Delaware
|
52-2314475
|
(State
or other jurisdiction
|
(I.R.S.
Employer
|
of
incorporation or organization)
|
Identification
No.)
|
400
Collins Road NE
|
|
Cedar
Rapids, Iowa
|
52498
|
(Address
of principal executive offices)
|
(Zip
Code)
|
Page No.
|
|||
PART
I.
|
FINANCIAL
INFORMATION:
|
||
Item
1.
|
Condensed
Consolidated Financial Statements:
|
||
Condensed
Consolidated Statement of Financial Position (Unaudited) —
|
|||
June
30, 2010 and September 30, 2009
|
2
|
||
Condensed
Consolidated Statement of Operations (Unaudited) —
|
|||
Three
and Nine Months Ended June 30, 2010 and 2009
|
3
|
||
Condensed
Consolidated Statement of Cash Flows (Unaudited) —
|
|||
Nine
Months Ended June 30, 2010 and 2009
|
4
|
||
Notes
to Condensed Consolidated Financial Statements (Unaudited)
|
5
|
||
Item
2.
|
Management's
Discussion and Analysis of
|
||
Financial
Condition and Results of Operations
|
22
|
||
Item
3.
|
Quantitative
and Qualitative Disclosures about Market Risk
|
37
|
|
Item
4.
|
Controls
and Procedures
|
38
|
|
PART
II.
|
OTHER
INFORMATION:
|
||
Item
2.
|
Unregistered
Sales of Equity Securities and Use of Proceeds
|
39
|
|
Item
6.
|
Exhibits
|
40
|
|
Signatures
|
41
|
June 30,
|
September 30,
|
|||||||
2010
|
2009
|
|||||||
ASSETS
|
||||||||
Current
Assets:
|
||||||||
Cash
and cash equivalents
|
$ | 303 | $ | 235 | ||||
Receivables,
net
|
917 | 913 | ||||||
Inventories,
net
|
980 | 943 | ||||||
Current
deferred income taxes
|
136 | 154 | ||||||
Other
current assets
|
90 | 117 | ||||||
Total
current assets
|
2,426 | 2,362 | ||||||
Property
|
709 | 719 | ||||||
Goodwill
|
756 | 695 | ||||||
Intangible
Assets
|
308 | 269 | ||||||
Long-term
Deferred Income Taxes
|
304 | 371 | ||||||
Other
Assets
|
233 | 229 | ||||||
TOTAL
ASSETS
|
$ | 4,736 | $ | 4,645 | ||||
LIABILITIES
AND EQUITY
|
||||||||
Current
Liabilities:
|
||||||||
Short-term
debt
|
$ | 22 | $ | 0 | ||||
Accounts
payable
|
388 | 366 | ||||||
Compensation
and benefits
|
211 | 199 | ||||||
Advance
payments from customers
|
332 | 349 | ||||||
Product
warranty costs
|
192 | 217 | ||||||
Other
current liabilities
|
221 | 228 | ||||||
Total
current liabilities
|
1,366 | 1,359 | ||||||
Long-term
Debt, Net
|
516 | 532 | ||||||
Retirement
Benefits
|
1,102 | 1,254 | ||||||
Other
Liabilities
|
171 | 205 | ||||||
Equity:
|
||||||||
Common
stock ($0.01 par value; shares authorized: 1,000; shares
issued: 183.8)
|
2 | 2 | ||||||
Additional
paid-in capital
|
1,409 | 1,395 | ||||||
Retained
earnings
|
2,715 | 2,444 | ||||||
Accumulated
other comprehensive loss
|
(1,084 | ) | (1,080 | ) | ||||
Common
stock in treasury, at cost (shares held: June 30, 2010, 26.5; September
30, 2009, 26.7)
|
(1,465 | ) | (1,469 | ) | ||||
Total
shareowners’ equity
|
1,577 | 1,292 | ||||||
Noncontrolling
interest
|
4 | 3 | ||||||
Total
equity
|
1,581 | 1,295 | ||||||
TOTAL
LIABILITIES AND EQUITY
|
$ | 4,736 | $ | 4,645 |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Sales:
|
||||||||||||||||
Product
sales
|
$ | 1,109 | $ | 978 | $ | 3,070 | $ | 2,965 | ||||||||
Service
sales
|
105 | 106 | 313 | 315 | ||||||||||||
Total
sales
|
1,214 | 1,084 | 3,383 | 3,280 | ||||||||||||
Costs,
expenses and other:
|
||||||||||||||||
Product
cost of sales
|
817 | 687 | 2,239 | 2,062 | ||||||||||||
Service
cost of sales
|
73 | 72 | 213 | 214 | ||||||||||||
Selling,
general and administrative expenses
|
119 | 108 | 347 | 331 | ||||||||||||
Interest
expense
|
5 | 5 | 15 | 12 | ||||||||||||
Other
income, net
|
(5 | ) | (3 | ) | (13 | ) | (16 | ) | ||||||||
Total
costs, expenses and other
|
1,009 | 869 | 2,801 | 2,603 | ||||||||||||
Income
before income taxes
|
205 | 215 | 582 | 677 | ||||||||||||
Income
tax provision
|
63 | 70 | 171 | 217 | ||||||||||||
Net
income
|
$ | 142 | $ | 145 | $ | 411 | $ | 460 | ||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$ | 0.90 | $ | 0.92 | $ | 2.61 | $ | 2.91 | ||||||||
Diluted
|
$ | 0.89 | $ | 0.91 | $ | 2.58 | $ | 2.89 | ||||||||
Weighted
average common shares:
|
||||||||||||||||
Basic
|
157.3 | 158.0 | 157.2 | 158.0 | ||||||||||||
Diluted
|
159.5 | 159.7 | 159.3 | 159.4 | ||||||||||||
Cash
dividends per share
|
$ | 0.24 | $ | 0.24 | $ | 0.72 | $ | 0.72 |
Nine Months Ended
|
||||||||
June
30
|
||||||||
2010
|
2009
|
|||||||
Operating
Activities:
|
||||||||
Net
income
|
$ | 411 | $ | 460 | ||||
Adjustments
to arrive at cash provided by operating activities:
|
||||||||
Depreciation
|
84 | 84 | ||||||
Amortization
of intangible assets
|
26 | 20 | ||||||
