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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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Emerging growth 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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commercial aircraft seats, including an extensive line of super first class, first class, business class, economy class and regional aircraft seats
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•
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a full line of aircraft food and beverage preparation and storage equipment, including coffee and espresso makers, water boilers, beverage containers, refrigerators, freezers, chillers and a line of microwave, high efficiency convection and steam ovens
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•
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modular lavatory systems, wastewater management systems and galley systems
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•
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both chemical and gaseous aircraft oxygen storage, distribution and delivery systems, protective breathing equipment and a broad range of lighting products
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•
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business jet and general aviation interior products, including an extensive line of executive aircraft and helicopter seats, direct and indirect overhead lighting systems, exterior lighting systems, passenger and crew oxygen systems, air valve systems and high-end aircraft monuments
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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 equipment, 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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•
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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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•
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robust connectivity management services that ensure interoperability between smart aircraft and legacy airline systems, allowing airlines to increase efficiency, reduce costs and enhance operations
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•
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cybersecurity as a service to protect the integrity of our customers’ information systems across a wide variety of domains including aviation, airports, rail and critical infrastructure
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•
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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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September 30
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||||||
(in billions)
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2017
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2016
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||||
Interior Systems
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$
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3.8
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$
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—
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Commercial Systems
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2.2
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2.2
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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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0.8
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0.7
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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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9.6
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$
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5.7
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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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•
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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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•
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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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•
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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 April 2017, we acquired B/E Aerospace, which provides aircraft cabin interior products and services
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•
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in December 2016, we acquired Pulse.aero, a company specializing in self-bag drop technologies used by airlines and airports
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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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in March 2015, we acquired Pacific Avionics Pty. Limited (Pacific Avionics), which provides technologies used for wireless information distribution
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(in millions)
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2017
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2016
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2015
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||||||
Customer-funded
(1)
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$
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746
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$
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621
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$
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578
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Company-funded
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327
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224
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272
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|||
Total research and development expense
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1,073
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845
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850
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|||
Increase in pre-production engineering costs, net
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35
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128
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136
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Total research and development investment
(2)
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$
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1,108
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$
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973
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$
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986
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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 U.S. Government initiatives to gain increased access to intellectual property
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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 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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deferral of discretionary spending by our airline customers for cabin retrofit activities
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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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•
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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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•
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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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•
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adverse impacts on our access to short-term commercial paper borrowings or other credit sources
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•
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supply problems associated with any financial constraints faced by our suppliers
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•
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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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•
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regulatory requirements and potential changes, including imposition of tariffs or embargoes, export controls and other trade restrictions, anti-bribery, anti-money laundering, antitrust and data privacy requirements
|
•
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changes in government spending on defense programs
|
•
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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
|
•
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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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•
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challenges in achieving strategic objectives, cost and revenue synergies and other expected benefits
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•
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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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•
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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
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•
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loss of key employees of the acquired businesses or joint venture
|
•
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risk of diverting the attention of senior management from our existing operations
|
•
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risk of litigation associated with an acquisition
|
•
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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
|
•
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continued increases in the average life span of retirees
|
•
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material changes in legislation or market dynamics impacting medical or pension matters
|
•
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the effect declines in the stock and bond markets have on our pension plan assets
|
•
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reductions in the discount rate used to determine the present value of our retirement benefit obligations
|
•
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adverse effects to future results due to the theft, destruction, loss, corruption or release of personal data, confidential information or intellectual property
|
•
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operational or business disruptions resulting from the failure of IT or other systems and subsequent mitigation activities
|
•
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negative publicity resulting in reputation or brand damage with our customers, suppliers, employees, shareowners and others
|
•
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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 integration
|
•
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maintaining employee morale and retaining key management and other employees
|
•
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the possibility of faulty assumptions underlying expectations regarding the integration process
|
•
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retaining existing business and operational relationships and attracting new business and operational relationships
|
•
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consolidating corporate and administrative infrastructures and eliminating duplicative operations
|
•
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coordinating geographically separate organizations
|
•
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unanticipated issues in integrating information technology, communications and other systems
|
•
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unforeseen expenses or delays associated with the integration
|
•
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consolidating with or merging into any other corporation or conveying or transferring all or substantially all its properties and assets
|
•
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incurring secured debt
|
•
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entering into sale and leaseback transactions
|
•
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designating subsidiaries as restricted or unrestricted
|
•
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the market price of our common stock could decline
|
•
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we could owe a substantial termination fee to UTC under certain circumstances
|
•
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if the Merger Agreement is terminated and our board seeks another business combination, our shareowners cannot be certain that we will be able to find a party willing to enter into a transaction on terms equivalent to or more attractive than the terms that UTC has agreed to in the Merger Agreement
|
•
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time and resources, financial and other, committed by our management to matters relating to the UTC Merger could otherwise have been devoted to pursuing other beneficial opportunities
|
•
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we may experience negative reactions from the financial markets or from our customers, suppliers or employees
|
•
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we will be required to pay our costs relating to the UTC Merger, such as legal, accounting, financial advisory and printing fees, whether or not the UTC Merger is completed
|
Item 1B.
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Unresolved Staff Comments.
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Item 2.
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Properties.
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Location (in thousands of square feet)
|
|
Owned
Facilities
|
|
Leased
Facilities
|
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Total
|
|||
Interior Systems
|
|
|
|
|
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|
|||
U.S.
|
|
394
|
|
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2,087
|
|
|
2,481
|
|
Europe / Africa / Middle East
|
|
277
|
|
|
256
|
|
|
533
|
|
Asia-Pacific
|
|
286
|
|
|
142
|
|
|
428
|
|
Americas, excluding U.S.
|
|
—
|
|
|
267
|
|
|
267
|
|
Total
|
|
957
|
|
|
2,752
|
|
|
3,709
|
|
|
|
|
|
|
|
|
|||
Commercial and Government Systems
|
|
|
|
|
|
|
|
|
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U.S.
|
|
3,357
|
|
|
1,691
|
|
|
5,048
|
|
Europe / Africa / Middle East
|
|
330
|
|
|
226
|
|
|
556
|
|
Asia-Pacific
|
|
—
|
|
|
369
|
|
|
369
|
|
Americas, excluding U.S.
|
|
—
|
|
|
148
|
|
|
148
|
|
Total
|
|
3,687
|
|
|
2,434
|
|
|
6,121
|
|
|
|
|
|
|
|
|
|||
Information Management Services
|
|
|
|
|
|
|
|||
U.S.
|
|
39
|
|
|
555
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|
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594
|
|
Europe / Africa / Middle East
|
|
—
|
|
|
43
|
|
|
43
|
|
Asia-Pacific
|
|
—
|
|
|
26
|
|
|
26
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Americas, excluding U.S.
|
|
—
|
|
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1
|
|
|
1
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Total
|
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39
|
|
|
625
|
|
|
664
|
|
Combined Total
|
|
4,683
|
|
|
5,811
|
|
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10,494
|
|
|
|
|
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|
|||
Type of Facility (in thousands of square feet)
|
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Owned
Facilities
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Leased
Facilities
|
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Total
|
|||
Interior Systems
|
|
|
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|
|||
Manufacturing and service
|
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939
|
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2,432
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|
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3,371
|
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Sales, engineering and general office space
|
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18
|
|
|
320
|
|
|
338
|
|
|
|
|
|
|
|
|
|||
Commercial and Government Systems
|
|
|
|
|
|
|
|||
Manufacturing and service
|
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1,267
|
|
|
989
|
|
|
2,256
|
|
Sales, engineering and general office space
|
|
2,420
|
|
|
1,445
|
|
|
3,865
|
|
|
|
|
|
|
|
|
|
|
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Information Management Services
|
|
|
|
|
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|
|||
Manufacturing and service
|
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39
|
|
|
30
|
|
|
69
|
|
Sales, engineering and general office space
|
|
—
|
|
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595
|
|
|
595
|
|
Combined Total
|
|
4,683
|
|
|
5,811
|
|
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10,494
|
|
Item 3.
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Legal Proceedings.
|
Item 4.
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Mine Safety Disclosures.
|
Item 4A.
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Executive Officers of the Company.
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Name, Office and Position, and Principal Occupations and Employment
|
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Age
|
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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
|
|
57
|
|
Patrick E. Allen
—Senior Vice President and Chief Financial Officer since January 2005
|
|
53
|
|
Tatum J. Buse
—Vice President, Finance and Corporate Controller since September 2013; Vice President Cost Optimization prior thereto
|
|
43
|
|
Philip J. Jasper
—Executive Vice President and Chief Operating Officer, Government Systems since September 2012
|
|
49
|
|
Bruce M. King
—Senior Vice President, Operations since May 2011
|
|
56
|
|
Werner Lieberherr
—Executive Vice President and Chief Operating Officer, Interior Systems since April 2017; President and Chief Executive Officer of B/E Aerospace, Inc. from December 2014 to April 2017; President and Co-Chief Executive Officer of B/E Aerospace, Inc. from January 2014 to December 2014; President and Chief Operating Officer of B/E Aerospace, Inc. prior thereto
|
|
58
|
|
Jeffrey D. MacLauchlan
—Senior Vice President, Corporate Development since September 2014; Vice President, Corporate Development of Lockheed Martin Corporation prior thereto
|
|
58
|
|
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
|
|
52
|
|
Nan Mattai
—Senior Vice President, Engineering and Information Technology since August 2015; Senior Vice President, Engineering and Technology prior thereto
|
|
65
|
|
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
|
|
53
|
|
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
|
|
53
|
|
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
|
|
51
|
|
Kent L. Statler
—Executive Vice President and Chief Operating Officer, Commercial Systems since February 2010
|
|
52
|
|
Douglas E. Stenske
—Vice President, Treasurer and Risk Management since September 2013; Vice President, Treasurer and Financial Planning prior thereto
|
|
51
|
|
Robert A. Sturgell
—Senior Vice President, Washington Operations since April 2009
|
|
58
|
|
PART II
|
|
Item 5.
|
Market for the Company's Common Equity, Related Stockholder Matters and Company Purchases of Equity Securities.
|
|
|
2017
|
|
2016
|
||||||||||||
Fiscal Quarters
|
|
High
|
|
Low
|
|
High
|
|
Low
|
||||||||
First
|
|
$
|
96.55
|
|
|
$
|
78.54
|
|
|
$
|
95.11
|
|
|
$
|
82.26
|
|
Second
|
|
99.85
|
|
|
88.80
|
|
|
93.20
|
|
|
76.03
|
|
||||
Third
|
|
109.30
|
|
|
96.13
|
|
|
94.98
|
|
|
81.04
|
|
||||
Fourth
|
|
135.31
|
|
|
104.91
|
|
|
87.11
|
|
|
80.92
|
|
Fiscal Quarters
|
|
2017
|
|
2016
|
||||
First
|
|
$
|
0.33
|
|
|
$
|
0.33
|
|
Second
|
|
0.33
|
|
|
0.33
|
|
||
Third
|
|
0.33
|
|
|
0.33
|
|
||
Fourth
|
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0.33
|
|
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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, 2017 through July 31, 2017
|
|
—
|
|
|
$
|
—
|
|
|
—
|
|
|
$
|
285 million
|
August 1, 2017 through August 31, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
285 million
|
|
September 1, 2017 through September 30, 2017
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
285 million
|
|
Total / Average
|
|
—
|
|
|
—
|
|
|
—
|
|
|
|
|
Item 6.
|
Selected Financial Data.
|
|
|
Years Ended September 30
|
||||||||||||||||||
(dollars in millions, except per share amounts)
|
|
2017(a)
|
|
2016(b)
|
|
2015(c)
|
|
2014(d)
|
|
2013(e)
|
||||||||||
Statement of Operations Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Sales
|
|
$
|
6,822
|
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
4,979
|
|
|
$
|
4,474
|
|
Cost of sales
|
|
4,868
|
|
|
3,642
|
|
|
3,630
|
|
|
3,469
|
|
|
3,103
|
|
|||||
Selling, general and administrative expenses
|
|
732
|
|
|
638
|
|
|
606
|
|
|
594
|
|
|
495
|
|
|||||
Income from continuing operations
|
|
705
|
|
|
727
|
|
|
694
|
|
|
618
|
|
|
630
|
|
|||||
Income (loss) from discontinued operations, net of taxes
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
|
(14
|
)
|
|
2
|
|
|||||
Net income
|
|
705
|
|
|
728
|
|
|
686
|
|
|
604
|
|
|
632
|
|
|||||
Net income as a percent of sales
|
|
10.3
|
%
|
|
13.8
|
%
|
|
13.1
|
%
|
|
12.1
|
%
|
|
14.1
|
%
|
|||||
Diluted earnings per share from continuing operations
|
|
4.79
|
|
|
5.50
|
|
|
5.19
|
|
|
4.52
|
|
|
4.56
|
|
|||||
Statement of Financial Position Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Working capital(f)
|
|
$
|
1,691
|
|
|
$
|
1,144
|
|
|
$
|
1,164
|
|
|
$
|
1,054
|
|
|
$
|
1,096
|
|
Property
|
|
1,398
|
|
|
1,035
|
|
|
964
|
|
|
919
|
|
|
773
|
|
|||||
Goodwill and intangible assets
|
|
11,287
|
|
|
2,586
|
|
|
2,607
|
|
|
2,551
|
|
|
1,067
|
|
|||||
Total assets
|
|
17,997
|
|
|
7,699
|
|
|
7,294
|
|
|
6,994
|
|
|
5,394
|
|
|||||
Short-term debt
|
|
479
|
|
|
740
|
|
|
448
|
|
|
504
|
|
|
436
|
|
|||||
Long-term debt, net
|
|
6,676
|
|
|
1,374
|
|
|
1,670
|
|
|
1,652
|
|
|
560
|
|
|||||
Shareowners' equity
|
|
6,043
|
|
|
2,078
|
|
|
1,875
|
|
|
1,884
|
|
|
1,618
|
|
|||||
Other Data:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Capital expenditures
|
|
$
|
240
|
|
|
$
|
193
|
|
|
$
|
210
|
|
|
$
|
163
|
|
|
$
|
120
|
|
Depreciation and amortization
|
|
399
|
|
|
253
|
|
|
252
|
|
|
225
|
|
|
177
|
|
|||||
Dividends per share
|
|
1.32
|
|
|
1.32
|
|
|
1.26
|
|
|
1.20
|
|
|
1.20
|
|
|||||
Stock Price:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
High
|
|
$
|
135.31
|
|
|
$
|
95.11
|
|
|
$
|
99.37
|
|
|
$
|
84.06
|
|
|
$
|
75.25
|
|
Low
|
|
78.54
|
|
|
76.03
|
|
|
72.35
|
|
|
65.76
|
|
|
52.24
|
|
(a)
|
On April 13, 2017, we completed the acquisition of B/E Aerospace for
$6.5 billion
in cash and stock, plus the assumption of
$2.0 billion
of debt, net of cash acquired. To finance the acquisition and repay assumed debt, we issued 31.2 million shares of common stock, issued
$4.35 billion
of senior unsecured notes and borrowed
$1.5 billion
under a new senior unsecured syndicated term loan facility. Income from continuing operations includes $86 million of transaction, integration and financing costs associated with the acquisition of B/E Aerospace ($125 million before income taxes) and $15 million of transaction costs associated with the pending acquisition of the Company by UTC ($24 million before income taxes).
|
(b)
|
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 $28 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.
|
(c)
|
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.
|
(d)
|
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
|
(e)
|
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.
|
(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
|
(in billions, except per share amounts)
|
|
FY17 Results
|
Total sales
|
|
$6.822
|
Diluted earnings per share from continuing operations
|
|
$4.79
|
Operating cash flow from continuing operations
|
|
$1.264
|
Capital expenditures
|
|
$0.240
|
Total research and development investment
(4)
|
|
$1.108
|
|
Year Ended September 30
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Cash Provided by Operating Activities from Continuing Operations
|
$
|
1,264
|
|
|
$
|
723
|
|
|
$
|
749
|
|
Less: Property Additions
|
(240
|
)
|
|
(193
|
)
|
|
(210
|
)
|
|||
Free Cash Flow
|
$
|
1,024
|
|
|
$
|
530
|
|
|
$
|
539
|
|
•
|
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)
|
|
2017
|
|
2016
|
|
2015
|
||||||
U.S.
