|||
Cash Provided by Operating Activities from Continuing Operations
|
723
|
|
|
749
|
|
|
660
|
|
|||
Investing Activities:
|
|
|
|
|
|
|
|
||||
Property additions
|
(193
|
)
|
|
(210
|
)
|
|
(163
|
)
|
|||
Acquisition of businesses, net of cash acquired
|
(17
|
)
|
|
(74
|
)
|
|
(1,405
|
)
|
|||
Acquisition of intangible assets
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Proceeds from business divestitures
|
—
|
|
|
—
|
|
|
24
|
|
|||
Other investing activities
|
1
|
|
|
(10
|
)
|
|
8
|
|
|||
Cash (Used for) Investing Activities from Continuing Operations
|
(209
|
)
|
|
(294
|
)
|
|
(1,537
|
)
|
|||
Financing Activities:
|
|
|
|
|
|
|
|
||||
Purchases of treasury stock
|
(261
|
)
|
|
(330
|
)
|
|
(211
|
)
|
|||
Cash dividends
|
(172
|
)
|
|
(167
|
)
|
|
(162
|
)
|
|||
Repayment of short-term borrowings
|
—
|
|
|
—
|
|
|
(200
|
)
|
|||
Increase (decrease) in short-term commercial paper borrowings, net
(1)
|
(8
|
)
|
|
(56
|
)
|
|
269
|
|
|||
Increase in long-term borrowings
|
—
|
|
|
—
|
|
|
1,089
|
|
|||
Proceeds from the exercise of stock options
|
21
|
|
|
49
|
|
|
37
|
|
|||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
13
|
|
|
6
|
|
|||
Other financing activities
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|||
Cash Provided by (Used for) Financing Activities from Continuing Operations
|
(422
|
)
|
|
(492
|
)
|
|
827
|
|
|
Year Ended September 30
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
(4
|
)
|
|
(23
|
)
|
|
(12
|
)
|
|||
Discontinued Operations:
|
|
|
|
|
|
||||||
Operating activities
|
—
|
|
|
(14
|
)
|
|
(16
|
)
|
|||
Investing activities
|
—
|
|
|
3
|
|
|
10
|
|
|||
Cash (Used For) Discontinued Operations
|
—
|
|
|
(11
|
)
|
|
(6
|
)
|
|||
Net Change in Cash and Cash Equivalents
|
88
|
|
|
(71
|
)
|
|
(68
|
)
|
|||
Cash and Cash Equivalents at Beginning of Period
|
252
|
|
|
323
|
|
|
391
|
|
|||
Cash and Cash Equivalents at End of Period
|
$
|
340
|
|
|
$
|
252
|
|
|
$
|
323
|
|
|
Year Ended September 30
|
||||||||||
|
2016
|
|
2015
|
|
2014
|
||||||
Gross borrowings of commercial paper with maturities greater than three months
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
265
|
|
Gross payments of commercial paper with maturities greater than three months
|
—
|
|
|
—
|
|
|
265
|
|
|||
Net borrowings of commercial paper with maturities greater than three months
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Common Stock
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
|
Shares Outstanding
|
|
Par Value
|
|
Additional Paid-In Capital
|
|
Retained Earnings
|
|
Accumulated Other Comprehensive Loss
|
|
Treasury Stock
|
|
Noncontrolling Interest
|
|
Total Equity
|
|||||||||||||||
Balance at September 30, 2013
|
135.1
|
|
|
$
|
2
|
|
|
$
|
1,469
|
|
|
$
|
4,163
|
|
|
$
|
(1,287
|
)
|
|
$
|
(2,729
|
)
|
|
$
|
5
|
|
|
$
|
1,623
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
604
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
604
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|
—
|
|
|
—
|
|
|
(79
|
)
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(162
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(162
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.8
|
|
|
—
|
|
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
46
|
|
|
—
|
|
|
37
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.2
|
|
|
—
|
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
(5
|
)
|
|||||||
Excess tax pools
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
10
|
|
|||||||
Employee savings plan
|
0.5
|
|
|
—
|
|
|
11
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
40
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|||||||
Treasury share repurchases
|
(2.7
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(206
|
)
|
|
—
|
|
|
(206
|
)
|
|||||||
Balance at September 30, 2014
|
134.0
|
|
|
$
|
2
|
|
|
$
|
1,489
|
|
|
$
|
4,605
|
|
|
$
|
(1,366
|
)
|
|
$
|
(2,846
|
)
|
|
$
|
5
|
|
|
$
|
1,889
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
686
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
686
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(333
|
)
|
|
—
|
|
|
—
|
|
|
(333
|
)
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(167
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(167
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
1.1
|
|
|
—
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
|
62
|
|
|
—
|
|
|
49
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.1
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(5
|
)
|
|||||||
Excess tax pools
|
—
|
|
|
—
|
|
|
12
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
11
|
|
|||||||
Employee savings plan
|
0.4
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
26
|
|
|
—
|
|
|
39
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
24
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
24
|
|
|||||||
Treasury share repurchases
|
(3.8
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(325
|
)
|
|
—
|
|
|
(325
|
)
|
|||||||
Balance at September 30, 2015
|
131.9
|
|
|
$
|
2
|
|
|
$
|
1,519
|
|
|
$
|
5,124
|
|
|
$
|
(1,699
|
)
|
|
$
|
(3,071
|
)
|
|
$
|
5
|
|
|
$
|
1,880
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
728
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
728
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(199
|
)
|
|
—
|
|
|
—
|
|
|
(199
|
)
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(172
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.4
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
|
—
|
|
|
23
|
|
|
—
|
|
|
21
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.1
|
|
|
—
|
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
(6
|
)
|
|||||||
Excess tax pools
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
8
|
|
|
—
|
|
|
10
|
|
|||||||
Employee savings plan
|
0.6
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
49
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
27
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
27
|
|
|||||||
Treasury share repurchases
|
(2.9
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(255
|
)
|
|
—
|
|
|
(255
|
)
|
|||||||
Treasury share retirements
(1)
|
—
|
|
|
(1
|
)
|
|
(44
|
)
|
|
(2,353
|
)
|
|
—
|
|
|
2,398
|
|
|
—
|
|
|
—
|
|
|||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||||
Balance at September 30, 2016
|
130.2
|
|
|
$
|
1
|
|
|
$
|
1,506
|
|
|
$
|
3,327
|
|
|
$
|
(1,898
|
)
|
|
$
|
(858
|
)
|
|
$
|
6
|
|
|
$
|
2,084
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Significant Accounting Policies
|
3.
|
Acquisitions, Goodwill and Intangible Assets
|
(in millions)
|
December 23, 2013
|
||
Restricted Cash
(1)
|
$
|
61
|
|
Receivables and Other current assets
|
216
|
|
|
Building held for sale
(2)
|
81
|
|
|
Business held for sale
(3)
|
15
|
|
|
Property
|
49
|
|
|
Intangible Assets
|
431
|
|
|
Other Assets
|
11
|
|
|
Total Identifiable Assets Acquired
|
864
|
|
|
Payable to ARINC option holders
(1)
|
(61
|
)
|
|
Current Liabilities
|
(171
|
)
|
|
Liability related to building held for sale
(2)
|
(81
|
)
|
|
Liabilities associated with business held for sale
(3)
|
(12
|
)
|
|
Long-term deferred income taxes
|
(182
|
)
|
|
Retirement Benefits and Other Long-term Liabilities
|
(39
|
)
|
|
Total Liabilities Assumed
|
(546
|
)
|
|
Net Identifiable Assets Acquired, excluding Goodwill
|
318
|
|
|
Goodwill
|
1,087
|
|
|
Net Assets Acquired
|
$
|
1,405
|
|
(in millions, except per share amounts)
|
|
2016 (as Reported)
|
|
2015 (as Reported)
|
|
2014 (Pro-forma)
|
||||||
Sales
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
5,085
|
|
Net income attributable to common shareowners from continuing operations
|
|
$
|
727
|
|
|
$
|
694
|
|
|
$
|
624
|
|
Basic earnings per share from continuing operations
|
|
$
|
5.57
|
|
|
$
|
5.25
|
|
|
$
|
4.62
|
|
Diluted earnings per share from continuing operations
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
|
$
|
4.56
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Increases / (decreases) to pro-forma net income:
|
|
|
|
|
|
|
||||||
Net reduction to depreciation resulting from fixed asset purchase accounting
adjustments
(1)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
2
|
|
Advisory, legal and accounting service fees
(2)
|
|
—
|
|
|
—
|
|
|
21
|
|
|||
Amortization of acquired ARINC intangible assets, net
(3)
|
|
—
|
|
|
—
|
|
|
(4
|
)
|
(in millions)
|
Commercial
Systems
|
|
Government
Systems
|
|
Information Management Services
|
|
Total
|
||||||||
Balance at September 30, 2014
|
$
|
262
|
|
|
$
|
508
|
|
|
$
|
1,093
|
|
|
$
|
1,863
|
|
ICG acquisition
|
38
|
|
|
—
|
|
|
—
|
|
|
38
|
|
||||
Pacific Avionics acquisition
|
15
|
|
|
—
|
|
|
—
|
|
|
15
|
|
||||
ARINC acquisition adjustment
|
—
|
|
|
—
|
|
|
(3
|
)
|
|
(3
|
)
|
||||
Foreign currency translation adjustments and other
|
(1
|
)
|
|
(8
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Balance at September 30, 2015
|
314
|
|
|
500
|
|
|
1,090
|
|
|
1,904
|
|
||||
ICG acquisition adjustment
|
13
|
|
|
—
|
|
|
—
|
|
|
13
|
|
||||
Matrix product line acquisition
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||
Foreign currency translation adjustments
|
(1
|
)
|
|
(3
|
)
|
|
—
|
|
|
(4
|
)
|
||||
Balance at September 30, 2016
|
$
|
326
|
|
|
$
|
503
|
|
|
$
|
1,090
|
|
|
$
|
1,919
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||
(in millions)
|
Gross
|
|
Accum
Amort
|
|
Net
|
|
Gross
|
|
Accum
Amort
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology and patents
|
$
|
354
|
|
|
$
|
(216
|
)
|
|
$
|
138
|
|
|
$
|
346
|
|
|
$
|
(195
|
)
|
|
$
|
151
|
|
Backlog
|
6
|
|
|
(3
|
)
|
|
3
|
|
|
5
|
|
|
(2
|
)
|
|
3
|
|
||||||
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired
|
340
|
|
|
(106
|
)
|
|
234
|
|
|
338
|
|
|
(87
|
)
|
|
251
|
|
||||||
Up-front sales incentives
|
313
|
|
|
(80
|
)
|
|
233
|
|
|
301
|
|
|
(62
|
)
|
|
239
|
|
||||||
License agreements
|
14
|
|
|
(10
|
)
|
|
4
|
|
|
13
|
|
|
(9
|
)
|
|
4
|
|
||||||
Trademarks and tradenames
|
15
|
|
|
(14
|
)
|
|
1
|
|
|
15
|
|
|
(14
|
)
|
|
1
|
|
||||||
Intangible assets with indefinite lives:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Trademarks and tradenames
|
47
|
|
|
—
|
|
|
47
|
|
|
47
|
|
|
—
|
|
|
47
|
|
||||||
In process research and development
|
7
|
|
|
—
|
|
|
7
|
|
|
7
|
|
|
—
|
|
|
7
|
|
||||||
Intangible assets
|
$
|
1,096
|
|
|
$
|
(429
|
)
|
|
$
|
667
|
|
|
$
|
1,072
|
|
|
$
|
(369
|
)
|
|
$
|
703
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for up-front sales incentives
|
$
|
16
|
|
|
$
|
19
|
|
|
$
|
24
|
|
|
$
|
26
|
|
|
$
|
26
|
|
|
$
|
122
|
|
Anticipated amortization expense for all other intangible assets
|
40
|
|
|
38
|
|
|
37
|
|
|
33
|
|
|
32
|
|
|
200
|
|
||||||
Total
|
$
|
56
|
|
|
$
|
57
|
|
|
$
|
61
|
|
|
$
|
59
|
|
|
$
|
58
|
|
|
$
|
322
|
|
4.
