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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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Large accelerated filer
þ
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Accelerated filer
o
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Non-accelerated filer
o
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(Do not check if a smaller reporting company)
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Smaller reporting company
o
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Emerging growth company
o
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Page No.
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PART I
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PART I.
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FINANCIAL INFORMATION
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Item 1.
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Condensed Consolidated Financial Statements
|
|
March 31,
2017 |
|
September 30,
2016 |
||||
ASSETS
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|
||||
Current Assets:
|
|
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|
||||
Cash and cash equivalents
|
$
|
281
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|
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$
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340
|
|
Receivables, net
|
1,135
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|
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1,094
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|
||
Inventories, net
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2,013
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|
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1,939
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|
||
Other current assets
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150
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117
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Total current assets
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3,579
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|
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3,490
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||||
Property
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1,042
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|
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1,035
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|
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Goodwill
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1,928
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|
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1,919
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Intangible Assets
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672
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|
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667
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|
||
Deferred Income Taxes
|
143
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|
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219
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Other Assets
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416
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|
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369
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|
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TOTAL ASSETS
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$
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7,780
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|
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$
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7,699
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LIABILITIES AND EQUITY
|
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Current Liabilities:
|
|
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|
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Short-term debt
|
$
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855
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$
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740
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Accounts payable
|
486
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|
|
527
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|
||
Compensation and benefits
|
196
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269
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|
||
Advance payments from customers
|
265
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|
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283
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|
||
Accrued customer incentives
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217
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246
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|
||
Product warranty costs
|
81
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|
87
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|
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Other current liabilities
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151
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194
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|
||
Total current liabilities
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2,251
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2,346
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||||
Long-term Debt, Net
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1,354
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|
|
1,374
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||
Retirement Benefits
|
1,533
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|
|
1,660
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Other Liabilities
|
240
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|
|
235
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Equity:
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Common stock ($0.01 par value; shares authorized: 1,000; shares issued: March 31, 2017, 143.8; September 30, 2016, 143.8)
|
1
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1
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||
Additional paid-in capital
|
1,514
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1,506
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||
Retained earnings
|
3,554
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|
|
3,327
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Accumulated other comprehensive loss
|
(1,873
|
)
|
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(1,898
|
)
|
||
Common stock in treasury, at cost (shares held: March 31, 2017, 12.6; September 30, 2016, 13.6)
|
(800
|
)
|
|
(858
|
)
|
||
Total shareowners’ equity
|
2,396
|
|
|
2,078
|
|
||
Noncontrolling interest
|
6
|
|
|
6
|
|
||
Total equity
|
2,402
|
|
|
2,084
|
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||
TOTAL LIABILITIES AND EQUITY
|
$
|
7,780
|
|
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$
|
7,699
|
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Three Months Ended
|
|
Six Months Ended
|
||||||||||||
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March 31
|
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March 31
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||||||||||||
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2017
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2016
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2017
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2016
|
||||||||
Sales:
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||||||||
Product sales
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$
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1,119
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$
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1,101
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$
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2,099
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|
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$
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2,069
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Service sales
|
223
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210
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|
|
436
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|
411
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|
||||
Total sales
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1,342
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1,311
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2,535
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2,480
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||||
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||||||||
Costs, expenses and other:
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Product cost of sales
|
779
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760
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1,447
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1,451
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||||
Service cost of sales
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151
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147
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|
299
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292
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|
||||
Selling, general and administrative expenses
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158
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160
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317
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|
|
323
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|
||||
Interest expense
|
25
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17
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45
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32
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|
||||
Other income, net
|
(4
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)
|
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(8
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)
|
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(9
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)
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(10
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)
|
||||
Total costs, expenses and other
|
1,109
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|
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1,076
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2,099
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2,088
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||||
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||||||||
Income from continuing operations before income taxes
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233
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235
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436
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|
392
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||||
Income tax expense
|
65
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63
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123
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87
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|
||||
Income from continuing operations
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168
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172
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313
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305
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Income (loss) from discontinued operations, net of taxes
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—
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(1
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)
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—
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1