(1) (2)
|
|
$
|
3,873
|
|
|
$
|
3,292
|
|
|
$
|
3,174
|
|
Non-U.S.
(1)
|
|
2,949
|
|
|
1,967
|
|
|
2,070
|
|
|||
Total
|
|
$
|
6,822
|
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
Percent increase
|
|
30
|
%
|
|
—
|
%
|
|
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Total cost of sales
|
|
$
|
4,868
|
|
|
$
|
3,642
|
|
|
$
|
3,630
|
|
Percent of total sales
|
|
71.4
|
%
|
|
69.3
|
%
|
|
69.2
|
%
|
•
|
$1.140 billion of cost of sales from the recently acquired B/E Aerospace business
|
•
|
an $83 million increase from higher organic sales, which was favorably impacted by benefits from cost savings initiatives
|
•
|
a $40 million increase in employee incentive compensation costs
|
•
|
partially offset by $33 million of asset and restructuring charges recorded in 2016
|
•
|
further offset by a $9 million decrease in company-funded R&D expense in Government Systems and Information Management Services, as detailed in the Research and Development Expense section below
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Customer-funded:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
54
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
262
|
|
|
231
|
|
|
187
|
|
|||
Government Systems
|
|
421
|
|
|
381
|
|
|
382
|
|
|||
Information Management Services
|
|
9
|
|
|
9
|
|
|
9
|
|
|||
Total customer-funded
|
|
746
|
|
|
621
|
|
|
578
|
|
|||
Company-funded:
|
|
|
|
|
|
|
|
|
||||
Interior Systems
|
|
112
|
|
|
—
|
|
|
—
|
|
|||
Commercial Systems
|
|
143
|
|
|
143
|
|
|
182
|
|
|||
Government Systems
|
|
72
|
|
|
79
|
|
|
88
|
|
|||
Information Management Services
(1)
|
|
—
|
|
|
2
|
|
|
2
|
|
|||
Total company-funded
|
|
327
|
|
|
224
|
|
|
272
|
|
|||
Total research and development expense
|
|
$
|
1,073
|
|
|
$
|
845
|
|
|
$
|
850
|
|
Percent of total sales
|
|
15.7
|
%
|
|
16.1
|
%
|
|
16.2
|
%
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Selling, general and administrative expenses
|
|
$
|
732
|
|
|
$
|
638
|
|
|
$
|
606
|
|
Percent of total sales
|
|
10.7
|
%
|
|
12.1
|
%
|
|
11.6
|
%
|
•
|
$99 million of SG&A costs from the recently acquired B/E Aerospace business
|
•
|
international customer bankruptcy and employee severance charges in 2017
|
•
|
a $3 million increase in employee incentive compensation costs
|
•
|
partially offset by $12 million of restructuring and asset impairment charges recorded in 2016 and the benefits of cost savings initiatives
|
•
|
$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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Interest expense
|
|
$
|
187
|
|
|
$
|
64
|
|
|
$
|
61
|
|
•
|
$92 million of incremental interest on the new debt issued to fund the B/E Aerospace acquisition
|
•
|
$29 million of fees incurred in 2017 associated with the bridge credit agreement entered into in December 2016 pursuant to the acquisition of B/E Aerospace
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Other income, net
|
|
$
|
16
|
|
|
$
|
20
|
|
|
$
|
15
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Income tax expense
|
|
$
|
226
|
|
|
$
|
208
|
|
|
$
|
268
|
|
Effective income tax rate
|
|
24.3
|
%
|
|
22.2
|
%
|
|
27.9
|
%
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Income from continuing operations
|
|
$
|
705
|
|
|
$
|
727
|
|
|
$
|
694
|
|
Percent of sales
|
|
10.3
|
%
|
|
13.8
|
%
|
|
13.2
|
%
|
|||
|
|
|
|
|
|
|
||||||
Income (loss) from discontinued operations, net of taxes
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
|||
Net income
|
|
$
|
705
|
|
|
$
|
728
|
|
|
$
|
686
|
|
|
|
|
|
|
|
|
||||||
Diluted earnings per share from continuing operations
|
|
$
|
4.79
|
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
Diluted earnings (loss) per share from discontinued operations
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
|||
Diluted earnings per share
|
|
$
|
4.79
|
|
|
$
|
5.51
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
|
||||||
Weighted average diluted common shares
|
|
147.2
|
|
|
132.1
|
|
|
133.7
|
|
•
|
$125 million of pre-tax transaction, integration and financing costs associated with the acquisition of B/E Aerospace
|
•
|
$92 million of incremental interest expense on the new debt issued to fund the B/E Aerospace acquisition
|
•
|
$24 million of pre-tax transaction costs associated with the pending acquisition of Rockwell Collins by UTC
|
•
|
an $18 million increase in income tax expense as detailed in the Income Tax Expense from Continuing Operations section above
|
•
|
partially offset by a $174 million increase in operating earnings from the recently acquired Interior Systems business, a $30 million increase in Information Management Services operating earnings and a $19 million increase in Government Systems operating earnings, net of a $12 million decrease in Commercial Systems operating earnings
|
•
|
also offset by the absence of $45 million of pre-tax restructuring and asset impairment charges recorded in 2016
|
•
|
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
|
•
|
commercial aircraft seats, including an extensive line of super first class, first class, business class, economy class and regional aircraft seats
|
•
|
a full line of aircraft food and beverage preparation and storage equipment, including coffee and espresso makers, water boilers, beverage containers, refrigerators, freezers, chillers and a line of microwave, high efficiency convection and steam ovens
|
•
|
modular lavatory systems, wastewater management systems and galley systems
|
•
|
both chemical and gaseous aircraft oxygen storage, distribution and delivery systems, protective breathing equipment and a broad range of lighting products
|
•
|
business jet and general aviation interior products, including an extensive line of executive aircraft and helicopter seats, direct and indirect overhead lighting systems, exterior lighting systems, passenger and crew oxygen systems, air valve systems and high-end aircraft monuments
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Interior products and services
|
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Aircraft seating
|
|
585
|
|
|
—
|
|
|
—
|
|
|||
Total
|
|
$
|
1,406
|
|
|
$
|
—
|
|
|
$
|
—
|
|
•
|
a $210 million increase in interior products and services sales, primarily due to increased original equipment deliveries of Airbus A350 galleys, Boeing 737 advanced lavatories and oxygen generators across multiple platforms
|
•
|
a $112 million decrease in aircraft seating, primarily due to the completion of certain super first class and retrofit programs
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Segment operating earnings
|
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Percent of sales
|
|
12.4
|
%
|
|
—
|
%
|
|
—
|
%
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Air transport aviation electronics:
|
|
|
|
|
|
|
||||||
Original equipment
|
|
$
|
910
|
|
|
$
|
850
|
|
|
$
|
806
|
|
Aftermarket
|
|
541
|
|
|
542
|
|
|
522
|
|
|||
Wide-body in-flight entertainment
|
|
19
|
|
|
38
|
|
|
57
|
|
|||
Total air transport aviation electronics
|
|
1,470
|
|
|
1,430
|
|
|
1,385
|
|
|||
Business and regional aviation electronics:
|
|
|
|
|
|
|
|
|
||||
Original equipment
|
|
477
|
|
|
534
|
|
|
640
|
|
|||
Aftermarket
|
|
471
|
|
|
431
|
|
|
409
|
|
|||
Total business and regional aviation electronics
|
|
948
|
|
|
965
|
|
|
1,049
|
|
|||
Total
|
|
$
|
2,418
|
|
|
$
|
2,395
|
|
|
$
|
2,434
|
|
Percent increase (decrease)
|
|
1%
|
|
|
(2)%
|
|
|
|
|
•
|
original equipment sales
increased
$60 million
, or
7 percent
, primarily due to higher Boeing 737 and Airbus A350 production rates, partially offset by lower legacy wide-body production rates
|
•
|
aftermarket sales
decreased
$1 million
, primarily due to lower retrofit and service and support sales, partially offset by higher regulatory mandate upgrade activity and higher used aircraft equipment sales
|
•
|
wide-body IFE sales
decreased
$19 million
, or
50 percent
, as airlines decommissioned their legacy IFE systems
|
•
|
original equipment sales
decreased
$57 million
, or
11 percent
, primarily due to lower business and regional aircraft OEM production rates, partially offset by higher product deliveries for the Bombardier CSeries and Global 7000 programs and higher customer-funded development program revenues
|
•
|
aftermarket sales
increased
$40 million
, or
9 percent
, primarily due to higher regulatory mandate upgrade and flight deck retrofit activity
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Segment operating earnings
|
|
$
|
519
|
|
|
$
|
531
|
|
|
$
|
554
|
|
Percent of sales
|
|
21.5
|
%
|
|
22.2
|
%
|
|
22.8
|
%
|
•
|
a $19 million increase in employee incentive compensation costs
|
•
|
a $12 million increase in international customer bankruptcy and employee severance charges in 2017
|
•
|
partially offset by benefits from cost savings initiatives
|
•
|
in addition, the benefits of a $23 million increase in sales were unfavorably impacted by sales mix, as lower margin customer-funded development revenues increased and higher margin business jet OEM sales decreased
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Avionics
|
|
$
|
1,472
|
|
|
$
|
1,483
|
|
|
$
|
1,436
|
|
Communication and navigation
|
|
808
|
|
|
723
|
|
|
751
|
|
|||
Total
|
|
$
|
2,280
|
|
|
$
|
2,206
|
|
|
$
|
2,187
|
|
Percent increase
|
|
3
|
%
|
|
1
|
%
|
|
|
|
•
|
a $25 million decrease from lower fixed wing sales, primarily due to the wind-down of legacy tanker hardware deliveries and lower deliveries for various fighter platforms as a result of production issues, net of higher development program sales
|
•
|
partially offset by a $14 million increase from higher simulation and training sales
|
•
|
a $23 million increase from higher data links sales
|
•
|
a $22 million increase from higher deliveries of GPS-related products
|
•
|
$40 million in other net increases to revenue, primarily due to higher test and training range sales and higher legacy communication sales
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Segment operating earnings
|
|
$
|
496
|
|
|
$
|
477
|
|
|
$
|
457
|
|
Percent of sales
|
|
21.8
|
%
|
|
21.6
|
%
|
|
20.9
|
%
|
•
|
the $74 million increase in sales volume discussed in the Government Systems sales section above, which resulted in a $43 million increase in cost and incremental earnings of $31 million, or 42 percent of the higher sales volume. The margins on the sales increase were favorably impacted by benefits from cost savings initiatives
|
•
|
a $7 million decrease in company-funded R&D expense
|
•
|
partially offset by a $19 million increase in employee incentive compensation costs
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
$
|
718
|
|
|
$
|
658
|
|
|
$
|
623
|
|
Percent increase
|
|
9
|
%
|
|
6
|
%
|
|
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Segment operating earnings
|
|
$
|
137
|
|
|
$
|
107
|
|
|
$
|
95
|
|
Percent of sales
|
|
19.1
|
%
|
|
16.3
|
%
|
|
15.2
|
%
|
•
|
a $60 million increase in sales volume discussed in the Information Management Services sales section above, which resulted in a $33 million increase in cost and an increase in earnings of $27 million, or 45 percent of the higher sales volume. The margins on the sales increase were favorably impacted by benefits from cost savings initiatives
|
•
|
operating earnings were positively impacted in 2017 by the favorable resolution of certain prior year claims associated with international business jet support services, in excess of the 2016 benefit associated with similar claims
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
General corporate, net
|
|
$
|
57
|
|
|
$
|
44
|
|
|
$
|
59
|
|
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Pension benefits
|
$
|
(25
|
)
|
|
$
|
(24
|
)
|
|
$
|
(6
|
)
|
Other retirement benefits
|
14
|
|
|
14
|
|
|
11
|
|
|||
Net benefit (income) expense
|
$
|
(11
|
)
|
|
$
|
(10
|
)
|
|
$
|
5
|
|
FINANCIAL CONDITION AND LIQUIDITY
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash provided by operating activities from continuing operations
|
|
$
|
1,264
|
|
|
$
|
723
|
|
|
$
|
749
|
|
•
|
higher cash receipts from customers, which increased by $1.867 billion to $6.947 billion in 2017 compared to $5.080 billion in 2016, primarily due to cash receipts of the recently acquired B/E Aerospace business. The increase in cash receipts from customers was more than the sales volume increase of $1.563 billion due to the timing of sales relative to the collection of receivables from customers
|
•
|
partially offset by higher payments for production inventory and other operating costs, which increased by $1.135 billion to $5.152 billion in 2017, compared to $4.017 billion in 2016, primarily due to cash payments of the recently acquired B/E Aerospace business
|
•
|
also offset by cash payments for income taxes, which increased $100 million to $230 million in 2017, compared to $130 million in 2016. The increase in cash used for income tax payments was primarily due to the retroactive reinstatement of the Federal R&D tax credit as a result of the Protecting Americans from Tax Hikes Act in 2016, as well as pre-tax income associated with the recently acquired B/E Aerospace business
|
•
|
further offset by payments for transaction costs associated with the B/E Aerospace acquisition of $114 million in 2017
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash used for investing activities from continuing operations
|
|
$
|
(3,674
|
)
|
|
$
|
(209
|
)
|
|
$
|
(294
|
)
|
•
|
$3.417 billion in cash consideration paid, net of cash acquired, related to the April 2017 acquisition of B/E Aerospace
|
•
|
a $47 million increase in cash payments for property additions to $240 million in 2017, primarily driven by the B/E Aerospace acquisition
|
•
|
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
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Cash provided by (used for) financing activities from continuing operations
|
|
$
|
2,759
|
|
|
$
|
(422
|
)
|
|
$
|
(492
|
)
|
•
|