|
Discontinued Operations and Divestitures
|
|
|
Year Ended September 30
|
||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Sales
|
|
$
|
—
|
|
|
$
|
18
|
|
|
$
|
94
|
|
Income (loss) from discontinued operations before income taxes
|
|
2
|
|
|
(13
|
)
|
|
(29
|
)
|
|||
Income tax benefit (expense) from discontinued operations
|
|
(1
|
)
|
|
5
|
|
|
15
|
|
5.
|
Receivables, Net
|
(in millions)
|
September 30,
2016 |
|
September 30, 2015
|
||||
Billed
|
$
|
748
|
|
|
$
|
752
|
|
Unbilled
|
439
|
|
|
403
|
|
||
Less progress payments
|
(87
|
)
|
|
(110
|
)
|
||
Total
|
1,100
|
|
|
1,045
|
|
||
Less allowance for doubtful accounts
|
(6
|
)
|
|
(7
|
)
|
||
Receivables, net
|
$
|
1,094
|
|
|
$
|
1,038
|
|
6.
|
Inventories, Net
|
(in millions)
|
September 30,
2016 |
|
September 30, 2015
|
||||
Finished goods
|
$
|
210
|
|
|
$
|
216
|
|
Work in process
|
236
|
|
|
250
|
|
||
Raw materials, parts and supplies
|
354
|
|
|
353
|
|
||
Less progress payments
|
(1
|
)
|
|
(7
|
)
|
||
Total
|
799
|
|
|
812
|
|
||
Pre-production engineering costs
|
1,140
|
|
|
1,012
|
|
||
Inventories, net
|
$
|
1,939
|
|
|
$
|
1,824
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
(1)
|
$
|
60
|
|
|
$
|
102
|
|
|
$
|
137
|
|
|
$
|
154
|
|
|
$
|
139
|
|
|
$
|
521
|
|
7.
|
Property
|
(in millions)
|
September 30,
2016 |
|
September 30, 2015
|
||||
Land
|
$
|
15
|
|
|
$
|
15
|
|
Buildings and improvements
|
468
|
|
|
429
|
|
||
Machinery and equipment
|
1,218
|
|
|
1,164
|
|
||
Information systems software and hardware
|
435
|
|
|
406
|
|
||
Furniture and fixtures
|
74
|
|
|
66
|
|
||
Capital leases
|
58
|
|
|
58
|
|
||
Construction in progress
|
183
|
|
|
180
|
|
||
Total
|
2,451
|
|
|
2,318
|
|
||
Less accumulated depreciation
|
(1,416
|
)
|
|
(1,354
|
)
|
||
Property
|
$
|
1,035
|
|
|
$
|
964
|
|
8.
|
Other Assets
|
(in millions)
|
September 30,
2016 |
|
September 30, 2015
|
||||
Long-term receivables
|
$
|
146
|
|
|
$
|
109
|
|
Investments in equity affiliates
|
10
|
|
|
13
|
|
||
Exchange and rental assets (net of accumulated depreciation of $101 at September 30, 2016 and $97 at September 30, 2015)
|
68
|
|
|
66
|
|
||
Other
|
153
|
|
|
156
|
|
||
Other assets
|
$
|
377
|
|
|
$
|
344
|
|
•
|
ACCEL (Tianjin) Flight Simulation Co., Ltd (ACCEL): ACCEL is a joint venture with Haite Group, for the joint development and production of commercial flight simulators in China
|
•
|
ADARI Aviation Technology Limited (ADARI): ADARI is a joint venture with Aviation Data Communication Corporation Co., LTD, that operates remote ground stations around China and develops certain content delivery management software
|
•
|
AVIC Leihua Rockwell Collins Avionics Company (ALRAC): ALRAC is a joint venture with China Leihua Electronic Technology Research Institute (a subsidiary of the Aviation Industry Corporation of China, or AVIC), for the joint production of integrated surveillance system products for the C919 aircraft in China
|
•
|
Data Link Solutions LLC (DLS): DLS is a joint venture with BAE Systems, plc for the joint pursuit of the worldwide military data link market
|
•
|
ESA Vision Systems LLC (ESA): ESA is a joint venture with Elbit Systems, Ltd. for the joint pursuit of helmet-mounted cueing systems for the worldwide military fixed wing aircraft market
|
•
|
Integrated Guidance Systems LLC (IGS): IGS is a joint venture with Honeywell International Inc. for the joint pursuit of integrated precision guidance solutions for worldwide guided weapons systems
|
•
|
Quest Flight Training Limited (Quest): Quest is a joint venture with Quadrant Group plc that provides aircrew training services primarily for the United Kingdom Ministry of Defence
|
•
|
Rockwell Collins CETC Avionics Co., Ltd (RCCAC): RCCAC is a joint venture with CETC Avionics Co., Ltd (CETCA) for the development and delivery of products related to the C919 program
|
9.
|
Debt
|
(in millions, except weighted average amounts)
|
September 30,
2016 |
|
September 30,
2015 |
||||
Short-term commercial paper borrowings outstanding
(1)
|
$
|
440
|
|
|
$
|
448
|
|
Current portion of long-term debt
|
300
|
|
|
—
|
|
||
Short-term debt
|
$
|
740
|
|
|
$
|
448
|
|
Weighted average interest rate of commercial paper borrowings
|
0.79
|
%
|
|
0.52
|
%
|
||
Weighted average maturity period of commercial paper borrowings (days)
|
15
|
|
|
25
|
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
September 30,
2016 |
|
September 30, 2015
|
||||
Fixed-rate notes due:
|
|
|
|
|
|
||||
December 2043
|
4.80%
|
|
$
|
398
|
|
|
$
|
398
|
|
December 2023
|
3.70%
|
|
399
|
|
|
399
|
|
||
November 2021
|
3.10%
|
|
250
|
|
|
250
|
|
||
July 2019
|
5.25%
|
|
300
|
|
|
299
|
|
||
Variable-rate note due:
|
|
|
|
|
|
||||
December 2016
|
3 month LIBOR + 0.35%
(1)
|
|
300
|
|
|
300
|
|
||
Fair value swap adjustment (Notes 14 and 15)
|
|
|
35
|
|
|
34
|
|
||
Total
|
|
|
$
|
1,682
|
|
|
$
|
1,680
|
|
Less current portion of long-term debt
|
|
|
300
|
|
|
—
|
|
||
Long-term Debt, Net
|
|
|
$
|
1,382
|
|
|
$
|
1,680
|
|
10.
