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© 2014 Rockwell Collins. All rights reserved.
Rockwell Collins Investor Conference March 6, 2014 Kelly Ortberg Chief Executive Officer and President
Accelerating growth
© 2014 Rockwell Collins. All rights reserved. 2
Safe harbor statement
This presentation contains statements, including certain projections and business trends, that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the financial condition of our customers, including bankruptcies; the health of the global economy, including potential deterioration in economic and financial market conditions; adjustments to the commercial OEM production rates and the aftermarket; the impacts of natural disasters, including operational disruption, potential supply shortages and other economic impacts; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; delays related to the award of domestic and international contracts; delays in customer programs; unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011 as modified by the Bipartisan Budget Act of 2013; the continued support for military transformation and modernization programs; potential adverse impact of oil prices on the commercial aerospace industry; the impact of terrorist events on the commercial aerospace industry; declining defense budgets resulting from budget deficits in the U.S. and abroad; changes in domestic and foreign government spending, budgetary, procurement and trade policies adverse to our businesses; market acceptance of our new and existing technologies, products and services; reliability of and customer satisfaction with our products and services; favorable outcomes on or potential cancellation or restructuring of contracts, orders or program priorities by our customers; recruitment and retention of qualified personnel; regulatory restrictions on air travel due to environmental concerns; effective negotiation of collective bargaining agreements by us and our customers; performance of our customers and subcontractors; risks inherent in development and fixed-price contracts, particularly the risk of cost overruns; risk of significant reduction to air travel or aircraft capacity beyond our forecasts; our ability to execute to our internal performance plans such as our productivity and quality improvements and cost reduction initiatives; achievement of ARINC integration and synergy plans as well as our other acquisition and related integration plans; continuing to maintain our planned effective tax rates; our ability to develop contract compliant systems and products on schedule and within anticipated cost estimates; risk of fines and penalties related to noncompliance with laws and regulations including export control and environmental regulations; risk of asset impairments; our ability to win new business and convert those orders to sales within the fiscal year in accordance with our annual operating plan; and the uncertainties of the outcome of lawsuits, claims and legal proceedings, as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof and the company assumes no obligation to update any forward-looking statement.
© 2014 Rockwell Collins. All rights reserved.
2014 Investor Conference
Agenda
8:30 a.m. Overview
Commercial Systems
Government Systems
Break
Information Management Services
Financial overview
Closing remarks
Panel Q&A
Break
Lunch
1:30 p.m. Adjourn
3
© 2014 Rockwell Collins. All rights reserved.
A leader in communication and electronic solutions
4
Commercial aviation and military applications including:
Integrated avionics
Communications
Navigation
Displays & surveillance systems
Information management solutions
Flight support services
Integrated mission & training solutions
Flight control
Global service & support
Portfolio mix (Pro forma FY14)
Commercial Systems
44%
Government Systems
44%
12% Information
Management Services
Commercial 56%
Defense 44%
© 2014 Rockwell Collins. All rights reserved.
Strategies to drive increased shareowner value
Accelerate growth ‒ Market share gains on new OEM
platforms entering service
‒ Expanding international business
‒ Positioning for new defense environment
‒ New growth platform with information management solutions
Expand free-cash flow ‒ Incremental margin on top-line growth
‒ Changing investment cycle with large programs winding down
Capital deployment with priorities on growth and shareowner return
5
© 2014 Rockwell Collins. All rights reserved.
We’ve managed through dynamic markets
Challenges
Our response
6
5-year recap
Rebalanced portfolio toward avionics and leveraged commercial capabilities
Reshaped cost structure
Shifted focus to emerging international markets
Invested through cycle and gained market share
Increased investments in air transport Increased balance in high end of
business aviation
Global recession
U.S. defense budget cycle
Unprecedented number of new aircraft developments
© 2014 Rockwell Collins. All rights reserved.
The market outlook is improving
Air transport market is in a prolonged upcycle
Business aviation market is bottoming out
Bipartisan Budget Act is providing some certainty
for DoD investment
International defense markets are growing
Increasing demand for information management solutions
7
© 2014 Rockwell Collins. All rights reserved.
