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) |
SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT: | |
Title of each class | Name of each exchange on which registered |
Common Stock, par value $.01 per share | New York Stock Exchange |
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: None |
Large accelerated filer R | Accelerated filer £ | |
Non-accelerated filer £ | (Do not check if a smaller reporting company) | Smaller reporting company £ |
Page No. | |||
PART I |
Item 1. | Business. |
• | communications systems and products designed to enable the transmission of information across the communications spectrum, including satellite communications |
• | navigation products and systems, including radio navigation products, global positioning system (GPS) equipment, handheld navigation devices and multi-mode receivers |
• | avionics sub-systems for aircraft flight decks that combine flight operations with navigation and guidance functions that can include flight controls and displays, information/data processing and communications, navigation, safety and surveillance systems |
• | cockpit display products, including multipurpose flat panel head-down displays, wide field of view head-up and helmet-mounted displays |
• | simulation and training systems, including visual system products, training systems and services |
• | maintenance, repair, parts and after-sales support services |
• | integrated avionics systems, such as Pro Line Fusion®, which provide advanced avionics capabilities to meet the challenges of operating in the next generation global airspace. Capabilities include synthetic and enhanced vision enabled flight displays, advanced flight and performance management systems, fly-by-wire integrated flight controls and information management solutions to improve operational efficiency |
• | integrated cabin electronics systems, including cabin management systems, passenger connectivity and entertainment solutions, business support systems to improve passenger productivity and passenger flight information systems |
• | communications systems and products, such as data link, high frequency, very high frequency and satellite communications systems |
• | navigation systems and products, including landing sensors to enable fully automatic landings, radio navigation and geophysical sensors, as well as flight management systems |
• | situational awareness and surveillance systems and products, such as synthetic and enhanced vision systems, surface surveillance and guidance solutions, head-up guidance systems, weather radar and collision avoidance systems |
• | integrated information management solutions to improve the overall efficiency of flight, maintenance and cabin operations. These include on-board information management systems and connectivity solutions, airborne and ground applications and services, and ground infrastructure and services |
• | electro-mechanical systems, including integrated pilot control solutions and primary and secondary actuation systems |
• | simulation and training systems, including full-flight simulators for crew training, visual system products, training systems and engineering services |
• | maintenance, repair, parts, after-sales support services and aftermarket used equipment |
September 30 | ||||||||
(in billions) | 2012 | 2011 | ||||||
Government Systems: | ||||||||
Funded orders | $ | 2.8 | $ | 2.9 | ||||
Unfunded orders | 0.5 | 0.1 | ||||||
Commercial Systems | 1.5 | 1.4 | ||||||
Total backlog | $ | 4.8 | $ | 4.4 |
• | Data Link Solutions LLC (DLS), a joint venture with BAE Systems, plc, for joint pursuit of the worldwide military data link market |
• | Vision Systems International, LLC (VSI), a joint venture with Elbit Systems, Ltd., for joint pursuit of helmet-mounted cueing systems for the worldwide military fixed wing aircraft market |
• | Integrated Guidance Systems LLC (IGS), a joint venture with Honeywell International, Inc., for joint pursuit of the development of weapons guidance and navigation solutions |
• | Quest Flight Training Limited, a joint venture with Quadrant Group plc, which provides aircrew training services primarily for the United Kingdom Ministry of Defence |
• | flight operations management solutions: January 2011 acquisition of Computing Technologies for Aviation, Inc. |
• | high-performance sensor simulation training applications: December 2010 acquisition of Blue Ridge Simulation, Inc. |
• | corporate flight handling and trip support services: December 2009 acquisition of AR Group, Inc. |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Customer-funded (1) | $ | 503 | $ | 550 | $ | 516 | ||||||
Company-funded | 320 | 355 | 345 | |||||||||
Total research and development expense | 823 | 905 | 861 | |||||||||
Increase in pre-production engineering costs | 123 | 126 | 80 | |||||||||
Total research and development investment (2) | $ | 946 | $ | 1,031 | $ | 941 |
