3 rd Quarter FY 2015 Conference Call

Transcription

1 Insert pictures into these angled boxes. Height should be 3.44 inches. 3 rd Quarter FY 2015 Conference Call July 24, 2015

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 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 and suppliers, 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 and pandemics, 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, including new aircraft programs entering service later than anticipated; the continued support for military transformation and modernization programs; potential impact of volatility in oil prices, currency exchange rates or interest rates on the commercial aerospace industry or our business; 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; potential unavailability of our mission-critical data and voice communication networks; unfavorable 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, our customers, and our suppliers; 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 internal performance plans such as 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. 2

3 3rd Quarter FY 2015 Results (in millions except EPS amounts) $1,264 Sales $1,293 Income from Continuing Operations, net of taxes 2% increase $163 9% increase $178 EPS from Continuing Operations $1.19 $1.33 Diluted Average Shares Outstanding % increase 2% decrease 3

4 $583 CS Sales 5% increase $611 Commercial Systems ($ in millions) Sales $35 million OEM growth: 10% Higher customer funded development program sales Improved share of airline selectable equipment Higher deliveries in support of Airbus A350 and Legacy 500 entry into service Higher hardware sales for Chinese regional aircraft CS Operating Earnings $3 million Aftermarket decrease: (1)% Lower spares provisioning for Boeing 787 Partially offset by higher regulatory mandate sales $130 $141 8% increase Operating Earnings Increase in operating earnings due to higher sales volume and favorable contract adjustments Operating Margins 22.3% 23.1% 4

5 GS Sales $535 $530 1% decrease GS Operating Earnings $112 $108 Government Systems ($ in millions) Sales Sales decrease 5 million: (1)% Lower deliveries of Firestorm targeting systems and JTRS Manpack radios Lower development sales for the CRIIS program Lower simulation and training sales Lower sales due to the impact of a stronger U.S. dollar Partially offset by higher hardware deliveries on rotary wing platforms, higher KC-10 retrofit and data link development program sales, and increased sales due to development effort on modernized GPS products Sales by category: Avionics increase 3% Communication Products flat Surface Solutions decrease (37)% Navigation Products increase 21% 4% decrease Operating Margins 20.9% 20.4% Operating Earnings Decrease in operating earnings due to lower sales, higher investment in company-funded R&D, and higher bid and proposal costs 5

6 IMS Sales Information Management Services ($ in millions) $146 $152 4% increase Sales Sales increase $6 million: 4% 8% increase in aviation related connectivity services Partially offset by lower sales due to the exit of certain government programs IMS Operating Earnings $23 $21 10% increase Operating Earnings Increase in operating earnings and operating margin primarily due to higher sales volume and the absence of certain licensing costs incurred in the prior year, partially offset by higher business development costs Operating Margins 14.4% 15.1% 6

7 Nine Month FY 2015 Results ($ in millions except EPS amounts) $3,577 Sales $3,860 Income from Continuing Operations, net of taxes $445 $510 8% increase 15% increase YTD YTD YTD YTD EPS from Continuing Operations $3.25 $3.81 Operating Cash Flow from Continuing Operations $265 (1) $341 17% increase 29% increase YTD YTD YTD YTD (1) Prior year amount has been revised to exclude discontinued operations. 7

8 Research and Development ($ in millions) R & D Investment $683 $731 Company-funded R&D increased due to efforts associated with positioning Government Systems business for new growth opportunities % of Sales YTD YTD Company Funded R&D Customer Funded R&D Increase in Pre-production Engineering, Net 19.1% 18.9% Customer funded R&D increased primarily due to the following: Higher costs for international development programs in Commercial Systems Increased costs for data link development programs in Government Systems Higher amortization of pre-production engineering costs Decreased investment in pre-production engineering driven by lower A350 spend and higher amortization expense 8

9 Capital Structure Status ($ in millions) 09/30/14 06/30/15 Cash and cash equivalents $ 323 $ 294 Short-term Debt (504) (745) Long-term Debt (1,663) (1,667) Net Debt $ (1,844) $ (2,118) Equity $ 1,889 $ 2,055 Debt To Total Capital 53% 54% Debt To EBITDA (1) 1.9x 1.9x (1) See slide 12 for non-gaap disclosures. 9

10 Status of Share Repurchases (shares in millions) Common Shares Outstanding million shares repurchased in fiscal year 2015 third quarter Cost of Purchases - $88 Million Average Cost per Share - $96.06 $380 million authorization remaining at the end of the third quarter 10

11 FY 2015 Guidance for Continuing Operations Total Sales $5.25 Bil. To $5.3 Bil. (From $5.2 Bil. to $5.3 Bil.) Total Segment Operating Margins About 21.0% (From 20.5% to 21.5%) Earnings Per Share $5.15 to $5.25 (From $5.10 to $5.30) Cash Flow from Operations $725 Mil. To $775 Mil. (From $700 Mil. To $800 Mil.) Research & Development Investment About $1 Bil. Capital Expenditures About $200 Mil. 11

12 Non-GAAP Financial Information The Non-GAAP ratio of debt to EBITDA information included on slide nine is believed to be useful to investors understanding and assessment of the Company s total capital structure and liquidity. The Company does not intend for the information to be considered in isolation or as a substitute for the related GAAP measures. The table below explains the debt to EBITDA calculation in more detail for the twelve-month period from October 1, 2013 through September 30, 2014 and the twelve-month period from July 1, 2014 through June 30, 2015 (unaudited, in millions). All businesses reported as discontinued operations have been excluded from the debt to EBITDA calculation. 12 months ended 9/30/14 6/30/15 Income from continuing operations before income taxes $ 882 $ 949 Interest expense Depreciation Amortization of intangible assets and pre-production engineering costs Earnings before interest, taxes, depreciation and amortization (EBITDA) $ 1,166 $ 1,264 9/30/14 6/30/15 Total debt $ 2,167 $ 2,412 Debt to EBITDA 1.9x 1.9x 12

13 13