|
Retirement Benefits
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||||||||||
(in millions)
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||
Service cost
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
10
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
126
|
|
|
155
|
|
|
168
|
|
|
6
|
|
|
7
|
|
|
9
|
|
||||||
Expected return on plan assets
|
(238
|
)
|
|
(242
|
)
|
|
(228
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Prior service credit
|
(1
|
)
|
|
(3
|
)
|
|
(12
|
)
|
|
(1
|
)
|
|
(5
|
)
|
|
(9
|
)
|
||||||
Net actuarial loss
|
78
|
|
|
72
|
|
|
72
|
|
|
8
|
|
|
7
|
|
|
8
|
|
||||||
Net benefit expense (income)
|
$
|
(24
|
)
|
|
$
|
(6
|
)
|
|
$
|
10
|
|
|
$
|
14
|
|
|
$
|
11
|
|
|
$
|
10
|
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||||
PBO at beginning of period
|
|
$
|
4,167
|
|
|
$
|
4,086
|
|
|
$
|
221
|
|
|
$
|
213
|
|
Service cost
|
|
11
|
|
|
12
|
|
|
3
|
|
|
3
|
|
||||
Interest cost
|
|
126
|
|
|
155
|
|
|
6
|
|
|
7
|
|
||||
Discount rate and other assumption changes
|
|
436
|
|
|
315
|
|
|
17
|
|
|
6
|
|
||||
Actuarial losses (gains)
|
|
29
|
|
|
(52
|
)
|
|
(1
|
)
|
|
7
|
|
||||
Plan participant contributions
|
|
—
|
|
|
—
|
|
|
5
|
|
|
3
|
|
||||
Benefits paid
|
|
(229
|
)
|
|
(330
|
)
|
|
(18
|
)
|
|
(18
|
)
|
||||
Plan amendments
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
Other
|
|
(13
|
)
|
|
(19
|
)
|
|
—
|
|
|
—
|
|
||||
PBO at end of period
|
|
4,527
|
|
|
4,167
|
|
|
231
|
|
|
221
|
|
||||
Plan assets at beginning of period
|
|
2,902
|
|
|
3,185
|
|
|
19
|
|
|
18
|
|
||||
Actual return on plan assets
|
|
346
|
|
|
(16
|
)
|
|
1
|
|
|
—
|
|
||||
Company contributions
|
|
69
|
|
|
69
|
|
|
12
|
|
|
16
|
|
||||
Plan participant contributions
|
|
—
|
|
|
—
|
|
|
5
|
|
|
3
|
|
||||
Benefits paid
|
|
(229
|
)
|
|
(330
|
)
|
|
(18
|
)
|
|
(18
|
)
|
||||
Other
|
|
(14
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
||||
Plan assets at end of period
|
|
3,074
|
|
|
2,902
|
|
|
19
|
|
|
19
|
|
||||
Funded status of plans
|
|
$
|
(1,453
|
)
|
|
$
|
(1,265
|
)
|
|
$
|
(212
|
)
|
|
$
|
(202
|
)
|
Funded status consists of:
|
|
|
|
|
|
|
|
|
||||||||
Retirement benefits liability
|
|
$
|
(1,448
|
)
|
|
$
|
(1,264
|
)
|
|
$
|
(212
|
)
|
|
$
|
(202
|
)
|
Compensation and benefits liability
|
|
(10
|
)
|
|
(11
|
)
|
|
—
|
|
|
—
|
|
||||
Other assets
|
|
5
|
|
|
10
|
|
|
—
|
|
|
—
|
|
||||
Net liability
|
|
$
|
(1,453
|
)
|
|
$
|
(1,265
|
)
|
|
$
|
(212
|
)
|
|
$
|
(202
|
)
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||
(in millions)
|
|
Prior Service
Cost (Credit)
|
|
Net Actuarial
Loss
|
|
Prior Service
Cost (Credit)
|
|
Net Actuarial
Loss
|
||||||||
Balance at September 30, 2014
|
|
$
|
6
|
|
|
$
|
2,035
|
|
|
$
|
(9
|
)
|
|
$
|
99
|
|
Current year net actuarial loss
|
|
—
|
|
|
515
|
|
|
—
|
|
|
14
|
|
||||
Amortization of prior service cost
|
|
3
|
|
|
—
|
|
|
5
|
|
|
—
|
|
||||
Amortization of actuarial loss
|
|
—
|
|
|
(72
|
)
|
|
—
|
|
|
(7
|
)
|
||||
Balance at September 30, 2015
|
|
9
|
|
|
2,478
|
|
|
(4
|
)
|
|
106
|
|
||||
Current year prior service cost
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
|
—
|
|
||||
Current year net actuarial loss
|
|
—
|
|
|
351
|
|
|
—
|
|
|
18
|
|
||||
Amortization of prior service cost
|
|
1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Amortization of actuarial loss
|
|
—
|
|
|
(78
|
)
|
|
—
|
|
|
(8
|
)
|
||||
Balance at September 30, 2016
|
|
$
|
10
|
|
|
$
|
2,751
|
|
|
$
|
(5
|
)
|
|
$
|
116
|
|
(in millions)
|
|
Pension
Benefits
|
|
Other
Retirement
Benefits
|
|
Total
|
||||||
Prior service cost
|
|
$
|
—
|
|
|
$
|
(1
|
)
|
|
$
|
(1
|
)
|
Net actuarial loss
|
|
92
|
|
|
8
|
|
|
100
|
|
|||
Total
|
|
$
|
92
|
|
|
$
|
7
|
|
|
$
|
99
|
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||||
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||
Discount rate
|
|
3.22
|
%
|
|
3.96
|
%
|
|
1.72
|
%
|
|
2.94
|
%
|
|
3.02
|
%
|
|
3.73
|
%
|
Compensation increase rate
|
|
4.00
|
%
|
|
4.00
|
%
|
|
3.03
|
%
|
|
3.04
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||||
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
||||||||||||
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
|
2016
|
|
2015
|
||||||
Discount rate
|
|
3.96
|
%
|
|
3.96
|
%
|
|
2.94
|
%
|
|
3.15
|
%
|
|
3.73
|
%
|
|
3.70
|
%
|
Expected long-term return on plan assets
|
|
8.23
|
%
|
|
8.23
|
%
|
|
6.73
|
%
|
|
6.70
|
%
|
|
8.25
|
%
|
|
8.25
|
%
|
Compensation increase rate
|
|
4.00
|
%
|
|
4.00
|
%
|
|
3.04
|
%
|
|
3.48
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
Health care cost gross trend rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.00
|
%
|
|
7.48
|
%
|
Ultimate trend rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.00
|
%
|
|
4.98
|
%
|
Year that trend reaches ultimate rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2019
|
|
|
2019
|
|
|
|
Target Mix
|
|
2016
|
|
2015
|
||||
Equities
|
|
40%
|
-
|
70%
|
|
53
|
%
|
|
54
|
%
|
Fixed income
|
|
25%
|
-
|
60%
|
|
45
|
%
|
|
44
|
%
|
Alternative investments
|
|
0%
|
-
|
15%
|
|
0
|
%
|
|
0
|
%
|
Cash
|
|
0%
|
-
|
5%
|
|
2
|
%
|
|
2
|
%
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||||||||||
Asset category (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. equity
|
|
$
|
560
|
|
|
$
|
347
|
|
|
$
|
—
|
|
|
$
|
907
|
|
|
$
|
533
|
|
|
$
|
362
|
|
|
$
|
—
|
|
|
$
|
895
|
|
Non-U.S. equity
|
|
683
|
|
|
40
|
|
|
—
|
|
|
723
|
|
|
575
|
|
|
93
|
|
|
—
|
|
|
668
|
|
||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate
|
|
—
|
|
|
1,143
|
|
|
—
|
|
|
1,143
|
|
|
—
|
|
|
1,088
|
|
|
—
|
|
|
1,088
|
|
||||||||
U.S. government
|
|
94
|
|
|
89
|
|
|
—
|
|
|
183
|
|
|
65
|
|
|
83
|
|
|
—
|
|
|
148
|
|
||||||||
Mortgage and asset-backed
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||||
Other
|
|
—
|
|
|
42
|
|
|
3
|
|
|
45
|
|
|
—
|
|
|
40
|
|
|
3
|
|
|
43
|
|
||||||||
Cash and cash equivalents
|
|
—
|
|
|
93
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
55
|
|
|
—
|
|
|
55
|
|
||||||||
Sub-total
|
|
1,337
|
|
|
1,756
|
|
|
3
|
|
|
3,096
|
|
|
1,173
|
|
|
1,723
|
|
|
3
|
|
|
2,899
|
|
||||||||
Net receivables (payables) related to investment transactions
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|
|
|
|
|
|
|
3
|
|
|||||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
$
|
3,074
|
|
|
|
|
|
|
|
|
$
|
2,902
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||||||||||||||||||
Asset category (in millions)
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Total
|
||||||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
U.S. equity
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
7
|
|
Non-U.S. equity
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||
Corporate
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
2
|
|
||||||||
U.S. government
|
|
2
|
|
|
1
|
|
|
—
|
|
|
3
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
3
|
|
||||||||
Mortgage and asset-backed
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||||||
Cash and cash equivalents
|
|
—
|
|
|
5
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
6
|
|
|
—
|
|
|
6
|
|
||||||||
Total
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
19
|
|
|
$
|
9
|
|
|
$
|
10
|
|
|
$
|
—
|
|
|
$
|
19
|
|
(in millions)
|
|
2016
|
|
2015
|
||||
Contributions to U.S. qualified plan
|
|
$
|
55
|
|
|
$
|
55
|
|
Contributions to U.S. non-qualified plan
|
|
9
|
|
|
9
|
|
||
Contributions to non-U.S. plans
|
|
5
|
|
|
5
|
|
||
Total
|
|
$
|
69
|
|
|
$
|
69
|
|
(in millions)
|
|
Pension
Benefits
|
|
Other
Retirement
Benefits
|
||||
2017
|
|
$
|
241
|
|
|
$
|
16
|
|
2018
|
|
235
|
|
|
16
|
|
||
2019
|
|
240
|
|
|
17
|
|
||
2020
|
|
244
|
|
|
17
|
|
||
2021
|
|
246
|
|
|
16
|
|
||
2022-2026
|
|
1,249
|
|
|
76
|
|
|
|
2016
|
|
2015
|
|
2014
|
|||||||||||||||
(in millions)
|
|
Shares
|
|
Expense
|
|
Shares
|
|
Expense
|
|
Shares
|
|
Expense
|
|||||||||
Contribution in shares
|
|
0.6
|
|
|
$
|
49
|
|
|
0.4
|
|
|
$
|
39
|
|
|
0.5
|
|
|
$
|
40
|
|
Contribution in cash
|
|
|
|
|
46
|
|
|
|
|
|
47
|
|
|
|
|
|
50
|
|
|||
Total
|
|
|
|
|
$
|
95
|
|
|
|
|
|
$
|
86
|
|
|
|
|
|
$
|
90
|
|
11.