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||||
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||||||||
Net income
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$
|
168
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$
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171
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$
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313
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$
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306
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||||||||
Earnings (loss) per share:
|
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||||||||
Basic
|
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||||||||
Continuing operations
|
$
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1.28
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$
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1.31
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$
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2.39
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$
|
2.33
|
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Discontinued operations
|
—
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—
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—
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|
—
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|
||||
Basic earnings per share
|
$
|
1.28
|
|
|
$
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1.31
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$
|
2.39
|
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$
|
2.33
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||||||||
Diluted
|
|
|
|
|
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|
||||||||
Continuing operations
|
$
|
1.27
|
|
|
$
|
1.30
|
|
|
$
|
2.37
|
|
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$
|
2.30
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.27
|
|
|
$
|
1.29
|
|
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$
|
2.37
|
|
|
$
|
2.31
|
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||||||||
Weighted average common shares:
|
|
|
|
|
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|
||||||||
Basic
|
130.9
|
|
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130.8
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130.7
|
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131.1
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|
||||
Diluted
|
132.4
|
|
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132.3
|
|
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132.1
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|
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132.7
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||||
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||||||||
Cash dividends per share
|
$
|
0.33
|
|
|
$
|
0.33
|
|
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$
|
0.66
|
|
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$
|
0.66
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Net income
|
$
|
168
|
|
|
$
|
171
|
|
|
$
|
313
|
|
|
$
|
306
|
|
Unrealized foreign currency translation adjustments
|
12
|
|
|
8
|
|
|
(9
|
)
|
|
—
|
|
||||
Pension and other retirement benefits adjustments (net of taxes for the three and six months ended March 31, 2017 of $9 and $18, respectively; net of taxes for the three and six months ended March 31, 2016 of $8 and $16, respectively)
|
16
|
|
|
13
|
|
|
32
|
|
|
26
|
|
||||
Foreign currency cash flow hedge adjustments (net of taxes for the three and six months ended March 31, 2017 of $1 and $1, respectively; net of taxes for the three and six months ended March 31, 2016 of $1 and $1, respectively)
|
5
|
|
|
2
|
|
|
2
|
|
|
3
|
|
||||
Comprehensive income
|
$
|
201
|
|
|
$
|
194
|
|
|
$
|
338
|
|
|
$
|
335
|
|
|
Six Months Ended
|
||||||
|
March 31
|
||||||
|
2017
|
|
2016
|
||||
Operating Activities:
|
|
|
|
||||
Net income
|
$
|
313
|
|
|
$
|
306
|
|
Income from discontinued operations, net of tax
|
—
|
|
|
1
|
|
||
Income from continuing operations
|
313
|
|
|
305
|
|
||
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
||||
Non-cash restructuring charges
|
—
|
|
|
6
|
|
||
Depreciation
|
75
|
|
|
71
|
|
||
Amortization of intangible assets and pre-production engineering costs
|
50
|
|
|
54
|
|
||
Stock-based compensation expense
|
13
|
|
|
15
|
|
||
Compensation and benefits paid in common stock
|
33
|
|
|
27
|
|
||
Deferred income taxes
|
15
|
|
|
48
|
|
||
Pension plan contributions
|
(63
|
)
|
|
(63
|
)
|
||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
|
|
|
|
||||
Receivables
|
(52
|
)
|
|
(50
|
)
|
||
Production inventory
|
(67
|
)
|
|
(87
|
)
|
||
Pre-production engineering costs
|
(76
|
)
|
|
(97
|
)
|
||
Accounts payable
|
(28
|
)
|
|
(23
|
)
|
||
Compensation and benefits
|
(71
|
)
|
|
(68
|
)
|
||
Advance payments from customers
|
(16
|
)
|
|
(64
|
)
|
||
Accrued customer incentives
|
(29
|
)
|
|
8
|
|
||
Product warranty costs
|
(6
|
)
|
|
(5
|
)
|
||
Income taxes
|
(36
|
)
|
|
5
|
|
||
Other assets and liabilities
|
(54
|
)
|
|
(37
|
)
|
||
Cash Provided by Operating Activities from Continuing Operations
|
1
|
|
|
45
|
|
||
Investing Activities:
|
|
|
|
||||
Property additions
|
(90
|
)
|
|
(93
|
)
|
||
Acquisition of business, net of cash acquired
|
(11
|
)
|
|
(17
|
)
|
||
Other investing activities
|
(1
|
)
|
|
—
|
|
||
Cash (Used for) Investing Activities from Continuing Operations
|
(102
|
)
|
|
(110
|
)
|
||
Financing Activities:
|
|
|
|
||||
Repayment of short-term borrowings
|
(300
|
)
|
|
—
|
|
||
Purchases of treasury stock
|
(5
|
)
|
|
(188
|
)
|
||
Cash dividends
|
(86
|
)
|
|
(86
|
)
|
||
Increase in short-term commercial paper borrowings, net
|
415
|
|
|
372
|
|
||
Proceeds from the exercise of stock options
|
27
|
|
|
13
|
|
||
Other financing activities
|
(1
|
)
|
|
(1
|
)
|
||
Cash Provided by Financing Activities from Continuing Operations
|
50
|
|
|
110
|
|
||
Effect of exchange rate changes on cash and cash equivalents
|
(8
|
)
|
|
3
|
|
||
Cash Provided by Discontinued Operations
|
—
|
|
|
—
|
|
||
Net Change in Cash and Cash Equivalents
|
(59
|
)
|
|
48
|
|
||
Cash and Cash Equivalents at Beginning of Period
|
340
|
|
|
252
|
|
||
Cash and Cash Equivalents at End of Period
|
$
|
281
|
|
|
$
|
300
|
|
|
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, 2016
|
130.2
|
|
|
$
|
1
|
|
|
$
|
1,506
|
|
|
$
|
3,327
|
|
|
$
|
(1,898
|
)
|
|
$
|
(858
|
)
|
|
$
|
6
|
|
|
$
|
2,084
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
313
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
313
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|
—
|
|
|
—
|
|
|
25
|
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.4
|
|
|
—
|
|
|
(3
|
)
|
|
—
|
|
|
—
|
|
|
30
|
|
|
—
|
|
|
27
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.1
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(7
|
)
|
|||||||
Employee stock purchase plan
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
5
|
|
|||||||
Employee savings plan
|
0.1
|
|
|
—
|
|
|
9
|
|
|
—
|
|
|
—
|
|
|
19
|
|
|
—
|
|
|
28
|
|
|||||||
Stock-based compensation
|
0.3
|
|
|
—
|
|
|
13
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
13
|
|
|||||||
Balance at March 31, 2017
|
131.1
|
|
|
$
|
1
|
|
|
$
|
1,514
|
|
|
$
|
3,554
|
|
|
$
|
(1,873
|
)
|
|
$
|
(800
|
)
|
|
$
|
6
|
|
|
$
|
2,402
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Balance at September 30, 2015
|
131.9
|
|
|
$
|
2
|
|
|
$
|
1,519
|
|
|
$
|
5,124
|
|
|
$
|
(1,699
|
)
|
|
$
|
(3,071
|
)
|
|
$
|
5
|
|
|
$
|
1,880
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
306
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
306
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|
—
|
|
|
—
|
|
|
29
|
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(86
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
0.2
|
|
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
|
14
|
|
|
—
|
|
|
13
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.1
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
(8
|
)
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
5
|
|
|||||||
Employee savings plan
|
0.2
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
22
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
15
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
15
|
|
|||||||
Treasury share repurchases
|
(2.1
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(188
|
)
|
|
—
|
|
|
(188
|
)
|
|||||||
Treasury share retirements
(1)
|
—
|
|
|
(1
|
)
|
|
(44
|
)
|
|
(2,353
|
)
|
|
—
|
|
|
2,398
|
|
|
—
|
|
|
—
|
|
|||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||||
Balance at March 31, 2016
|
130.4
|
|
|
$
|
1
|
|
|
$
|
1,485
|
|
|
$
|
2,991
|
|
|
$
|
(1,670
|
)
|
|
$
|
(824
|
)
|
|
$
|
6
|
|
|
$
|
1,989
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Recently Issued Accounting Standards
|
3.
|
Acquisitions, Goodwill and Intangible Assets
|
(in millions)
|
Commercial
Systems
|
|
Government
Systems
|
|
Information Management Services
|
|
Total
|
||||||||
Balance at September 30, 2016
|
$
|
326
|
|
|
$
|
503
|
|
|
$
|
1,090
|
|
|
$
|
1,919
|
|
Pulse.aero acquisition
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
||||
Foreign currency translation adjustments
|
(1
|
)
|
|
(3
|
)
|
|
1
|
|
|
(3
|
)
|
||||
Balance at March 31, 2017
|
$
|
325
|
|
|
$
|
500
|
|
|
$
|
1,103
|
|
|
$
|
1,928
|
|
|
March 31, 2017
|
|
September 30, 2016
|
||||||||||||||||||||
(in millions)
|
Gross
|
|
Accum
Amort
|
|
Net
|
|
Gross
|
|
Accum
Amort
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology and patents
|
$
|
360
|
|
|
$
|
(224
|
)
|
|
$
|
136
|
|
|
$
|
354
|
|
|
$
|
(216
|
)
|
|
$
|
138
|
|
Backlog
|
6
|
|
|
(4
|
)
|
|
2
|
|
|
6
|
|
|
(3
|
)
|
|
3
|
|
||||||
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired
|
342
|
|
|
(116
|
)
|
|
226
|
|
|
340
|
|
|
(106
|
)
|
|
234
|
|
||||||
Up-front sales incentives
|
335
|
|
|
(86
|
)
|
|
249
|
|
|
313
|
|
|
(80
|
)
|
|
233
|
|
||||||
License agreements
|
14
|
|
|
(10
|
)
|
|
4
|
|
|
14
|
|
|
(10
|
)
|
|
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
|
$
|
1,126
|
|
|
$
|
(454
|
)
|
|
$
|
672
|
|
|
$
|
1,096
|
|
|
$
|
(429
|
)
|
|
$
|
667
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for up-front sales incentives
|
$
|
13
|
|
|
$
|
20
|
|
|
$
|
26
|
|
|
$
|
28
|
|
|
$
|
28
|
|
|
$
|
140
|
|
Anticipated amortization expense for all other intangible assets
|
40
|
|
|
38
|
|
|
37
|
|
|
35
|
|
|
34
|
|
|
204
|
|
||||||
Total
|
$
|
53
|
|
|
$
|
58
|
|
|
$
|
63
|
|
|
$
|
63
|
|
|
$
|
62
|
|
|
$
|
344
|
|
4.
|
Discontinued Operations and Divestitures
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||
|
March 31
|
|
March 31
|
||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||
Income (loss) from discontinued operations before income taxes
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
2
|
|
Income tax expense from discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
5.
|
Receivables, Net
|
(in millions)
|
March 31,
2017 |
|
September 30,
2016 |
||||
Billed
|
$
|
699
|
|
|
$
|
748
|
|
Unbilled
|
505
|
|
|
439
|
|
||
Less progress payments
|
(63
|
)
|
|
(87
|
)
|
||
Total
|
1,141
|
|
|
1,100
|
|
||
Less allowance for doubtful accounts
|
(6
|
)
|
|
(6
|
)
|
||
Receivables, net
|
$
|
1,135
|
|
|
$
|
1,094
|
|
6.
|
Inventories, Net
|
(in millions)
|
March 31,
2017 |
|
September 30,
2016 |
||||
Finished goods
|
$
|
246
|
|
|
$
|
210
|
|
Work in process
|
237
|
|
|
236
|
|
||
Raw materials, parts and supplies
|
381
|
|
|
354
|
|
||
Less progress payments
|
(15
|
)
|
|
(1
|
)
|
||
Total
|
849
|
|
|
799
|
|
||
Pre-production engineering costs
|
1,164
|
|
|
1,140
|
|
||
Inventories, net
|
$
|
2,013
|
|
|
$
|
1,939
|
|
(in millions)
|
2017
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
|
$
|
57
|
|
|
$
|
97
|
|
|
$
|
137
|
|
|
$
|
158
|
|
|
$
|
148
|
|
|
$
|
592
|
|
7.
|
Other Assets
|
(in millions)
|
March 31,
2017 |
|
September 30,
2016 |
||||
Long-term receivables
|
$
|
175
|
|
|
$
|
146
|
|
Investments in equity affiliates
|
8
|
|
|
10
|
|
||
Exchange and rental assets (net of accumulated depreciation of $102 at March 31, 2017 and $101 at September 30, 2016)
|
68
|
|
|
68
|
|
||
Other
|
165
|
|
|
145
|
|
||
Other Assets
|
$
|
416
|
|
|
$
|
369
|
|
8.