Stock-based
compensation expense
|
17 | 15 | ||||||
Compensation
and benefits paid in common stock
|
48 | 49 | ||||||
Tax
benefit from stock-based compensation
|
14 | 1 | ||||||
Excess
tax benefit from stock-based compensation
|
(13 | ) | (1 | ) | ||||
Deferred
income taxes
|
49 | 27 | ||||||
Pension
plan contributions
|
(108 | ) | (87 | ) | ||||
Changes
in assets and liabilities, excluding effects of acquisitions and foreign
currency
adjustments:
|
||||||||
Receivables
|
19 | 60 | ||||||
Inventories
|
(65 | ) | (33 | ) | ||||
Accounts
payable
|
20 | (73 | ) | |||||
Compensation
and benefits
|
15 | (139 | ) | |||||
Advance
payments from customers
|
(19 | ) | 7 | |||||
Product
warranty costs
|
(25 | ) | (7 | ) | ||||
Income
taxes
|
2 | 14 | ||||||
Other
assets and liabilities
|
(35 | ) | (16 | ) | ||||
Cash
Provided by Operating Activities
|
440 | 381 | ||||||
Investing
Activities:
|
||||||||
Property
additions
|
(83 | ) | (117 | ) | ||||
Acquisition
of businesses, net of cash acquired
|
(95 | ) | (146 | ) | ||||
Acquisition
of intangible assets
|
(5 | ) | (1 | ) | ||||
Other
investing activities
|
0 | (1 | ) | |||||
Cash
Used for Investing Activities
|
(183 | ) | (265 | ) | ||||
Financing
Activities:
|
||||||||
Purchases
of treasury stock
|
(117 | ) | (95 | ) | ||||
Cash
dividends
|
(113 | ) | (114 | ) | ||||
Decrease
in short-term borrowings
|
0 | (170 | ) | |||||
Net
proceeds from the issuance of long-term debt
|
0 | 296 | ||||||
Proceeds
from the exercise of stock options
|
31 | 10 | ||||||
Excess
tax benefit from stock-based compensation
|
13 | 1 | ||||||
Cash
Used for Financing Activities
|
(186 | ) | (72 | ) | ||||
Effect
of exchange rate changes on cash and cash equivalents
|
(3 | ) | (1 | ) | ||||
Net
Change in Cash and Cash Equivalents
|
68 | 43 | ||||||
Cash
and Cash Equivalents at Beginning of Period
|
235 | 175 | ||||||
Cash
and Cash Equivalents at End of Period
|
$ | 303 | $ | 218 |
1.
|
Business
Description and Basis of
Presentation
|
2.
|
Recently
Issued Accounting Standards
|
3.
|
Acquisitions
|
4.
|
Receivables,
Net
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Billed
|
$ | 722 | $ | 734 | ||||
Unbilled
|
261 | 217 | ||||||
Less
progress payments
|
(54 | ) | (27 | ) | ||||
Total
|
929 | 924 | ||||||
Less
allowance for doubtful accounts
|
(12 | ) | (11 | ) | ||||
Receivables,
net
|
$ | 917 | $ | 913 |
5.
|
Inventories,
Net
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Finished
goods
|
$ | 174 | $ | 177 | ||||
Work
in process
|
275 | 262 | ||||||
Raw
materials, parts and supplies
|
341 | 341 | ||||||
Less
progress payments
|
(100 | ) | (77 | ) | ||||
Total
|
690 | 703 | ||||||
Pre-production
engineering costs
|
290 | 240 | ||||||
Inventories,
net
|
$ | 980 | $ | 943 |
6.
|
Property
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Land
|
$ | 30 | $ | 30 | ||||
Buildings
and improvements
|
353 | 349 | ||||||
Machinery
and equipment
|
931 | 891 | ||||||
Information
systems software and hardware
|
274 | 259 | ||||||
Furniture
and fixtures
|
62 | 62 | ||||||
Construction
in progress
|
70 | 88 | ||||||
Total
|
1,720 | 1,679 | ||||||
Less
accumulated depreciation
|
(1,011 | ) | (960 | ) | ||||
Property
|
$ | 709 | $ | 719 |
7.
|
Goodwill
and Intangible Assets
|
Government
|
Commercial
|
|||||||||||
(in
millions)
|
Systems
|
Systems
|
Total
|
|||||||||
Balance
at September 30, 2009
|
$ | 496 | $ | 199 | $ | 695 | ||||||
Air
Routing acquisition
|
0 | 57 | 57 | |||||||||
DataPath
adjustment
|
16 | 0 | 16 | |||||||||
Foreign
currency translation adjustments
|
(12 | ) | 0 | (12 | ) | |||||||
Balance
at June 30, 2010
|
$ | 500 | $ | 256 | $ | 756 |
June 30, 2010
|
September 30, 2009
|
|||||||||||||||||||||||
Accum
|
Accum
|
|||||||||||||||||||||||
(in
millions)
|
Gross
|
Amort
|
Net
|
Gross
|
Amort
|
Net
|
||||||||||||||||||
Intangible
assets with finite lives:
|
||||||||||||||||||||||||
Developed
technology and patents
|
$ | 212 | $ | (117 | ) | $ | 95 | $ | 214 | $ | (104 | ) | $ | 110 | ||||||||||
Customer
relationships
|
237 | (46 | ) | 191 | 174 | (36 | ) | 138 | ||||||||||||||||
License
agreements
|
22 | (5 | ) | 17 | 17 | (4 | ) | 13 | ||||||||||||||||
Trademarks
and tradenames
|
14 | (11 | ) | 3 | 15 | (9 | ) | 6 | ||||||||||||||||
Intangible
assets with indefinite lives:
|
||||||||||||||||||||||||
Trademarks
and tradenames
|
2 | 0 | 2 | 2 | 0 | 2 | ||||||||||||||||||
Intangible
assets
|
$ | 487 | $ | (179 | ) | $ | 308 | $ | 422 | $ | (153 | ) | $ | 269 |
8.