We’re positioned to take advantage of market growth
Strong customer focus drives supplier-of-choice relationships
Positioned on long-cycle programs for the future
Operating model leverages common investments across markets
Reduced cost structure provides leverage for future growth
Expanding positions in international markets
Broadest portfolio of information management offerings
8
© 2014 Rockwell Collins. All rights reserved.
We’re growing our international business
Growing positions with international OEMs and airlines
Expanding JVs and partnerships to capture future growth
Gaining share in international defense markets
Strong global presence in information management services
9
Domestic 60%
International 40%
Domestic 50%
International 50%
2013
2018
Domestic 50%
International 50%
© 2014 Rockwell Collins. All rights reserved.
ARINC accelerates our growth
10
Allows Rockwell Collins to capture the growing service link of the value chain
Provides scale for incremental growth ‒ Customer base
‒ Products and services
‒ Breadth to provide complete solutions
Synergistic with industry-leading avionics business
© 2014 Rockwell Collins. All rights reserved.
5-year outlook
Revenue
Operating CashFlow
Last 5 Years Next 5 Years
Earnings Per Share
$-‐
$2,500
$5,000
$7,500
2009 2010 2011 2012 2013
$-‐
$250
$500
$750
$1,000
2009 2010 2011 2012 2013
$-‐
$2.00
$4.00
$6.00
$8.00
2009 2010 2011 2012 2013
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
Mid-‐to-‐high single digit growth
Double-‐digit growth
Double-‐digit growth
11
© 2014 Rockwell Collins. All rights reserved.
Business presentations
Patrick Allen Senior Vice President and Chief Financial Officer
Kent Statler Executive Vice President and Chief Operating Officer Commercial Systems
Phil Jasper Executive Vice President and Chief Operating Officer Government Systems
Jeff Standerski Senior Vice President Information Management Services
12
© 2014 Rockwell Collins. All rights reserved.
Kent Statler Executive Vice President and Chief Operating Officer
Commercial Systems
© 2014 Rockwell Collins. All rights reserved.
What we do
Integrated flight decks
Head-down and head-up displays
Communication, navigation and surveillance systems
Information management systems
Flight control
Global customer service and support
14
© 2014 Rockwell Collins. All rights reserved.
Markets we serve
Air transport OEMs
15
FY13 revenue $2.2B
WB IFE* 4%
Business and regional OEMs
Aftermarket
Business and
regional 45%
Air transport
51%
OE 56%
Aftermarket 40%
WB IFE* 4%
* Widebody in-flight entertainment
© 2014 Rockwell Collins. All rights reserved.
Overall market outlook looks positive
Robust backlogs
Historically high production
Strong aftermarket
16
Air Transport Business and Regional
Delivery rates are bottoming
New models entering service
Aftermarket will improve with increased aircraft utilization
© 2014 Rockwell Collins. All rights reserved.
Commercial Systems is positioned to deliver profitable growth
Captured positions in growing markets
Differentiated products and services
Accelerated profitable growth
17
75% of investments for captured positions behind us; 90% of revenue ahead
© 2014 Rockwell Collins. All rights reserved.
What drives our growth
18
Innovative technologies
Accelerated profitable growth
Superior customer value
© 2014 Rockwell Collins. All rights reserved.
Innovative technologies aligned with customer needs
19
Empowering user
interface
Extensive situational awareness
Information management
systems
Large format displays Touch screen displays
Synthetic vision Enhanced vision Compact head-up display
Synthetic vision approach to 100’
Flight path hazard avoidance
Synchronized aircraft Information security Air-to-ground connectivity
Secure aircraft data networks
Graphical flight planning
© 2014 Rockwell Collins. All rights reserved.
Bombardier
Boeing
Delivering superior customer value is foundational to growth
Deliver high quality products
on time
Superior customer
value
Airbus
Customer aligned goals
Competitive costs
New programs and expanded content
New programs and expanded content
B737 MAX B787 B777X opportunity
Global 5000/6000
Global 7000/8000
CSeries
A350
20
Next-generation aircraft opportunity A380
Challenger family
Superior customer service
© 2014 Rockwell Collins. All rights reserved.