|
Debt
|
(in millions, except weighted average amounts)
|
March 31,
2017 |
|
September 30,
2016 |
||||
Short-term commercial paper borrowings outstanding
(1)
|
$
|
855
|
|
|
$
|
440
|
|
Current portion of long-term debt
|
—
|
|
|
300
|
|
||
Short-term debt
|
$
|
855
|
|
|
$
|
740
|
|
Weighted average interest rate of commercial paper borrowings
|
1.22
|
%
|
|
0.79
|
%
|
||
Weighted average maturity period of commercial paper borrowings (days)
|
10
|
|
|
15
|
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
March 31,
2017 |
|
September 30,
2016 |
||||
Fixed-rate notes due:
|
|
|
|
|
|
||||
July 2019
|
5.25%
|
|
$
|
300
|
|
|
$
|
300
|
|
November 2021
|
3.10%
|
|
250
|
|
|
250
|
|
||
December 2023
|
3.70%
|
|
400
|
|
|
400
|
|
||
December 2043
|
4.80%
|
|
400
|
|
|
400
|
|
||
Variable-rate note due:
|
|
|
|
|
|
||||
December 2016
|
3 month LIBOR + 0.35%
|
|
—
|
|
|
300
|
|
||
Fair value swap adjustment (see Notes 13 and 14)
|
|
|
15
|
|
|
35
|
|
||
Total
|
|
|
1,365
|
|
|
1,685
|
|
||
Less unamortized debt issuance costs and discounts
|
|
|
11
|
|
|
11
|
|
||
Less current portion of long-term debt
|
|
|
—
|
|
|
300
|
|
||
Long-term Debt, Net
|
|
|
$
|
1,354
|
|
|
$
|
1,374
|
|
9.
|
Retirement Benefits
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Three Months Ended
|
|
Three Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
27
|
|
|
31
|
|
|
2
|
|
|
2
|
|
||||
Expected return on plan assets
|
(60
|
)
|
|
(59
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
|
|
||||||
Prior service credit
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Net actuarial loss
|
23
|
|
|
20
|
|
|
2
|
|
|
2
|
|
||||
Net benefit expense (income)
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
4
|
|
|
$
|
4
|
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||
|
Six Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Service cost
|
$
|
6
|
|
|
$
|
6
|
|
|
$
|
1
|
|
|
$
|
1
|
|
Interest cost
|
55
|
|
|
63
|
|
|
3
|
|
|
3
|
|
||||
Expected return on plan assets
|
(120
|
)
|
|
(119
|
)
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amortization:
|
|
|
|
|
|
|
|
||||||||
Prior service credit
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
—
|
|
||||
Net actuarial loss
|
46
|
|
|
39
|
|
|
4
|
|
|
4
|
|
||||
Net benefit expense (income)
|
$
|
(13
|
)
|
|
$
|
(12
|
)
|
|
$
|
7
|
|
|
$
|
7
|
|
10.
|
Stock-Based Compensation and Earnings Per Share
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Stock-based compensation expense included in:
|
|
|
|
|
|
|
|
||||||||
Product cost of sales
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
5
|
|
Selling, general and administrative expenses
|
5
|
|
|
6
|
|
|
9
|
|
|
10
|
|
||||
Total
|
$
|
7
|
|
|
$
|
9
|
|
|
$
|
13
|
|
|
$
|
15
|
|
Income tax benefit
|
$
|
2
|
|
|
$
|
3
|
|
|
$
|
4
|
|
|
$
|
5
|
|
|
Options
|
|
Performance Shares
|
|
Restricted Stock Units
|
||||||||||||
(shares in thousands)
|
Number Issued
|
Weighted Average Fair Value
|
|
Number Issued
|
Weighted Average Fair Value
|
|
Number Issued
|
Weighted Average Fair Value
|
|||||||||
Six months ended March 31, 2017
|
650.4
|
|
$
|
17.19
|
|
|
125.7
|
|
$
|
87.96
|
|
|
15.6
|
|
$
|
90.04
|
|
Six months ended March 31, 2016
|
628.9
|
|
$
|
17.76
|
|
|
128.6
|
|
$
|
85.05
|
|
|
68.3
|
|
$
|
85.75
|
|
|
2017 Grants
|
|
2016 Grants
|
||
Risk-free interest rate
|
1.0% - 2.7%
|
|
|
0.7% - 2.5%
|
|
Expected dividend yield
|
1.5
|
%
|
|
1.4% - 1.6%
|
|
Expected volatility
|
19.0
|
%
|
|
20.0
|
%
|
Expected life
|
7 years
|
|
|
7 years
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
|
||||||||
Income from continuing operations
|
$
|
168
|
|
|
$
|
172
|
|
|
$
|
313
|
|
|
$
|
305
|
|
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
1
|
|
||||
Net income
|
$
|
168
|
|
|
$
|
171
|
|
|
$
|
313
|
|
|
$
|
306
|
|
Denominator:
|
|
|
|
|
|
|
|
|
|
||||||
Denominator for basic earnings per share – weighted average common shares
|
130.9
|
|
|
130.8
|
|
|
130.7
|
|
|
131.1
|
|
||||
Effect of dilutive securities:
|
|
|
|
|
|
|
|
||||||||
Stock options
|
1.0
|
|
|
1.0
|
|
|
0.9
|
|
|
1.1
|
|
||||
Performance shares, restricted stock and restricted stock units
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
|
0.5
|
|
||||
Dilutive potential common shares
|
1.5
|
|
|
1.5
|
|
|
1.4
|
|
|
1.6
|
|
||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
132.4
|
|
|
132.3
|
|
|
132.1
|
|
|
132.7
|
|
||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
|
||||||
Basic
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.28
|
|
|
$
|
1.31
|
|
|
$
|
2.39
|
|
|
$
|
2.33
|
|
Discontinued operations
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Basic earnings per share
|
$
|
1.28
|
|
|
$
|
1.31
|
|
|
$
|
2.39
|
|
|
$
|
2.33
|
|
Diluted
|
|
|
|
|
|
|
|
||||||||
Continuing operations
|
$
|
1.27
|
|
|
$
|
1.30
|
|
|
$
|
2.37
|
|
|
$
|
2.30
|
|
Discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.27
|
|
|
$
|
1.29
|
|
|
$
|
2.37
|
|
|
$
|
2.31
|
|
11.
|
Accumulated Other Comprehensive Loss
|
|
Foreign Exchange Translation Adjustment
|
|
Pension and Other Postretirement Adjustments
(1)
|
|
Change in the Fair Value of Effective Cash Flow Hedges
|
|
Total
|
||||||||
Balance at December 31, 2016
|
$
|
(97
|
)
|
|
$
|
(1,802
|
)
|
|
$
|
(7
|
)
|
|
$
|
(1,906
|
)
|
Other comprehensive income before reclassifications
|
12
|
|
|
—
|
|
|
4
|
|
|
16
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
16
|
|
|
1
|
|
|
17
|
|
||||
Net current period other comprehensive income
|
12
|
|
|
16
|
|
|
5
|
|
|
33
|
|
||||
Balance at March 31, 2017
|
$
|
(85
|
)
|
|
$
|
(1,786
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1,873
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2016
|
$
|
(76
|
)
|
|
$
|
(1,818
|
)
|
|
$
|
(4
|
)
|
|
$
|
(1,898
|
)
|
Other comprehensive loss before reclassifications
|
(9
|
)
|
|
—
|
|
|
—
|
|
|
(9
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
32
|
|
|
2
|
|
|
34
|
|
||||
Net current period other comprehensive income (loss)
|
(9
|
)
|
|
32
|
|
|
2
|
|
|
25
|
|
||||
Balance at March 31, 2017
|
$
|
(85
|
)
|
|
$
|
(1,786
|
)
|
|
$
|
(2
|
)
|
|
$
|
(1,873
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at December 31, 2015
|
$
|
(64
|
)
|
|
$
|
(1,624
|
)
|
|
$
|
(5
|
)
|
|
$
|
(1,693
|
)
|
Other comprehensive income before reclassifications
|
8
|
|
|
—
|
|
|
—
|
|
|
8
|
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
13
|
|
|
2
|
|
|
15
|
|
||||
Net current period other comprehensive income
|
8
|
|
|
13
|
|
|
2
|
|
|
23
|
|
||||
Balance at March 31, 2016
|
$
|
(56
|
)
|
|
$
|
(1,611
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,670
|
)
|
|
|
|
|
|
|
|
|
||||||||
Balance at September 30, 2015
|
$
|
(56
|
)
|
|
$
|
(1,637
|
)
|
|
$
|
(6
|
)
|
|
$
|
(1,699
|
)
|
Other comprehensive loss before reclassifications
|
—
|
|
|
—
|
|
|
(1
|
)
|
|
(1
|
)
|
||||
Amounts reclassified from accumulated other comprehensive loss
|
—
|
|
|
26
|
|
|
4
|
|
|
30
|
|
||||
Net current period other comprehensive income
|
—
|
|
|
26
|
|
|
3
|
|
|
29
|
|
||||
Balance at March 31, 2016
|
$
|
(56
|
)
|
|
$
|
(1,611
|
)
|
|
$
|
(3
|
)
|
|
$
|
(1,670
|
)
|
12.
|
Income Taxes
|
13.