|
Shareowners' Equity
|
|
|
Foreign Exchange Translation Adjustment
|
|
Pension and Other Postretirement Adjustments
(1)
|
|
Change in the Fair Value of Effective Cash Flow Hedges
|
|
Total
|
||||||||
Balance at September 30, 2013
|
|
$
|
12
|
|
|
$
|
(1,293
|
)
|
|
$
|
(6
|
)
|
|
$
|
(1,287
|
)
|
Other comprehensive income (loss) before reclassifications
|
|
(27
|
)
|
|
(92
|
)
|
|
3
|
|
|
(116
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
37
|
|
|
—
|
|
|
37
|
|
||||
Net current period other comprehensive income (loss)
|
|
(27
|
)
|
|
(55
|
)
|
|
3
|
|
|
(79
|
)
|
||||
Balance at September 30, 2014
|
|
(15
|
)
|
|
(1,348
|
)
|
|
(3
|
)
|
|
(1,366
|
)
|
||||
Other comprehensive (loss) before reclassifications
|
|
(41
|
)
|
|
(334
|
)
|
|
(7
|
)
|
|
(382
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
45
|
|
|
4
|
|
|
49
|
|
||||
Net current period other comprehensive (loss)
|
|
(41
|
)
|
|
(289
|
)
|
|
(3
|
)
|
|
(333
|
)
|
||||
Balance at September 30, 2015
|
|
(56
|
)
|
|
(1,637
|
)
|
|
(6
|
)
|
|
(1,699
|
)
|
||||
Other comprehensive (loss) before reclassifications
|
|
(20
|
)
|
|
(234
|
)
|
|
(2
|
)
|
|
(256
|
)
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
53
|
|
|
4
|
|
|
57
|
|
||||
Net current period other comprehensive income (loss)
|
|
(20
|
)
|
|
(181
|
)
|
|
2
|
|
|
(199
|
)
|
||||
Balance at September 30, 2016
|
|
$
|
(76
|
)
|
|
$
|
(1,818
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1,898
|
)
|
12.
|
Stock-Based Compensation and Earnings Per Share
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Stock-based compensation expense included in:
|
|
|
|
|
|
|
||||||
Product cost of sales
|
|
$
|
8
|
|
|
$
|
7
|
|
|
$
|
7
|
|
Selling, general and administrative expenses
|
|
19
|
|
|
17
|
|
|
17
|
|
|||
Total
|
|
$
|
27
|
|
|
$
|
24
|
|
|
$
|
24
|
|
Income tax benefit
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
8
|
|
|
|
Shares (in thousands)
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Life
(in years)
|
|
Aggregate
Intrinsic
Value
(in millions)
|
|||||
Outstanding at September 30, 2015
|
|
3,699
|
|
|
$
|
61.02
|
|
|
|
|
|
|
|
Granted
|
|
642
|
|
|
86.77
|
|
|
|
|
|
|
||
Exercised
|
|
(387
|
)
|
|
56.31
|
|
|
|
|
|
|
||
Forfeited or expired
|
|
(40
|
)
|
|
83.85
|
|
|
|
|
|
|
||
Outstanding at September 30, 2016
|
|
3,914
|
|
|
$
|
65.48
|
|
|
5.5
|
|
$
|
75
|
|
Vested or expected to vest
(1)
|
|
3,905
|
|
|
$
|
65.43
|
|
|
5.5
|
|
$
|
75
|
|
Exercisable at September 30, 2016
|
|
2,759
|
|
|
$
|
57.93
|
|
|
4.2
|
|
$
|
73
|
|
|
|
2016
|
|
2015
|
|
2014
|
||||||
Weighted-average fair value per share of options granted
|
|
$
|
17.75
|
|
|
$
|
19.59
|
|
|
$
|
18.60
|
|
Intrinsic value of options exercised (in millions)
(2)
|
|
$
|
13
|
|
|
$
|
48
|
|
|
$
|
26
|
|
|
2016 Grants
|
|
2015 Grants
|
|
2014 Grants
|
|||
Risk-free interest rate
|
0.7% - 2.5%
|
|
|
0.5% - 2.6%
|
|
|
0.3% - 3.0%
|
|
Expected dividend yield
|
1.4% - 1.6%
|
|
|
1.6
|
%
|
|
1.9
|
%
|
Expected volatility
|
20.0
|
%
|
|
24.0
|
%
|
|
28.0
|
%
|
Expected life
|
7 years
|
|
|
7 years
|
|
|
7 years
|
|
|
|
Performance
Shares
|
|
Restricted
Stock
|
|
Restricted
Stock Units
|
|||||||||||||||
(shares in thousands)
|
|
Shares
|
|
Weighted
Average
Grant Date Fair Value
|
|
Shares
|
|
Weighted
Average
Grant Date Fair Value
|
|
Shares
|
|
Weighted
Average
Grant Date Fair Value
|
|||||||||
Nonvested at September 30, 2015
|
|
438
|
|
|
$
|
68.92
|
|
|
23
|
|
|
$
|
30.24
|
|
|
340
|
|
|
$
|
64.34
|
|
Granted
|
|
131
|
|
|
85.13
|
|
|
—
|
|
|
—
|
|
|
72
|
|
|
85.85
|
|
|||
Vested
|
|
(168
|
)
|
|
56.10
|
|
|
—
|
|
|
—
|
|
|
(54
|
)
|
|
54.37
|
|
|||
Forfeited
|
|
(15
|
)
|
|
79.47
|
|
|
—
|
|
|
—
|
|
|
(7
|
)
|
|
78.68
|
|
|||
Nonvested at September 30, 2016
|
|
386
|
|
|
$
|
79.60
|
|
|
23
|
|
|
$
|
30.24
|
|
|
351
|
|
|
$
|
69.86
|
|
(in millions)
|
|
Performance Shares
|
|
Restricted Stock
|
|
Restricted Stock Units
|
||||||
Total unrecognized compensation costs at September 30, 2016
|
|
$
|
12
|
|
|
$
|
—
|
|
|
$
|
5
|
|
Weighted-average life remaining at September 30, 2016, in years
|
|
0.9
|
|
|
0
|
|
|
0.9
|
|
|||
Weighted-average fair value per share granted in 2015
|
|
$
|
82.76
|
|
|
$
|
—
|
|
|
$
|
84.63
|
|
Weighted-average fair value per share granted in 2014
|
|
$
|
71.63
|
|
|
$
|
—
|
|
|
$
|
72.42
|
|
(in millions, except per share amounts)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
||||||
Income from continuing operations
|
|
$
|
727
|
|
|
$
|
694
|
|
|
$
|
618
|
|
Income (loss) from discontinued operations, net of taxes
|
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|||
Net income
|
|
$
|
728
|
|
|
$
|
686
|
|
|
$
|
604
|
|
Denominator:
|
|
|
|
|
|
|
|
|
||||
Denominator for basic earnings per share – weighted average common shares
|
|
130.5
|
|
|
132.3
|
|
|
135.1
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
|
||||||
Stock options
|
|
1.0
|
|
|
1.0
|
|
|
1.2
|
|
|||
Performance shares, restricted stock and restricted stock units
|
|
0.6
|
|
|
0.4
|
|
|
0.4
|
|
|||
Dilutive potential common shares
|
|
1.6
|
|
|
1.4
|
|
|
1.6
|
|
|||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
|
132.1
|
|
|
133.7
|
|
|
136.7
|
|
|||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
5.57
|
|
|
$
|
5.25
|
|
|
$
|
4.57
|
|
Discontinued operations
|
|
0.01
|
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|||
Basic earnings per share
|
|
$
|
5.58
|
|
|
$
|
5.19
|
|
|
$
|
4.47
|
|
Diluted
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
|
$
|
4.52
|
|
Discontinued operations
|
|
0.01
|
|
|
(0.06
|
)
|
|
(0.10
|
)
|
|||
Diluted earnings per share
|
|
$
|
5.51
|
|
|
$
|
5.13
|
|
|
$
|
4.42
|
|
13.
|
Income Taxes
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
U.S. income
|
|
$
|
824
|
|
|
$
|
835
|
|
|
$
|
754
|
|
Non-U.S. income
|
|
111
|
|
|
127
|
|
|
128
|
|
|||
Total
|
|
$
|
935
|
|
|
$
|
962
|
|
|
$
|
882
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Current:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
$
|
120
|
|
|
$
|
169
|
|
|
$
|
110
|
|
Non-U.S.
|
|
29
|
|
|
38
|
|
|
37
|
|
|||
U.S. state and local
|
|
11
|
|
|
11
|
|
|
4
|
|
|||
Total current
|
|
160
|
|
|
218
|
|
|
151
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
47
|
|
|
49
|
|
|
105
|
|
|||
Non-U.S.