Captured standard positions deliver growth
21
5 unannounced programs
Boeing 787
Airbus 350
Bombardier CSeries
Boeing 737 MAX
COMAC C919
Boeing 777X (future opportunity)
Embraer Legacy 500
Embraer Legacy 450
Bombardier Learjet 85
COMAC ARJ21
Bombardier Global 7000
Bombardier Global 8000
Gulfstream G280
Air transport aircraft
Business and regional aircraft
E n t r y i n t o s e r v i c e / r a t e s a c c e l e r a t i n g t h r o u g h 2 0 1 9
Mitsubishi MRJ
© 2014 Rockwell Collins. All rights reserved.
New standard positions bring increased content
Widebody ~2.0X
Narrowbody ~1.5X
Business aviation ~2.0X (light to heavy Jets)
22
© 2014 Rockwell Collins. All rights reserved. 23
Expanding our global presence to capture future business
Geographically diverse customer base provides >50% in international revenues
Major share at emerging international OEMs
Launched JVs in China to capture
future growth
Systems engineering co-located with
customers including Canada, France,
Brazil and China
MRO service centers strategically
positioned around the globe
Domestic 55%
International 45%
Domestic 48% International
52%
Domestic ~ 40%
International ~ 60%
FY08
FY13
FY18
Commercial Systems
© 2014 Rockwell Collins. All rights reserved.
Commercial Systems continues to deliver growth
High single-digit
growth
15% decline
OE OE
Aftermarket
Aftermarket
Widebody IFE
CAGR
24
High single-digit
growth
2013 Next 5 Years
Revenue growth rate 2X above market
An
nu
al re
ven
ue
© 2014 Rockwell Collins. All rights reserved.
Commercial Systems is positioned to deliver…
25
High single-digit revenue growth through captured standard positions
Margin expansion with increased volume and Lean focus
Increased cash flows as large development programs wind down
– 75% investment complete
– 90% of revenue in the future
Share gains to fuel growth beyond next five years
© 2014 Rockwell Collins. All rights reserved.
Phil Jasper Executive Vice President and Chief Operating Officer
Government Systems
© 2014 Rockwell Collins. All rights reserved.
What we do
27
Integrated avionics for manned and unmanned aircraft
Head-down, head-up and helmet displays
Integrated mission and training solutions
Networked communication
Precise navigation and targeting
© 2014 Rockwell Collins. All rights reserved.
Markets we serve
Fixed Wing
Rotary Wing
Ground Forces
28
FY13 revenue $2.4B
Fixed Wing 56%
Ground Forces 24%
Rotary Wing 20%
Domestic 71%
Int’l 29%
© 2014 Rockwell Collins. All rights reserved.
Market outlook
Domestic market stabilizing
New airborne platforms transitioning to production
KC-46, KC-390, dual-use helicopters and F-35
Fewer new platform developments drive incremental upgrades to legacy fleets
Shift from traditional development model to commercial procurement
Increased international spending on border security and surveillance
29
© 2014 Rockwell Collins. All rights reserved.
Government Systems is positioned to return to growth
30
FY10 revenue $2.9B
FY10
FY13 revenue $2.4B
FY13
Fixed Wing 49%
U.S. Army Ground 20%
Rotary Wing 17%
Fixed Wing 56%
ROW Ground 16%
Rotary Wing 20%
U.S. Army Ground 8%
ROW Ground 14%
Less reliance on U.S. Army ground forces provides stability
Rest of the world (ROW) ground positioned in growing markets
– International targeting and ISR systems
CAGR
FY10 FY13
An
nu
al re
ven
ue
U.S. Army Ground
Rotary
Fixed
(4%)
1%
(1%)
US Army Grd
Rotary
Fixed
ROW Ground
(31%)
ROW Ground
© 2014 Rockwell Collins. All rights reserved.
What drives our growth
Leverage Commercial
Systems technology
Return to growth
Breadth of mission solutions
31
Captured positions
© 2014 Rockwell Collins. All rights reserved.