|
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
|
|
|
|
March 31, 2017
|
|
September 30, 2016
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
57
|
|
|
$
|
55
|
|
Interest rate swap assets
|
Level 2
|
|
15
|
|
|
35
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
11
|
|
|
11
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(10
|
)
|
|
(13
|
)
|
||
Contingent consideration for ICG acquisition
|
Level 3
|
|
(13
|
)
|
|
(13
|
)
|
||
Contingent consideration for Pulse.aero acquisition
|
Level 3
|
|
(5
|
)
|
|
—
|
|
|
Asset (Liability)
|
||||||||||||||
|
March 31, 2017
|
|
September 30, 2016
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
281
|
|
|
$
|
281
|
|
|
$
|
340
|
|
|
$
|
340
|
|
Short-term debt
|
(855
|
)
|
|
(855
|
)
|
|
(740
|
)
|
|
(740
|
)
|
||||
Long-term debt
|
(1,339
|
)
|
|
(1,420
|
)
|
|
(1,339
|
)
|
|
(1,508
|
)
|
14.
|
Derivative Financial Instruments
|
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
March 31,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
11
|
|
|
$
|
11
|
|
Interest rate swaps
|
Other assets
|
|
15
|
|
|
35
|
|
||
Total
|
|
|
$
|
26
|
|
|
$
|
46
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
March 31,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
10
|
|
|
$
|
13
|
|
|
|
|
Amount of Gain (Loss)
|
|
Amount of Gain (Loss)
|
||||||||||||
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
|
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
Location of Gain (Loss)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Fair Value Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Interest rate swaps
|
Interest expense
|
|
$
|
2
|
|
|
$
|
2
|
|
|
$
|
4
|
|
|
$
|
5
|
|
Cash Flow Hedges
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
|
|
|
|
||||||||
Amount of gain (loss) recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
4
|
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
||||
Amount of loss reclassified from AOCL into income
|
Cost of sales
|
|
(2
|
)
|
|
(3
|
)
|
|
(3
|
)
|
|
(5
|
)
|
||||
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
|
|
|
|
||||||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
—
|
|
|
(2
|
)
|
|
(1
|
)
|
|
(5
|
)
|
15.
|
Guarantees and Indemnifications
|
|
Six Months Ended
|
||||||
|
March 31
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Balance at beginning of year
|
$
|
87
|
|
|
$
|
89
|
|
Warranty costs incurred
|
(20
|
)
|
|
(21
|
)
|
||
Product warranty accrual
|
19
|
|
|
18
|
|
||
Changes in estimates for prior years
|
(5
|
)
|
|
(2
|
)
|
||
Balance at March 31
|
$
|
81
|
|
|
$
|
84
|
|
16.
|
Environmental Matters
|
17.
|
Legal Matters
|
18.
|
Restructuring and Asset Impairment Charges
|
(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
|
|
19.
|
Business Segment Information
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
$
|
594
|
|
|
$
|
611
|
|
|
$
|
1,143
|
|
|
$
|
1,173
|
|
Government Systems
|
565
|
|
|
538
|
|
|
1,040
|
|
|
989
|
|
||||
Information Management Services
|
183
|
|
|
162
|
|
|
352
|
|
|
318
|
|
||||
Total sales
|
$
|
1,342
|
|
|
$
|
1,311
|
|
|
$
|
2,535
|
|
|
$
|
2,480
|
|
|
|
|
|
|
|
|
|
||||||||
Segment operating earnings:
|
|
|
|
|
|
|
|
|
|
||||||
Commercial Systems
|
$
|
132
|
|
|
$
|
135
|
|
|
$
|
257
|
|
|
$
|
260
|
|
Government Systems
|
114
|
|
|
108
|
|
|
210
|
|
|
194
|
|
||||
Information Management Services
|
36
|
|
|
29
|
|
|
66
|
|
|
53
|
|
||||
Total segment operating earnings
|
282
|
|
|
272
|
|
|
533
|
|
|
507
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Interest expense
(1)
|
(25
|
)
|
|
(17
|
)
|
|
(45
|
)
|
|
(32
|
)
|
||||
Stock-based compensation
|
(7
|
)
|
|
(9
|
)
|
|
(13
|
)
|
|
(15
|
)
|
||||
General corporate, net
|
(12
|
)
|
|
(11
|
)
|
|
(23
|
)
|
|
(23
|
)
|
||||
Transaction costs for B/E Aerospace acquisition
(1)
|
(5
|
)
|
|
—
|
|
|
(16
|
)
|
|
—
|
|
||||
Restructuring and asset impairment charges
|
—
|
|
|
—
|
|
|
—
|
|
|
(45
|
)
|
||||
Income from continuing operations before income taxes
|
233
|
|
|
235
|
|
|
436
|
|
|
392
|
|
||||
Income tax expense
|
(65
|
)
|
|
(63
|
)
|
|
(123
|
)
|
|
(87
|
)
|
||||
Income from continuing operations
|
$
|
168
|
|
|
$
|
172
|
|
|
$
|
313
|
|
|
$
|
305
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Commercial Systems sales categories:
|
|
|
|
|
|
|
|
|
|||||||
Air transport aviation electronics
|
$
|
364
|
|
|
$
|
355
|
|
|
$
|
693
|
|
|
$
|
682
|
|
Business and regional aviation electronics
|
230
|
|
|
256
|
|
|
450
|
|
|
491
|
|
||||
Commercial Systems sales
|
594
|
|
|
611
|
|
|
1,143
|
|
|
1,173
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Government Systems sales categories:
|
|
|
|
|
|
|
|
||||||||
Avionics
|
367
|
|
|
357
|
|
|
686
|
|
|
650
|
|
||||
Communication and navigation
|
198
|
|
|
181
|
|
|
354
|
|
|
339
|
|
||||
Government Systems sales
|
565
|
|
|
538
|
|
|
1,040
|
|
|
989
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Information Management Services sales
|
183
|
|
|
162
|
|
|
352
|
|
|
318
|
|
||||
|
|
|
|
|
|
|
|
||||||||
Total sales
|
$
|
1,342
|
|
|
$
|
1,311
|
|
|
$
|
2,535
|
|
|
$
|
2,480
|
|
20.
|
Subsequent Events
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
Amount
|
||
Fixed-rate notes due:
|
|
|
|
||
July 2019
|
1.95%
|
|
$
|
300
|
|
March 2022
|
2.80%
|
|
1,100
|
|
|
March 2024
|
3.20%
|
|
950
|
|
|
March 2027
|
3.50%
|
|
1,300
|
|
|
April 2047
|
4.35%
|
|
1,000
|
|
|
Total
|
|
|
4,650
|
|
|
Less unamortized debt issuance costs and discounts
|
|
|
41
|
|
|
Long-term Debt, Net
|
|
|
$
|
4,609
|
|
Item 2.