$3.980 billion related to financing of the April 2017 B/E Aerospace acquisition. $6.099 billion in net proceeds from the issuance of long-term debt were principally used to repay $2.119 billion of assumed B/E Aerospace debt, finance the cash portion of the B/E Aerospace purchase price, pay related transaction fees and expenses and repay approximately $300 million of the Company's outstanding commercial paper borrowings
|
•
|
cash repurchases of common stock decreased $215 million to $46 million in 2017, compared to $261 million in 2016
|
•
|
partially offset by a $930 million increase in repayments of long-term debt and a $102 million decrease in the net proceeds from short-term commercial paper borrowings
|
•
|
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
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Amount of share repurchases
|
|
$
|
39
|
|
|
$
|
255
|
|
|
$
|
325
|
|
Number of shares repurchased
|
|
0.4
|
|
|
2.9
|
|
|
3.8
|
|
|||
Weighted average price per share
|
|
$
|
104.32
|
|
|
$
|
87.30
|
|
|
$
|
85.32
|
|
|
September 30
|
||||||
(in millions)
|
2017
|
|
2016
|
||||
Cash and cash equivalents
|
$
|
703
|
|
|
$
|
340
|
|
|
|
|
|
||||
Short-term debt
|
(479
|
)
|
|
(740
|
)
|
||
Long-term debt, net
|
(6,676
|
)
|
|
(1,374
|
)
|
||
Total Debt
|
$
|
(7,155
|
)
|
|
$
|
(2,114
|
)
|
Total equity
|
$
|
6,050
|
|
|
$
|
2,084
|
|
Debt to total capitalization
(1)
|
54
|
%
|
|
50
|
%
|
Credit Rating Agency
|
|
Short-Term Rating
|
|
Long-Term Rating
|
|
Outlook
|
Fitch Ratings
|
|
F2
|
|
BBB
|
|
Positive
|
Moody’s Investors Service
|
|
P-2
|
|
Baa2
|
|
Stable
|
Standard & Poor’s
|
|
A-2
|
|
BBB
|
|
Positive
|
|
|
Payments Due by Period
|
||||||||||||||||||
(in millions)
|
|
Total
|
|
Less than
1 Year
|
|
1 - 3
Years
|
|
4 - 5
Years
|
|
Thereafter
|
||||||||||
Long-term debt
|
|
$
|
6,870
|
|
|
$
|
150
|
|
|
$
|
1,320
|
|
|
$
|
1,350
|
|
|
$
|
4,050
|
|
Interest on long-term debt
|
|
2,788
|
|
|
234
|
|
|
436
|
|
|
365
|
|
|
1,753
|
|
|||||
Non-cancelable operating leases
|
|
441
|
|
|
83
|
|
|
118
|
|
|
76
|
|
|
164
|
|
|||||
Non-cancelable capital leases, including interest
|
|
71
|
|
|
6
|
|
|
11
|
|
|
11
|
|
|
43
|
|
|||||
Purchase obligations:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Purchase orders
|
|
2,125
|
|
|
1,665
|
|
|
323
|
|
|
131
|
|
|
6
|
|
|||||
Purchase contracts
|
|
173
|
|
|
38
|
|
|
61
|
|
|
47
|
|
|
27
|
|
|||||
Total
|
|
$
|
12,468
|
|
|
$
|
2,176
|
|
|
$
|
2,269
|
|
|
$
|
1,980
|
|
|
$
|
6,043
|
|
|
|
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)
|
|
$
|
240
|
|
|
$
|
179
|
|
|
$
|
58
|
|
|
$
|
—
|
|
|
$
|
3
|
|
RECENTLY ISSUED ACCOUNTING STANDARDS
|
ENVIRONMENTAL
|
CRITICAL ACCOUNTING POLICIES
|
|
|
September 30
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Pre-production engineering costs
|
|
$
|
1,175
|
|
|
$
|
1,140
|
|
Up-front sales incentives
|
|
243
|
|
|
233
|
|
||
Total Program Investments
|
|
$
|
1,418
|
|
|
$
|
1,373
|
|
•
|
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)
|
2017
|
|
2016
|
|
2015
|
||||||
Amortization of pre-production engineering
|
$
|
59
|
|
|
$
|
49
|
|
|
$
|
47
|
|
Amortization of up-front sales incentives
|
13
|
|
|
18
|
|
|
15
|
|
|||
Total amortization of Program Investments
|
$
|
72
|
|
|
$
|
67
|
|
|
$
|
62
|
|
(in millions)
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
|
$
|
95
|
|
|
$
|
130
|
|
|
$
|
147
|
|
|
$
|
144
|
|
|
$
|
137
|
|
|
$
|
522
|
|
Anticipated amortization expense for up-front sales incentives
|
20
|
|
|
25
|
|
|
27
|
|
|
27
|
|
|
27
|
|
|
117
|
|
||||||
Total anticipated amortization for Program Investments
|
$
|
115
|
|
|
$
|
155
|
|
|
$
|
174
|
|
|
$
|
171
|
|
|
$
|
164
|
|
|
$
|
639
|
|
|
|
Change in Assumption (in millions)
|
||
Assumption
|
|
25 Basis Point Increase
|
|
25 Basis Point Decrease
|
Pension obligation discount rate
|
|
$112 pension projected benefit obligation decrease
|
|
$116 pension projected benefit obligation increase
|
Pension obligation discount rate
|
|
$2 pension expense increase
|
|
$2 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.
|
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
|
||||||
|
2017
|
|
2016
|
||||
ASSETS
|
|
|
|
||||
Current Assets:
|
|
|
|
||||
Cash and cash equivalents
|
$
|
703
|
|
|
$
|
340
|
|
Receivables, net
|
1,426
|
|
|
1,094
|
|
||
Inventories, net
|
2,451
|
|
|
1,939
|
|
||
Other current assets
|
180
|
|
|
117
|
|
||
Total current assets
|
4,760
|
|
|
3,490
|
|
||
|
|
|
|
||||
Property
|
1,398
|
|
|
1,035
|
|
||
Goodwill
|
9,158
|
|
|
1,919
|
|
||
Customer Relationship Intangible Assets
|
1,525
|
|
|
467
|
|
||
Other Intangible Assets
|
604
|
|
|
200
|
|
||
Deferred Income Tax Asset
|
21
|
|
|
219
|
|
||
Other Assets
|
531
|
|
|
369
|
|
||
TOTAL ASSETS
|
$
|
17,997
|
|
|
$
|
7,699
|
|
LIABILITIES AND EQUITY
|
|
|
|
|
|
||
Current Liabilities:
|
|
|
|
|
|
||
Short-term debt
|
$
|
479
|
|
|
$
|
740
|
|
Accounts payable
|
927
|
|
|
527
|
|
||
Compensation and benefits
|
385
|
|
|
269
|
|
||
Advance payments from customers
|
361
|
|
|
283
|
|
||
Accrued customer incentives
|
287
|
|
|
246
|
|
||
Product warranty costs
|
186
|
|
|
87
|
|
||
Other current liabilities
|
444
|
|
|
194
|
|
||
Total current liabilities
|
3,069
|
|
|
2,346
|
|
||
|
|
|
|
||||
Long-term Debt, Net
|
6,676
|
|
|
1,374
|
|
||
Retirement Benefits
|
1,208
|
|
|
1,660
|
|
||
Deferred Income Tax Liability
|
331
|
|
|
1
|
|
||
Other Liabilities
|
663
|
|
|
234
|
|
||
|
|
|
|
||||
Equity:
|
|
|
|
|
|
||
Common stock ($0.01 par value; shares authorized: 1,000; shares issued: September 30, 2017, 175.0; September 30, 2016, 143.8)
|
2
|
|
|
1
|
|
||
Additional paid-in capital
|
4,559
|
|
|
1,506
|
|
||
Retained earnings
|
3,838
|
|
|
3,327
|
|
||
Accumulated other comprehensive loss
|
(1,575
|
)
|
|
(1,898
|
)
|
||
Common stock in treasury, at cost (shares held: September 30, 2017, 12.1; September
30, 2016, 13.6)
|
(781
|
)
|
|
(858
|
)
|
||
Total shareowners’ equity
|
6,043
|
|
|
2,078
|
|
||
Noncontrolling interest
|
7
|
|
|
6
|
|
||
Total equity
|
6,050
|
|
|
2,084
|
|
||
TOTAL LIABILITIES AND EQUITY
|
$
|
17,997
|
|
|
$
|
7,699
|
|
|
Year Ended September 30
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
|
|
|
|
||||||
Product sales
|
$
|
5,885
|
|
|
$
|
4,411
|
|
|
$
|
4,438
|
|
Service sales
|
937
|
|
|
848
|
|
|
806
|
|
|||
Total sales
|
6,822
|
|
|
5,259
|
|
|
5,244
|
|
|||
|
|
|
|
|
|
||||||
Costs, expenses and other:
|
|
|
|
|
|
|
|
||||
Product cost of sales
|
4,237
|
|
|
3,045
|
|
|
3,064
|
|
|||
Service cost of sales
|
631
|
|
|
597
|
|
|
566
|
|
|||
Selling, general and administrative expenses
|
732
|
|
|
638
|
|
|
606
|
|
|||
Transaction and integration costs
|
120
|
|
|
—
|
|
|
—
|
|
|||
Interest expense
|
187
|
|
|
64
|
|
|
61
|
|
|||
Other income, net
|
(16
|
)
|
|
(20
|
)
|
|
(15
|
)
|
|||
Total costs, expenses and other
|
5,891
|
|
|
4,324
|
|
|
4,282
|
|
|||
|
|
|
|
|
|
||||||
Income from continuing operations before income taxes
|
931
|
|
|
935
|
|
|
962
|
|
|||
Income tax expense
|
226
|
|
|
208
|
|
|
268
|
|
|||
Income from continuing operations
|
705
|
|
|
727
|
|
|
694
|
|
|||
|
|
|
|
|
|
||||||
Income (loss) from discontinued operations, net of taxes
|
—
|
|
|
1
|
|
|
(8
|
)
|
|||
|
|
|
|
|
|
||||||
Net income
|
$
|
705
|
|
|
$
|
728
|
|
|
$
|
686
|
|
|
|
|
|
|
|
||||||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
||||
Basic
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.85
|
|
|
$
|
5.57
|
|
|
$
|
5.25
|
|
Discontinued operations
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
|||
Basic earnings per share
|
$
|
4.85
|
|
|
$
|
5.58
|
|
|
$
|
5.19
|
|
|
|
|
|
|
|
||||||
Diluted
|
|
|
|
|
|
||||||
Continuing operations
|
$
|
4.79
|
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
Discontinued operations
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
|||
Diluted earnings per share
|
$
|
4.79
|
|
|
$
|
5.51
|
|
|
$
|
5.13
|
|
|
|
|
|
|
|
||||||
Weighted average common shares:
|
|
|
|
|
|
||||||
Basic
|
145.5
|
|
|
130.5
|
|
|
132.3
|
|
|||
Diluted
|
147.2
|
|
|
132.1
|
|
|
133.7
|
|
|||
|
|
|
|
|
|
||||||
Cash dividends per share
|
$
|
1.32
|
|
|
$
|
1.32
|
|
|
$
|
1.26
|
|
|
Year Ended September 30
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Net income
|
$
|
705
|
|
|
$
|
728
|
|
|
$
|
686
|
|
Unrealized foreign currency translation and other adjustments
|
77
|
|
|
(20
|
)
|
|
(41
|
)
|
|||
Pension and other retirement benefits adjustments (net of taxes: 2017, $(140); 2016, $102; 2015, $169)
|
243
|
|
|
(181
|
)
|
|
(289
|
)
|
|||
Foreign currency cash flow hedge adjustments (net of taxes: 2017, $0; 2016, $1; 2015, $(1))
|
3
|
|
|
2
|
|
|
(3
|
)
|
|||
Comprehensive income
|
$
|
1,028
|
|
|
$
|
529
|
|
|
$
|
353
|
|
|
Year Ended September 30
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Operating Activities:
|
|
|
|
|
|
||||||
Net income
|
$
|
705
|
|
|
$
|
728
|
|
|
$
|
686
|
|
Income (loss) from discontinued operations, net of tax
|
—
|
|
|
1
|
|
|
(8
|
)
|
|||
Income from continuing operations
|
705
|
|
|
727
|
|
|
694
|
|
|||
Adjustments to arrive at cash provided by operating activities:
|
|
|
|
|
|
||||||
Non-cash restructuring charges
|
—
|
|
|
6
|
|
|
—
|
|
|||
Depreciation
|
168
|
|
|
144
|
|
|
152
|
|
|||
Amortization of intangible assets, pre-production engineering costs and other
|
226
|
|
|
109
|
|
|
100
|
|
|||
Amortization of acquired contract liability
|
(69
|
)
|
|
—
|
|
|
—
|
|
|||
Amortization of inventory fair value adjustment
|
74
|
|
|
—
|
|
|
—
|
|
|||
Stock-based compensation expense
|
31
|
|
|
27
|
|
|
24
|
|
|||
Compensation and benefits paid in common stock
|
67
|
|
|
59
|
|
|
50
|
|
|||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
—
|
|
|
(13
|
)
|
|||
Deferred income taxes
|
43
|
|
|
48
|
|
|
50
|
|
|||
Pension plan contributions
|
(68
|
)
|
|
(69
|
)
|
|
(69
|
)
|
|||
Fair value of acquisition-related contingent consideration
|
—
|
|
|
1
|
|
|
—
|
|
|||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:
|
|
|
|
|
|
||||||
Receivables
|
121
|
|
|
(91
|
)
|
|
(46
|
)
|
|||
Production inventory
|
(50
|
)
|
|
(18
|
)
|
|
(23
|
)
|
|||
Pre-production engineering costs
|
(94
|
)
|
|
(177
|
)
|
|
(183
|
)
|
|||
Accounts payable
|
141
|
|
|
38
|
|
|
(29
|
)
|
|||
Compensation and benefits
|
39
|
|
|
(4
|
)
|
|
24
|
|
|||
Advance payments from customers
|
10
|
|
|
(82
|
)
|
|
16
|
|
|||
Accrued customer incentives
|
(8
|
)
|
|
14
|
|
|
30
|
|
|||
Product warranty costs
|
(21
|
)
|
|
(2
|
)
|
|
(14
|
)
|
|||
Income taxes
|
(45
|
)
|
|
25
|
|
|
50
|
|
|||
Other assets and liabilities
|
(6
|
)
|
|
(32
|
)
|
|
(64
|
)
|
|||
Cash Provided by Operating Activities from Continuing Operations
|
1,264
|
|
|
723
|
|
|
749
|
|
|||
Investing Activities:
|
|
|
|
|
|
|
|
||||
Property additions
|
(240
|
)
|
|
(193
|
)
|
|
(210
|
)
|
|||
Acquisition of businesses, net of cash acquired
|
(3,429
|
)
|
|
(17
|
)
|
|
(74
|
)
|
|||
Other investing activities
|
(5
|
)
|
|
1
|
|
|
(10
|
)
|
|||
Cash (Used for) Investing Activities from Continuing Operations
|
(3,674
|
)
|
|
(209
|
)
|
|
(294
|
)
|
|||
Financing Activities:
|
|
|
|
|
|
|
|
||||
Repayment of long-term debt, including current portion
|
(930
|
)
|
|
—
|
|
|
—
|
|
|||
Repayment of acquired long-term debt
|
(2,119
|
)
|
|
—
|
|
|
—
|
|
|||
Purchases of treasury stock
|
(46
|
)
|
|
(261
|
)
|
|
(330
|
)
|
|||
Cash dividends
|
(194
|
)
|
|
(172
|
)
|
|
(167
|
)
|
|||
Increase in long-term borrowings
|
6,099
|
|
|
—
|
|
|
—
|
|
|||
Decrease in short-term commercial paper borrowings, net
|
(110
|
)
|
|
(8
|
)
|
|
(56
|
)
|
|||
Proceeds from the exercise of stock options
|
64
|
|
|
21
|
|
|
49
|
|
|||
Excess tax benefit from stock-based compensation (see Note 2)
|
—
|
|
|
—
|
|
|
13
|
|
|||
Other financing activities
|
(5
|
)
|
|
(2
|
)
|
|
(1
|
)
|
|||
Cash Provided by (Used for) Financing Activities from Continuing Operations
|
2,759
|
|
|
(422
|
)
|
|
(492
|
)
|
|
Year Ended September 30
|
||||||||||
|
2017
|
|
2016
|
|
2015
|
||||||
Effect of exchange rate changes on cash and cash equivalents
|
14
|
|
|
(4
|
)
|
|
(23
|
)
|
|||
Discontinued Operations:
|
|
|
|
|
|
||||||
Operating activities
|
—
|
|
|
—
|
|
|
(14
|
)
|
|||
Investing activities
|
—
|
|
|
—
|
|
|
3
|
|
|||
Cash (Used For) Discontinued Operations
|
—
|
|
|
—
|
|
|
(11
|
)
|
|||
Net Change in Cash and Cash Equivalents
|
363
|
|
|
88
|
|
|
(71
|
)
|
|||
Cash and Cash Equivalents at Beginning of Period
|
340
|
|
|
252
|
|
|
323
|
|
|||
Cash and Cash Equivalents at End of Period
|
$
|
703
|
|
|
$
|
340
|
|
|
$
|
252
|
|
|
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, 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
|
)
|
|||||||
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
|
|
Net income
|
—
|
|
|
—
|
|
|
—
|
|
|
705
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
705
|
|
|||||||
Other comprehensive income
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|
—
|
|
|
—
|
|
|
323
|
|
|||||||
Cash dividends
|
—
|
|
|
—
|
|
|
—
|
|
|
(194
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(194
|
)
|
|||||||
Shares issued:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||
Exercise of stock options
|
1.1
|
|
|
—
|
|
|
(5
|
)
|
|
—
|
|
|
—
|
|
|
69
|
|
|
—
|
|
|
64
|
|
|||||||
Vesting of performance shares and restricted stock units
|
0.2
|
|
|
—
|
|
|
(12
|
)
|
|
—
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
(7
|
)
|
|||||||
Employee stock purchase plan
|
0.1
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
7
|
|
|
—
|
|
|
11
|
|
|||||||
Employee savings plan
|
0.5
|
|
|
—
|
|
|
21
|
|
|
—
|
|
|
—
|
|
|
35
|
|
|
—
|
|
|
56
|
|
|||||||
B/E Aerospace business acquisition
|
31.2
|
|
|
1
|
|
|
3,014
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
3,015
|
|
|||||||
Stock-based compensation
|
—
|
|
|
—
|
|
|
31
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
31
|
|
|||||||
Treasury share repurchases
|
(0.4
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(39
|
)
|
|
—
|
|
|
(39
|
)
|
|||||||
Other
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
1
|
|
|||||||
Balance at September 30, 2017
|
162.9
|
|
|
$
|
2
|
|
|
$
|
4,559
|
|
|
$
|
3,838
|
|
|
$
|
(1,575
|
)
|
|
$
|
(781
|
)
|
|
$
|
7
|
|
|
$
|
6,050
|
|
1.