|
|
—
|
|
|
(4
|
)
|
|
(2
|
)
|
|||
U.S. state and local
|
|
1
|
|
|
5
|
|
|
10
|
|
|||
Total deferred
|
|
48
|
|
|
50
|
|
|
113
|
|
|||
Income tax expense
|
|
$
|
208
|
|
|
$
|
268
|
|
|
$
|
264
|
|
|
|
2016
|
|
2015
|
|
2014
|
|||
Statutory tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Foreign rate differential
|
|
(0.7
|
)
|
|
(1.0
|
)
|
|
(1.1
|
)
|
State and local income taxes
|
|
1.1
|
|
|
1.2
|
|
|
1.3
|
|
Research and development credit
|
|
(6.4
|
)
|
|
(3.2
|
)
|
|
(1.1
|
)
|
Domestic manufacturing deduction
|
|
(2.0
|
)
|
|
(2.0
|
)
|
|
(1.7
|
)
|
Tax settlements
|
|
—
|
|
|
(1.6
|
)
|
|
(0.9
|
)
|
Change in valuation allowance
|
|
(4.5
|
)
|
|
—
|
|
|
—
|
|
Other
|
|
(0.3
|
)
|
|
(0.5
|
)
|
|
(1.6
|
)
|
Effective income tax rate
|
|
22.2
|
%
|
|
27.9
|
%
|
|
29.9
|
%
|
|
|
September 30
|
||||||
(in millions)
|
|
2016
|
|
2015
|
||||
Deferred income taxes
|
|
$
|
219
|
|
|
$
|
165
|
|
Other liabilities
|
|
(1
|
)
|
|
(3
|
)
|
||
Deferred income taxes, net
|
|
$
|
218
|
|
|
$
|
162
|
|
|
|
September 30, 2015
|
||||||
(in millions)
|
|
Revised
|
|
As Reported
|
||||
Current deferred income tax asset
|
|
$
|
—
|
|
|
$
|
9
|
|
Current deferred income tax liability
|
|
—
|
|
|
(84
|
)
|
||
Current deferred income taxes, net
|
|
$
|
—
|
|
|
$
|
(75
|
)
|
Long-term deferred income taxes
|
|
$
|
165
|
|
|
$
|
241
|
|
Other liabilities
|
|
(3
|
)
|
|
(4
|
)
|
||
Long-term deferred income taxes, net
|
|
$
|
162
|
|
|
$
|
237
|
|
|
|
September 30
|
||||||
(in millions)
|
|
2016
|
|
2015
|
||||
Inventory
|
|
$
|
(282
|
)
|
|
$
|
(226
|
)
|
Product warranty costs
|
|
29
|
|
|
29
|
|
||
Customer incentives
|
|
68
|
|
|
62
|
|
||
Contract reserves
|
|
6
|
|
|
11
|
|
||
Retirement benefits
|
|
549
|
|
|
487
|
|
||
Intangibles
|
|
(171
|
)
|
|
(177
|
)
|
||
Capital lease liability
|
|
20
|
|
|
21
|
|
||
Property
|
|
(179
|
)
|
|
(154
|
)
|
||
Stock-based compensation
|
|
33
|
|
|
30
|
|
||
Deferred compensation
|
|
16
|
|
|
15
|
|
||
Capital loss carryover
|
|
41
|
|
|
42
|
|
||
Compensation and benefits
|
|
28
|
|
|
29
|
|
||
Valuation allowance
|
|
—
|
|
|
(42
|
)
|
||
Other
|
|
60
|
|
|
35
|
|
||
Deferred income taxes, net
|
|
$
|
218
|
|
|
$
|
162
|
|
|
September 30
|
||||||||||
(in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Balance at beginning of year
|
$
|
42
|
|
|
$
|
43
|
|
|
$
|
11
|
|
Charged to costs and expenses
(1)
|
—
|
|
|
—
|
|
|
43
|
|
|||
Deductions
(2) (3)
|
(42
|
)
|
|
(1
|
)
|
|
(11
|
)
|
|||
Balance at September 30
|
$
|
—
|
|
|
$
|
42
|
|
|
$
|
43
|
|
|
|
September 30
|
||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Beginning balance
|
|
$
|
39
|
|
|
$
|
48
|
|
|
$
|
56
|
|
Additions for tax positions related to the current year
|
|
11
|
|
|
8
|
|
|
13
|
|
|||
Additions for tax positions of prior years
|
|
7
|
|
|
6
|
|
|
1
|
|
|||
Additions for tax positions related to acquisitions
|
|
—
|
|
|
—
|
|
|
8
|
|
|||
Reductions for tax positions of prior years
|
|
(10
|
)
|
|
(17
|
)
|
|
(17
|
)
|
|||
Reductions for tax positions of prior years related to lapse of statute of limitations
|
|
—
|
|
|
(1
|
)
|
|
(2
|
)
|
|||
Reductions for tax positions related to settlements with taxing authorities
|
|
(2
|
)
|
|
(5
|
)
|
|
(11
|
)
|
|||
Ending balance
|
|
$
|
45
|
|
|
$
|
39
|
|
|
$
|
48
|
|
14.
|
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
|
|
|
|
September 30, 2016
|
|
September 30, 2015
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
55
|
|
|
$
|
50
|
|
Interest rate swap assets
|
Level 2
|
|
35
|
|
|
34
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
11
|
|
|
7
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(13
|
)
|
|
(11
|
)
|
||
Contingent consideration for ICG acquisition
|
Level 3
|
|
(13
|
)
|
|
(12
|
)
|
|
Asset (Liability)
|
||||||||||||||
|
September 30, 2016
|
|
September 30, 2015
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
340
|
|
|
$
|
340
|
|
|
$
|
252
|
|
|
$
|
252
|
|
Short-term debt
|
(740
|
)
|
|
(740
|
)
|
|
(448
|
)
|
|
(448
|
)
|
||||
Long-term debt
|
(1,347
|
)
|
|
(1,508
|
)
|
|
(1,646
|
)
|
|
(1,750
|
)
|
15.
|
Derivative Financial Instruments
|
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
September 30,
2016 |
|
September 30, 2015
|
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
11
|
|
|
$
|
7
|
|
Interest rate swaps
|
Other assets
|
|
35
|
|
|
34
|
|
||
Total
|
|
|
$
|
46
|
|
|
$
|
41
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
September 30,
2016 |
|
September 30, 2015
|
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
13
|
|
|
$
|
11
|
|
|
|
|
Amount of Gain (Loss)
|
||||||
(in millions)
|
Location of Gain (Loss)
|
|
September 30,
2016 |
|
September 30, 2015
|
||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
||||
Fair Value Hedges
|
|
|
|
|
|
||||
Interest rate swaps
|
Interest expense
|
|
$
|
10
|
|
|
$
|
11
|
|
Cash Flow Hedges
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
||||
Amount of (loss) recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
(3
|
)
|
|
(10
|
)
|
||
Amount of (loss) reclassified from AOCL into income
|
Cost of sales
|
|
(6
|
)
|
|
(6
|
)
|
||
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
(1
|
)
|
|
(8
|
)
|
16.
|
Guarantees and Indemnifications
|
|
September 30
|
||||||||||
(in millions)
|
2016
|
|
2015
|
|
2014
|
||||||
Balance at beginning of year
|
$
|
89
|
|
|
$
|
104
|
|
|
$
|
121
|
|
Warranty costs incurred
|
(42
|
)
|
|
(46
|
)
|
|
(47
|
)
|
|||
Product warranty accrual
|
46
|
|
|
42
|
|
|
46
|
|
|||
Changes in estimates for prior years
|
(6
|
)
|
|
(10
|
)
|
|
(15
|
)
|
|||
Increase from acquisitions
|
—
|
|
|
1
|
|
|
—
|
|
|||
Foreign currency translation adjustments and other
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|||
Balance at September 30
|
$
|
87
|
|
|
$
|
89
|
|
|
$
|
104
|
|
17.
|
Contractual Obligations and Other Commitments
|
|
|
Payments Due By Period
|
||||||||||||||||||||||||||
(in millions)
|
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
|
Total
|
||||||||||||||
Non-cancelable operating leases
|
|
$
|
63
|
|
|
$
|
52
|
|
|
$
|
39
|
|
|
$
|
28
|
|
|
$
|
21
|
|
|
$
|
113
|
|
|
$
|
316
|
|
Purchase contracts
|
|
34
|
|
|
32
|
|
|
29
|
|
|
27
|
|
|
26
|
|
|
40
|
|
|
188
|
|
|||||||
Long-term debt
|
|
300
|
|
|
—
|
|
|
300
|
|
|
—
|
|
|
—
|
|
|
1,050
|
|
|
1,650
|
|
|||||||
Interest on long-term debt
|
|
58
|
|
|
58
|
|
|
58
|
|
|
42
|
|
|
42
|
|
|
473
|
|
|
731
|
|
|||||||
Total
|
|
$
|
455
|
|
|
$
|
142
|
|
|
$
|
426
|
|
|
$
|
97
|
|
|
$
|
89
|
|
|
$
|
1,676
|
|
|
$
|
2,885
|
|
18.
|
Environmental Matters
|
19.
|
Legal Matters
|
20.