|
Other
Assets
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Long-term
receivables
|
$ | 82 | $ | 97 | ||||
Investments
in equity affiliates
|
11 | 10 | ||||||
Exchange
and rental assets (net of accumulated depreciation of $104 at June
30, 2010 and $103 at September 30, 2009)
|
50 | 50 | ||||||
Other
|
90 | 72 | ||||||
Other
assets
|
$ | 233 | $ | 229 |
|
·
|
Vision
Systems International, LLC (VSI): VSI 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
|
|
·
|
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
|
|
·
|
Integrated
Guidance Systems LLC (IGS): IGS is a joint venture with
Honeywell International Inc. for the joint pursuit of integrated precision
guidance solutions for worldwide guided weapons
systems
|
|
·
|
Quest
Flight Training Limited (Quest): Quest is a joint venture with
Quadrant Group plc (Quadrant) that provides aircrew training services
primarily for the United Kingdom Ministry of
Defence
|
9.
|
Other
Current Liabilities
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Customer
incentives
|
$ | 122 | $ | 122 | ||||
Contract
reserves
|
12 | 11 | ||||||
Income
taxes payable
|
2 | 4 | ||||||
Other
|
85 | 91 | ||||||
Other
current liabilities
|
$ | 221 | $ | 228 |
10.
|
Debt
|
June 30,
|
September 30,
|
|||||||
(in
millions)
|
2010
|
2009
|
||||||
Principal
amount of 2019 Notes, net of discount
|
$ | 298 | $ | 298 | ||||
Principal
amount of 2013 Notes
|
200 | 200 | ||||||
Principal
amount of variable rate loan due June 2011
|
22 | 26 | ||||||
Fair
value swap adjustment (Notes 16 and 17)
|
18 | 8 | ||||||
Total
|
538 | 532 | ||||||
Less
current portion
|
(22 | ) | 0 | |||||
Long-term
debt, net
|
$ | 516 | $ | 532 |
11.
|
Retirement
Benefits
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Service
cost
|
$ | 1 | $ | 1 | $ | 4 | $ | 4 | ||||||||
Interest
cost
|
40 | 42 | 119 | 126 | ||||||||||||
Expected
return on plan assets
|
(53 | ) | (51 | ) | (158 | ) | (151 | ) | ||||||||
Amortization:
|
||||||||||||||||
Prior
service credit
|
(5 | ) | (5 | ) | (14 | ) | (14 | ) | ||||||||
Net
actuarial loss
|
23 | 8 | 68 | 22 | ||||||||||||
Net
benefit expense (income)
|
$ | 6 | $ | (5 | ) | $ | 19 | $ | (13 | ) |
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
(in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Service
cost
|
$ | 0 | $ | 1 | $ | 2 | $ | 2 | ||||||||
Interest
cost
|
3 | 4 | 9 | 11 | ||||||||||||
Expected
return on plan assets
|
(1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||||||
Amortization:
|
||||||||||||||||
Prior
service credit
|
(5 | ) | (5 | ) | (16 | ) | (16 | ) | ||||||||
Net
actuarial loss
|
4 | 2 | 10 | 7 | ||||||||||||
Net
benefit expense
|
$ | 1 | $ | 1 | $ | 4 | $ | 3 |
12.
|
Stock-Based
Compensation
|
Three Months Ended
|
Nine Months Ended
|
||||||||||||
June
30
|
June
30
|
||||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
|||||||||
Stock-based
compensation expense included in:
|
|||||||||||||
Product
cost of sales
|
$ | 1 | $ | 1 | $ | 3 | $ | 3 | |||||
Service
cost of sales
|
1 | 0 | 2 | 1 | |||||||||
Selling,
general and administrative expenses
|
4 | 4 | 12 | 11 | |||||||||
Total
|
$ | 6 | $ | 5 | $ | 17 | $ | 15 |
Performance
|
Restricted
|
Restricted
|
|||||||||||||||||
Options
|
Shares
|
Stock
|
Stock Units
|
||||||||||||||||
Weighted
|
Weighted
|
Weighted
|
Weighted
|
||||||||||||||||
Number
|
Average
|
Number
|
Average
|
Number
|
Average
|
Number
|
Average
|
||||||||||||
(shares
in thousands)
|
Issued
|
Fair
Value
|
Issued
|
Fair
Value
|
Issued
|
Fair
Value
|
Issued
|
Fair
Value
|
|||||||||||
Nine
months ended June
30, 2010
|
822.4
|
$
|
12.80
|
197.6
|
$
|
53.12
|
56.6
|
$
|
53.08
|
26.2
|
$
|
53.73
|
|||||||
Nine
months ended June
30, 2009
|
1,327.9
|
$
|
7.12
|
308.7
|
$
|
30.61
|
98.7
|
$
|
30.39
|
40.9
|
$
|
35.83
|
2010
|
2009
|
|||||||
Grants
|
Grants
|
|||||||
Risk-free
interest rate (U.S. Treasury zero coupon issues)
|
2.68% | 2.37% | ||||||
Expected
dividend yield
|
2.33% | 1.59% | ||||||
Expected
volatility
|
27.00% | 24.00% | ||||||
Expected
life
|
7 years
|
6 years
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
(in
millions, except per share amounts)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Numerator:
|
||||||||||||||||
Numerator
for basic and diluted earnings per share – Net
income
|
$ | 142 | $ | 145 | $ | 411 | $ | 460 | ||||||||
Denominator:
|
||||||||||||||||
Denominator
for basic earnings per share – weighted
average common shares
|
157.3 | 158.0 | 157.2 | 158.0 | ||||||||||||
Effect
of dilutive securities:
|
||||||||||||||||
Stock
options
|
1.7 | 1.2 | 1.7 | 1.0 | ||||||||||||
Performance
shares, restricted shares and restricted stock units
|
0.5 | 0.5 | 0.4 | 0.4 | ||||||||||||
Dilutive
potential common shares
|
2.2 | 1.7 | 2.1 | 1.4 | ||||||||||||
Denominator
for diluted earnings per share – adjusted
weighted average shares and assumed conversion
|
159.5 | 159.7 | 159.3 | 159.4 | ||||||||||||
Earnings
per share:
|
||||||||||||||||
Basic
|
$ | 0.90 | $ | 0.92 | $ | 2.61 | $ | 2.91 | ||||||||
Diluted
|
$ | 0.89 | $ | 0.91 | $ | 2.58 | $ | 2.89 |
13.