|
Business Description and Basis of Presentation
|
2.
|
Significant Accounting Policies
|
3.
|
Acquisitions, Goodwill and Intangible Assets
|
(in millions)
|
|
||
Cash consideration
|
$
|
3,521
|
|
Value of common stock issued for B/E Aerospace common stock
(1)
|
3,015
|
|
|
Total purchase price
|
$
|
6,536
|
|
(in millions)
|
April 13, 2017
|
||
Cash and cash equivalents
|
$
|
104
|
|
Receivables, net
|
485
|
|
|
Inventories, net
(1)
|
545
|
|
|
Other current assets
|
56
|
|
|
Property
|
279
|
|
|
Intangible Assets
|
1,586
|
|
|
Other Assets
|
53
|
|
|
Total Identifiable Assets Acquired
|
3,108
|
|
|
|
|
||
Accounts payable
|
(234
|
)
|
|
Compensation and benefits
|
(75
|
)
|
|
Advance payments from customers
|
(62
|
)
|
|
Accrued customer incentives
|
(48
|
)
|
|
Product warranty costs
|
(117
|
)
|
|
Other current liabilities
(2)
|
(359
|
)
|
|
Long-term Debt, Net
|
(2,119
|
)
|
|
Retirement Benefits
|
(12
|
)
|
|
Deferred Income Tax Liability
|
(299
|
)
|
|
Other Liabilities
(2)
|
(432
|
)
|
|
Total Liabilities Assumed
|
(3,757
|
)
|
|
Net Identifiable Assets Acquired, excluding Goodwill
|
(649
|
)
|
|
Goodwill
|
7,185
|
|
|
Net Assets Acquired
|
$
|
6,536
|
|
|
Weighted Average Life (in years)
|
|
Fair Value
(in millions)
|
||
Developed technology
|
9
|
|
$
|
435
|
|
Seating customer relationships
|
6
|
|
860
|
|
|
Other customer relationships
|
8
|
|
291
|
|
|
Total
|
7
|
|
$
|
1,586
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Transaction and integration costs
|
|
$
|
96
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Interest expense
|
|
29
|
|
|
—
|
|
|
—
|
|
|||
Total Transaction, integration and financing costs
|
|
$
|
125
|
|
|
$
|
—
|
|
|
$
|
—
|
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
||||
Pro forma sales
|
|
$
|
8,376
|
|
|
$
|
8,121
|
|
Pro forma net income attributable to common shareowners from continuing operations
|
|
886
|
|
|
691
|
|
||
Pro forma basic earnings per share from continuing operations
|
|
6.09
|
|
|
4.27
|
|
||
Pro forma diluted earnings per share from continuing operations
|
|
6.02
|
|
|
4.23
|
|
(in millions)
|
|
2017
|
|
2016
|
||||
Increases (decreases) to pro forma net income:
|
|
|
|
|
||||
Net reduction to depreciation resulting from fixed asset adjustments
(1)
|
|
$
|
12
|
|
|
$
|
21
|
|
Advisory, legal and accounting service fees
(2)
|
|
156
|
|
|
(123
|
)
|
||
Amortization of acquired B/E Aerospace intangible assets, net
(3)
|
|
(83
|
)
|
|
(152
|
)
|
||
Interest expense incurred on acquisition financing, net
(4)
|
|
(17
|
)
|
|
(65
|
)
|
||
Long-term contract program adjustments
(5)
|
|
(59
|
)
|
|
(128
|
)
|
||
Acquired contract liability amortization
(6)
|
|
47
|
|
|
119
|
|
||
Inventory fair value adjustment amortization
(7)
|
|
56
|
|
|
(56
|
)
|
||
Compensation adjustments
(8)
|
|
6
|
|
|
14
|
|
(in millions)
|
Interior Systems
|
|
Commercial
Systems
|
|
Government
Systems
|
|
Information Management Services
|
|
Total
|
||||||||||
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
|
|
|||||
B/E Aerospace acquisition
|
7,185
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7,185
|
|
|||||
Pulse.aero acquisition
|
—
|
|
|
—
|
|
|
—
|
|
|
12
|
|
|
12
|
|
|||||
Foreign currency translation adjustments
|
38
|
|
|
(1
|
)
|
|
3
|
|
|
2
|
|
|
42
|
|
|||||
Balance at September 30, 2017
|
$
|
7,223
|
|
|
$
|
325
|
|
|
$
|
506
|
|
|
$
|
1,104
|
|
|
$
|
9,158
|
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||
(in millions)
|
Gross
|
|
Accum
Amort
|
|
Net
|
|
Gross
|
|
Accum
Amort
|
|
Net
|
||||||||||||
Intangible assets with finite lives:
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||
Developed technology and patents
|
$
|
806
|
|
|
$
|
(256
|
)
|
|
$
|
550
|
|
|
$
|
354
|
|
|
$
|
(216
|
)
|
|
$
|
138
|
|
Backlog
|
6
|
|
|
(5
|
)
|
|
1
|
|
|
6
|
|
|
(3
|
)
|
|
3
|
|
||||||
Customer relationships:
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||
Acquired
|
1,495
|
|
|
(213
|
)
|
|
1,282
|
|
|
340
|
|
|
(106
|
)
|
|
234
|
|
||||||
Up-front sales incentives
|
336
|
|
|
(93
|
)
|
|
243
|
|
|
313
|
|
|
(80
|
)
|
|
233
|
|
||||||
License agreements
|
15
|
|
|
(10
|
)
|
|
5
|
|
|
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
|
|
||||||
Intangible assets
|
$
|
2,720
|
|
|
$
|
(591
|
)
|
|
$
|
2,129
|
|
|
$
|
1,096
|
|
|
$
|
(429
|
)
|
|
$
|
667
|
|
(in millions)
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for up-front sales incentives
|
$
|
20
|
|
|
$
|
25
|
|
|
$
|
27
|
|
|
$
|
27
|
|
|
$
|
27
|
|
|
$
|
117
|
|
Anticipated amortization expense for all other intangible assets
|
269
|
|
|
266
|
|
|
264
|
|
|
264
|
|
|
261
|
|
|
515
|
|
||||||
Total
|
$
|
289
|
|
|
$
|
291
|
|
|
$
|
291
|
|
|
$
|
291
|
|
|
$
|
288
|
|
|
$
|
632
|
|
4.
|
Discontinued Operations and Divestitures
|
|
|
Year Ended September 30
|
||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
18
|
|
Income (loss) from discontinued operations before income taxes
|
|
—
|
|
|
2
|
|
|
(13
|
)
|
|||
Income tax benefit (expense) from discontinued operations
|
|
—
|
|
|
(1
|
)
|
|
5
|
|
5.
|
Receivables, Net
|
(in millions)
|
September 30,
2017 |
|
September 30, 2016
|
||||
Billed
|
$
|
1,055
|
|
|
$
|
748
|
|
Unbilled
|
461
|
|
|
439
|
|
||
Less progress payments
|
(78
|
)
|
|
(87
|
)
|
||
Total
|
1,438
|
|
|
1,100
|
|
||
Less allowance for doubtful accounts
|
(12
|
)
|
|
(6
|
)
|
||
Receivables, net
|
$
|
1,426
|
|
|
$
|
1,094
|
|
6.
|
Inventories, Net
|
(in millions)
|
September 30,
2017 |
|
September 30, 2016
|
||||
Finished goods
|
$
|
259
|
|
|
$
|
210
|
|
Work in process
|
347
|
|
|
236
|
|
||
Raw materials, parts and supplies
|
677
|
|
|
354
|
|
||
Less progress payments
|
(7
|
)
|
|
(1
|
)
|
||
Total
|
1,276
|
|
|
799
|
|
||
Pre-production engineering costs
|
1,175
|
|
|
1,140
|
|
||
Inventories, net
|
$
|
2,451
|
|
|
$
|
1,939
|
|
(in millions)
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
||||||||||||
Anticipated amortization expense for pre-production engineering costs
|
$
|
95
|
|
|
$
|
130
|
|
|
$
|
147
|
|
|
$
|
144
|
|
|
$
|
137
|
|
|
$
|
522
|
|
7.
|
Property
|
(in millions)
|
September 30,
2017 |
|
September 30, 2016
|
||||
Land
|
$
|
22
|
|
|
$
|
15
|
|
Buildings and improvements
|
597
|
|
|
468
|
|
||
Machinery and equipment
|
1,400
|
|
|
1,218
|
|
||
Information systems software and hardware
|
510
|
|
|
435
|
|
||
Furniture and fixtures
|
87
|
|
|
74
|
|
||
Capital leases
|
58
|
|
|
58
|
|
||
Construction in progress
|
250
|
|
|
183
|
|
||
Total
|
2,924
|
|
|
2,451
|
|
||
Less accumulated depreciation
|
(1,526
|
)
|
|
(1,416
|
)
|
||
Property
|
$
|
1,398
|
|
|
$
|
1,035
|
|
8.
|
Other Assets
|
(in millions)
|
September 30,
2017 |
|
September 30, 2016
|
||||
Long-term receivables
|
$
|
211
|
|
|
$
|
146
|
|
Investments in equity affiliates
|
7
|
|
|
10
|
|
||
Exchange and rental assets (net of accumulated depreciation of $106 at September 30, 2017 and $101 at September 30, 2016)
|
71
|
|
|
68
|
|
||
Other
|
242
|
|
|
145
|
|
||
Other assets
|
$
|
531
|
|
|
$
|
369
|
|
•
|
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
|
•
|
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,
2017 |
|
September 30,
2016 |
||||
Short-term commercial paper borrowings outstanding
(1)
|
$
|
330
|
|
|
$
|
440
|
|
Current portion of long-term debt
|
149
|
|
|
300
|
|
||
Short-term debt
|
$
|
479
|
|
|
$
|
740
|
|
Weighted average annualized interest rate of commercial paper borrowings
|
1.45
|
%
|
|
0.79
|
%
|
||
Weighted average maturity period of commercial paper borrowings (days)
|
18
|
|
|
15
|
|
(in millions, except interest rate figures)
|
Interest Rate
|
|
September 30,
2017 |
|
September 30, 2016
|
||||
Fixed-rate notes due:
|
|
|
|
|
|
||||
July 2019
|
1.95%
|
|
$
|
300
|
|
|
$
|
—
|
|
July 2019
|
5.25%
|
|
300
|
|
|
300
|
|
||
November 2021
|
3.10%
|
|
250
|
|
|
250
|
|
||
March 2022
|
2.80%
|
|
1,100
|
|
|
—
|
|
||
December 2023
|
3.70%
|
|
400
|
|
|
400
|
|
||
March 2024
|
3.20%
|
|
950
|
|
|
—
|
|
||
March 2027
|
3.50%
|
|
1,300
|
|
|
—
|
|
||
December 2043
|
4.80%
|
|
400
|
|
|
400
|
|
||
April 2047
|
4.35%
|
|
1,000
|
|
|
—
|
|
||
Variable-rate term loan due:
|
|
|
|
|
|
||||
April 2020
|
1 month LIBOR + 1.25%
(1)
|
|
870
|
|
|
—
|
|
||
Variable-rate note due:
|
|
|
|
|
|
||||
December 2016
|
3 month LIBOR + 0.35%
|
|
—
|
|
|
300
|
|
||
Fair value swap adjustment (Notes 14 and 15)
|
|
|
14
|
|
|
35
|
|
||
Total
|
|
|
6,884
|
|
|
1,685
|
|
||
Less unamortized debt issuance costs and discounts
|
|
|
59
|
|
|
11
|
|
||
Less current portion of long-term debt
|
|
|
149
|
|
|
300
|
|
||
Long-term Debt, Net
|
|
|
$
|
6,676
|
|
|
$
|
1,374
|
|
10.