New development programs
Captured positions deliver growth
32
International C-130 KC-10
KC-135
P-3
USCG aircraft
E-6
UH/MH-60 & 47
F-35 avionics & simulation
Incumbent programs with long service life remaining
Long-range strike
T-X
UCLASS
CRH
VXX
JTRS HMS
International targeting
Saab Gripen US/NATO AWACS CH-53K KC-46
MIDS-J ARC-210
I n c u m b e n c y d r i v e s u p g r a d e a d v a n t a g e
Captured programs yet to enter production
KC-390
AW101, 169, 189, 609
International C-130 JPALS MGUE TTNT
© 2014 Rockwell Collins. All rights reserved.
Leveraging Commercial Systems investments creates differentiation
Common systems and capability developed once, used many times
Cost of reused elements is 25% of the original investment
Limits customer cost to missionization
Source: U.S. Army
33
Application of commercial technology results in decreased program costs
Norm
aliz
ed a
pplic
atio
n c
ost
SOA MH-60/47
Army UH-60M
Army CH-47F
USMC VH-60
USCG HH-60
© 2014 Rockwell Collins. All rights reserved.
Networked communication
Military H/U/VHF radios
Tactical data links
Satellite communication
Software defined radios
and waveforms
Electronic warfare
34
Precision navigation and targeting
Secure GPS receivers
Digital anti-jam receivers
Precision weapons
Airborne radio
navigation
Digital targeting
High-integrity computing
Multi-level security
microprocessors
High assurance guards
Sensor data processing
and integration
Image processing
Strong mission product portfolio drives increased content
© 2014 Rockwell Collins. All rights reserved.
Coupling Commercial Systems and military technology expands platform content
120% increase in shipset content
Tanker cockpit
Tactical data links Sensor integration Image processing Military radios
35
Mission integration provides value of $20M
per aircraft
E-6 products
SATCOM Multi-level security Integrated mission
systems Nuclear C2
100% increase in content
KC-390 cockpit
Military HF SATCOM Radio navigation Tactical data links
© 2014 Rockwell Collins. All rights reserved.
36
FY13
FY18
Domestic 71%
Int’l 29%
Int’l 35%
Domestic 65%
FY08
Domestic 79%
Int’l 21%
International revenue growth remains strong
Use of Commercial Systems technology lowers export risk
International growth accelerated through export of captured OEM positions
Installed base, OEM wins and aircraft retrofits generate:
‒ Mid single digit growth in Asia and Europe
‒ Double digit growth in Middle East
Government Systems
© 2014 Rockwell Collins. All rights reserved.
FY10 FY13 Next 5 Years
Low-mid single-digit growth
Government Systems is positioned to return to growth
37
Rotary
Fixed Fixed
Rotary
Fixed
Rotary 1%
(1%)
(31%) U.S. Army Ground
ROW Grd (4%)
US Army Grd
ROW Grd
Low single-digit decline
US Army Grd
ROW Grd
CAGR
Low-mid single-digit growth
Low single-digit growth
An
nu
al re
ven
ue
© 2014 Rockwell Collins. All rights reserved.
Government Systems is positioned for profitable growth
Captured positions and strong product portfolio deliver growth
International growth remains strong
Portfolio much less reliant on U.S. Army modernization
Industry-leading margins through application of Commercial Systems technology
38
© 2014 Rockwell Collins. All rights reserved. 39
accelerating growth
© 2014 Rockwell Collins. All rights reserved.
Kelly Ortberg Chief Executive Officer and President
Information Management Services
© 2014 Rockwell Collins. All rights reserved.
Increasing demand for information enablement
Double-digit market growth: • Increasing fleet size • Increasing percentage of information-enabled aircraft • Increasing applications and services
2030
information-enabled “smart aircraft”
80% information enabled
84,700 (1) active commercial aircraft
2020 2010 2000
• Advanced avionics • Connectivity & services • Apps & content • Security
33,800 (1) active commercial aircraft
15-20% information enabled
(1) – Air transport, regional and business aviation aircraft
41
© 2014 Rockwell Collins. All rights reserved. 42
Passenger network
Secure data network
Smart router
Communication radios
Cyber security firewall
Computers& servers
Satellite communications
Air-to-ground communications
OEM services
Information services
Maintenance services
Airline/business aviation operations eCommerce
Aviation authorities
Information management
services
Information management
systems
Information management provides new platform for growth
Information enablement
Rockwell Collins network operations
© 2014 Rockwell Collins. All rights reserved.