|
Comprehensive
Income
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Net
income
|
$ | 142 | $ | 145 | $ | 411 | $ | 460 | ||||||||
Unrealized
foreign currency translation adjustment
|
(18 | ) | 15 | (30 | ) | 1 | ||||||||||
Foreign
currency cash flow hedge adjustment
|
2 | 4 | (1 | ) | 2 | |||||||||||
Amortization
of defined benefit plan costs
|
10 | 3 | 29 | 3 | ||||||||||||
Other
|
(2 | ) | 0 | (2 | ) | 0 | ||||||||||
Comprehensive
income
|
$ | 134 | $ | 167 | $ | 407 | $ | 466 |
14.
|
Other
Income, Net
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||
June
30
|
June
30
|
|||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||
Royalty
income
|
$ | 2 | $ | 2 | $ | 6 | $ | 6 | ||||
Earnings
from equity affiliates
|
2 | 1 | 7 | 5 | ||||||||
Interest
income
|
1 | 1 | 3 | 4 | ||||||||
Other
|
0 | (1 | ) | (3 | ) | 1 | ||||||
Other
income, net
|
$ | 5 | $ | 3 | $ | 13 | $ | 16 |
15.
|
Income
Taxes
|
16.
|
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
|
June 30, 2010
|
September 30, 2009
|
||||||||
Fair Value
|
Fair Value
|
Fair Value
|
|||||||
(in millions)
|
Hierarchy
|
Asset (Liability)
|
Asset (Liability)
|
||||||
Deferred compensation
plan investments
|
Level
1
|
$ | 33 | $ | 35 | ||||
Interest
rate swap assets
|
Level
2
|
18 | 8 | ||||||
Foreign
currency forward exchange contract
assets
|
Level
2
|
7 | 8 | ||||||
Foreign
currency forward exchange contract
liabilities
|
Level
2
|
(13 | ) | (11 | ) |
Asset
(Liability)
|
||||||||||||
June
30, 2010
|
September
30, 2009
|
|||||||||||
Carrying
|
Fair
|
Carrying
|
Fair
|
|||||||||
(in
millions)
|
Amount
|
Value
|
Amount
|
Value
|
||||||||
Cash
and cash equivalents
|
$ | 303 | $ | 303 | $ | 235 | $ | 235 | ||||
Short-term
debt
|
(22 | ) | (22 | ) | 0 | 0 | ||||||
Long-term
debt
|
(516 | ) | (554 | ) | (532 | ) | (559 | ) |
17.
|
Derivative
Financial Instruments
|
Asset
Derivatives
|
||||||||||
June 30,
|
September 30,
|
|||||||||
(in
millions)
|
Classification
|
2010
|
2009
|
|||||||
Foreign
currency forward exchange
contracts
|
Other
current assets
|
$
|
7
|
$
|
8
|
|||||
Interest
rate swaps
|
Other
assets
|
18
|
8
|
|||||||
Total
|
$
|
25
|
$
|
16
|
Liability
Derivatives
|
||||||||||
June 30,
|
September 30,
|
|||||||||
(in
millions)
|
Classification
|
2010
|
2009
|
|||||||
Foreign
currency forward exchange
contracts
|
Other
current liabilities
|
$
|
13
|
$
|
11
|
Amount of Gain (Loss)
|
||||||||||||||||||
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||||
Location of
|
June 30
|
June 30
|
||||||||||||||||
(in millions)
|
Gain (Loss)
|
2010
|
2009
|
2010
|
2009
|
|||||||||||||
Fair
Value Hedges
|
||||||||||||||||||
Foreign
currency forward exchange contracts
|
Cost
of sales
|
$
|
(4
|
)
|
$
|
(1
|
)
|
$
|
(8
|
)
|
$
|
(1
|
)
|
|||||
Interest
rate swaps
|
Interest
expense
|
2
|
1
|
6
|
3
|
|||||||||||||
Cash
Flow Hedges
|
||||||||||||||||||
Foreign
currency forward exchange contracts:
|
||||||||||||||||||
Amount
of gain (loss) recognized in AOCL (effective portion, before deferred tax
impact)
|
AOCL
|
$
|
2
|
$
|
7
|
$
|
2
|
$
|
1
|
|||||||||
Amount
of gain (loss) reclassified from AOCL into income
|
Cost
of sales
|
(1
|
)
|
0
|
4
|
(2
|
)
|
18.
|
Guarantees
and Indemnifications
|
Nine Months Ended
|
||||||||
June
30
|
||||||||
(in
millions)
|
2010
|
2009
|
||||||
Balance
at beginning of year
|
$ | 217 | $ | 226 | ||||
Warranty
costs incurred
|
(38 | ) | (39 | ) | ||||
Product
warranty accrual
|
23 | 34 | ||||||
Increase
from acquisitions
|
0 | 2 | ||||||
Pre-existing
warranty adjustments
|
(10 | ) | (2 | ) | ||||
Balance
at June 30
|
$ | 192 | $ | 221 |
19.
|
Environmental
Matters
|
20.
|
Legal
Matters
|
21.
|
2009
Restructuring and Asset Impairment
Charges
|
Employee
|
||||
(in
millions)
|
Separation Costs
|
|||
Balance
at September 30, 2009
|
$ | 10 | ||
Cash
payments
|
(9 | ) | ||
Reserve
adjustment
|
(1 | ) | ||
Balance
at June 30, 2010
|
$ | 0 |
22.