|
Retirement Benefits
|
|
Pension Benefits
|
|
Other Retirement Benefits
|
||||||||||||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
Service cost
|
$
|
13
|
|
|
$
|
11
|
|
|
$
|
12
|
|
|
$
|
3
|
|
|
$
|
3
|
|
|
$
|
3
|
|
Interest cost
|
111
|
|
|
126
|
|
|
155
|
|
|
5
|
|
|
6
|
|
|
7
|
|
||||||
Expected return on plan assets
|
(241
|
)
|
|
(238
|
)
|
|
(242
|
)
|
|
(2
|
)
|
|
(2
|
)
|
|
(1
|
)
|
||||||
Amortization:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||
Prior service credit
|
—
|
|
|
(1
|
)
|
|
(3
|
)
|
|
(1
|
)
|
|
(1
|
)
|
|
(5
|
)
|
||||||
Net actuarial loss
|
92
|
|
|
78
|
|
|
72
|
|
|
9
|
|
|
8
|
|
|
7
|
|
||||||
Net benefit expense (income)
|
$
|
(25
|
)
|
|
$
|
(24
|
)
|
|
$
|
(6
|
)
|
|
$
|
14
|
|
|
$
|
14
|
|
|
$
|
11
|
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||||
PBO at beginning of period
|
|
$
|
4,527
|
|
|
$
|
4,167
|
|
|
$
|
231
|
|
|
$
|
221
|
|
Service cost
|
|
13
|
|
|
11
|
|
|
3
|
|
|
3
|
|
||||
Interest cost
|
|
111
|
|
|
126
|
|
|
5
|
|
|
6
|
|
||||
Discount rate and other assumption changes
|
|
(156
|
)
|
|
436
|
|
|
(7
|
)
|
|
17
|
|
||||
Actuarial losses (gains)
|
|
4
|
|
|
29
|
|
|
(6
|
)
|
|
(1
|
)
|
||||
Plan participant contributions
|
|
—
|
|
|
—
|
|
|
4
|
|
|
5
|
|
||||
Benefits paid
|
|
(223
|
)
|
|
(229
|
)
|
|
(17
|
)
|
|
(18
|
)
|
||||
Group annuity purchase
|
|
(101
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Plan amendments
|
|
—
|
|
|
—
|
|
|
—
|
|
|
(2
|
)
|
||||
B/E Aerospace acquisition
|
|
16
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
|
|
11
|
|
|
(13
|
)
|
|
—
|
|
|
—
|
|
||||
PBO at end of period
|
|
4,202
|
|
|
4,527
|
|
|
213
|
|
|
231
|
|
||||
Plan assets at beginning of period
|
|
3,074
|
|
|
2,902
|
|
|
19
|
|
|
19
|
|
||||
Actual return on plan assets
|
|
362
|
|
|
346
|
|
|
2
|
|
|
1
|
|
||||
Company contributions
|
|
68
|
|
|
69
|
|
|
12
|
|
|
12
|
|
||||
Plan participant contributions
|
|
—
|
|
|
—
|
|
|
4
|
|
|
5
|
|
||||
Benefits paid
|
|
(223
|
)
|
|
(229
|
)
|
|
(17
|
)
|
|
(18
|
)
|
||||
Group annuity purchase
|
|
(103
|
)
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
B/E Aerospace acquisition
|
|
4
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Other
|
|
4
|
|
|
(14
|
)
|
|
—
|
|
|
—
|
|
||||
Plan assets at end of period
|
|
3,186
|
|
|
3,074
|
|
|
20
|
|
|
19
|
|
||||
Funded status of plans
|
|
$
|
(1,016
|
)
|
|
$
|
(1,453
|
)
|
|
$
|
(193
|
)
|
|
$
|
(212
|
)
|
Funded status consists of:
|
|
|
|
|
|
|
|
|
||||||||
Retirement benefits liability
|
|
$
|
(1,015
|
)
|
|
$
|
(1,448
|
)
|
|
$
|
(193
|
)
|
|
$
|
(212
|
)
|
Compensation and benefits liability
|
|
(11
|
)
|
|
(10
|
)
|
|
—
|
|
|
—
|
|
||||
Other assets
|
|
10
|
|
|
5
|
|
|
—
|
|
|
—
|
|
||||
Net liability
|
|
$
|
(1,016
|
)
|
|
$
|
(1,453
|
)
|
|
$
|
(193
|
)
|
|
$
|
(212
|
)
|
|
|
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, 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
|
|
||||
Current year prior service cost
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||
Current year net actuarial loss
|
|
—
|
|
|
(270
|
)
|
|
—
|
|
|
(13
|
)
|
||||
Amortization of prior service cost
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
||||
Amortization of actuarial loss
|
|
—
|
|
|
(92
|
)
|
|
—
|
|
|
(9
|
)
|
||||
Balance at September 30, 2017
|
|
$
|
10
|
|
|
$
|
2,389
|
|
|
$
|
(4
|
)
|
|
$
|
94
|
|
(in millions)
|
|
Pension
Benefits
|
|
Other
Retirement
Benefits
|
|
Total
|
||||||
Prior service cost
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Net actuarial loss
|
|
82
|
|
|
7
|
|
|
89
|
|
|||
Total
|
|
$
|
82
|
|
|
$
|
7
|
|
|
$
|
89
|
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||||
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Discount rate
|
|
3.53
|
%
|
|
3.22
|
%
|
|
2.29
|
%
|
|
1.72
|
%
|
|
3.39
|
%
|
|
3.02
|
%
|
Compensation increase rate
|
|
4.00
|
%
|
|
4.00
|
%
|
|
3.05
|
%
|
|
3.03
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
|
|
Pension Benefits
|
|
Other
Retirement Benefits
|
||||||||||||||
|
|
U.S.
|
|
Non-U.S.
|
|
U.S.
|
||||||||||||
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
||||||
Discount rate
|
|
3.22
|
%
|
|
3.96
|
%
|
|
1.72
|
%
|
|
2.94
|
%
|
|
3.39
|
%
|
|
3.73
|
%
|
Expected long-term return on plan assets
|
|
8.00
|
%
|
|
8.23
|
%
|
|
6.74
|
%
|
|
6.73
|
%
|
|
8.00
|
%
|
|
8.25
|
%
|
Compensation increase rate
|
|
4.00
|
%
|
|
4.00
|
%
|
|
3.03
|
%
|
|
3.04
|
%
|
|
4.00
|
%
|
|
4.00
|
%
|
Health care cost gross trend rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
7.50
|
%
|
|
7.00
|
%
|
Ultimate trend rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
5.00
|
%
|
|
5.00
|
%
|
Year that trend reaches ultimate rate
(1)
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
2022
|
|
|
2019
|
|
|
|
Target Mix
|
|
2017
|
|
2016
|
||||
Equities
|
|
40%
|
-
|
70%
|
|
57
|
%
|
|
53
|
%
|
Fixed income
|
|
25%
|
-
|
60%
|
|
40
|
%
|
|
45
|
%
|
Alternative investments
|
|
0%
|
-
|
15%
|
|
0
|
%
|
|
0
|
%
|
Cash
|
|
0%
|
-
|
5%
|
|
3
|
%
|
|
2
|
%
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||||||||||||||||||
Asset category (in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Not Leveled
(1)
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Not Leveled
(1)
|
|
Total
|
||||||||||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
U.S. equity
|
$
|
558
|
|
|
$
|
15
|
|
|
$
|
—
|
|
|
$
|
394
|
|
|
$
|
967
|
|
|
$
|
560
|
|
|
$
|
7
|
|
|
$
|
—
|
|
|
$
|
340
|
|
|
$
|
907
|
|
Non-U.S. equity
|
814
|
|
|
28
|
|
|
—
|
|
|
—
|
|
|
842
|
|
|
683
|
|
|
40
|
|
|
—
|
|
|
—
|
|
|
723
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate
|
—
|
|
|
795
|
|
|
—
|
|
|
305
|
|
|
1,100
|
|
|
—
|
|
|
798
|
|
|
—
|
|
|
345
|
|
|
1,143
|
|
||||||||||
U.S. government
|
42
|
|
|
24
|
|
|
—
|
|
|
68
|
|
|
134
|
|
|
94
|
|
|
31
|
|
|
—
|
|
|
58
|
|
|
183
|
|
||||||||||
Mortgage and asset-backed
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||||||
Other
|
—
|
|
|
50
|
|
|
3
|
|
|
—
|
|
|
53
|
|
|
—
|
|
|
42
|
|
|
3
|
|
|
—
|
|
|
45
|
|
||||||||||
Cash and cash equivalents
|
—
|
|
|
82
|
|
|
—
|
|
|
—
|
|
|
82
|
|
|
—
|
|
|
93
|
|
|
—
|
|
|
—
|
|
|
93
|
|
||||||||||
Sub-total
|
$
|
1,414
|
|
|
$
|
995
|
|
|
$
|
3
|
|
|
$
|
767
|
|
|
3,179
|
|
|
$
|
1,337
|
|
|
$
|
1,013
|
|
|
$
|
3
|
|
|
$
|
743
|
|
|
3,096
|
|
||
Net receivables (payables) related to investment transactions
|
|
|
|
|
|
|
|
|
|
|
|
7
|
|
|
|
|
|
|
|
|
|
|
(22
|
)
|
|||||||||||||||
Total
|
|
|
|
|
|
|
|
|
|
|
|
$
|
3,186
|
|
|
|
|
|
|
|
|
|
|
$
|
3,074
|
|
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||||||||||||||||||||||||||
Asset category (in millions)
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Not Leveled
|
|
Total
|
|
Level 1
|
|
Level 2
|
|
Level 3
|
|
Not Leveled
|
|
Total
|
||||||||||||||||||||
Equity securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
U.S. equity
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
8
|
|
Non-U.S. equity
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
1
|
|
||||||||||
Fixed income securities:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||||||||||||
Corporate
|
—
|
|
|
3
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
—
|
|
|
2
|
|
|
—
|
|
|
—
|
|
|
2
|
|
||||||||||
U.S. government
|
2
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
|
2
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
3
|
|
||||||||||
Mortgage and asset-backed
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
1
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
||||||||||
Cash and cash equivalents
|
—
|
|
|
4
|
|
|
—
|
|
|
—
|
|
|
4
|
|
|
—
|
|
|
5
|
|
|
—
|
|
|
—
|
|
|
5
|
|
||||||||||
Total
|
$
|
11
|
|
|
$
|
9
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
20
|
|
|
$
|
11
|
|
|
$
|
8
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
19
|
|
(in millions)
|
|
2017
|
|
2016
|
||||
Contributions to U.S. qualified plan
|
|
$
|
55
|
|
|
$
|
55
|
|
Contributions to U.S. non-qualified plan
|
|
8
|
|
|
9
|
|
||
Contributions to non-U.S. plans
|
|
5
|
|
|
5
|
|
||
Total
|
|
$
|
68
|
|
|
$
|
69
|
|
(in millions)
|
|
Pension
Benefits
|
|
Other
Retirement
Benefits
|
||||
2018
|
|
$
|
236
|
|
|
$
|
16
|
|
2019
|
|
233
|
|
|
15
|
|
||
2020
|
|
236
|
|
|
16
|
|
||
2021
|
|
239
|
|
|
16
|
|
||
2022
|
|
242
|
|
|
16
|
|
||
2023-2027
|
|
1,223
|
|
|
74
|
|
|
|
2017
|
|
2016
|
|
2015
|
|||||||||||||||
(in millions)
|
|
Shares
|
|
Expense
|
|
Shares
|
|
Expense
|
|
Shares
|
|
Expense
|
|||||||||
Contribution in shares
|
|
0.5
|
|
|
$
|
56
|
|
|
0.6
|
|
|
$
|
49
|
|
|
0.4
|
|
|
$
|
39
|
|
Contribution in cash
|
|
|
|
|
54
|
|
|
|
|
|
46
|
|
|
|
|
|
47
|
|
|||
Total
|
|
|
|
|
$
|
110
|
|
|
|
|
|
$
|
95
|
|
|
|
|
|
$
|
86
|
|
11.
|
Shareowners' Equity
|
|
|
Foreign Exchange Translation and Other Adjustments
|
|
Pension and Other Postretirement Adjustments
(1)
|
|
Change in the Fair Value of Effective Cash Flow Hedges
|
|
Total
|
||||||||
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
|
)
|
||||
Other comprehensive income before reclassifications
|
|
77
|
|
|
180
|
|
|
1
|
|
|
258
|
|
||||
Amounts reclassified from accumulated other comprehensive income
|
|
—
|
|
|
63
|
|
|
2
|
|
|
65
|
|
||||
Net current period other comprehensive income
|
|
77
|
|
|
243
|
|
|
3
|
|
|
323
|
|
||||
Balance at September 30, 2017
|
|
$
|
1
|
|
|
$
|
(1,575
|
)
|
|
$
|
(1
|
)
|
|
$
|
(1,575
|
)
|
12.