Jeff Standerski Senior Vice President
Information Management Services
© 2014 Rockwell Collins. All rights reserved. 44
Information Management Services (IMS)
+ Employees: 1,800 Primary locations: Annapolis, Maryland London Singapore
Employees: 250 Primary location: Houston, Texas
Flight services
Information Management Services
41%
22%
21%
16% Rail/security
Airports
Business aviation
Airline aviation Domestic
55%
International 45%
2013 2013
© 2014 Rockwell Collins. All rights reserved.
Airline and business aviation communications
Air-to-ground voice and data network
Ground-to-ground network
Business aviation flight support services
Airport operational efficiency systems
Rail and security command and control systems
45
What we do
© 2014 Rockwell Collins. All rights reserved.
The network
Mission critical private network ‒ Global coverage ‒ High assurance and high availability ‒ Connects 100s of legacy airline systems ‒ 1100+ ground stations ‒ Satellite communications service
Revenue generated by usage and value-added applications
Community of users
Air-to-ground network
46
Ground-to-ground network
© 2014 Rockwell Collins. All rights reserved.
(Landing) (Preflight to take-off)
Airline to aircraft
Passenger to airline Airline to airline Passenger to TSA Airline to flight status displays
Airline to customs & immigration
47
Air-to-ground network
A day at airline and airport operations
Private ground- to-ground network
$
$
$
$
$ $
$
(Enroute)
$
$ $
© 2014 Rockwell Collins. All rights reserved.
(Enroute) (Postflight)
(Preflight to take-off)
Flight operations management
Airport information IMS flight operations
48
Air-to-ground network
A day within business aviation flight support services
Trip logs
Real-time weather Flight plan
upload
Flight following Fuel management
Agent network
$$$
$
$
$ $$ $
$ $
$
$
Passenger to Internet
$
Private ground- to-ground network
© 2014 Rockwell Collins. All rights reserved.
Market outlook
49
Airline aviation
Growth in air traffic and total fleet Increased broadband data usage
Improved global airspace operations (e.g., FAA NextGen)
Business aviation
Integrated global service offerings Adoption of mobile devices for graphical weather,
charts and maps
Increased passenger connectivity demands
Airports
Integrated airport environment Increased data exchange between airports
and airlines
Automated security and customs processes
© 2014 Rockwell Collins. All rights reserved. 50
Strong market presence around the globe
#1 in North American airline and business aviation communications market
Leader in business aviation flight support services
FAA DataComm / NextGen
Positioned in 50+ leading airports (e.g., Dallas, Las Vegas and Vancouver)
Americas
Exclusive provider of airline and business aviation communications in China and Thailand
Fleet-wide information management enablement and services at Cathay Pacific
Positioned in 20+ leading airports (e.g., Tokyo, Hong Kong and Seoul)
Asia Pacific
Virgin Atlantic, Emirates and South African Airways are examples of key customers
Positioned in 40+ leading airports (e.g., Heathrow, Dubai and Doha)
Europe, Middle East & Africa
Long-term customers. Renewal rates > 95%
© 2014 Rockwell Collins. All rights reserved.
What drives our growth
51
Accelerated revenue growth
Enhanced data / services drive
demand Synergies
© 2014 Rockwell Collins. All rights reserved.
Enhanced data / services drive demand
3. More types of users – aviation “eco-system”
1. Airline aviation traffic growth
Air-to-ground messages
2. More data per airline & business aviation aircraft
10x increase in data generated
52
B767 B787
Sources: Airbus & Boeing
Air traffic doubles every 15 yrs
5% CAGR since 1980
5% CAGR projected for next 15 years
Core business
Current Future
High single digit growth
IMS revenue
© 2014 Rockwell Collins. All rights reserved.