|
Restructuring, Pension Settlement and Asset Impairment Charges, Net
|
(in millions)
|
Cost of Sales
|
|
Selling, General and Administrative Expenses
|
|
Total
|
||||||
Employee separation costs
|
$
|
31
|
|
|
$
|
8
|
|
|
$
|
39
|
|
Asset impairment charges
|
2
|
|
|
4
|
|
|
6
|
|
|||
Restructuring and asset impairment charges
|
$
|
33
|
|
|
$
|
12
|
|
|
$
|
45
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Sales:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
2,395
|
|
|
$
|
2,434
|
|
|
$
|
2,299
|
|
Government Systems
|
|
2,206
|
|
|
2,187
|
|
|
2,209
|
|
|||
Information Management Services
|
|
658
|
|
|
623
|
|
|
471
|
|
|||
Total sales
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
|
|
|
|
|
|
|
||||||
Segment operating earnings:
|
|
|
|
|
|
|
|
|
||||
Commercial Systems
|
|
$
|
531
|
|
|
$
|
554
|
|
|
$
|
509
|
|
Government Systems
|
|
477
|
|
|
457
|
|
|
465
|
|
|||
Information Management Services
|
|
107
|
|
|
95
|
|
|
62
|
|
|||
Total segment operating earnings
|
|
1,115
|
|
|
1,106
|
|
|
1,036
|
|
|||
|
|
|
|
|
|
|
||||||
Interest expense
(1)
|
|
(64
|
)
|
|
(61
|
)
|
|
(59
|
)
|
|||
Stock-based compensation
|
|
(27
|
)
|
|
(24
|
)
|
|
(24
|
)
|
|||
General corporate, net
|
|
(44
|
)
|
|
(59
|
)
|
|
(59
|
)
|
|||
Gain on divestiture of business
|
|
—
|
|
|
—
|
|
|
10
|
|
|||
ARINC transaction costs
(1)
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||
Restructuring, pension settlement and asset impairment charges, net
|
|
(45
|
)
|
|
—
|
|
|
(9
|
)
|
|||
Income from continuing operations before income taxes
|
|
935
|
|
|
962
|
|
|
882
|
|
|||
Income tax expense
|
|
(208
|
)
|
|
(268
|
)
|
|
(264
|
)
|
|||
Income from continuing operations
|
|
$
|
727
|
|
|
$
|
694
|
|
|
$
|
618
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Identifiable assets:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
3,050
|
|
|
$
|
2,906
|
|
|
$
|
2,655
|
|
Government Systems
|
|
2,052
|
|
|
1,953
|
|
|
1,938
|
|
|||
Information Management Services
|
|
1,906
|
|
|
1,886
|
|
|
1,885
|
|
|||
Corporate
|
|
699
|
|
|
559
|
|
|
527
|
|
|||
Total identifiable assets
|
|
$
|
7,707
|
|
|
$
|
7,304
|
|
|
$
|
7,005
|
|
Investments in equity affiliates:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
4
|
|
|
$
|
7
|
|
|
$
|
—
|
|
Government Systems
|
|
6
|
|
|
6
|
|
|
8
|
|
|||
Information Management Services
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total investments in equity affiliates
|
|
$
|
10
|
|
|
$
|
13
|
|
|
$
|
8
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
125
|
|
|
$
|
117
|
|
|
$
|
108
|
|
Government Systems
|
|
74
|
|
|
83
|
|
|
80
|
|
|||
Information Management Services
|
|
54
|
|
|
52
|
|
|
37
|
|
|||
Total depreciation and amortization
|
|
$
|
253
|
|
|
$
|
252
|
|
|
$
|
225
|
|
Capital expenditures for property:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
74
|
|
|
$
|
90
|
|
|
$
|
68
|
|
Government Systems
|
|
69
|
|
|
81
|
|
|
66
|
|
|||
Information Management Services
|
|
50
|
|
|
39
|
|
|
29
|
|
|||
Total capital expenditures for property
|
|
$
|
193
|
|
|
$
|
210
|
|
|
$
|
163
|
|
Earnings (loss) from equity affiliates:
|
|
|
|
|
|
|
||||||
Commercial Systems
|
|
$
|
(3
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
Government Systems
|
|
2
|
|
|
3
|
|
|
7
|
|
|||
Information Management Services
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total earnings (loss) from equity affiliates
|
|
$
|
(1
|
)
|
|
$
|
3
|
|
|
$
|
7
|
|
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
||||||
Commercial Systems product categories:
|
|
|
|
|
|
|
||||||
Air transport aviation electronics
|
|
$
|
1,430
|
|
|
$
|
1,385
|
|
|
$
|
1,285
|
|
Business and regional aviation electronics
|
|
965
|
|
|
1,049
|
|
|
1,014
|
|
|||
Commercial Systems sales
|
|
2,395
|
|
|
2,434
|
|
|
2,299
|
|
|||
|
|
|
|
|
|
|
||||||
Government Systems product categories:
|
|
|
|
|
|
|
|
|||||
Avionics
|
|
1,483
|
|
|
1,436
|
|
|
1,409
|
|
|||
Communication and Navigation
|
|
723
|
|
|
751
|
|
|
800
|
|
|||
Government Systems sales
|
|
2,206
|
|
|
2,187
|
|
|
2,209
|
|
|||
|
|
|
|
|
|
|
||||||
Information Management Services sales
|
|
658
|
|
|
623
|
|
|
471
|
|
|||
|
|
|
|
|
|
|
||||||
Total sales
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
|
|
Sales
|
|
Property
|
||||||||||||||||||||
(in millions)
|
|
2016
|
|
2015
|
|
2014
|
|
2016
|
|
2015
|
|
2014
|
||||||||||||
U.S.
(1)
|
|
$
|
3,292
|
|
|
$
|
3,174
|
|
|
$
|
2,993
|
|
|
$
|
921
|
|
|
$
|
861
|
|
|
$
|
805
|
|
Europe / Africa / Middle East
|
|
937
|
|
|
1,070
|
|
|
1,040
|
|
|
86
|
|
|
83
|
|
|
90
|
|
||||||
Asia-Pacific
|
|
545
|
|
|
503
|
|
|
486
|
|
|
17
|
|
|
15
|
|
|
19
|
|
||||||
Americas, excluding U.S.
|
|
485
|
|
|
497
|
|
|
460
|
|
|
11
|
|
|
5
|
|
|
5
|
|
||||||
Non U.S.
|
|
1,967
|
|
|
2,070
|
|
|
1,986
|
|
|
114
|
|
|
103
|
|
|
114
|
|
||||||
Total
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
|
$
|
1,035
|
|
|
$
|
964
|
|
|
$
|
919
|
|
22.
|
Quarterly Financial Information (Unaudited)
|
|
|
2016 Quarters
|
||||||||||||||||||
(in millions, except per share amounts)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
||||||||||
Sales
|
|
$
|
1,169
|
|
|
$
|
1,311
|
|
|
$
|
1,334
|
|
|
$
|
1,445
|
|
|
$
|
5,259
|
|
Gross profit (total sales less product and service cost of sales)
|
|
333
|
|
|
404
|
|
|
419
|
|
|
461
|
|
|
1,617
|
|
|||||
Income from continuing operations
|
|
133
|
|
|
172
|
|
|
214
|
|
|
208
|
|
|
727
|
|
|||||
Income (loss) from discontinued operations, net of taxes
|
|
2
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
1
|
|
|||||
Net income
|
|
$
|
135
|
|
|
$
|
171
|
|
|
$
|
214
|
|
|
$
|
208
|
|
|
$
|
728
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.01
|
|
|
$
|
1.31
|
|
|
$
|
1.65
|
|
|
$
|
1.60
|
|
|
$
|
5.57
|
|
Discontinued operations
|
|
0.02
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|||||
Basic earnings per share
|
|
$
|
1.03
|
|
|
$
|
1.31
|
|
|
$
|
1.65
|
|
|
$
|
1.60
|
|
|
$
|
5.58
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.00
|
|
|
$
|
1.30
|
|
|
$
|
1.63
|
|
|
$
|
1.58
|
|
|
$
|
5.50
|
|
Discontinued operations
|
|
0.02
|
|
|
(0.01
|
)
|
|
—
|
|
|
—
|
|
|
0.01
|
|
|||||
Diluted earnings per share
|
|
$
|
1.02
|
|
|
$
|
1.29
|
|
|
$
|
1.63
|
|
|
$
|
1.58
|
|
|
$
|
5.51
|
|
|
|
2015 Quarters
|
||||||||||||||||||
(in millions, except per share amounts)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
||||||||||
Sales
|
|
$
|
1,226
|
|
|
$
|
1,341
|
|
|
$
|
1,293
|
|
|
$
|
1,384
|
|
|
$
|
5,244
|
|
Gross profit (total sales less product and service cost of sales)
|
|
369
|
|
|
404
|
|
|
405
|
|
|
436
|
|
|
1,614
|
|
|||||
Income from continuing operations
|
|
169
|
|
|
163
|
|
|
178
|
|
|
184
|
|
|
694
|
|
|||||
Income (loss) from discontinued operations, net of taxes
|
|
(2
|
)
|
|
(6
|
)
|
|
—
|
|
|
—
|
|
|
(8
|
)
|
|||||
Net income
|
|
$
|
167
|
|
|
$
|
157
|
|
|
$
|
178
|
|
|
$
|
184
|
|
|
$
|
686
|
|
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.28
|
|
|
$
|
1.23
|
|
|
$
|
1.35
|
|
|
$
|
1.40
|
|
|
$
|
5.25
|
|
Discontinued operations
|
|
(0.02
|
)
|
|
(0.04
|
)
|
|
—
|
|
|
—
|
|
|
(0.06
|
)
|
|||||
Basic earnings per share
|
|
$
|
1.26
|
|
|
$
|
1.19
|
|
|
$
|
1.35
|
|
|
$
|
1.40
|
|
|
$
|
5.19
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.26
|
|
|
$
|
1.22
|
|
|
$
|
1.33
|
|
|
$
|
1.38
|
|
|
$
|
5.19
|
|
Discontinued operations
|
|
(0.02
|
)
|
|
(0.05
|
)
|
|
—
|
|
|
—
|
|
|
(0.06
|
)
|
|||||
Diluted earnings per share
|
|
$
|
1.24
|
|
|
$
|
1.17
|
|
|
$
|
1.33
|
|
|
$
|
1.38
|
|
|
$
|
5.13
|
|
23.
|
Subsequent Event
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
|
Item 9A.
|
Controls and Procedures.
|
Item 9B.
|
Other Information.
|
PART III
|
|
Item 10.
|
Directors, Executive Officers and Corporate Governance.
|
Item 11.
|
Executive Compensation.