|
Management's Discussion and Analysis of Financial Condition and Results of Operations
|
OVERVIEW AND OUTLOOK
|
•
|
total sales between $6.7 billion to $6.8 billion (From $5.3 billion to $5.4 billion)
|
•
|
total segment operating margins of 19.0 percent to 20.0 percent (From about 21.0 percent)
(1)
|
•
|
earnings per share $4.50 to $4.70
(2)
|
•
|
adjusted earnings per share $5.95 to $6.15
(2)
|
•
|
cash provided by operating activities of $900 million to $1.0 billion (From $800 million to $900 million), which includes an expected $50 million net increase in pre-production engineering costs included in inventory
|
•
|
capital expenditures of about $250 million (From $200 million)
|
•
|
total research and development investment of $1.05 billion to $1.15 billion (From $900 million to $950 million)
(3)
|
•
|
full year income tax rate of 27 percent to 28 percent (From 28 percent to 29 percent)
|
|
|
Year Ending
|
||||||
|
|
September 30, 2017 (estimated)
|
||||||
($ millions, impact to forecasted net income; except per share amounts)
|
|
Low End of Guidance Range
|
|
High End of Guidance Range
|
||||
Forecasted Rockwell Collins stand-alone net income (GAAP)
|
|
$
|
705
|
|
|
$
|
725
|
|
Estimated B/E Aerospace acquisition-related expenses
|
|
~(100)
|
||||||
Estimated amortization of B/E Aerospace acquisition-related intangible assets
|
|
~(80)
|
||||||
Estimated incremental interest expense from the B/E Aerospace acquisition
|
|
~(60)
|
||||||
Estimated impact of B/E Aerospace operations excluding above items
|
|
200
|
|
|
210
|
|
||
Forecasted net income (GAAP)
|
|
665
|
|
|
695
|
|
||
Estimated B/E Aerospace acquisition-related expenses
|
|
~100
|
||||||
Estimated amortization of total combined acquisition-related intangible assets
|
|
~110
|
||||||
Forecasted adjusted net income (non-GAAP)
|
|
$
|
875
|
|
|
$
|
905
|
|
|
|
|
|
|
||||
Forecasted Rockwell Collins stand-alone earnings per share (GAAP)
|
|
$
|
5.35
|
|
|
$
|
5.50
|
|
Impact of 31.2 million shares of COL equity issued
|
|
~(0.55)
|
||||||
Estimated B/E Aerospace acquisition-related expenses
|
|
~(0.70)
|
||||||
Estimated amortization of B/E Aerospace acquisition-related intangible assets
|
|
~(0.55)
|
||||||
Estimated incremental interest expense from the B/E Aerospace acquisition
|
|
~(0.40)
|
||||||
Estimated impact of B/E Aerospace operations excluding above items
|
|
1.35
|
|
|
1.40
|
|
||
Forecasted earnings per share (GAAP)
|
|
4.50
|
|
|
4.70
|
|
||
Estimated B/E Aerospace acquisition-related expenses
|
|
~0.70
|
||||||
Estimated amortization of total combined acquisition-related intangible assets
|
|
~0.75
|
||||||
Forecasted adjusted earnings per share (non-GAAP)
|
|
$
|
5.95
|
|
|
$
|
6.15
|
|
RESULTS OF OPERATIONS
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total sales
|
$
|
1,342
|
|
|
$
|
1,311
|
|
|
$
|
2,535
|
|
|
$
|
2,480
|
|
Percent increase
|
2
|
%
|
|
|
|
2
|
%
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Total cost of sales
|
$
|
930
|
|
|
$
|
907
|
|
|
$
|
1,746
|
|
|
$
|
1,743
|
|
Percent of total sales
|
69.3
|
%
|
|
69.2
|
%
|
|
68.9
|
%
|
|
70.3
|
%
|
•
|
a $24 million increase from higher sales volume which was unfavorably impacted by sales mix and favorably impacted by benefits from cost savings initiatives
|
•
|
in addition, company-funded R&D expense increased by $2 million, as detailed in the Research and Development Expense section below
|
•
|
the above items were partially offset by lower amortization expense for intangible assets of $4 million
|
•
|
a $47 million increase from higher sales volume which was unfavorably impacted by sales mix and favorably impacted by benefits from cost savings initiatives
|
•
|
partially offset by $33 million of asset and restructuring charges recorded in the six months ended March 31, 2016, a $6 million decrease in intangible asset amortization expense and a $5 million decrease in company-funded R&D expense, as detailed in the Research and Development Expense section below
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Customer-funded:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
$
|
66
|
|
|
$
|
61
|
|
|
$
|
131
|
|
|
$
|
108
|
|
Government Systems
|
115
|
|
|
99
|
|
|
213
|
|
|
186
|
|
||||
Information Management Services
|
2
|
|
|
2
|
|
|
4
|
|
|
4
|
|
||||
Total customer-funded
|
183
|
|
|
162
|
|
|
348
|
|
|
298
|
|
||||
Company-funded:
|
|
|
|
|
|
|
|
||||||||
Commercial Systems
|
30
|
|
|
26
|
|
|
57
|
|
|
61
|
|
||||
Government Systems
|
18
|
|
|
19
|
|
|
36
|
|
|
36
|
|
||||
Information Management Services
(1)
|
—
|
|
|
1
|
|
|
—
|
|
|
1
|
|
||||
Total company-funded
|
48
|
|
|
46
|
|
|
93
|
|
|
98
|
|
||||
Total R&D expense
|
$
|
231
|
|
|
$
|
208
|
|
|
$
|
441
|
|
|
$
|
396
|
|
Percent of total sales
|
17.2
|
%
|
|
15.9
|
%
|
|
17.4
|
%
|
|
16.0
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Selling, general and administrative expenses
|
$
|
158
|
|
|
$
|
160
|
|
|
$
|
317
|
|
|
$
|
323
|
|
Percent of total sales
|
11.8
|
%
|
|
12.2
|
%
|
|
12.5
|
%
|
|
13.0
|
%
|
•
|
the benefit of cost savings initiatives
|
•
|
partially offset by $5 million of transaction costs incurred during the three months ended March 31, 2017 associated with the acquisition of B/E Aerospace
|
•
|
$12 million of restructuring and asset impairment charges recorded in three months ended December 31, 2015
|
•
|
the benefit of cost savings initiatives
|
•
|
partially offset by $16 million of transaction costs incurred during the six months ended March 31, 2017 associated with the acquisition of B/E Aerospace
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Interest expense
|
$
|
25
|
|
|
$
|
17
|
|
|
$
|
45
|
|
|
$
|
32
|
|
•
|
$11 million of fees incurred during the six months ended March 31, 2017 associated with the new bridge credit agreement entered into in December 2016 pursuant to the acquisition of B/E Aerospace
|
•
|
higher interest rates on commercial paper for the six months ended March 31, 2017 compared to the same period in the prior year
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions, except per share amounts)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Income from continuing operations
|
$
|
168
|
|
|
$
|
172
|
|
|
$
|
313
|
|
|
$
|
305
|
|
Percent of sales
|
12.5
|
%
|
|
13.1
|
%
|
|
12.3
|
%
|
|
12.3
|
%
|
||||
|
|
|
|
|
|
|
|
||||||||
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
(1
|
)
|
|
—
|
|
|
1
|
|
||||
Net income
|
$
|
168
|
|
|
$
|
171
|
|
|
$
|
313
|
|
|
$
|
306
|
|
|
|
|
|
|
|
|
|
||||||||
Diluted earnings per share from continuing operations
|
$
|
1.27
|
|
|
$
|
1.30
|
|
|
$
|
2.37
|
|
|
$
|
2.30
|
|
Diluted earnings per share from discontinued operations
|
—
|
|
|
(0.01
|
)
|
|
—
|
|
|
0.01
|
|
||||
Diluted earnings per share
|
$
|
1.27
|
|
|
$
|
1.29
|
|
|
$
|
2.37
|
|
|
$
|
2.31
|
|
|
|
|
|
|
|
|
|
||||||||
Weighted average diluted common shares
|
132.4
|
|
|
132.3
|
|
|
132.1
|
|
|
132.7
|
|
•
|
$13 million of pre-tax transaction and financing costs incurred during the three months ended March 31, 2017 associated with the acquisition of B/E Aerospace
|
•
|
partially offset by a $7 million increase in Information Management Services operating earnings and a $6 million increase in Government Systems operating earnings, net of a $3 million decrease in Commercial Systems operating earnings
|
•
|
the absence of $45 million of pre-tax restructuring and asset impairment charges recorded in the six months ended March 31, 2016
|
•
|
a $16 million increase in Government Systems operating earnings and a $13 million increase in Information Management Services operating earnings, net of $3 million decrease in Commercial Systems operating earnings
|
•
|
partially offset by a $36 million increase in income tax expense primarily due to the retroactive benefit from the reinstatement of the Federal R&D Tax Credit in the six months ended March 31, 2016 as well as higher pre-tax income in the six months ended March 31, 2017 compared to the same period in the prior year
|
•
|
also offset by $27 million of pre-tax transaction and financing costs incurred during the six months ended March 31, 2017 associated with the acquisition of B/E Aerospace
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Air transport aviation electronics:
|
|
|
|
|
|
|
|
||||||||
Original equipment
|
$
|
224
|
|
|
$
|
214
|
|
|
$
|
424
|
|
|
$
|
397
|
|
Aftermarket
|
136
|
|
|
131
|
|
|
259
|
|
|
264
|
|
||||
Wide-body in-flight entertainment (IFE)
|
4
|
|
|
10
|
|
|
10
|
|
|
21
|
|
||||
Total air transport aviation electronics
|
364
|
|
|
355
|
|
|
693
|
|
|
682
|
|
||||
Business and regional aviation electronics:
|
|
|
|
|
|
|
|
|
|
||||||
Original equipment
|
113
|
|
|
139
|
|
|
231
|
|
|
269
|
|
||||
Aftermarket
|
117
|
|
|
117
|
|
|
219
|
|
|
222
|
|
||||
Total business and regional aviation electronics
|
230
|
|
|
256
|
|
|
450
|
|
|
491
|
|
||||
Total
|
$
|
594
|
|
|
$
|
611
|
|
|
$
|
1,143
|
|
|
$
|
1,173
|
|
Percent (decrease)
|
(3
|
)%
|
|
|
|
(3
|
)%
|
|
|
•
|
original equipment sales
increased
$10 million
, or
5 percent
, primarily due to higher Airbus A350 production rates, favorable customer timing for airline selectable equipment, and deliveries of display systems for the Boeing 737 MAX program, partially offset by lower legacy wide-body production rates
|
•
|
aftermarket sales
increased
$5 million
, or
4 percent
, primarily due to higher regulatory mandate upgrade activity and higher simulation equipment sales, partially offset by lower spares provisioning for Boeing 787 aircraft and lower retrofit sales
|
•
|