Identified synergies drive over $125M in revenue through 2018
Service expansion through airline channel relationships
Flight support services growing through combined, complementary service offerings in business aviation
Airline and business aviation communication services to drive increased information enablement, applications and content
53
2015
2018
$10M/year
$50M+/year
© 2014 Rockwell Collins. All rights reserved.
Creating a one-stop shop for business aviation flight support services
54
Flight Services
International trip support
Regional trip support
Regional trip support
Connectivity services
Weather services
Connectivity services
International trip support
Integrated solution
Revenue synergy drive growth 1. International trip support and weather services provided to ARINC Direct customers
2. Regional trip support and connectivity services provided to Ascend customers
3. Market share gain from strength of complementary portfolios
© 2014 Rockwell Collins. All rights reserved.
Leveraging communication services to deliver enablement, applications and content
55
Cabin apps & content Passenger connectivity Credit card transactions Audio-video distribution
Aircraft apps & content Graphical weather Electronic charts Maintenance data
Ground-to-ground network, applications and infrastructure
On-board system
Cathay Pacific’s eEnabled aircraft
© 2014 Rockwell Collins. All rights reserved. 56
Strong core business with identified synergies and further expansion potential
High single-digit revenue growth in core business – further enhanced by synergies
High incremental margins from more data users / usage over existing network infrastructure
Long-term stable cash flow generation from connectivity and app subscription business
Core business
Synergies
Current Future
IMS
reven
ue
High single-digit growth
Double-digit growth
© 2014 Rockwell Collins. All rights reserved.
Patrick Allen Senior Vice President and Chief Financial Officer
2014 Rockwell Collins Investor Conference
© 2014 Rockwell Collins. All rights reserved.
Business & regional aircraft deliveries down 40%
- 200 400 600 800
1,000 1,200 1,400 1,600 1,800
2008 2009 2010 2011 2012 2013
Business & Regional Aircraft Deliveries
$-
$50
$100
$150
$200
$250
$300
2008 2009 2010 2011 2012 2013
DOD Investment Accounts (Base + OCO Investment)
($ Billions)
-
200
400
600
800
1,000
1,200
1,400
2008 2009 2010 2011 2012 2013
Air Transport Aircraft Deliveries
DOD investment spend down 33%
Air transport deliveries up 50%
Core revenues remained flat despite 2 of 3
markets declining
58
Over the last five years
© 2014 Rockwell Collins. All rights reserved. 59
We remained focused on our core performance
Maintain profitability
Cash flow performance
Invested in emerging markets
Offset market declines
Sustained average operating margins above 20%
Decreased headcount ~10% Closed 17 facilities
Generated 126%(1) average operating cash flow as a percent of net income (before deferred investments)
Focus Area Result
Increased headcount in emerging markets by 60%
Three new joint ventures in emerging markets
Business jet market share gains offset four years of market declines
(1) – See Non-GAAP Financial Information table at the end of this presentation.
© 2014 Rockwell Collins. All rights reserved. 60
While deploying our cash
Invested 20% of sales in R&D for core growth
Purchased ARINC Complementary business adds $550 million of revenue growing high single digits organically
Focus area Result
Commercial Systems poised to grow 2X market
Government Systems leverages commercial technologies for mission systems
Returned capital to shareowners
Maintained dividend payout ratio Repurchased 36 million shares
Leveraging a return to growth for company and investors
© 2014 Rockwell Collins. All rights reserved.
Air transport market is in a prolonged upcycle
Business jet production is bottoming out
More budget certainty for DoD investment accounts
International defense markets are growing
61
The market outlook is improving
© 2014 Rockwell Collins. All rights reserved.
