2017 Annual Report

Financial
Highlights

Selected financial data

The following selected financial data should be read in conjunction with the consolidated financial statements and notes thereto included in Item 8 on our Form 10-K. The Statement of Operations, Statement of Financial Position and Other Data have been derived from our audited financial statements. We operate on a 52/53-week fiscal year ending on the Friday closest to September 30. Fiscal years 2017, 2016, 2015 and 2013 were 52-week fiscal years, while fiscal year 2014 was a 53-week fiscal year. Certain prior-year data has been reclassified to conform to the current-year presentation and to reflect the adoption of new guidance in 2017 requiring debt issuance costs to be presented as a deduction from the carrying amount of the related debt (see Note 2 in Notes to Consolidated Financial Statements in Item 8 of our Form 10-K for September 30, 2017).

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 2017(a): $ 6,822 2016(b): $ 5,259 2015(c): $ 5,244 2014(d): $ 4,979 2013(e): $ 4,474
Cost of sales 2017(a): 4,868 2016(b): 3,642 2015(c): 3,630 2014(d): 3,469 2013(e): 3,103
Selling, general and administrative expenses 2017(a): 732 2016(b): 638 2015(c): 606 2014(d): 594 2013(e): 495
Income from continuing operations 2017(a): 705 2016(b): 727 2015(c): 694 2014(d): 618 2013(e): 630
Income (loss) from discontinued operations, net of taxes 2017(a): — 2016(b): 1 2015(c): (8) 2014(d): (14) 2013(e): 2
Net income 2017(a): 705 2016(b): 728 2015(c): 686 2014(d): 604 2013(e): 632
Net income as a percent of sales 2017(a): 10.3% 2016(b): 13.8% 2015(c): 13.1% 2014(d): 12.1% 2013(e): 14.1%
Diluted earnings per share from continuing operations 2017(a): 4.79 2016(b): 5.50 2015(c): 5.19 2014(d): 4.52 2013(e): 4.56
Statement of Financial Position Data:
Working capital(f) 2017(a): $ 1,691 2016(b): $ 1,144 2015(c): $ 1,164 2014(d): $ 1,054 2013(e): $ 1,096
Property 2017(a): 1,398 2016(b): 1,035 2015(c): 964 2014(d): 919 2013(e): 773
Goodwill and intangible assets 2017(a): 11,287 2016(b): 2,586 2015(c): 2,607 2014(d): 2,551 2013(e): 1,067
Total assets 2017(a): 17,997 2016(b): 7,699 2015(c): 7,294 2014(d): 6,994 2013(e): 5,394
Short-term debt 2017(a): 479 2016(b): 740 2015(c): 448 2014(d): 504 2013(e): 436
Long-term debt, net 2017(a): 6,676 2016(b): 1,374 2015(c): 1,670 2014(d): 1,652 2013(e): 560
Shareowners’ equity 2017(a): 6,043 2016(b): 2,078 2015(c): 1,875 2014(d): 1,884 2013(e): 1,618
Other Data:
Capital expenditures 2017(a): $ 240 2016(b): $ 193 2015(c): $ 210 2014(d): $ 163 2013(e): $ 120
Depreciation and amortization 2017(a): 399 2016(b): 253 2015(c): 252 2014(d): 225 2013(e): 177
Dividends per share 2017(a): 1.32 2016(b): 1.32 2015(c): 1.26 2014(d): 1.20 2013(e): 1.20
Stock Price:
High 2017(a): $ 135.31 2016(b): $ 95.11 2015(c): $ 99.37 2014(d): $ 84.06 2013(e): $ 75.25
Low 2017(a): 78.54 2016(b): 76.03 2015(c): 72.35 2014(d): 65.76 2013(e): 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 sale of the KOSI business. On December 23, 2013, we acquired ARINC for $1.405 billion. This acquisition was funded through a combination of new long-term debt and short-term commercial paper borrowings.
  • (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.

Sales from continuing operations*
($ in millions)

chart1

Diluted earnings
per share from
continuing operations*
(in dollars)

chart2

Cash provided by operating activities from continuing operations*
($ in millions)

chart3

Return on
invested capital(a)(b)
(percent)*

chart4

* Restated to reflect the results of discontinued operations.

Shareowner return performance(c)
(including dividend reinvestment)
Fiscal year ended September 30

Cumulative total returns

2012 2013 2014 2015 2016 2017
Rockwell Collins, Inc. 2012: $100.00 2013: $130.34 2014: $149.38 2016: $161.07 2016: $167.78 2017: $263.51
S&P 500 2012:$100.00 2013: $120.06 2014: $142.60 2015: $144.36 2016: $163.95 2017: $194.46
Peer Group 2012:$100.00 2013: $146.57 2014: $168.51 2015: $179.24 2016: $209.63 2017: $291.83
Closing market price of COL at fiscal year end 2012:$53.64 2013: $68.59 2014: $77.35 2015: $82.24 2016: $84.34 2017: $130.71
  • (a)The company calculates return on invested capital (ROIC) as net income from continuing operations excluding after-tax interest expense, divided by the average of invested capital at the beginning and end of the fiscal year. Invested capital is calculated as the sum of total shareowners’ equity (excluding defined benefit pension accounting adjustments impacting accumulated other comprehensive loss) and total debt, less cash and cash equivalents.
  • (b)ROIC has been impacted by debt that was issued to finance the acquisition of (1) ARINC since fiscal year 2014 and (2) B/E Aerospace in fiscal year 2017.
  • (c)The cumulative total returns table and adjacent line graph compare the cumulative total shareowner return on the company’s Common Stock against the cumulative total return of the S&P Aerospace and Defense Select Industry Index (Peer Group) and the S&P 500 Composite Index (S&P 500) for the five-year period ended September 30, 2017. In each case a fixed investment of $100 at the respective closing prices on September 30, 2012 and reinvestment of all dividends are assumed.

Safe harbor statement

This Annual Report 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, those detailed herein, in our Form 10-K and from time to time in our other Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof.

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