|
Business
Segment Information
|
Three Months Ended
|
Nine Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Sales:
|
||||||||||||||||
Government
Systems
|
$ | 754 | $ | 651 | $ | 2,063 | $ | 1,838 | ||||||||
Commercial
Systems
|
460 | 433 | 1,320 | 1,442 | ||||||||||||
Total
sales
|
$ | 1,214 | $ | 1,084 | $ | 3,383 | $ | 3,280 | ||||||||
Segment
operating earnings:
|
||||||||||||||||
Government
Systems
|
$ | 153 | $ | 158 | $ | 437 | $ | 443 | ||||||||
Commercial
Systems
|
75 | 75 | 212 | 282 | ||||||||||||
Total
segment operating earnings
|
228 | 233 | 649 | 725 | ||||||||||||
Interest
expense
|
(5 | ) | (5 | ) | (15 | ) | (12 | ) | ||||||||
Stock-based
compensation
|
(6 | ) | (5 | ) | (17 | ) | (15 | ) | ||||||||
General
corporate, net
|
(12 | ) | (8 | ) | (36 | ) | (21 | ) | ||||||||
Restructuring
adjustment
|
0 | 0 | 1 | 0 | ||||||||||||
Income
before income taxes
|
205 | 215 | 582 | 677 | ||||||||||||
Income
tax provision
|
(63 | ) | (70 | ) | (171 | ) | (217 | ) | ||||||||
Net
income
|
$ | 142 | $ | 145 | $ | 411 | $ | 460 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June
30
|
June
30
|
|||||||||||||||
(in
millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Government
Systems product categories:
|
||||||||||||||||
Airborne
solutions
|
$ | 460 | $ | 452 | $ | 1,325 | $ | 1,286 | ||||||||
Surface
solutions
|
294 | 199 | 738 | 552 | ||||||||||||
Government
Systems sales
|
$ | 754 | $ | 651 | $ | 2,063 | $ | 1,838 | ||||||||
Commercial
Systems product categories:
|
||||||||||||||||
Air
transport aviation electronics
|
$ | 239 | $ | 244 | $ | 731 | $ | 723 | ||||||||
Business
and regional aviation electronics
|
221 | 189 | 589 | 719 | ||||||||||||
Commercial
Systems sales
|
$ | 460 | $ | 433 | $ | 1,320 | $ | 1,442 |
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Total
sales
|
$ | 1,214 | $ | 1,084 | ||||
Percent
increase
|
12 | % |
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Total
cost of sales
|
$ | 890 | $ | 759 | ||||
Percent
of total sales
|
73.3 | % | 70.0 | % |
|
·
|
A
$66 million increase primarily resulting from higher cost of sales
associated with the $87 million increase in organic sales volume
in Government Systems and Commercial Systems. See the Government Systems
and Commercial Systems Financial Results sections below for further
discussion.
|
|
·
|
Incremental
cost of sales from the DataPath and Air Routing acquisitions
totaling $32 million.
|
|
·
|
A
$25 million increase attributable to higher employee incentive
compensation expenses. No employee incentive compensation was awarded in
2009, while incentive compensation payouts are expected for 2010. For the
three months ended June 30, 2010, $18 million of employee incentive
compensation expense was included within cost of sales. For the three
months ended June 30, 2009, employee incentive compensation resulted in a
favorable reduction to cost of sales of $7 million. The favorable
adjustment in 2009 was due to the reversal of incentive pay expenses from
the first and second quarters as we projected 2009 incentive awards would
not be achieved during the third quarter of last
year.
|
|
·
|
An
$8 million increase attributable to higher defined benefit pension
expense. As discussed in the Retirement Plans section below, the increase
in pension expense was primarily due to the unfavorable impact of a
decrease in the discount rate used to measure our U.S. pension expense
from 7.60 percent in 2009 to 5.47 percent in 2010. For the three months
ended June 30, 2010, $3 million of pension expense was included within
cost of sales, compared to $5 million of pension income during the same
period of 2009.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Customer-funded:
|
||||||||
Government
Systems
|
$ | 108 | $ | 100 | ||||
Commercial
Systems
|
19 | 19 | ||||||
Total
customer-funded
|
127 | 119 | ||||||
Company-funded:
|
||||||||
Government
Systems
|
29 | 23 | ||||||
Commercial
Systems
|
58 | 60 | ||||||
Total
company-funded
|
87 | 83 | ||||||
Total
research and development expense
|
214 | 202 | ||||||
Percent
of total sales
|
17.6 | % | 18.6 | % |
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Selling,
general and administrative expenses
|
$ | 119 | $ | 108 | ||||
Percent
of total sales
|
9.8 | % | 10.0 | % |
|
·
|
A
$15 million increase in SG&A expenses due to the combined impact of
incremental SG&A expenses from the DataPath and Air Routing
acquisitions, higher employee incentive compensation costs and an increase
in defined benefit pension expense.
|
|
·
|
A
$4 million decrease in SG&A expenses primarily comprised of reductions
in employee headcount and other cost
savings.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions, except per share amounts)
|
2010
|
2009
|
||||||
Net
income
|
$ | 142 | $ | 145 | ||||
Net
income as a percent of sales
|
11.7 | % | 13.4 | % | ||||
Diluted
earnings per share
|
$ | 0.89 | $ | 0.91 |
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Airborne
solutions
|
$ | 460 | $ | 452 | ||||
Surface
solutions
|
294 | 199 | ||||||
Total
|
$ | 754 | $ | 651 | ||||
Percent
increase
|
16 | % |
|
·
|
An
$18 million increase in tanker and transport aircraft program revenues
primarily due to increased production volume and higher spare parts
deliveries.
|
|
·
|
A
decrease of $15 million in fighter jet program revenues due to the
wind-down of several programs.
|
|
·
|
Organic
sales increased $61 million, or 31 percent, primarily due to $43 million
of higher revenues from a vehicle electronics integration program and
higher sales from a number of international programs, including $8 million
from a UK Ministry of Defense precision targeting
program.
|
|
·
|
Incremental
sales from the May 29, 2009 acquisition of DataPath contributed $34
million, or 17 percentage points of revenue
growth.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Segment
operating earnings
|
$ | 153 | $ | 158 | ||||
Percent
of sales
|
20.3 | % | 24.3 | % |
|
·
|
A
$21 million reduction in operating earnings attributable to the combined
impact of a $16 million increase in employee incentive compensation costs
and a $5 million increase in pension expense as discussed in the Cost of
Sales section above. For the three months ended June 30, 2010, employee
incentive compensation costs and defined benefit pension expense were $12
million and $2 million, respectively. For the three months ended June 30,
2009, employee incentive compensation and defined benefit pension income
benefited operating earnings by $4 million and $3 million,
respectively.
|
|
·
|
A
$6 million reduction in operating earnings related to higher
company-funded R&D expense, as explained in the Cost of Sales section
above.
|
|
·
|
The
$103 million increase in sales volume discussed in the Government Systems
sales section above resulted in an $88 million increase to costs and
incremental operating earnings of $15 million. The higher costs primarily
resulted from the vehicle electronics integration program and DathPath
acquisition discussed in the Government Systems Sales section above. The
incremental operating earnings included $6 million of favorable contract
adjustments offset by $6 million of higher costs related to the transition
of work from our former San Jose, California location to other facilities.