Pro Line Fusion
62
Pro Line Fusion on 18 commercial platforms
Competitive product offering for light business jets
R&D investments are paying off
Key investments Payoff
Air Transport investments: Displays Information management Communication, navigation and
surveillance systems
Leveraged 787 win onto A350 and 737 MAX
Government Systems investments: Utilize Fusion/AT investments Networked radios Precision targeting solutions
Deployed commercial technologies across military platforms
Developed solutions to address U.S. and international markets
© 2014 Rockwell Collins. All rights reserved. 63
A350
CSeries
Global 5000/6000
Global 7000/8000
737 MAX
Gulfstream 280
Learjet 85
Embraer 450/500
Agusta 149
Saab Gripen
$18 billion in revenue over the lifecycle of these programs
$7 billion in operating profit
Pre-production engineering investments are paying off
Key programs Payoff
$-
$200
$400
$600
$800
2014 2015 2016 2017 2018
Pre-production engineering program sales
($ Millions)
© 2014 Rockwell Collins. All rights reserved. 64
Pre-production engineering starts to deliver
~75% of the spend is behind us and over 90% of the revenue is in front of us
$-‐
$100
$200
$300
$400
$500
$600
$700
$800
$900
2009 2010 2011 2012 2013 2014 2015 2016 2017 2018
Sales Commi7ed pre-‐produc=on engineering spend
© 2014 Rockwell Collins. All rights reserved. 65
Long-term ARINC expectations:
Organic sales growth in high-single digits
Revenue synergies expand ARINC sales
growth to double-digits
EBITDA margins expanding to greater than
20%(2); incremental margins of 40%-50%
ARINC initially increases Rockwell Collins’
cash flow by about 10% and accelerates
thereafter
Capital expenditures as a percent of
sales ~6%
Acquisition of ARINC adds platform for growth
Rockwell Collins combined business is 56% commercial and growing
$-‐
$100
$200
$300
$400
$500
$600
2011 2012 2013
ARINC Sales (1)
(1) Excludes sales for ARINC's Aerospace Systems Engineering and Support business, which is in the process of being divested. (2) See ARINC Projected Financial Information table in Rockwell Collins’ first quarter results press release dated January 21, 2014.
10% CAGR
© 2014 Rockwell Collins. All rights reserved.
R&D ~18-20% of sales Bolt-on acquisitions Capital expenditures ~3% of sales
66
Invest in growth
Repay majority of short-term debt
Expected to take ~2 years
Continue shareowner friendly capital
deployment
Dividend payout of 20%-25% of net income
Resume “normal” share repurchases after debt pay down
Capital deployment going forward
© 2014 Rockwell Collins. All rights reserved.
5-year outlook
Revenue
Earnings Per Share
Operating CashFlow
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
2014 2015 2016 2017 2018
Mid-‐to-‐high single-‐digit growth
Double-‐digit growth
Double-‐digit growth
67
• Commercial Systems high single-digit growth
• Government Systems low single-digit growth
• Information Management Services accelerating to double-digit growth
• Deferred investments decreasing • Pension headwinds abating
• Expanding margins with sales growth • Resume share repurchases
© 2014 Rockwell Collins. All rights reserved. 68
accelerating growth
© 2014 Rockwell Collins. All rights reserved.
Non-GAAP Financial Information
69
Five Years EndingSeptember 30, 2013
Operating cash flows, as reported 3,152$
Add: Increase in pre-production engineering costs, net 548 (a)
Add: Amortization expense for pre-production engineering costs 80 (b)
Operating cash flows, as adjusted 3,780$
Income from continuing operations, as reported 3,002$
Adjusted operating cash flows as a percent of income from continuing operations 126%
(b) Represents the amortization expense for pre-production engineering costs of $25 million, $18 million, $15 million, $15 million and $7 million for the twelve months ended September 30, 2013, 2012, 2011, 2010 and 2009, respectively.
The Non-GAAP information included in this presentation is believed to be useful to an investor's understanding and assessment of our on-going operations. The company does not intend for the Non-GAAP information to be considered in isolation or as a substitute for the related GAAP measures.
The following table is intended to show operating cash flows as a percent of net income for the last five years excluding the impact of pre-production engineering investment for the last five years (unaudited, in millions):
(a) Represents the net increase in pre-production engineering costs capitalized within inventory. Pre-production engineering costs capitalized within inventory were $714 million and $166 million at September 30, 2013 and September 30, 2008, respectively.