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.
|
Plan Category
|
|
(a)
Number Of
Securities To Be Issued
Upon Exercise Of
Outstanding Options,
Warrants And Rights
|
|
(b)
Weighted-Average
Exercise Price Of
Outstanding Options,
Warrants And Rights
|
|
(c)
Number Of Securities
Remaining Available For
Future Issuance Under
Equity Compensation Plans
(Excluding Securities
Reflected In Column (a))
|
||||||
Equity Compensation Plans Approved By Security Holders
(1)
|
|
4,998,114
|
|
(2)
|
|
$
|
65.48
|
|
|
11,481,695
|
|
(3)(4)
|
Equity Compensation Plans Not Approved By Security Holders
|
|
0
|
|
|
|
0
|
|
|
0
|
|
|
|
Total
|
|
4,998,114
|
|
|
|
$
|
65.48
|
|
|
11,481,695
|
|
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence.
|
Item 14.
|
Principal Accounting Fees and Services.
|
PART IV
|
|
Item 15.
|
Exhibits and Financial Statement Schedules.
|
(a)
|
|
|
|
Financial Statements, Financial Statement Schedules and Exhibits.
|
|
|
|
(1
|
)
|
|
Financial Statements
|
|
|
|
|
|
The financial statements are included under Item 8 of this Annual Report on Form 10-K:
|
|
|
|
|
|
Consolidated Statement of Financial Position, as of September 30, 2016 and 2015
|
|
|
|
|
|
Consolidated Statement of Operations, years ended September 30, 2016, 2015 and 2014
|
|
|
|
|
Consolidated Statement of Comprehensive Income, years ended September 30, 2016, 2015 and 2014
|
|
|
|
|
|
|
Consolidated Statement of Cash Flows, years ended September 30, 2016, 2015 and 2014
|
|
|
|
|
|
Consolidated Statement of Equity, years ended September 30, 2016, 2015 and 2014
|
|
|
|
|
|
Notes to Consolidated Financial Statements
|
|
|
|
|
|
Report of Independent Registered Public Accounting Firm
|
|
|
|
|
|
|
|
|
|
|
All other schedules not filed herewith are omitted because of the absence of conditions under which they are required or because the information called for is shown in the financial statements or notes thereto.
|
|
|
|
|
|
Exhibits
|
|
|
|
3-a-1
|
|
|
Restated Certificate of Incorporation of the Company, as amended, filed as Exhibit 3-a-1 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference.
|
|
|
3-a-2
|
|
|
Certificate of Merger effecting name change of the Company from "New Rockwell Collins, Inc." to "Rockwell Collins, Inc.", filed as Exhibit 3-a-2 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference.
|
|
|
3-b-1
|
|
|
By-Laws of the Company, as amended and restated effective April 20, 2016, filed as Exhibit 3-b-1 to the Company's Form 8-K dated April 20, 2016, is incorporated herein by reference.
|
|
|
4-a-1
|
|
|
Indenture dated as of November 1, 2001 between the Company and Citibank, N.A., as Trustee, filed as Exhibit 4.b to the Company's Registration Statement on Form S-3 (No. 333-72914), is incorporated herein by reference.
|
|
|
4-a-3
|
|
|
Form of Supplemental Indenture dated as of December 4, 2006 between the Company and The Bank of New York Trust Company, N.A. (as incoming trustee), filed as Exhibit 4-a-4 to the Company's Form 8-K dated November 9, 2006, is incorporated herein by reference.
|
|
|
4-a-4
|
|
|
Form of certificate for the Company's 5.25% Notes due July 15, 2019, filed as Exhibit 4 to the Company's Form 8-K dated May 1, 2009, is incorporated herein by reference.
|
|
|
4-a-6
|
|
|
Form of certificate for the Company's 3.100% notes due November 15, 2021, filed as Exhibit 4 to the Company's Form 8-K dated November 16, 2011, is incorporated herein by reference.
|
|
|
4-a-7
|
|
|
Underwriting Agreement, dated December 11, 2013, between the Company and Citigroup Global Markets Inc., J.P. Morgan Securities LLC, Merrill Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as representitives of the several Underwriters named in Schedule 1 to the Underwriting Agreement, filed as Exhibit 1 to the Company's Form 8-K dated December 17, 2013, is incorporated herein by reference.
|
|
|
4-a-8
|
|
|
Form of certificate for the Company's Floating Rate Notes due 2016, filed as Exhibit 4.1 to the Company's Form 8-K dated December 17, 2013, is incorporated herein by reference.
|
|
|
4-a-9
|
|
|
Form of certificate for the Company's 3.700% Notes due 2023, filed as Exhibit 4.2 to the Company's Form 8-K dated December 17, 2013, is incorporated herein by reference.
|
|
|
4-a-10
|
|
|
Form of certificate for the Company's 4.800% Notes due 2043, filed as Exhibit 4.3 to the Company's Form 8-K dated December 17, 2013, is incorporated herein by reference.
|
|
|
*10-a-1
|
|
|
The Company's 2001 Long-Term Incentives Plan, as amended, filed as Exhibit 10-a-9 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference.
|
|
|
*10-a-2
|
|
|
Forms of Stock Option Agreements under the Company's 2001 Long-Term Incentives Plan, filed as Exhibit 10-a-2 to the Company's Form 10-K for year ended September 30, 2001, are incorporated herein by reference.
|
|
|
*10-a-4
|
|
|
The Company's 2006 Long-Term Incentives Plan, as amended, filed as Appendix A to the Company's Notice and Proxy Statement dated December 18, 2009, is incorporated herein by reference.
|
|
|
10-m-1
|
|
|
Tax Allocation Agreement dated as of June 29, 2001 by and between Rockwell International Corporation and the Company, filed as Exhibit 2.3 to the Company's Form 8-K dated July 11, 2001, is incorporated herein by reference.
|
|
|
*10-n-1
|
|
|
Form of Change of Control Agreement between the Company and certain executives of the Company (Three-Year Agreement), as amended, filed as Exhibit 10-n-1 to the Company's Form 8-K dated April 21, 2009, is incorporated herein by reference.
|
|
|
10-o-3
|
|
|
Five-Year Credit Agreement dated as of September 24, 2013 among us, the Banks listed therein, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, Credit Agricole Corporate & Investment Bank, Mizuho Bank Ltd., The Bank of New York Mellon, U.S. Bank National Association and Wells Fargo Bank, N.A., as Co-Documentation Agents, and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Bookrunners, filed as Exhibit 10.2 to the Company's Form 8-K dated September 24, 2013, is incorporated herein by reference.
|
|
|
10-o-4
|
|
|
364-Day Credit Agreement dated as of September 24, 2013 among us, the Banks listed therein, JPMorgan Chase Bank, N.A., as Administrative Agent, Citibank, N.A., as Syndication Agent, Bank of America, N.A. Credit Agricole Corporate & Investment Bank, Mizuho Bank (USA), The Bank of New York Mellon, U.S. Bank National Association and Wells Fargo Bank, N.A., as Co-Documentation Agents, and Citigroup Global Markets Inc. and J.P. Morgan Securities LLC, as Joint Lead Arrangers and Bookrunners, filed as Exhibit 10.3 to the Company's Form 8-K dated September 24, 2013, is incorporated herein by reference.
|
|
|
*10-q-7
|
|
|
Forms of Three-Year Performance Share Agreements, adopted on November 20, 2009, filed as Exhibit 10-q-7 to the Company's Form 10-K for year ended September 30, 2009, is incorporated herein by reference.
|
|
|
*10-q-8
|
|
|
Forms of Three-Year Performance Share Agreements, adopted on November 14, 2011, filed as Exhibit 10-q-8 to the Company's Form 10-K for year ended September 30, 2011, is incorporated herein by reference.
|
|
|
*10-q-9
|
|
|
Form of Three-Year Performance Share Agreement filed as Exhibit 10-q-1 to the Company's Form 10-Q for the quarter ended December 31, 2015, is incorporated herein by reference.
|
|
|
*10-s-1
|
|
|
Non-Employee Director Compensation Summary.
|
|
|
*10-s-2
|
|
|
Non-Employee Director Deferral Election Forms.
|
|
|
10-t-1
|
|
|
Agreement and Plan of Merger, dated as of August 10, 2013, by and among Rockwell Collins, Inc., Avatar Merger Sub, Inc., Radio Holdings, Inc. and TC Group IV Managing GP, L.L.C., filed as Exhibit 99.1 to the Company's Form 8-K dated November 12, 2013, is incorporated herein by reference.
|
|
|
12
|
|
|
Statement re: Computation of Ratio of Earnings to Fixed Charges.
|
|
|
21
|
|
|
List of subsidiaries of the Company.
|
|
|
23
|
|
|
Consent of Independent Registered Public Accounting Firm.
|
|
|
24
|
|
|
Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of the Company.
|
|
|
31.1
|
|
|
Section 302 Certification of Chief Executive Officer.
|
|
|
31.2
|
|
|
Section 302 Certification of Chief Financial Officer.
|
|
|
32.1
|
|
|
Section 906 Certification of Chief Executive Officer.
|
|
|
32.2
|
|
|
Section 906 Certification of Chief Financial Officer.
|
|
|
101.INS
|
|
|
XBRL Instance Document.
|
|
|
101.SCH
|
|
|
XBRL Taxonomy Extension Schema.
|
|
|
101.CAL
|
|
|
XBRL Taxonomy Extension Calculation Linkbase.