|
Stock-Based Compensation and Earnings Per Share
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Stock-based compensation expense included in:
|
|
|
|
|
|
|
||||||
Product cost of sales
|
|
$
|
9
|
|
|
$
|
8
|
|
|
$
|
7
|
|
Selling, general and administrative expenses
|
|
22
|
|
|
19
|
|
|
17
|
|
|||
Total
|
|
$
|
31
|
|
|
$
|
27
|
|
|
$
|
24
|
|
Income tax benefit
|
|
$
|
10
|
|
|
$
|
9
|
|
|
$
|
8
|
|
|
|
Shares (in thousands)
|
|
Weighted
Average
Exercise
Price
|
|
Weighted
Average
Remaining
Life
(in years)
|
|
Aggregate
Intrinsic
Value
(in millions)
|
|||||
Outstanding at September 30, 2016
|
|
3,914
|
|
|
$
|
65.48
|
|
|
|
|
|
|
|
Granted
|
|
667
|
|
|
89.00
|
|
|
|
|
|
|
||
Exercised
|
|
(1,069
|
)
|
|
59.36
|
|
|
|
|
|
|
||
Forfeited or expired
|
|
(34
|
)
|
|
87.21
|
|
|
|
|
|
|
||
Outstanding at September 30, 2017
|
|
3,478
|
|
|
$
|
71.67
|
|
|
6.0
|
|
$
|
205
|
|
Vested or expected to vest
(1)
|
|
3,468
|
|
|
$
|
71.62
|
|
|
6.0
|
|
$
|
205
|
|
Exercisable at September 30, 2017
|
|
2,246
|
|
|
$
|
62.96
|
|
|
4.7
|
|
$
|
152
|
|
|
|
2017
|
|
2016
|
|
2015
|
||||||
Weighted-average fair value per share of options granted
|
|
$
|
17.26
|
|
|
$
|
17.75
|
|
|
$
|
19.59
|
|
Intrinsic value of options exercised (in millions)
(2)
|
|
$
|
49
|
|
|
$
|
13
|
|
|
$
|
48
|
|
|
|
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, 2016
|
|
386
|
|
|
$
|
79.60
|
|
|
23
|
|
|
$
|
30.24
|
|
|
351
|
|
|
$
|
69.86
|
|
Granted
|
|
129
|
|
|
88.25
|
|
|
—
|
|
|
—
|
|
|
226
|
|
|
92.84
|
|
|||
Vested
|
|
(134
|
)
|
|
71.61
|
|
|
—
|
|
|
—
|
|
|
(52
|
)
|
|
71.95
|
|
|||
Forfeited
|
|
(11
|
)
|
|
85.56
|
|
|
—
|
|
|
—
|
|
|
(13
|
)
|
|
93.48
|
|
|||
Nonvested at September 30, 2017
|
|
370
|
|
|
$
|
85.44
|
|
|
23
|
|
|
$
|
30.24
|
|
|
512
|
|
|
$
|
80.56
|
|
(in millions)
|
|
Performance Shares
|
|
Restricted Stock
|
|
Restricted Stock Units
|
||||||
Total unrecognized compensation costs at September 30, 2017
|
|
$
|
14
|
|
|
$
|
—
|
|
|
$
|
16
|
|
Weighted-average life remaining at September 30, 2017, in years
|
|
0.9
|
|
|
0
|
|
|
1.4
|
|
|||
Weighted-average fair value per share granted in 2016
|
|
$
|
85.13
|
|
|
$
|
—
|
|
|
$
|
85.85
|
|
Weighted-average fair value per share granted in 2015
|
|
$
|
82.76
|
|
|
$
|
—
|
|
|
$
|
84.63
|
|
(in millions, except per share amounts)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Numerator for basic and diluted earnings per share:
|
|
|
|
|
|
|
||||||
Income from continuing operations
|
|
$
|
705
|
|
|
$
|
727
|
|
|
$
|
694
|
|
Income (loss) from discontinued operations, net of taxes
|
|
—
|
|
|
1
|
|
|
(8
|
)
|
|||
Net income
|
|
$
|
705
|
|
|
$
|
728
|
|
|
$
|
686
|
|
Denominator:
|
|
|
|
|
|
|
|
|
||||
Denominator for basic earnings per share – weighted average common shares
|
|
145.5
|
|
|
130.5
|
|
|
132.3
|
|
|||
Effect of dilutive securities:
|
|
|
|
|
|
|
||||||
Stock options
|
|
1.2
|
|
|
1.0
|
|
|
1.0
|
|
|||
Performance shares, restricted stock and restricted stock units
|
|
0.5
|
|
|
0.6
|
|
|
0.4
|
|
|||
Dilutive potential common shares
|
|
1.7
|
|
|
1.6
|
|
|
1.4
|
|
|||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion
|
|
147.2
|
|
|
132.1
|
|
|
133.7
|
|
|||
Earnings (loss) per share:
|
|
|
|
|
|
|
|
|
||||
Basic
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
4.85
|
|
|
$
|
5.57
|
|
|
$
|
5.25
|
|
Discontinued operations
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
|||
Basic earnings per share
|
|
$
|
4.85
|
|
|
$
|
5.58
|
|
|
$
|
5.19
|
|
Diluted
|
|
|
|
|
|
|
||||||
Continuing operations
|
|
$
|
4.79
|
|
|
$
|
5.50
|
|
|
$
|
5.19
|
|
Discontinued operations
|
|
—
|
|
|
0.01
|
|
|
(0.06
|
)
|
|||
Diluted earnings per share
|
|
$
|
4.79
|
|
|
$
|
5.51
|
|
|
$
|
5.13
|
|
13.
|
Income Taxes
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
U.S. income
|
|
$
|
688
|
|
|
$
|
824
|
|
|
$
|
835
|
|
Non-U.S. income
|
|
243
|
|
|
111
|
|
|
127
|
|
|||
Total
|
|
$
|
931
|
|
|
$
|
935
|
|
|
$
|
962
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Current:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
$
|
97
|
|
|
$
|
120
|
|
|
$
|
169
|
|
Non-U.S.
|
|
68
|
|
|
29
|
|
|
38
|
|
|||
U.S. state and local
|
|
18
|
|
|
11
|
|
|
11
|
|
|||
Total current
|
|
183
|
|
|
160
|
|
|
218
|
|
|||
Deferred:
|
|
|
|
|
|
|
||||||
U.S. federal
|
|
48
|
|
|
47
|
|
|
49
|
|
|||
Non-U.S.
|
|
(5
|
)
|
|
—
|
|
|
(4
|
)
|
|||
U.S. state and local
|
|
—
|
|
|
1
|
|
|
5
|
|
|||
Total deferred
|
|
43
|
|
|
48
|
|
|
50
|
|
|||
Income tax expense
|
|
$
|
226
|
|
|
$
|
208
|
|
|
$
|
268
|
|
|
|
2017
|
|
2016
|
|
2015
|
|||
Statutory tax rate
|
|
35.0
|
%
|
|
35.0
|
%
|
|
35.0
|
%
|
Foreign rate differential
|
|
(5.5
|
)
|
|
(0.7
|
)
|
|
(1.0
|
)
|
State and local income taxes
|
|
1.6
|
|
|
1.1
|
|
|
1.2
|
|
Research and development credit
|
|
(5.0
|
)
|
|
(6.4
|
)
|
|
(3.2
|
)
|
Domestic manufacturing deduction
|
|
(2.1
|
)
|
|
(2.0
|
)
|
|
(2.0
|
)
|
Tax settlements
|
|
(0.1
|
)
|
|
—
|
|
|
(1.6
|
)
|
Change in valuation allowance
|
|
0.1
|
|
|
(4.5
|
)
|
|
—
|
|
Other
|
|
0.3
|
|
|
(0.3
|
)
|
|
(0.5
|
)
|
Effective income tax rate
|
|
24.3
|
%
|
|
22.2
|
%
|
|
27.9
|
%
|
|
|
September 30
|
||||||
(in millions)
|
|
2017
|
|
2016
|
||||
Inventory
|
|
$
|
(276
|
)
|
|
$
|
(282
|
)
|
Product warranty costs
|
|
45
|
|
|
29
|
|
||
Customer incentives
|
|
66
|
|
|
68
|
|
||
Contract reserves
|
|
49
|
|
|
6
|
|
||
Retirement benefits
|
|
400
|
|
|
549
|
|
||
Intangibles
|
|
(602
|
)
|
|
(171
|
)
|
||
Capital lease liability
|
|
19
|
|
|
20
|
|
||
Property
|
|
(196
|
)
|
|
(179
|
)
|
||
Stock-based compensation
|
|
37
|
|
|
33
|
|
||
Deferred compensation
|
|
27
|
|
|
16
|
|
||
Capital loss carryover
|
|
—
|
|
|
41
|
|
||
Compensation and benefits
|
|
38
|
|
|
28
|
|
||
Research and development credit carryforward
|
|
25
|
|
|
—
|
|
||
Valuation allowance
|
|
(23
|
)
|
|
—
|
|
||
Other
|
|
81
|
|
|
60
|
|
||
Deferred income taxes, net
|
|
$
|
(310
|
)
|
|
$
|
218
|
|
|
September 30
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of year
|
$
|
—
|
|
|
$
|
42
|
|
|
$
|
43
|
|
Charged to costs and expenses
|
1
|
|
|
—
|
|
|
—
|
|
|||
B/E Aerospace acquisition
|
22
|
|
|
—
|
|
|
—
|
|
|||
Deductions
(1)
|
—
|
|
|
(42
|
)
|
|
(1
|
)
|
|||
Balance at September 30
|
$
|
23
|
|
|
$
|
—
|
|
|
$
|
42
|
|
|
|
September 30
|
||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Beginning balance
|
|
$
|
45
|
|
|
$
|
39
|
|
|
$
|
48
|
|
Additions for tax positions related to the current year
|
|
73
|
|
|
11
|
|
|
8
|
|
|||
Additions for tax positions of prior years
|
|
1
|
|
|
7
|
|
|
6
|
|
|||
Additions for tax positions related to acquisitions
|
|
86
|
|
|
—
|
|
|
—
|
|
|||
Reductions for tax positions of prior years
|
|
(1
|
)
|
|
(10
|
)
|
|
(17
|
)
|
|||
Reductions for tax positions of prior years related to lapse of statute of limitations
|
|
—
|
|
|
—
|
|
|
(1
|
)
|
|||
Reductions for tax positions related to settlements with taxing authorities
|
|
(3
|
)
|
|
(2
|
)
|
|
(5
|
)
|
|||
Ending balance
|
|
$
|
201
|
|
|
$
|
45
|
|
|
$
|
39
|
|
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, 2017
|
|
September 30, 2016
|
||||
(in millions)
|
Fair Value
Hierarchy
|
|
Fair Value
Asset (Liability)
|
|
Fair Value
Asset (Liability)
|
||||
Deferred compensation plan investments
|
Level 1
|
|
$
|
63
|
|
|
$
|
55
|
|
Deferred compensation plan investments
|
Level 2
|
|
24
|
|
|
—
|
|
||
Interest rate swap assets
|
Level 2
|
|
14
|
|
|
35
|
|
||
Foreign currency forward exchange contract assets
|
Level 2
|
|
8
|
|
|
11
|
|
||
Foreign currency forward exchange contract liabilities
|
Level 2
|
|
(7
|
)
|
|
(13
|
)
|
||
Acquisition-related contingent consideration
|
Level 3
|
|
(17
|
)
|
|
(13
|
)
|
|
Asset (Liability)
|
||||||||||||||
|
September 30, 2017
|
|
September 30, 2016
|
||||||||||||
(in millions)
|
Carrying
Amount
|
|
Fair
Value
|
|
Carrying
Amount
|
|
Fair
Value
|
||||||||
Cash and cash equivalents
|
$
|
703
|
|
|
$
|
703
|
|
|
$
|
340
|
|
|
$
|
340
|
|
Short-term debt
|
(479
|
)
|
|
(479
|
)
|
|
(740
|
)
|
|
(740
|
)
|
||||
Long-term debt
|
(6,662
|
)
|
|
(6,898
|
)
|
|
(1,339
|
)
|
|
(1,508
|
)
|
15.
|
Derivative Financial Instruments
|
|
|
|
Asset Derivatives
|
||||||
(in millions)
|
Classification
|
|
September 30,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current assets
|
|
$
|
8
|
|
|
$
|
11
|
|
Interest rate swaps
|
Other assets
|
|
14
|
|
|
35
|
|
||
Total
|
|
|
$
|
22
|
|
|
$
|
46
|
|
|
|
|
Liability Derivatives
|
||||||
(in millions)
|
Classification
|
|
September 30,
2017 |
|
September 30, 2016
|
||||
Foreign currency forward exchange contracts
|
Other current liabilities
|
|
$
|
7
|
|
|
$
|
13
|
|
|
|
|
Amount of Gain (Loss)
|
||||||
(in millions)
|
Location of Gain (Loss)
|
|
September 30,
2017 |
|
September 30, 2016
|
||||
Derivatives Designated as Hedging Instruments:
|
|
|
|
|
|
||||
Fair Value Hedges
|
|
|
|
|
|
||||
Interest rate swaps
|
Interest expense
|
|
$
|
8
|
|
|
$
|
10
|
|
Cash Flow Hedges
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts:
|
|
|
|
|
|
||||
Amount of gain (loss) recognized in AOCL (effective portion, before deferred tax impact)
|
AOCL
|
|
1
|
|
|
(3
|
)
|
||
Amount of (loss) reclassified from AOCL into income
|
Cost of sales
|
|
(2
|
)
|
|
(6
|
)
|
||
Derivatives Not Designated as Hedging Instruments:
|
|
|
|
|
|
||||
Foreign currency forward exchange contracts
|
Cost of sales
|
|
(1
|
)
|
|
(1
|
)
|
16.
|
Guarantees and Indemnifications
|
|
September 30
|
||||||||||
(in millions)
|
2017
|
|
2016
|
|
2015
|
||||||
Balance at beginning of year
|
$
|
87
|
|
|
$
|
89
|
|
|
$
|
104
|
|
Warranty costs incurred
|
(61
|
)
|
|
(42
|
)
|
|
(48
|
)
|
|||
Product warranty accrual
|
59
|
|
|
46
|
|
|
42
|
|
|||
Changes in estimates for prior years
|
(16
|
)
|
|
(6
|
)
|
|
(10
|
)
|
|||
Increase from acquisitions
|
117
|
|
|
—
|
|
|
1
|
|
|||
Balance at September 30
|
$
|
186
|
|
|
$
|
87
|
|
|
$
|
89
|
|
17.
|
Contractual Obligations and Other Commitments
|
|
|
Payments Due By Period
|
||||||||||||||||||||||||||
(in millions)
|
|
2018
|
|
2019
|
|
2020
|
|
2021
|
|
2022
|
|
Thereafter
|
|
Total
|
||||||||||||||
Non-cancelable operating leases
|
|
$
|
83
|
|
|
$
|
68
|
|
|
$
|
50
|
|
|
$
|
40
|
|
|
$
|
36
|
|
|
$
|
164
|
|
|
$
|
441
|
|
Purchase contracts
|
|
38
|
|
|
33
|
|
|
28
|
|
|
26
|
|
|
21
|
|
|
27
|
|
|
173
|
|
|||||||
Long-term debt
|
|
150
|
|
|
750
|
|
|
570
|
|
|
—
|
|
|
1,350
|
|
|
4,050
|
|
|
6,870
|
|
|||||||
Interest on long-term debt
|
|
234
|
|
|
233
|
|
|
203
|
|
|
192
|
|
|
173
|
|
|
1,753
|
|
|
2,788
|
|
|||||||
Total
|
|
$
|
505
|
|
|
$
|
1,084
|
|
|
$
|
851
|
|
|
$
|
258
|
|
|
$
|
1,580
|
|
|
$
|
5,994
|
|
|
$
|
10,272
|
|
18.
|
Environmental Matters
|
19.