wide-body IFE sales
decreased
$6 million
, or
60 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$26 million
, or
19 percent
, primarily due to lower business aircraft OEM production rates
|
•
|
aftermarket sales were flat as higher regulatory mandate upgrade and flight deck retrofit activity was offset by higher used aircraft equipment sales in the prior year
|
•
|
original equipment sales
increased
$27 million
, or
7 percent
, primarily due to higher Airbus A350 production rates and favorable customer timing for airline selectable equipment, partially offset by lower wide-body production rates
|
•
|
aftermarket sales
decreased
$5 million
, or
2 percent
, primarily due to lower spares provisioning for Boeing 787 aircraft and lower head-up display retrofit sales, partially offset by higher regulatory mandate upgrade activity
|
•
|
wide-body IFE sales
decreased
$11 million
, or
52 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$38 million
, or
14 percent
, primarily due to certain lower business aircraft OEM production rates, partially offset by higher product deliveries for the Bombardier CSeries program and higher customer-funded development program revenues
|
•
|
aftermarket sales
decreased
$3 million
, or
1 percent
, primarily due to the absence of a large used aircraft equipment sale in the prior year, partially offset by higher flight deck retrofit activity
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
132
|
|
|
$
|
135
|
|
|
$
|
257
|
|
|
$
|
260
|
|
Percent of sales
|
22.2
|
%
|
|
22.1
|
%
|
|
22.5
|
%
|
|
22.2
|
%
|
•
|
operating earnings were negatively impacted by a $17 million decrease in sales volume discussed in the Commercial Systems sales section above
|
•
|
company-funded R&D expense increased $4 million
|
•
|
the above items were partially offset by the benefit of cost savings initiatives
|
•
|
operating earnings were negatively impacted by a $30 million decrease in sales and sales mix, as lower margin customer-funded development revenues increased and higher margin business jet OEM sales decreased in the six months ended March 31, 2017
|
•
|
partially offset by a decrease in SG&A costs in Commercial Systems of $9 million, primarily due to cost savings initiatives
|
•
|
in addition, company-funded R&D expense decreased by $4 million
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Avionics
|
$
|
367
|
|
|
$
|
357
|
|
|
$
|
686
|
|
|
$
|
650
|
|
Communication and navigation
|
198
|
|
|
181
|
|
|
354
|
|
|
339
|
|
||||
Total
|
$
|
565
|
|
|
$
|
538
|
|
|
$
|
1,040
|
|
|
$
|
989
|
|
Percent increase
|
5
|
%
|
|
|
|
5
|
%
|
|
|
•
|
a $9 million increase from higher simulation and training sales
|
•
|
$1 million in other net increases to revenue, primarily due to higher fixed wing development program sales, partially offset by the wind-down of legacy tanker hardware deliveries
|
•
|
a $9 million increase from higher data links sales
|
•
|
$8 million in other net increases to revenue, primarily due to higher deliveries of GPS-related products
|
•
|
a $24 million increase from higher simulation and training sales
|
•
|
$12 million in other net increases to revenue, primarily due to higher fixed wing development program sales, partially offset by the wind-down of legacy tanker hardware deliveries
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
114
|
|
|
$
|
108
|
|
|
$
|
210
|
|
|
$
|
194
|
|
Percent of sales
|
20.2
|
%
|
|
20.1
|
%
|
|
20.2
|
%
|
|
19.6
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Sales
|
$
|
183
|
|
|
$
|
162
|
|
|
$
|
352
|
|
|
$
|
318
|
|
Percent increase
|
13
|
%
|
|
|
|
11
|
%
|
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Segment operating earnings
|
$
|
36
|
|
|
$
|
29
|
|
|
$
|
66
|
|
|
$
|
53
|
|
Percent of sales
|
19.7
|
%
|
|
17.9
|
%
|
|
18.8
|
%
|
|
16.7
|
%
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
General corporate, net
|
$
|
12
|
|
|
$
|
11
|
|
|
$
|
23
|
|
|
$
|
23
|
|
|
Three Months Ended
|
|
Six Months Ended
|
||||||||||||
|
March 31
|
|
March 31
|
||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
Pension benefits
|
$
|
(7
|
)
|
|
$
|
(6
|
)
|
|
$
|
(13
|
)
|
|
$
|
(12
|
)
|
Other retirement benefits
|
4
|
|
|
4
|
|
|
7
|
|
|
7
|
|
||||
Net benefit (income)
|
$
|
(3
|
)
|
|
$
|
(2
|
)
|
|
$
|
(6
|
)
|
|
$
|
(5
|
)
|
FINANCIAL CONDITION AND LIQUIDITY
|
|
Six Months Ended
|
||||||
|
March 31
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash provided by operating activities from continuing operations
|
$
|
1
|
|
|
$
|
45
|
|
•
|
cash payments for income taxes increased $114 million to $145 million during the six months ended
March 31, 2017
, compared to $31 million during the same period in the prior year. The increase in cash used for 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 in the three months ended December 31, 2015, as well as higher pre-tax income from continuing operations in the three months ended December 31, 2016 compared to the same period in the prior year
|
•
|
payments for transaction costs associated with the B/E Aerospace acquisition of $41 million during the six months ended
March 31, 2017
|
•
|
higher payments for production inventory and other operating costs, which increased $21 million to $2.111 billion for the six months ended March 31, 2017, compared to $2.090 billion during the six months ended March 31, 2016. The increased payments for operating costs primarily resulted from higher sales volume and payments to suppliers
|
•
|
the above items were partially offset by higher cash receipts from customers, which increased by $112 million to $2.481 billion in the six months ended
March 31, 2017
compared to $2.369 billion in the six months ended March 31, 2016. The increase in cash receipts from customers was more than the sales volume increase of $55 million due to the timing of sales relative to the collection of receivables from customers
|
•
|
in addition, payments for employee incentive pay decreased $16 million. Incentive pay is expensed in the year incurred and then paid in the first fiscal quarter of the following year. In the six months ended
March 31, 2017
, $121 million was paid for employee incentive pay costs expensed during 2016. This compares to $137 million paid during the six months ended
March 31, 2016
for employee incentive pay costs expensed during 2015
|
|
Six Months Ended
|
||||||
|
March 31
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash (used for) investing activities from continuing operations
|
$
|
(102
|
)
|
|
$
|
(110
|
)
|
•
|
during the six months ended March 31, 2016, we paid $17 million for the Matrix series projector product line acquisition in February 2016
|
•
|
a $3 million decrease in cash payments for property additions for the six months ended
March 31, 2017
, compared to the same period in the prior year
|
•
|
partially offset by $11 million paid of the $13 million purchase price for the December 2016 acquisition of Pulse.aero
|
|
Six Months Ended
|
||||||
|
March 31
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash provided by financing activities from continuing operations
|
$
|
50
|
|
|
$
|
110
|
|
•
|
repayment of $300 million of variable rate long-term debt that matured in December 2016
|
•
|
partially offset by a decrease in cash repurchases of common stock of $183 million to $5 million during the six months ended
March 31, 2017
, compared to $188 million repurchased during the same period in the prior year
|
•
|
in addition, net proceeds from short-term commercial paper borrowings increased $43 million
|
•
|
also, proceeds received from the exercise of stock options increased $14 million
|
(in millions)
|
March 31,
2017 |
|
September 30,
2016 |
||||
Cash and cash equivalents
|
$
|
281
|
|
|
$
|
340
|
|
|
|
|
|
||||
Short-term debt
|
(855
|
)
|
|
(740
|
)
|
||
Long-term debt, net
|
(1,354
|
)
|
|
(1,374
|
)
|
||
Total debt
|
$
|
(2,209
|
)
|
|
$
|
(2,114
|
)
|
Total equity
|
$
|
2,402
|
|
|
$
|
2,084
|
|
Debt to total capitalization
(1)
|
48
|
%
|
|
50
|
%
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F2
|
|
BBB
|
|
Stable
|
Moody’s Investors Service
|
|
P-2
|
|
Baa2
|
|
Stable
|
Standard & Poor’s
|
|
A-2
|
|
BBB
|
|
Stable
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
CAUTIONARY STATEMENT
|
Item 3.
|
Quantitative and Qualitative Disclosures about Market Risk.
|
|
|
March 31, 2017
|
||||||||
(in millions)
|
|
Interest Rate
|
|
Carrying Value
|
|
Fair Value
|
||||
$400 Notes due 2043
|
|
4.80%
|
|
$
|
400
|
|
|
$
|
430
|
|
$400 Notes due 2023
|
|
3.70%
|
|
400
|
|
|
414
|
|
||
$250 Notes due 2021
|
|
3.10%
|
|
250
|
|
|
255
|
|
||
$300 Notes due 2019
|
|
5.25%
|
|
300
|
|
|
321
|
|
Item 4.
|
Controls and Procedures.
|
•
|
the diversion of management's attention from ongoing business concerns and performance shortfalls at one or both of the companies as a result of the devotion of management's attention to the merger
|
•
|
managing a larger combined company
|
•
|
maintaining employee morale and retaining key management and other employees
|
•
|
the possibility of faulty assumptions underlying expectations regarding the integration process
|
•
|
retaining existing business and operational relationships and attracting new business and operational relationships
|
•
|
consolidating corporate and administrative infrastructures and eliminating duplicative operations
|
•
|
coordinating geographically separate organizations
|
•
|
unanticipated issues in integrating information technology, communications and other systems
|
•
|
unforeseen expenses or delays associated with the merger.