(1) | Customer-funded R&D includes activities relating to the development of new products and the improvement of existing products for which we are reimbursed by our customers. Customer-funded R&D includes amortization of pre-production engineering costs as disclosed in Note 6 of the Notes to Consolidated Financial Statements in Item 8 below. |
(2) | Total research and development investment consists of company and customer-funded research and development expenditures as well as the net increase in pre-production engineering costs capitalized within inventory. As disclosed in Note 6 of the Notes to Consolidated Financial Statements in Item 8 below, pre-production engineering costs capitalized within inventory were $569 million and $446 million at September 30, 2012 and September 30, 2011, respectively. The net increase in pre-production engineering costs during 2012 was therefore $123 million. This increase, and a description of the critical accounting policies involving pre-production engineering, are discussed under the caption Management's Discussion and Analysis of the Financial Condition and Results of Operations in Item 7 below. |
Item 1A. | Risk Factors. |
• | dependence on Congressional appropriations and administrative allotment of funds |
• | the ability of the U.S. Government to terminate, without prior notice, partially completed government programs and contracts that were previously authorized |
• | changes in governmental procurement legislation and regulations and other policies which may reflect military and political developments |
• | significant changes in contract scheduling or program structure, which generally result in delays or reductions in deliveries |
• | intense competition for available U.S. Government business necessitating increases in time and investment for design and development |
• | difficulty of forecasting costs and schedules when bidding on developmental and highly sophisticated technical work |
• | changes over the life of U.S. Government contracts, particularly development contracts, which generally result in adjustments of contract prices |
• | claims based on U.S. Government work and violation of associated compliance and other requirements, which may result in fines, the cancellation or suspension of payments or suspension or debarment proceedings affecting potential further business with the U.S. Government |
• | reductions in demand for aircraft and delayed aircraft delivery schedules |
• | challenges in the financial condition of some of our existing and potential customers |
• | reductions in the need for, or the deferral of, aircraft maintenance and repair services and spare parts support |
• | retirement or storage of older generation aircraft, resulting in fewer retrofits and less demand for services for those aircraft |
• | limited availability of financing for airlines or aircraft |
• | high fuel costs |
• | health pandemics or other disruptions to commercial air travel demand |
• | delays in the development of the necessary satellite and ground infrastructure by the U.S. and other governments |
• | delays in adopting national and international regulatory standards |
• | competitors developing better products |
• | failure of our product development investments in communications, navigation and surveillance products that enable airspace management technologies to coincide with market evolution to, and demand for, these products |
• | the ability and desire of customers to invest in products enabling airspace management technologies |
• | declines in revenues, profitability and cash flows from reduced orders, payment delays or other factors caused by the economic problems of our customers |
• | adverse impacts on our access to short-term commercial paper borrowings or other credit sources |
• | supply problems associated with any financial constraints faced by our suppliers |
• | laws, regulations and policies of non-U.S. governments relating to investments and operations, as well as U.S. laws affecting the activities of U.S. companies abroad |
• | regulatory requirements and potential changes, including imposition of tariffs or embargoes, export controls and other trade restrictions and antitrust and data privacy requirements |
• | changes in government spending on defense programs, including the potential spending decline in European countries |
• | uncertainties and restrictions concerning the availability of funding, credit or guarantees |
• | requirements of certain customers which obligate us to specified levels of in-country purchases, manufacturing or investments, known as offsets, and penalties in the event we fail to perform in accordance with the offset requirements |
• | import and export licensing requirements and regulations |
• | uncertainties as to local laws and enforcement of contract and intellectual property rights |