|
Legal Matters
|
20.
|
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
|
|
21.
|
Business Segment Information
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Sales:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
1,406
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
2,418
|
|
|
2,395
|
|
|
2,434
|
|
|||
Government Systems
|
|
2,280
|
|
|
2,206
|
|
|
2,187
|
|
|||
Information Management Services
|
|
718
|
|
|
658
|
|
|
623
|
|
|||
Total sales
|
|
$
|
6,822
|
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
|
|
|
|
|
|
||||||
Segment operating earnings:
|
|
|
|
|
|
|
|
|
||||
Interior Systems
|
|
$
|
174
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
519
|
|
|
531
|
|
|
554
|
|
|||
Government Systems
|
|
496
|
|
|
477
|
|
|
457
|
|
|||
Information Management Services
|
|
137
|
|
|
107
|
|
|
95
|
|
|||
Total segment operating earnings
|
|
1,326
|
|
|
1,115
|
|
|
1,106
|
|
|||
|
|
|
|
|
|
|
||||||
Interest expense
(1)
|
|
(187
|
)
|
|
(64
|
)
|
|
(61
|
)
|
|||
Stock-based compensation
|
|
(31
|
)
|
|
(27
|
)
|
|
(24
|
)
|
|||
General corporate, net
|
|
(57
|
)
|
|
(44
|
)
|
|
(59
|
)
|
|||
Transaction and integration costs
(1)
|
|
(120
|
)
|
|
—
|
|
|
—
|
|
|||
Restructuring and asset impairment charges
|
|
—
|
|
|
(45
|
)
|
|
—
|
|
|||
Income from continuing operations before income taxes
|
|
931
|
|
|
935
|
|
|
962
|
|
|||
Income tax expense
|
|
(226
|
)
|
|
(208
|
)
|
|
(268
|
)
|
|||
Income from continuing operations
|
|
$
|
705
|
|
|
$
|
727
|
|
|
$
|
694
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Identifiable assets:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
10,030
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
3,124
|
|
|
3,050
|
|
|
2,906
|
|
|||
Government Systems
|
|
2,022
|
|
|
2,052
|
|
|
1,953
|
|
|||
Information Management Services
|
|
1,917
|
|
|
1,906
|
|
|
1,886
|
|
|||
Corporate
|
|
904
|
|
|
691
|
|
|
549
|
|
|||
Total identifiable assets
|
|
$
|
17,997
|
|
|
$
|
7,699
|
|
|
$
|
7,294
|
|
Investments in equity affiliates:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
1
|
|
|
4
|
|
|
7
|
|
|||
Government Systems
|
|
6
|
|
|
6
|
|
|
6
|
|
|||
Information Management Services
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total investments in equity affiliates
|
|
$
|
7
|
|
|
$
|
10
|
|
|
$
|
13
|
|
Depreciation and amortization:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
130
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
132
|
|
|
125
|
|
|
117
|
|
|||
Government Systems
|
|
79
|
|
|
74
|
|
|
83
|
|
|||
Information Management Services
|
|
58
|
|
|
54
|
|
|
52
|
|
|||
Total depreciation and amortization
|
|
$
|
399
|
|
|
$
|
253
|
|
|
$
|
252
|
|
Capital expenditures for property:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
43
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
72
|
|
|
74
|
|
|
90
|
|
|||
Government Systems
|
|
68
|
|
|
69
|
|
|
81
|
|
|||
Information Management Services
|
|
57
|
|
|
50
|
|
|
39
|
|
|||
Total capital expenditures for property
|
|
$
|
240
|
|
|
$
|
193
|
|
|
$
|
210
|
|
Earnings (loss) from equity affiliates:
|
|
|
|
|
|
|
||||||
Interior Systems
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Commercial Systems
|
|
(2
|
)
|
|
(3
|
)
|
|
—
|
|
|||
Government Systems
|
|
—
|
|
|
2
|
|
|
3
|
|
|||
Information Management Services
|
|
—
|
|
|
—
|
|
|
—
|
|
|||
Total earnings (loss) from equity affiliates
|
|
$
|
(2
|
)
|
|
$
|
(1
|
)
|
|
$
|
3
|
|
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
||||||
Interior Systems sales categories:
|
|
|
|
|
|
|
||||||
Interior products and services
|
|
$
|
821
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Aircraft seating
|
|
585
|
|
|
—
|
|
|
—
|
|
|||
Interior Systems sales
|
|
1,406
|
|
|
—
|
|
|
—
|
|
|||
|
|
|
|
|
|
|
||||||
Commercial Systems sales categories:
|
|
|
|
|
|
|
||||||
Air transport aviation electronics
|
|
1,470
|
|
|
1,430
|
|
|
1,385
|
|
|||
Business and regional aviation electronics
|
|
948
|
|
|
965
|
|
|
1,049
|
|
|||
Commercial Systems sales
|
|
2,418
|
|
|
2,395
|
|
|
2,434
|
|
|||
|
|
|
|
|
|
|
||||||
Government Systems sales categories:
|
|
|
|
|
|
|
|
|||||
Avionics
|
|
1,472
|
|
|
1,483
|
|
|
1,436
|
|
|||
Communication and navigation
|
|
808
|
|
|
723
|
|
|
751
|
|
|||
Government Systems sales
|
|
2,280
|
|
|
2,206
|
|
|
2,187
|
|
|||
|
|
|
|
|
|
|
||||||
Information Management Services sales
|
|
718
|
|
|
658
|
|
|
623
|
|
|||
|
|
|
|
|
|
|
||||||
Total sales
|
|
$
|
6,822
|
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
|
Sales
|
|
Property
|
||||||||||||||||||||
(in millions)
|
|
2017
|
|
2016
|
|
2015
|
|
2017
|
|
2016
|
|
2015
|
||||||||||||
U.S.
(1)
|
|
$
|
3,873
|
|
|
$
|
3,292
|
|
|
$
|
3,174
|
|
|
$
|
1,134
|
|
|
$
|
921
|
|
|
$
|
861
|
|
Europe / Africa / Middle East
|
|
1,607
|
|
|
937
|
|
|
1,070
|
|
|
152
|
|
|
86
|
|
|
83
|
|
||||||
Asia-Pacific
|
|
787
|
|
|
545
|
|
|
503
|
|
|
94
|
|
|
17
|
|
|
15
|
|
||||||
Americas, excluding U.S.
|
|
555
|
|
|
485
|
|
|
497
|
|
|
18
|
|
|
11
|
|
|
5
|
|
||||||
Non U.S.
|
|
2,949
|
|
|
1,967
|
|
|
2,070
|
|
|
264
|
|
|
114
|
|
|
103
|
|
||||||
Total
|
|
$
|
6,822
|
|
|
$
|
5,259
|
|
|
$
|
5,244
|
|
|
$
|
1,398
|
|
|
$
|
1,035
|
|
|
$
|
964
|
|
22.
|
Quarterly Financial Information (Unaudited)
|
|
|
2017 Quarters
|
||||||||||||||||||
(in millions, except per share amounts)
|
|
First
|
|
Second
|
|
Third
|
|
Fourth
|
|
Total
|
||||||||||
Sales
|
|
$
|
1,193
|
|
|
$
|
1,342
|
|
|
$
|
2,094
|
|
|
$
|
2,193
|
|
|
$
|
6,822
|
|
Gross profit (total sales less product and service cost of sales)
|
|
377
|
|
|
412
|
|
|
570
|
|
|
595
|
|
|
1,954
|
|
|||||
Income from continuing operations
|
|
145
|
|
|
168
|
|
|
179
|
|
|
213
|
|
|
705
|
|
|||||
Income from discontinued operations, net of taxes
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Net income
|
|
$
|
145
|
|
|
$
|
168
|
|
|
$
|
179
|
|
|
$
|
213
|
|
|
$
|
705
|
|
Earnings per share:
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Basic
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.11
|
|
|
$
|
1.28
|
|
|
$
|
1.13
|
|
|
$
|
1.31
|
|
|
$
|
4.85
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Basic earnings per share
|
|
$
|
1.11
|
|
|
$
|
1.28
|
|
|
$
|
1.13
|
|
|
$
|
1.31
|
|
|
$
|
4.85
|
|
Diluted
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Continuing operations
|
|
$
|
1.10
|
|
|
$
|
1.27
|
|
|
$
|
1.12
|
|
|
$
|
1.29
|
|
|
$
|
4.79
|
|
Discontinued operations
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Diluted earnings per share
|
|
$
|
1.10
|
|
|
$
|
1.27
|
|
|
$
|
1.12
|
|
|
$
|
1.29
|
|
|
$
|
4.79
|
|
|
|
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
|
|
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)
|
|
4,714,767
|
|
(2)(5)
|
|
$
|
71.67
|
|
|
7,211,294
|
|
(3)(4)
|
Equity Compensation Plans Not Approved By Security Holders
|
|
0
|
|
|
|
0
|
|
|
0
|
|
|
|
Total
|
|
4,714,767
|
|
|
|
$
|
71.67
|
|
|
7,211,294
|
|
|
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:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
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
|
|
|
|
|
|
3-a-2
|
|
|
|
|
|
3-b-1
|
|
|
|
|
|
4-a-1
|
|
|
|
|
|
4-a-2
|
|
|
|
|
|
4-a-3
|
|
|
|
|
|
4-a-4
|
|
|
|
|
|
4-a-5
|
|
|
|
|
|
4-a-6
|
|
|
|
|
|
4-a-7
|
|
|
|
|
|
4-a-8
|
|
|
|
|
|
4-a-9
|
|
|
|
|
|
4-a-10
|
|
|
|
|
|
|
|
|
|
|
4-a-11
|
|
|
|
|
|
4-a-12
|
|
|
|
|
|
4-a-13
|
|
|
|
|
|
4-a-14
|
|
|
|
|
|
4-a-15
|
|
|
|
|
|
*10-a-1
|
|
|
|
|
|
*10-a-2
|
|
|
|
|
|
*10-a-3
|
|
|
|
|
|
*10-a-4
|
|
|
|
|
|
*10-a-5
|
|
|
|
|
|
*10-a-6
|
|
|
|
|
|
*10-a-7
|
|
|
|
|
|
*10-a-8
|
|
|
|
|
|
*10-a-9
|
|
|
|
|
|
*10-a-10
|
|
|
|
|
|
*10-a-11
|
|
|
|
|
|
*10-a-12
|
|
|
|
|
|
*10-a-13
|
|
|
|
|
|
*10-b-1
|
|
|
|
|
|
*10-b-3
|
|
|
|
|
|
*10-c-1
|
|
|
|
|
|
*10-d-1
|
|
|
|
|
|
*10-e-1
|
|
|
|
|
*10-e-2
|
|
|
|
|
|
*10-f-1
|
|
|
|
|
|
*10-f-2
|
|
|
|
|
|
*10-f-3
|
|
|
|
|
|
*10-g-1
|
|
|
|
|
|
*10-g-2
|
|
|
|
|
|
*10-g-3
|
|
|
|
|
|
*10-h-1
|
|
|
|
|
|
*10-h-2
|
|
|
|
|
|
*10-h-3
|
|
|
|
|
|
*10-h-4
|
|
|
|
|
|
*10-i-1
|
|
|
|
|
|
10-k-1
|
|
|
|
|
|
10-l-1
|
|
|
|
|
|
10-m-1
|
|
|
|
|
|
*10-n-1
|
|
|
|
|
|
*10-n-2
|
|
|
|
|
|
10-o-1
|
|
|
|
|
|
10-o-2
|
|
|
|
|
|
10-o-3
|
|
|
|
|
|
*10-s-1
|
|
|
|
|
|
*10-s-2
|
|
|
|
|
|
10-t-1
|
|
|
|
|
10-t-2
|
|
|
|
|
|
12
|
|
|
|
|
|
21
|
|
|
|
|
|
23
|
|
|
|
|
|
24
|
|
|
|
|
|
31.1
|
|
|
|
|
|
31.2
|
|
|
|
|
|
32.1
|
|
|
|
|
|
32.2
|
|
|
|
|
|
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
|
||
RICHARD G. HAMERMESH*
|
|
Director
|
||
DAVID LILLEY*
|
|
Director
|
||
ANDREW J. POLICANO*
|
|
Director
|
||
CHERYL L. SHAVERS*
|
|
Director
|
||
JEFFREY L. TURNER*
|
|
Director
|
||
JOHN T. WHATES*
|
|
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**
|
|
|
1.
|
Patrick E. Allen
|
2.
|
Bruce M. King
|
3.
|
Nan Mattai
|
4.
|
Robert K. Ortberg
|
5.
|
Kent L. Statler
|
6.
|
Robert A. Sturgell
|
1.
|
Tatum J. Buse
|
2.
|
Philip J. Jasper
|
3.
|
Werner Lieberherr
|
4.
|
Jeffrey D. MacLauchlan
|
5.
|
Colin R. Mahoney
|
6.
|
David Nieuwsma
|
7.
|
Robert J. Perna
|
8.
|
Jeffrey A. Standerski
|
9.
|
Douglas E. Stenske
|
|
2017
|
|
2016
|
|
2015
|
|
2014
|
|
2013
|
||||||||||
Earnings available for fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Income from continuing operations before income taxes
|
$
|
931
|
|
|
$
|
935
|
|
|
$
|
962
|
|
|
$
|
882
|
|
|
$
|
865
|
|
Add / (Deduct):
|
|
|
|
|
|
|
|
|
|
||||||||||
Earnings from equity affiliates, net of distributions
|
3
|
|
|
3
|
|
|
1
|
|
|
14
|
|
|
(3
|
)
|
|||||
|
934
|
|
|
938
|
|
|
963
|
|
|
896
|
|
|
862
|
|
|||||
Add fixed charges included in earnings:
|
|
|
|
|
|
|
|
|
|
||||||||||
Interest expense
|
187
|
|
|
64
|
|
|
61
|
|
|
59
|
|
|
28
|
|
|||||
Interest element of rentals
|
28
|
|
|
26
|
|
|
25
|
|
|
22
|
|
|
23
|
|
|||||
Total earnings available for fixed charges
|
$
|
1,149
|
|
|
$
|
1,028
|
|
|
$
|
1,049
|
|
|
$
|
977
|
|
|
$
|
913
|
|
Fixed charges:
|
|
|
|
|
|
|
|
|
|
||||||||||
Fixed charges included in earnings
|
$
|
215
|
|
|
$
|
90
|
|
|
$
|
86
|
|
|
$
|
81
|
|
|
$
|
51
|
|
Capitalized interest
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|
—
|
|
|||||
Total fixed charges
|
$
|
215
|
|
|
$
|
90
|
|
|
$
|
86
|
|
|
$
|
81
|
|
|
$
|
51
|
|
|
|
|
|
|
|
|
|
|
|
||||||||||
Ratio of earnings to fixed charges
(1)
|
5
|
|
|
11
|
|
|
12
|
|
|
12
|
|
|
18
|
|
|
|
State/Country of
|
Name
|
|
Incorporation
|
|
|
|
ACCEL (Tianjin) Flight Simulation Co. Ltd.