|
|
|
101.DEF
|
|
|
XBRL Taxonomy Extension Definition Linkbase.
|
|
|
101.LAB
|
|
|
XBRL Taxonomy Extension Label Linkbase.
|
|
|
101.PRE
|
|
|
XBRL Taxonomy Extension Presentation Linkbase.
|
|
|
|
|
|
|
ROCKWELL COLLINS, INC.
|
|
|
|
By
|
/s/ ROBERT J. PERNA
|
|
|
|
Robert J. Perna
Senior Vice President, General Counsel and Secretary
|
|
|
|
|
|
/s/ ROBERT K. ORTBERG
|
|
Chairman, President and Chief Executive Officer (principal executive officer)
|
||
Robert K. Ortberg
|
|
|||
ANTHONY J. CARBONE*
|
|
Director
|
||
CHRIS A. DAVIS*
|
|
Director
|
||
RALPH E. EBERHART*
|
|
Director
|
||
JOHN A. EDWARDSON*
|
|
Director
|
||
DAVID LILLEY*
|
|
Director
|
||
ANDREW J. POLICANO*
|
|
Director
|
||
CHERYL L. SHAVERS*
|
|
Director
|
||
JEFFREY L. TURNER*
|
|
Director
|
||
|
|
|
||
/s/ PATRICK E. ALLEN
|
|
Senior Vice President and Chief Financial Officer (principal financial officer)
|
||
Patrick E. Allen
|
|
|||
/s/ TATUM J. BUSE
|
|
Vice President, Finance and Corporate Controller (principal accounting officer)
|
||
Tatum J. Buse
|
|
|||
*By
|
/s/ ROBERT J. PERNA
|
|
|
|
|
Robert J. Perna, Attorney-in-fact**
|
|
|
•
|
Granted restricted stock units ("RSUs") with a value equal to:
|
◦
|
$100,000 plus
|
◦
|
$120,000 multiplied by a fraction where the numerator is the number of days until the next Annual Meeting of Shareowners and the denominator is 365.
|
•
|
$100,000 payable in equal quarterly installments at the beginning of each quarter.
|
•
|
At each Annual Meeting of Shareowners, granted RSUs with a value of $120,000.
|
•
|
Additional cash retainer of $30,000, payable in equal quarterly installments at the beginning of each quarter.
|
•
|
Audit - $25,000
|
•
|
Compensation - $20,000
|
•
|
Technology and Cybersecurity - $20,000
|
•
|
Nominating and Governance - $15,000
|
•
|
Corporate Strategy and Finance - $15,000
|
•
|
All chair fees are payable in equal quarterly installments at the beginning of each quarter.
|
•
|
Each Audit Committee member, other than the Chair, receives $10,000, payable in equal quarterly installments at the beginning of each quarter.
|
•
|
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 RSUs in lieu thereof.
|
•
|
A signed copy of this form must be received by the Company no later than [December 15, 2016]. Your deferral election will become irrevocable five days after its receipt by the Company. Please send your deferral election to Bob Perna. A stamped envelope is enclosed for your convenience.
|
•
|
If the termination of your directorship occurs by reason of your death, no deferral of RSUs will occur. Further, if your death occurs after the termination of your directorship and you have deferred RSUs, any undistributed RSUs will be distributed to your beneficiary (or your estate if no beneficiary has been designated) as soon as practicable (and in all cases by December 31st of the calendar year following the calendar year in which your death occurs).
|
•
|
If a change in control occurs before the termination of your directorship, no deferral of RSUs will occur. Further, if a change in control occurs after the termination of your directorship and you have deferred RSUs, any undistributed RSUs will be distributed upon the change in control.
|
A.
|
25%
|
B.
|
50%
|
C.
|
75%
|
D.
|
100%
|
A.
|
In one installment, with such installment to be paid within the first sixty (60) days of the calendar year following the calendar year in which occurs the ____ (insert a number from 2 to 5) anniversary of the termination of my directorship.
|
B.
|
In up to ___ (insert a number from 2 to 10) annual installments. The first installment will be distributed within the first sixty (60) days of the calendar year following the calendar year in which occurs the
|
•
|
A signed copy of this form must be received by the Company no later than [December 15, 2016]. Your deferral election will become irrevocable five days after its receipt by the Company. Please send your deferral election to Bob Perna. A stamped envelope is enclosed for your convenience.
|
•
|
As required by Section 409A of the Internal Revenue Code, (1) your deferral election will not be given effect until twelve months and one day after the date upon which it becomes irrevocable (e.g., if your directorship terminates before this period expires your deferral will not occur) and (2) you may not receive any RSUs you defer pursuant to this election until a date that is no less than five years after the date upon which payment would be made as a result of the termination of your directorship occurs, except in the case of death or change in control as noted below.
|
•
|
If the termination of your directorship occurs by reason of your death, no deferral of RSUs will occur. Further, if your death occurs after the termination of your directorship and you have deferred RSUs, any undistributed RSUs will be distributed to your beneficiary (or your estate if no beneficiary has been designated) as soon as practicable (and in all cases by December 31st of the calendar year following the calendar year in which your death occurs).
|
•
|
If a change in control occurs before the termination of your directorship, no deferral of RSUs will occur. Further, if a change in control occurs after the termination of your directorship and you have deferred RSUs, any undistributed RSUs will be distributed upon the change in control.
|
A.
|
25%
|
B.
|
50%
|
C.
|
75%
|
D.
|
100%
|
A.
|
In one installment, with such installment to be paid within the first sixty (60) days of the calendar year following the calendar year in which occurs the fifth anniversary of the termination of my directorship.
|
B.
|
In up to ___ (insert a number from 2 to 10) annual installments. The first installment will be distributed within the first sixty (60) days of the calendar year following the calendar year in which occurs the fifth anniversary of the termination of my directorship. Each subsequent annual installment will occur within such sixty (60) day period each year. Each annual installment will be calculated by multiplying the balance of the deferred RSUs by a fraction. The numerator of the fraction will be one and the denominator of the fraction will be the remaining number of annual installments.
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
|
2012
|
||||||||||
Earnings available for fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
$
|
935
|
|
|
$
|
962
|
|
|
$
|
882
|
|
|
$
|
865
|
|
|
$
|
832
|
|
Add / (Deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings from equity affiliates, net of distributions
|
3
|
|
|
1
|
|
|
14
|
|
|
(3
|
)
|
|
(8
|
)
|
|||||
|
938
|
|
|
963
|
|
|
896
|
|
|
862
|
|
|
824
|
|
|||||
Add fixed charges included in earnings:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
64
|
|
|
61
|
|
|
59
|
|
|
28
|
|
|
27
|
|
|||||
Interest element of rentals
|
26
|
|
|
25
|
|
|
22
|
|
|
23
|
|
|
24
|
|
|||||
Total earnings available for fixed charges
|
$
|
1,028
|
|
|
$
|
1,049
|
|
|
$
|
977
|
|
|
$
|
913
|
|
|
$
|
875
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges included in earnings
|
$
|
90
|
|
|
$
|
86
|
|
|
$
|
81
|
|
|
$
|
51
|
|
|
$
|
51
|
|
Capitalized interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total fixed charges
|
$
|
90
|
|
|
$
|
86
|
|
|
$
|
81
|
|
|
$
|
51
|
|
|
$
|
51
|
|
Ratio of earnings to fixed charges
(1)
|
11
|
|
|
12
|
|
|
12
|
|
|
18
|
|
|
17
|
|
|
|
State/Country of
|
Name
|
|
Incorporation
|
|
|
|
ARINC Incorporated
|
|
Delaware
|
|
|
|
Radio Holdings, Inc.
|
|
Delaware
|
|
|
|
Rockwell Collins EUMEA Holdings SAS
|
|
France
|
|
|
|
Rockwell Collins European Holdings S.à r.l.
|
|
Luxembourg
|
|
|
|
Rockwell Collins International Financing S.à r.l.
|
|
Luxembourg
|
|
|
|
Rockwell Collins International Holdings S.à r.l.
|
|
Luxembourg
|
|
|
|
Rockwell Collins International, Inc.
|
|
Texas
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
|
|
November 15, 2016
|
Robert K. Ortberg
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Anthony J. Carbone
|
|
Director
|
|
November 15, 2016
|
Anthony J. Carbone
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Chris A Davis
|
|
Director
|
|
November 15, 2016
|
Chris A. Davis
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Ralph E. Eberhart
|
|
Director
|
|
November 15, 2016
|
Ralph E. Eberhart
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ John A. Edwardson
|
|
Director
|
|
November 15, 2016
|
John A. Edwardson
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ David Lilley
|
|
Director
|
|
November 15, 2016
|
David Lilley
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Andrew J. Policano
|
|
Director
|
|
November 15, 2016
|
Andrew J. Policano
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Cheryl L. Shavers
|
|
Director
|
|
November 15, 2016
|
Cheryl L. Shavers
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
/s/ Jeffrey L. Turner
|
|
Director
|
|
November 15, 2016
|
Jeffrey L. Turner
|
|
|
|
|
1.
|
I have reviewed the annual report on Form 10-K for the fiscal year ended
September 30, 2016
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
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b)
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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: November 15, 2016
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/s/ Robert K. Ortberg
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Robert K. Ortberg
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Chairman, President and Chief Executive Officer
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1.
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I have reviewed the annual report on Form 10-K for the fiscal year ended
September 30, 2016
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.
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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:
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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;
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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;
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c)
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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
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d)
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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.
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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: November 15, 2016
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/s/ Patrick E. Allen
|
|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
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(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
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 15, 2016
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/s/ Robert K. Ortberg
|
|
Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
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(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
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(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
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Date: November 15, 2016
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/s/ Patrick E. Allen
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|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
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