We announced plans to close the San Jose facility in the fourth quarter of
2009.
|
|
·
|
A
$7 million benefit to operating earnings related to a reduction in
warranty expense. The reduction in warranty expense was primarily due to
(i) the absence of unfavorable charges which occurred in 2009 related to
retrofits of fielded product and (ii) a favorable adjustment of $3 million
recorded in the third quarter of 2010 to reduce warranty reserves for
certain tanker transport aircraft programs. During the three months ended
June 30, 2010, warranty expenses for the Government Systems segment, net
of the favorable adjustment, were zero compared to net warranty expense of
$7 million during the same period of
2009.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Air
transport aviation electronics:
|
||||||||
Original
equipment
|
$ | 114 | $ | 91 | ||||
Aftermarket
|
115 | 130 | ||||||
Wide-body
in-flight entertainment products
|
10 | 23 | ||||||
Total
air transport aviation electronics
|
239 | 244 | ||||||
Business
and regional aviation electronics:
|
||||||||
Original
equipment
|
126 | 120 | ||||||
Aftermarket
|
95 | 69 | ||||||
Total
business and regional aviation electronics
|
221 | 189 | ||||||
Total
|
$ | 460 | $ | 433 | ||||
Percent
increase
|
6 | % |
|
·
|
Air
transport aftermarket sales decreased $15 million, or 12 percent,
primarily related to a $16 million reduction in spares and retrofit
revenues.
|
|
·
|
Wide-body
in-flight entertainment products (Wide-body IFE) decreased $13 million.
Wide-body IFE relates to sales of twin-aisle IFE products and systems to
customers in the air transport aviation electronics market. In September
2005 we announced our strategic decision to shift research and development
resources away from traditional IFE systems for next generation wide-body
aircraft. We continue to execute on Wide-body IFE contracts and plan to
support existing customers, which includes on-going service and support
activities. Sales related to Wide-body IFE service and support activities
are included in the air transport aviation electronics
aftermarket.
|
|
·
|
Air
transport original equipment manufacturer (OEM) revenues increased $23
million, or 25 percent, primarily due to higher sales to Boeing resulting
from the impact of last year’s unfavorable post-labor strike inventory
rationalization and an increase in 787
revenues.
|
|
·
|
Organic
business and regional aviation electronics aftermarket sales increased $17
million, or 25 percent, primarily due to $15 million of higher retrofits
and spares sales, which includes a $7 million increase from spares parts
deliveries associated with a border patrol aircraft
program.
|
|
·
|
Incremental
revenue from the Air Routing acquisition contributed $9 million to
business and regional aviation electronics aftermarket
sales.
|
|
·
|
Regional
jet OEM sales increased $5 million, or 18 percent, primarily due to higher
equipment sales for Chinese turbo-prop regional
aircraft.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Segment
operating earnings
|
$ | 75 | $ | 75 | ||||
Percent
of sales
|
16.3 | % | 17.3 | % |
·
|
A
$15 million reduction in operating earnings attributable to the combined
impact of a $12 million increase in employee incentive compensation costs
and a $3 million increase in pension expense as discussed in the Cost of
Sales section above. For the three months ended June 30, 2010, employee
incentive compensation costs and defined benefit pension expenses were $8
million and $1 million, respectively. For the three months ended June 30,
2009, employee incentive compensation and defined benefit pension income
benefited operating earnings by $4 million and $2 million,
respectively.
|
|
·
|
The
$27 million increase in sales volume discussed in the Commercial Systems
sales section above resulted in a $12 million increase to costs and
incremental operating earnings of $15
million.
|
Three
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
General
corporate, net
|
$ | 12 | $ | 8 |
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Total
sales
|
$ | 3,383 | $ | 3,280 | ||||
Percent
increase
|
3 | % |
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Total
cost of sales
|
$ | 2,452 | $ | 2,276 | ||||
Percent
of total sales
|
72.5 | % | 69.4 | % |
|
·
|
Incremental
cost of sales from the DataPath, Air Routing and SEOS acquisitions
totaling $147 million.
|
|
·
|
A
$42 million increase attributable to higher employee incentive
compensation expenses. No employee incentive compensation was awarded in
2009, while incentive compensation payouts are expected for 2010. For the
nine months ended June 30, 2010, $36 million of employee compensation
expense was included in cost of sales. For the nine months ended June 30,
2009, employee incentive compensation resulted in a favorable reduction to
cost of sales of $6 million. The reduction to cost of sales in 2009 was
due to a favorable adjustment from lower than expected compensation paid
to employees for incentive awards earned in
2008.
|
|
·
|
A
$23 million increase attributable to higher defined benefit pension
expense. As discussed in the Retirement Plans section below, the increase
in pension expense was primarily due to the unfavorable impact of a
decrease in the discount rate used to measure our U.S. pension expense
from 7.60 percent in 2009 to 5.47 percent in 2010. For the nine months
ended June 30, 2010, $9 million of pension expense was included within
cost of sales, compared to $14 million of pension income during the same
period of 2009.
|
|
·
|
The
remaining variance primarily related to a $62 million reduction in cost of
sales from lower Commercial Systems sales volume, partially offset by a
$26 million increase in cost of sales associated with the organic sales
growth in Government Systems. See the Government Systems and Commercial
Systems Financial Results sections below for further
discussion.
|
Nine
Months Ended
|
||||||||
June
30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Customer-funded:
|
||||||||
Government
Systems
|
$ | 318 | $ | 316 | ||||
Commercial
Systems
|
57 | 59 | ||||||
Total
customer-funded
|
375 | 375 | ||||||
Company-funded:
|
||||||||
Government
Systems
|
82 | 62 | ||||||
Commercial
Systems
|
172 | 191 | ||||||
Total
company-funded
|
254 | 253 | ||||||
Total
research and development expense
|
629 | 628 | ||||||
Percent
of total sales
|
18.6 | % | 19.1 | % |
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Selling,
general and administrative expenses
|
$ | 347 | $ | 331 | ||||
Percent
of total sales
|
10.3 | % | 10.1 | % |
|
·
|
A
$37 million increase due to the combined impact of incremental SG&A
expense from the DataPath, Air Routing, and SEOS acquisitions, higher
employee incentive compensation costs, and an increase in defined benefit
pension expense.