|
|
China
|
ADARI Aviation Technology Company Limited
|
|
China
|
ADB Industries
|
|
California
|
Advanced Thermal Sciences Corporation
|
|
Delaware
|
Advanced Thermal Sciences Taiwan Corp.
|
|
Taiwan
|
Aeronautical Radio, Inc.
|
|
Delaware
|
Aerospace Lighting Corporation
|
|
New York
|
Air Routing International, L.P.
|
|
Texas
|
Air Routing LP, LLC
|
|
Delaware
|
AKS Aerospace, Inc.
|
|
Delaware
|
Altis Aero Systems LLC
|
|
Delaware
|
AR Group GP, L.L.C.
|
|
Texas
|
ARINC (Asia Pacific) Pte. Ltd.
|
|
Singapore
|
ARINC (Barbados) Ltd.
|
|
Barbados
|
ARINC (Malaysia) SDN. BHD.
|
|
Malaysia
|
ARINC (Singapore) Pte. Ltd.
|
|
Singapore
|
ARINC (St.Lucia) Limited
|
|
St Lucia
|
ARINC (Thailand) Limited
|
|
Bangkok
|
ARINC Aeronautical Radio of Canada, Ltd.
|
|
Federally Chartered
|
ARINC Albania SHPK
|
|
Albania
|
ARINC Antigua Limited
|
|
Antigua
|
ARINC Aviation Technology Company Ltd.
|
|
China
|
ARINC Bulgaria EOOD
|
|
Bulgaria
|
ARINC Control and Information Systems, LLC
|
|
Delaware
|
ARINC Costa Rica S.R.L.
|
|
Costa Rica
|
ARINC de Colombia Ltda.
|
|
Colombia
|
ARINC de Mexico, S.A. de C.V.
|
|
Mexico
|
ARINC de Venezuela, S.A.
|
|
Venezuela
|
ARINC Direct, LLC
|
|
Delaware
|
ARINC do Brasil Servicos de Tecnologia em Sistemas Ltda.
|
|
Brazil
|
ARINC Incorporated
|
|
Delaware
|
ARINC Incorporated N.V.
|
|
St Maarten
|
ARINC India Private Limited
|
|
Delhi
|
ARINC Information Management Services Tanzania Limited
|
|
Tanzania
|
ARINC International of Canada ULC
|
|
Nova Scotia
|
ARINC International, Inc.
|
|
Delaware
|
ARINC IRELAND LIMITED
|
|
Ireland
|
ARINC Kosovo SH.P.K.
|
|
Kosovo
|
ARINC Managed Services, LLC
|
|
Delaware
|
ARINC MAROC SARLAU
|
|
Morocco
|
ARINC New Zealand Limited
|
|
New Zealand
|
ARINC Overseas, LLC
|
|
Delaware
|
ARINC Peru S.A.C.
|
|
Peru
|
ARINC Republica Dominicana, S.R.L.
|
|
Dominican Republic
|
ARINC Romania S.R.L.
|
|
Romania
|
ARINC Saudi Arabia, LLC
|
|
Saudi Arabia
|
ARINC Servicos de Comunicacao e Gestao da Informacao Ltda.
|
|
Brazil
|
ARINC SISTEMAS AEROPORTAURIOS DE COLOMBIA S.A.S.
|
|
Colombia
|
ARINC solucije d.o.o. za trgovincu i usluge
|
|
Croatia
|
ARINC South Africa Proprietary Limited
|
|
South Africa
|
ARINC Trinidad and Tobago Limited
|
|
Trinidad and Tobago
|
ARINC Turkey Bilgi Yönetim Hizmetleri ve Ticaret Limited Şirketi
|
|
Turkey
|
ARINC Turks & Caicos Ltd.
|
|
Turks and Caicos Islands
|
ARINC Vietnam Co., Ltd.
|
|
Vietnam
|
ATS Japan Corp.
|
|
Japan
|
ATS Korea
|
|
Korea
|
AVIC Leihua Rockwell Collins Avionics Company
|
|
China
|
B E Aerospace (Hong Kong) Limited
|
|
Hong Kong
|
B E Aerospace DAe Systems Hispania S.L.
|
|
Spain
|
B/E Aerospace (Germany) GmbH
|
|
Germany
|
B/E Aerospace (UK) Limited
|
|
United Kingdom
|
B/E Aerospace Australia Pty Limited
|
|
Australia
|
B/E Aerospace B.V.
|
|
Netherlands
|
B/E Aerospace Canada Company (fka B/E Aerospace Company)
|
|
Nova Scotia
|
B/E Aerospace Fischer GmbH
|
|
Germany
|
B/E Aerospace Limited
|
|
Manitoba
|
B/E Aerospace Machined Products, Inc.
|
|
Delaware
|
B/E Aerospace Pte. Limited
|
|
Singapore
|
B/E Aerospace S.r.l.
|
|
Italy
|
B/E Aerospace Shanghai Co., Ltd.
|
|
China
|
B/E Aerospace Systems GmbH
|
|
Germany
|
B/E Aerospace Thermal and Power Management Finance LLC
|
|
Delaware
|
B/E Aerospace, Inc.
|
|
Delaware
|
BE Aerospace (Netherlands) B.V.
|
|
Netherlands
|
BE Aerospace (UK) Europe Holdings Limited
|
|
United Kingdom
|
BE Aerospace Australia, Inc.
|
|
Delaware
|
BE Aerospace Canada, Inc.
|
|
Delaware
|
BE Aerospace El Salvador, Inc.
|
|
Delaware
|
BE Aerospace Global Holding BV
|
|
Netherlands
|
BE Aerospace Global Holdings Limited
|
|
United Kingdom
|
BE Aerospace Holdings (UK) Limited
|
|
United Kingdom
|
BE Aerospace International Holdings Limited
|
|
United Kingdom
|
BE Aerospace International Holdings, LLC
|
|
Delaware
|
BE Aerospace Investments Holdings II S.a r.l.
|
|
Luxembourg
|
BE Aerospace Investments Holdings Ltd.
|
|
Cayman Islands
|
BE Aerospace Thermal and Power Management Holdings (UK) Limited
|
|
United Kingdom
|
BE Aircraft Mexico, LLC
|
|
Delaware
|
BE El Salvador, Sociedad Anonima de Capital Variable
|
|
El Salvador
|
BE Engineering Services India Private Limited
|
|
India
|
BE Intellectual Property, Inc.
|
|
Delaware
|
BEA (Barbados) DRE SRL
|
|
Barbados
|
BEA (Barbados) Global Holdings SRL
|
|
Barbados
|
BEA (Barbados) International Holdings SRL
|
|
Barbados
|
BEA Europe Holding LLC
|
|
Delaware
|
BEA Holding (USA) LLC
|
|
Delaware
|
BEA Jersey Limited
|
|
Jersey
|
Brazonics, Inc.
|
|
Delaware
|
Burns Aerospace Europe SARL
|
|
France
|
CGR/Thompson Industries, Inc.
|
|
California
|
Collins Aviation Maintenance Services (Shanghai) Limited
|
|
China
|
Collins Radio Company
|
|
Iowa
|
Data Link Solutions L.L.C.
|
|
Delaware
|
Emteq Corporate LLC
|
|
Delaware
|
Emteq Engineering LLC
|
|
Delaware
|
Emteq Enterprises, LLC
|
|
Delaware
|
EMTEQ Europe GmbH
|
|
Switzerland
|
Emteq International LLC
|
|
Delaware
|
Emteq LLC
|
|
Delaware
|
Ensambladores Electronicos de Mexico, S. de. R.L. de C.V.
|
|
Mexico
|
Flight Structures, Inc.
|
|
Washington
|
Intertrade, Limited
|
|
Iowa
|
J. A. Reinhardt & Co., Inc.
|
|
Pennsylvania
|
JAR Realty Holding, LLC
|
|
Delaware
|
Koninklijke Fabriek Inventum B.V.
|
|
Netherlands
|
Macrolink, Inc.
|
|
Delaware
|
Maine Electronics, Inc.
|
|
Delaware
|
NLX Holding Corporation
|
|
Delaware
|
Nordskog Industries, Inc.
|
|
California
|
Orion Defense Systems, Inc.
|
|
Delaware
|
Performance Metal Fabricators, Inc.
|
|
Illinois
|
PMI Enterprises, Inc.
|
|
Delaware
|
Pulse.Aero Limited
|
|
United Kingdom
|
Quest Flight Training Limited
|
|
United Kingdom
|
Radio Holdings, Inc.
|
|
Delaware
|
RICOMP Claims Management Corporation
|
|
Delaware
|
Rockwell Collins - ESA Vision Systems, LLC
|
|
Delaware
|
Rockwell Collins (India) Enterprises Private Limited
|
|
India
|
Rockwell Collins (Shanghai) Avionics Trading Company Limited
|
|
Shanghai
|
Rockwell Collins Asia-PAC Holdings LLC
|
|
Delaware
|
Rockwell Collins Australia Pty Limited
|
|
Australia
|
Rockwell Collins Business Services, LLC
|
|
Delaware
|
Rockwell Collins Canada, Inc.
|
|
Federally Chartered
|
Rockwell Collins CETC Avionics Co., Ltd.
|
|
China
|
Rockwell Collins Control Technologies, Inc.
|
|
Delaware
|
Rockwell Collins de Colombia SAS
|
|
Colombia
|
Rockwell Collins Deutschland GmbH
|
|
Germany
|
Rockwell Collins Deutschland Holdings GmbH
|
|
Germany
|
Rockwell Collins Deutschland Services GmbH
|
|
Germany
|
Rockwell Collins do Brasil Ltda.
|
|
Brazil
|
Rockwell Collins EUMEA Holdings SAS
|
|
France
|
Rockwell Collins Flight Services, Inc.
|
|
Delaware
|
Rockwell Collins France S.A.S
|
|
France
|
Rockwell Collins Global Logistics Solutions LLC
|
|
Delaware
|
Rockwell Collins India Private Limited
|
|
Delhi
|
Rockwell Collins In-Flight Network Company
|
|
Delaware
|
Rockwell Collins Information Management Services (Cayman) Ltd.
|
|
Cayman Islands
|
Rockwell Collins International Financing S.a r.l.
|
|
Luxembourg
|
Rockwell Collins International Holdings S.á r.l.
|
|
Luxembourg
|
Rockwell Collins International, Inc.
|
|
Texas
|
Rockwell Collins Latin America Holdings S.a r.l.
|
|
Luxembourg
|
Rockwell Collins Leasing LLC
|
|
Delaware
|
Rockwell Collins Mexico Holdings LLC
|
|
Delaware
|
Rockwell Collins Network Enabling Software, Inc.
|
|
Pennsylvania
|
Rockwell Collins Optronics, Inc.
|
|
California
|
Rockwell Collins Prescription Center, Inc.
|
|
Delaware
|
Rockwell Collins Public Safety Solutions, Inc.
|
|
Delaware
|
Rockwell Collins Saudi Arabia Limited
|
|
Saudi Arabia
|
Rockwell Collins Services Company
|
|
Delaware
|
Rockwell Collins Simulation & Training Solutions LLC
|
|
Delaware
|
Rockwell Collins Southeast Asia Pte. Ltd.
|
|
Singapore
|
Rockwell Collins Support Company
|
|
Delaware
|
Rockwell Collins Sweden AB
|
|
Sweden
|
Rockwell Collins Systems International, Inc.
|
|
Delaware
|
Rockwell Collins Technologies LLC
|
|
Delaware
|
Rockwell Collins UK Financing LP
|
|
United Kingdom
|
Rockwell Collins UK Limited
|
|
United Kingdom
|
Rockwell Collins Vision Systems, Inc.
|
|
California
|
Rockwell Collins, Inc.
|
|
Nevada
|
RSC Portfolio, LLC
|
|
Delaware
|
Sandy Bay Machine, Inc.
|
|
Delaware
|
Sonic.Aero Limited
|
|
United Kingdom
|
SWAP
|
|
United Kingdom
|
SWAP (One) Limited
|
|
United Kingdom
|
Thermal Solutions LLC
|
|
Delaware
|
TSI Group, Inc.
|
|
Delaware
|
Vision Systems International LLC
|
|
California
|
WASP Membranes Limited
|
|
United Kingdom
|
Wessex Advanced Switching Products Limited
|
|
United Kingdom
|
Woven Electronics, LLC
|
|
South Carolina
|
ZAO Rockwell Collins
|
|
Russia
|
Signature
|
|
Title
|
|
Date
|
|
|
|
|
|
|
|
|
|
|
/s/ Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
|
|
November 14, 2017
|
Robert K. Ortberg
|
|
|
|
|
|
|
|
|
|
/s/ Anthony J. Carbone
|
|
Director
|
|
November 14, 2017
|
Anthony J. Carbone
|
|
|
|
|
|
|
|
|
|
/s/ Chris A Davis
|
|
Director
|
|
November 14, 2017
|
Chris A. Davis
|
|
|
|
|
|
|
|
|
|
/s/ Ralph E. Eberhart
|
|
Director
|
|
November 14, 2017
|
Ralph E. Eberhart
|
|
|
|
|
|
|
|
|
|
/s/ John A. Edwardson
|
|
Director
|
|
November 14, 2017
|
John A. Edwardson
|
|
|
|
|
|
|
|
|
|
/s/ Richard G. Hamermesh
|
|
Director
|
|
November 14, 2017
|
Richard G. Hamermesh
|
|
|
|
|
|
|
|
|
|
/s/ David Lilley
|
|
Director
|
|
November 14, 2017
|
David Lilley
|
|
|
|
|
|
|
|
|
|
/s/ Andrew J. Policano
|
|
Director
|
|
November 14, 2017
|
Andrew J. Policano
|
|
|
|
|
|
|
|
|
|
/s/ Cheryl L. Shavers
|
|
Director
|
|
November 14, 2017
|
Cheryl L. Shavers
|
|
|
|
|
|
|
|
|
|
/s/ Jeffrey L. Turner
|
|
Director
|
|
November 14, 2017
|
Jeffrey L. Turner
|
|
|
|
|
|
|
|
|
|
/s/ John T. Whates
|
|
Director
|
|
November 14, 2017
|
John T. Whates
|
|
|
|
|
1.
|
I have reviewed the annual report on Form 10-K for the fiscal year ended
September 30, 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: November 14, 2017
|
/s/ Robert K. Ortberg
|
|
Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
|
1.
|
I have reviewed the annual report on Form 10-K for the fiscal year ended
September 30, 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: November 14, 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: November 14, 2017
|
/s/ Robert K. Ortberg
|
|
Robert K. Ortberg
|
|
Chairman, President and Chief Executive Officer
|
(1)
|
The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
|
(2)
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
|
Date: November 14, 2017
|
/s/ Patrick E. Allen
|
|
Patrick E. Allen
|
|
Senior Vice President and
|
|
Chief Financial Officer
|