|
•
|
consolidating with or merging into any other corporation or conveying or transferring its properties and assets substantially as an entirety
|
•
|
incurring secured debt
|
•
|
entering into sale and leaseback transactions
|
•
|
designating subsidiaries as restricted or unrestricted
|
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)
|
||||||
January 1, 2017 through January 31, 2017
|
—
|
|
$
|
—
|
|
—
|
|
$
|
125
|
million
|
February 1, 2017 through February 28, 2017
|
—
|
|
$
|
—
|
|
—
|
|
$
|
125
|
million
|
March 1, 2017 through March 31, 2017
|
—
|
|
$
|
—
|
|
—
|
|
$
|
125
|
million
|
Total/Average
|
—
|
|
$
|
—
|
|
—
|
|
|
|
|
|
|
|
|
ROCKWELL COLLINS, INC.
|
|
|
|
By
|
/s/ Tatum J. Buse
|
|
|
|
Tatum J. Buse Vice President, Finance and Controller Principal Accounting Officer and an Authorized Officer
|
Event
|
Treatment of Performance Shares
|
Death, Disability & Retirement (attained age 55 at time of termination)
|
Entitled to a pro rata payment of any Performance Shares earned. Payment occurs at the end of Performance Period.
|
Qualifying Termination after a Change of Control/Divestiture
|
Performance Shares paid out at target multiplied by the average payout over the prior three completed performance periods.
|
Other Terminations/Detrimental Activity
|
Performance Shares forfeited.
|
(c)
|
For purposes of this Agreement, "Good Reason" shall mean:
|
FY2017-2019 Long-Term Incentives
|
|||||
|
|
|
|
|
|
Performance Level
|
Cumulative Sales
|
Free Cash Flow
|
Total Payout %
|
||
Goal ($M)
|
Payout %
|
Goal($M)
|
Payout %
|
||
Maximum
|
$19,330
|
100%
|
$2,631
|
100%
|
200%
|
Target
|
$16,808
|
50%
|
$2,288
|
50%
|
100%
|
Minimum
|
$14,287
|
0%
|
$1,945
|
0%
|
0%
|
Weighting
|
50%
|
50%
|
|
Rank
|
Company
|
Three Year TSR
|
1
|
Peer 1
|
50%
|
2
|
Peer 2
|
48%
|
3
|
Peer 3
|
43%
|
4
|
Peer 4
|
39%
|
5
|
Peer 5
|
38%
|
7
|
Peer 6
|
31%
|
8
|
Peer 7
|
30%
|
9
|
Peer 8
|
28%
|
10
|
Peer 9
|
25%
|
11
|
Peer 10
|
19%
|
|
||
6
|
Rockwell Collins
|
36%
|
France
|
Foreign Ownership Reporting
Residents of France with foreign account balances in excess of EUR 1 million or its equivalent must report monthly to the Bank of France.
Consent to Receive Information in English
By accepting the Restricted Stock Units, you confirm having read and understood the Plan and the Agreement, which were provided in the English language. You accept the terms of those documents accordingly.
En acceptant cette attribution gratuite d’actions, vous confirmez avoir lu et comprenez le Plan et ce Contrat, incluant tous leurs termes et conditions, qui ont été transmis en langue anglaise. Vous acceptez les dispositions de ces documents en connaissance de cause.
|
|
|
India
|
Repatriation Requirement
You are required to repatriate to India all proceeds from the subsequent sale of Stock acquired under the Plan within 90 days from the date of sale. You will not take any action or non-action that has the effect of delaying or eliminating the receipt or realization of any such foreign exchange. Upon receipt or realization of foreign exchange in India, you shall surrender such foreign exchange to an authorized person or bank within a period of 180 days from the date of such receipt or realization, as the case may be. Please note that you should keep the remittance certificate received from the bank where foreign currency is deposited in the event that the Reserve Bank of India, the Company or your employer requests proof of repatriation.
|
|
|
Ireland
|
Director Reporting
If you are a director or shadow director of the Company or related company, you
may be subject to special reporting requirements with regard to the acquisition
of Stock or rights over Stock. Please contact your personal legal advisor for further details if you are a director or shadow director.
|
||
Japan
|
Foreign Ownership Information
If you acquire shares of Common Stock valued at more than ¥100,000,000 in a single transaction, you must file a Securities Acquisition Report with the Ministry of Finance (“MOF”) through the Bank of Japan within 20 days of the acquisition of the Shares. In addition, with respect to any Options granted, if you pay more than ¥30,000,000 in a single transaction for the Stock at exercise of the Option, you must file a Payment Report with the MOF through the Bank of Japan by the 20th day of the month following the month in which the payment was made. The precise reporting requirements may vary depending on the bank handling the payment. A Payment Report is required independently of a Securities Acquisition Report. Consequently, if the total amount that you pay on a one-time basis at exercise of an Option exceeds ¥100,000,000, you must file both a Payment Report and a Securities Acquisition Report.
Exit Tax
Please note that you may potentially be subject to tax on your Restricted Stock Unit, Option, or Performance Share awards (if any), even prior to vesting or exercise or otherwise receiving any value under an award, if you relocate from Japan if you (1) hold financial assets with an aggregate value of ¥100,000,000 or more upon departure from Japan and (2) maintained a principle place of residence (
jusho
) or temporary place of abode (
kyosho
) in Japan for 5 years or more during the 10-year period immediately prior to departing Japan. You should discuss your tax treatment with your personal tax advisor.
|
|
|
Korea
|
Foreign Exchange Restriction
If you remit funds out of Korea to exercise options, the transfer of funds may be subject to reporting to the local bank handling the transfer or the Customs Service, Financial Supervisory Service, or National Tax Service. It is your responsibility to provide or complete any necessary documentation and comply with the Foreign Exchange Transaction Law (“FETL”) or any other applicable requirements, and you are advised to seek personal advice regarding any such requirements.
Repatriation Requirement
Please note that proceeds received from the sale of stock overseas must be repatriated to Korea within three (3) years if such proceeds exceed US $500,000 per sale. Separate sales may be deemed a single sale if the sole purpose of separate sales was to avoid a sale exceeding the US $500,000 per sale threshold.
|
|
|
Mexico
|
Labor Law Acknowledgment
The invitation Rockwell Collins, Inc. is making under the Plan is unilateral and discretionary and is not related to the salary and other contractual benefits granted to you by your employer; therefore, benefits derived from the Plan will not under any circumstance be considered as an integral part of your salary. Rockwell Collins reserves the absolute right to amend the Plan and discontinue it at any time without incurring any liability whatsoever. This invitation and, in your case, the acquisition of shares does not, in any way, establish a labor relationship between you and Rockwell Collins, nor does it establish any rights between you and your employer.
La invitación que Rockwell Collins, Inc. hace en relación con el Plan es unilateral, discrecional y no se relaciona con el salario y otros beneficios que recibe actualmente de su actual empleador, por lo que cualquier beneficio derivado del Plan no será considerado bajo ninguna circunstancia como parte integral de su salario. Por lo anterior, Rockwell Collins se reserva el derecho absoluto para modificar o terminar el mismo, sin incurrir en responsabilidad alguna. Esta invitación y, en su caso, la adquisición de acciones, de ninguna manera establecen relación laboral alguna entre usted y Rockwell Collins y tampoco genera derecho alguno entre usted y su empleador.
|
|
Singapore
|
Securities Law Notice
This grant and the Stock to be issued thereunder shall be made available only to an employee of the Company or its Subsidiary, in reliance of the prospectus exemption set out in Section 273(1)(f) of the Securities and Futures Act (Chapter 289) of Singapore. In addition, you agree, by your acceptance of this grant, not to sell any Stock within six months of the date of grant. Please note that neither the Agreement nor any other document or material in connection with the grant or the Stock thereunder has been or will be lodged, registered or reviewed by any regulatory authority in Singapore.
Exit Tax and Deemed Exercise Rule
If you have received a grant in relation to your employment in Singapore, please note that if you are 1) a permanent resident of Singapore and leave Singapore permanently or are transferred out of Singapore; or 2) neither a Singapore citizen nor permanent resident and either cease employment in Singapore or leave Singapore for any period exceeding 3 months, you will likely be taxed on your awards on a “deemed exercise” basis, even though your awards have not yet vested, been exercised, or paid out. You should discuss your tax treatment with your personal tax advisor.