|
|
·
|
A
$21 million decrease in SG&A expense primarily comprised of reductions
in employee headcount and other cost
savings.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions, except per share amounts)
|
2010
|
2009
|
||||||
Net
income
|
$ | 411 | $ | 460 | ||||
Net
income as a percent of sales
|
12.1 | % | 14.0 | % | ||||
Diluted
earnings per share
|
$ | 2.58 | $ | 2.89 |
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Airborne
solutions
|
$ | 1,325 | $ | 1,286 | ||||
Surface
solutions
|
738 | 552 | ||||||
Total
|
$ | 2,063 | $ | 1,838 | ||||
Percent
increase
|
12 | % |
|
·
|
A
$58 million increase in tanker and transport and special mission program
revenues was primarily due to the combined impact of recent international
program wins to upgrade fixed-wing aircraft and higher production volume
and development revenues on KC-135
programs.
|
|
·
|
A
$30 million increase was related to higher development work and deliveries
of satellite radio units for certain mission system programs and increased
effort on a secure network infrastructure upgrade
program.
|
|
·
|
Incremental
sales from the November 2008 SEOS acquisition contributed $5 million, or
less than 1 percentage point of revenue
growth.
|
|
·
|
The
above items were partially offset by a $50 million reduction in fighter
jet program revenues due to the wind-down of several
programs.
|
|
·
|
Incremental
sales from the DataPath acquisition contributed $172 million, or 31
percentage points of revenue
growth.
|
|
·
|
Organic
sales increased $14 million, or 3 percent, primarily due to $54 million of
higher revenue from a vehicle electronics integration program, partially
offset by a $42 million reduction in sales of hand-held GPS
receivers.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Segment
operating earnings
|
$ | 437 | $ | 443 | ||||
Percent
of sales
|
21.2 | % | 24.1 | % |
|
·
|
A
$40 million reduction in operating earnings attributable to the combined
impact of a $27 million increase in employee incentive compensation costs
and a $13 million increase in pension expense as discussed in the Cost of
Sales section above. For the nine months ended June 30, 2010, employee
incentive compensation costs and defined benefit pension expenses were $24
million and $6 million, respectively. For the nine months ended June 30,
2009, employee incentive compensation and defined benefit pension income
benefited operating earnings by $3 million and $7 million,
respectively.
|
|
·
|
A
$20 million reduction in operating earnings related to higher
company-funded R&D expense, as explained in the Cost of Sales section
above.
|
|
·
|
The
$225 million increase in sales volume discussed in the Government Systems
sales section above resulted in a $183 million increase to costs and
incremental operating earnings of $42 million. The higher costs primarily
resulted from acquisitions and the vehicle electronics integration program
discussed in the Government Systems Sales section
above.
|
|
·
|
A
$12 million benefit to operating earnings was due to a reduction in
warranty expense, primarily related to favorable non-cash adjustments of
$9 million recorded during the nine months ended June 30, 2010 to reduce
warranty reserves for certain tanker transport aircraft programs.
Government Systems recorded $4 million of income related to warranty
during the nine months ended June 30, 2010 as the non-cash adjustments
exceeded product warranty accruals. Government Systems recorded $8 million
of warranty expense during the same period of
2009.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Air
transport aviation electronics:
|
||||||||
Original
equipment
|
$ | 325 | $ | 260 | ||||
Aftermarket
|
367 | 402 | ||||||
Wide-body
in-flight entertainment products
|
39 | 61 | ||||||
Total
air transport aviation electronics
|
731 | 723 | ||||||
Business
and regional aviation electronics:
|
||||||||
Original
equipment
|
349 | 490 | ||||||
Aftermarket
|
240 | 229 | ||||||
Total
business and regional aviation electronics
|
589 | 719 | ||||||
Total
|
$ | 1,320 | $ | 1,442 | ||||
Percent
(decrease)
|
(8 | )% |
|
·
|
Air
transport OEM sales increased $65 million, or 25 percent, primarily due to
higher sales to Boeing across multiple platforms as sales in the prior
year were adversely impacted by Boeing’s labor strike and post-labor
strike inventory rationalization.
|
|
·
|
Air
transport aftermarket sales decreased $35 million, or 9 percent, due
primarily to a $31 million reduction in aftermarket hardware sales driven
by lower retrofits, spares, and simulation
revenues.
|
|
·
|
Wide-body
in-flight entertainment products (Wide-body IFE) decreased $22 million, or
36 percent. Wide-body IFE relates to sales of twin-aisle IFE products and
systems to customers in the air transport aviation electronics market. In
September 2005 we announced our strategic decision to shift research and
development resources away from traditional IFE systems for next
generation wide-body aircraft. We continue to execute on Wide-body IFE
contracts and plans to support existing customers, which includes on-going
service and support activities. Sales related to Wide-body IFE service and
support activities are included in the air transport aviation electronics
aftermarket.
|
|
·
|
Business
jet OEM sales decreased $133 million, or 34 percent, primarily due to
depressed business jet OEM production
rates.
|
|
·
|
Regional
jet OEM sales decreased $8 million, or 9 percent, primarily due to
depressed regional jet OEM production rates at Bombardier, partially
offset by higher OEM equipment sales for Chinese turbo-prop regional
aircraft.
|
|
·
|
Organic
business and regional aftermarket sales decreased $7 million, or 3
percent, as an $11 million reduction in aftermarket hardware sales was
partially offset by a $4 million increase in service
revenues.
|
|
·
|
Incremental
revenue from the Air Routing acquisition contributed $18 million to
business and regional aviation electronics aftermarket
sales.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Segment
operating earnings
|
$ | 212 | $ | 282 | ||||
Percent
of sales
|
16.1 | % | 19.6 | % |
|
·
|
The
$140 million reduction in organic sales volume explained in the Commercial
Systems Sales section above resulted in an $82 million decrease to
operating earnings and a $58 million decrease to
costs.
|
|
·
|
A
$29 million reduction in operating earnings attributable to the combined
impact of a $19 million increase in employee incentive compensation costs
and a $10 million increase in pension expense as discussed in the Cost of
Sales section above. For the nine months ended June 30, 2010, employee
incentive compensation costs and defined benefit pension expenses were $16
million and $4 million, respectively. For the nine months ended June 30,
2009, employee incentive compensation and defined benefit pension income
benefited operating earnings by $3 million and $6 million,
respectively.
|
|
·
|
A
$19 million benefit to operating earnings due to lower company-funded
R&D expense, as explained in the Cost of Sales section
above.
|
|
·
|
The
remaining variance was due to a $22 million benefit to operating earnings
primarily related to the combined impact of (i) a reduction in SG&A
expenses from reduced head count and other cost saving initiatives, (ii) a
reduction in charges for excess and obsolete inventory and (iii) a
favorable contract settlement.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
General
corporate, net
|
$ | 36 | $ | 21 |
Three
Months Ended
|
Nine
Months Ended
|
|||||||||||||||
June 30
|
June 30
|
|||||||||||||||
(dollars
in millions)
|
2010
|
2009
|
2010
|
2009
|
||||||||||||
Pension
benefits
|
$ | 6 | $ | (5 | ) | $ | 19 | $ | (13 | ) | ||||||
Other
retirement benefits
|
1 | 1 | 4 | 3 | ||||||||||||
Net
benefit expense (income)
|
$ | 7 | $ | (4 | ) | $ | 23 | $ | (10 | ) |
|
·
|
total
sales of about $4.7 billion
|
|
·
|
diluted
earnings per share of about $3.50
|
|
·
|
cash
provided by operating activities of about $700
million
|
|
·
|
capital
expenditures of about $135 million
|
|
·
|
total
company and customer-funded R&D expenditures of about $850 million, or
about 18 percent of sales
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(in
millions)
|
2010
|
2009
|
||||||
Cash
provided by operating activities
|
$ | 440 | $ | 381 |
|
·
|
Payments
for incentive pay decreased $113 million in 2010 compared to 2009.
Incentive pay is expensed in the year it is incurred and paid in the first
fiscal quarter of the following year. During the first nine months of
2009, $113 million was paid for employee incentive pay costs incurred
during 2008. For the full fiscal year 2009, no incentive pay costs were
incurred; accordingly, there was no 2010 payment for incentive
pay.
|
|
·
|
Payments
for income taxes decreased $42 million to $105 million in 2010 compared to
$147 million in 2009 primarily due to lower estimated taxable income in
2010.
|
|
·
|
Cash
receipts from customers increased $56 million to $3,406 million in 2010
compared to $3,350 million in 2009, primarily due to the higher sales
volume in 2010 discussed in the Results of Operations section above and
higher advances from government related contracts for financing of
inventory.
|
|
·
|
The
above items were partially offset by a $145 million increase in payments
for inventory and other operating costs to $2,738 million in 2010 compared
to $2,593 million in 2009. The increase was primarily due to increased
costs associated with the higher sales volume in 2010 discussed in the
Results of Operations section above and inventory purchases for
anticipated production volume.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(in
millions)
|
2010
|
2009
|
||||||
Cash
used for investing activities
|
$ | (183 | ) | $ | (265 | ) |
|
·
|
In
the first nine months of 2010 we acquired Air Routing for $91 million
compared to the 2009 acquisitions of DataPath and SEOS for $146
million.
|
|
·
|
$34
million reduction in property additions in 2010 compared to
2009.
|
Nine
Months Ended
|
||||||||
June 30
|
||||||||
(in
millions)
|
2010
|
2009
|
||||||
Cash
used for financing activities
|
$ | (186 | ) | $ | (72 | ) |
June
30,
|
September
30,
|
|||||||
(dollars
in millions)
|
2010
|
2009
|
||||||
Cash
and cash equivalents
|
$ | 303 | $ | 235 | ||||
Long-term
debt, net
|
(516 | ) | (532 | ) | ||||
Short-term
debt
|
(22 | ) | 0 | |||||
Net
debt (1)
|
$ | (235 | ) | $ | (297 | ) | ||
Total
equity
|
$ | 1,581 | $ | 1,295 | ||||
Debt
to total capitalization (2)
|
25 | % | 29 | % | ||||
Net
debt to total capitalization (3)
|
13 | % | 19 | % |
(1)
|
Calculated
as total of short-term and long-term debt, net (Total Debt), less cash and
cash equivalents
|
(2)
|
Calculated
as Total Debt divided by the sum of Total Debt plus Total
equity
|
(3)
|
Calculated
as Net debt divided by the sum of Net debt plus Total
equity
|
Credit Rating Agency
|
Short-Term Rating
|
Long-Term Rating
|
Outlook
|
|||
Fitch Ratings
|
F1
|
A
|
Stable
|
|||
Moody’s
Investors Service
|
P-1
|
A1
|
Stable
|
|||
Standard
& Poor’s
|
A-1
|
A
|
Stable
|
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 Appropriate
Dollar Value) of
Shares that May Yet
Be Purchased Under
the Plans or
Programs 1
|
||||||||||
April
1, 2010 through April 30, 2010
|
199,925 | $ | 64.58 | 199,925 | $ |
130
million
|
||||||||
May
1, 2010 through May 31, 2010
|
300,000 | 61.28 | 300,000 |
112
million
|
||||||||||
June
1, 2010 through June 30, 2010
|
345,000 | 56.64 | 345,000 |
92 million
|
||||||||||
Total
|
844,925 | $ | 60.17 | 844,925 | $ |
92
million
|
(1)
|
On
September 16, 2009, our Board authorized the repurchase of an additional
$200 million of our common stock. This authorization has no stated
expiration.
|
Item
6.
|
Exhibits
|
(a)
|
Exhibits
|
31.1
|
Certification
by Chief Executive Officer Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
|
|
31.2
|
Certification
by Chief Financial Officer Pursuant to Rule 13a-14(a) of the Securities
Exchange Act of 1934.
|
|
32.1
|
Certification
by Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
|
32.2
|
Certification
by Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-Oxley Act of
2002.
|
ROCKWELL COLLINS, INC.
|
||
(Registrant)
|
||
Date: July
29, 2010
|
By
|
/s/ M. A. Schulte
|
M.
A. Schulte
|
||
Vice
President, Finance and Controller
|
||
(Principal
Accounting Officer)
|
||
Date:
July 29, 2010
|
By
|
/s/ G. R. Chadick
|
G.
R. Chadick
|
||
Senior
Vice President,
|
||
General
Counsel and
Secretary
|