Director Reporting
If you are a director or shadow director of the Company or a Subsidiary, you may be subject to special reporting requirements with regard to the acquisition of Stock or rights over Stock. Please contact your personal legal advisor for further details if you are a director or shadow director.
|
|
|
United Arab Emirates
|
Securities Law Notice
This Plan has not been approved or licensed by the UAE Central Bank or any other relevant licensing authorities or governmental agencies in the United Arab Emirates. This Plan is strictly private and confidential and has not been reviewed by, deposited or registered with the UAE Central Bank or any other licensing authority or governmental agencies in the United Arab Emirates. This Plan is being issued from outside the United Arab Emirates to a limited number of employees of Rockwell Collins, Inc. and affiliated companies and must not be provided to any person other than the original recipient and may not be reproduced or used for any other purpose. Further, the information contained in this report is not intended to lead to the issue of any securities or the conclusion of any other contract of whatsoever nature within the territory of the United Arab Emirates.
|
|
|
United Kingdom
|
Withholding of Tax
The following provision supplements, as applicable, Section 5 of the Restricted Stock Unit Award Terms and Conditions, Section 16 of the Performance Share Agreement, and Section 5 of the Stock Option Agreement Terms and Conditions:
If payment or withholding of any tax, social contributions, and/or other charges that may be due is not made within ninety (90) days of the event giving rise to such amounts (the “
Due Date
”) or such other period specified in Section 222(1)(c) of the U.K. Income Tax (Earnings and Pensions) Act 2003, the amount of any uncollected amounts will constitute a loan owed by Participant to his employer, effective on the Due Date. Participant agrees that the loan will bear interest at the then-current Official Rate of Her Majesty’s Revenue and Customs (“
HMRC
”), it will be immediately due and repayable, and the Company or the employer may recover it at any time thereafter by any legal means. Notwithstanding the foregoing, if Participant is a director or executive officer of the Company (within the meaning of Section 13(k) of the U.S. Securities and Exchange Act of 1934, as amended), Participant will not be eligible for such a loan to cover such amounts. In the event that Participant is a director or executive officer and the amounts are not collected from or paid by Participant by the Due Date, any uncollected amounts will constitute a benefit to Participant on which additional income tax and national insurance contributions will be payable. Participant will be responsible for reporting and paying any income tax and national insurance contributions due on this additional benefit directly to HMRC under the self-assessment regime.
Settlement
Notwithstanding any discretion in the Plan or the Agreement to the contrary, settlement of the award shall be made only in Stock and not, in whole or in part, in the form of cash.
|
|
Canada
|
Grant of Performance Shares
You are not subject to tax when your Performance Shares are granted to you.
Vesting of Performance Shares
You are subject to income tax and any applicable social contributions (e.g., Canada Pension Plan, Quebec Pension Plan, and Quebec Parental Insurance Plan contributions, etc.) on the fair market value of the shares that you receive when your Performance Shares vest. Social contributions are subject to annual contribution ceiling.
Sale of Shares
When you sell the shares you received upon vesting of your Performance Shares, you may be subject to capital gains tax. Your gain is equal to the difference between the amount for which you sell the shares and the “tax cost” of the shares. One-half of any capital gain is subject to income tax at your marginal rate in the year of sale, to the extent it cannot be netted out against capital losses sustained on other investments in the year of sale or in certain prior or subsequent tax years.
The tax cost is generally equal to the fair market value of the shares on the date they are acquired. However, if you also own additional Rockwell Collins shares, the tax cost of the shares acquired upon vesting of a Restricted Stock Unit is derived by averaging the fair market value of such shares on the date they are acquired with the tax cost of the additional Rockwell Collins shares that you already own. As a limited exception to this averaging rule, if you sell the shares acquired on the vesting of your Performance Shares within 30 days after the acquisition date, depending on which method would be most advantageous to you, you may choose the tax cost of the shares to be based either on (1) the averaging method described above, or (2) the fair market value of such shares on the date they are acquired.
Tax Withholding and Reporting Requirement
When your Performance Shares vest, Rockwell Collins may withhold and cause to be sold on the market a sufficient number of the shares otherwise deliverable to you to satisfy income tax and any applicable Canada Pension Plan withholding requirements. Your employer will remit the sale proceeds to the Canada Revenue Agency. Alternatively, your employer will implement such other arrangement as it chooses (including withholding from salary or other employment income) to satisfy its source deduction obligation.
|
France
|
Grant of Performance Shares
You are not subject to tax when your Performance Shares are granted to you.
Vesting of Performance Shares
You are subject to income tax and social contributions (including CSG and CRDS) on the fair market value of the shares that you receive when your Performance Shares vest. A surtax may also apply to “High Earners” above the applicable income threshold.
Sale of Shares
When you sell the shares you received upon vesting of your Performance Shares, the gain equal to the difference between the net sale price and the fair market value on the vest date is taxable as capital gains. Capital gains realized upon the sale of the shares will be subject to progressive personal income tax rates and to social contributions (though a certain portion of the global social contribution rate will be deductible in the year of payment).
For the calculation of the personal income tax base only, a rebate depending on the holding period would apply (equal to 50% if the shares have been held between 2 and 8 years, 65% after 8 years of holding). The “High Earners” surtax may also apply. Any capital loss can be offset against capital gains of the same nature realized by you and your household during the same year or during the ten following years.
Tax Withholding and Reporting Requirement
If you are a resident of France, income tax is not withheld and you must instead remit the income tax due as a result of the vesting of your Performance Shares to the France tax authorities. However, social insurance contributions will be withheld. To facilitate the payment of applicable social insurance contributions, Rockwell Collins may withhold a portion of the shares issued upon vesting of the Performance Shares with an aggregate market value sufficient to pay your social insurance contribution withholding obligation. You may then be issued the resulting net shares after taxes. Please note, though, that Rockwell Collins and/or your employer may satisfy social insurance contribution withholding through any means set forth in the grant agreement.
The income will be reported on your pay slip and on the annual wage statement (“DADS”). It is also your responsibility to report and pay any taxes resulting from the sale of your shares and the receipt of any dividends. Please note that if you are not a French tax resident, the withholding rules may be different. In addition, withholding rules may change in the future and Rockwell Collins and/or your employer may withhold at vesting and/or sale of shares if required to do so under French law.
|
Germany
|
Grant of Performance Shares
You are not subject to tax when your Performance Shares are granted to you.
Vesting of Performance Shares
You are subject to income tax (plus solidarity surcharge and church tax, if applicable) and social insurance contributions (to the extent you have not exceeded the applicable contribution ceiling) on the fair market value of the shares that you receive when your Performance Shares vest.
Sale of Shares
Assuming you receive shares on or after January 1, 2009 as a result of the vesting of Performance Shares, when you sell such shares, you may be subject to capital gains tax and solidarity surcharge. Your gain is equal to the difference between:
(1)the amount for which you sell the shares, and
(2)the aggregate fair market value of the shares on the date when your Performance Shares vest.
A small amount of the capital gain may be exempt. Different rules will apply if you held directly or indirectly 1% or more of Rockwell Collins Inc.’s share capital at any time during the five years preceding the sale.
Tax Withholding and Reporting Requirements
Your employer will withhold and report income tax and social contributions (to the extent you have not exceeded the applicable contribution ceiling) due upon receipt of your shares. You are required to report any income, dividends, and non-exempt capital gain resulting from your participation in the Plan on your annual personal tax return.
|
(c)
|
Any benefit payment otherwise payable under the Plan on or after January 1, 2017, may be reduced for:
|
(i)
|
Compliance with Domestic Relations Order. Paid to an individual other than the Participant as necessary to comply with the provisions of a domestic relations order (as defined in Code Section 414(p)(1)(B)) that the Plan Administrator accepts in its sole discretion; or
|
(ii)
|
Payment of Employment Taxes. Withheld to satisfy any tax obligations of the Participant relating to such Participant’s benefit under the Plan, including federal employment taxes under Code Sections 3101, 3121(a) or 3121(v)(2), any federal tax withholding provisions or corresponding withholding provisions of applicable state, local or foreign tax laws as a result of the payment of federal employment taxes, and additional taxes attributable to the pyramiding under Code Section 3401.
|
1.
|
I have reviewed the quarterly report on Form 10-Q for the quarter ended
March 31, 2017
of Rockwell Collins, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: April 21, 2017
|
/s/ Robert K. Ortberg
|
|
Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
|
1.
|
I have reviewed the quarterly report on Form 10-Q for the quarter ended
March 31, 2017
of Rockwell Collins, Inc.;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
a)
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
b)
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
c)
|
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
d)
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting;
|
5.
|
The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):
|
a)
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and
|
b)
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.
|
Date: April 21, 2017
|
/s/ Patrick E. Allen
|
|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
|
(1)
|
The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: April 21, 2017
|
/s/ Robert K. Ortberg
|
|
Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
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(1)
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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)
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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: April 21, 2017
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/s/ Patrick E. Allen
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Patrick E. Allen
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Senior Vice President and
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Chief Financial Officer
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