• | rapid changes in government, economic and political policies, political or civil unrest or the threat of international boycotts or U.S. anti-boycott legislation |
• | the difficulty in integrating newly-acquired businesses and operations in an efficient and cost-effective manner and the risk that we encounter significant unanticipated costs or other problems associated with integration |
• | the challenges in achieving strategic objectives, cost savings and other benefits expected from acquisitions |
• | the risk that our markets do not evolve as anticipated and that the technologies acquired do not prove to be those needed to be successful in those markets |
• | the risk that we assume significant liabilities that exceed the limitations of any applicable indemnification provisions or the financial resources of any indemnifying parties |
• | the potential loss of key employees of the acquired businesses |
• | the risk of diverting the attention of senior management from our existing operations |
• | continued increases in medical costs related to current employees due to increased usage of medical benefits, medical inflation and the impact of recent U.S. Government health care legislation |
• | material changes in legislation or market dynamics as a result impacting medical or pension matters |
• | the effect declines in the stock and bond markets have on the performance of our pension plan assets |
• | potential reductions in the discount rate used to determine the present value of our retirement benefit obligations |
• | future results could be adversely affected due to the theft, destruction, loss, misappropriation or release of confidential data or intellectual property |
• | operational or business delays resulting from the disruption of IT systems and subsequent mitigation activities |
• | negative publicity resulting in reputation or brand damage with our customers, partners or industry peers |
Item 1B. | Unresolved Staff Comments. |
Item 2. | Properties. |
Location | Owned Facilities | Leased Facilities | Total | ||||||
(in thousands of square feet) | |||||||||
U.S. | 3,362 | 2,378 | 5,740 | ||||||
Europe | 329 | 300 | 629 | ||||||
Canada and Mexico | — | 132 | 132 | ||||||
Asia Pacific | — | 204 | 204 | ||||||
South America | — | 9 | 9 | ||||||
Total | 3,691 | 3,023 | 6,714 | ||||||
Type of Facility | Owned Facilities | Leased Facilities | Total | ||||||
(in thousands of square feet) | |||||||||
Manufacturing and service | 1,852 | 1,300 | 3,152 | ||||||
Sales, engineering and general office space | 1,839 | 1,723 | 3,562 | ||||||
Total | 3,691 | 3,023 | 6,714 |
Item 3. | Legal Proceedings. |
Item 4. | Mine Safety Disclosures. |
Item 4A. | Executive Officers of the Company. |
Name, Office and Position, and Principal Occupations and Employment | Age | |
Clayton M. Jones—Chairman of the Board of Rockwell Collins since June 2002; Chief Executive Officer of Rockwell Collins since June 2001; President of Rockwell Collins from June 2001 to September 2012 | 63 | |
Robert K. Ortberg—President of Rockwell Collins since September 2012; Executive Vice President and Chief Operating Officer, Government Systems from February 2010 to September 2012; Executive Vice President and Chief Operating Officer, Commercial Systems of Rockwell Collins prior thereto | 52 | |
Barry M. Abzug—Senior Vice President, Corporate Development of Rockwell Collins since October 2001 | 60 | |
Patrick E. Allen—Senior Vice President and Chief Financial Officer of Rockwell Collins since January 2005 | 48 | |
John-Paul E. Besong—Senior Vice President, e-Business of Rockwell Collins since April 2007; Senior Vice President of e-Business & Lean Electronics of Rockwell Collins prior thereto | 59 | |
Gary R. Chadick—Senior Vice President, General Counsel and Secretary of Rockwell Collins since July 2001 | 51 | |
Gregory S. Churchill—Executive Vice President, International and Service Solutions since February 2010; Executive Vice President and Chief Operating Officer, Government Systems of Rockwell Collins prior thereto | 55 | |
Philip J. Jasper—Executive Vice President and Chief Operating Officer, Government Systems since September 2012; Vice President, Business Development, Government Systems from May 2010 to September 2012; Vice President & General Manager, Mobility and Rotary Wing Solutions of Rockwell Collins prior thereto. | 44 | |
Bruce M. King—Senior Vice President, Operations of Rockwell Collins since May 2011; Vice President and General Manager Communications Products of Rockwell Collins from September 2010 to May 2011; Vice President and General Manager, Surface Solutions of Rockwell Collins from January 2008 to September 2010; Vice President and General Manager, Communication Systems of Rockwell Collins prior thereto | 51 | |
Ronald W. Kirchenbauer—Senior Vice President, Human Resources of Rockwell Collins since April 2003 | 65 | |
Nan Mattai—Senior Vice President, Engineering and Technology of Rockwell Collins since November 2004 | 60 | |
Marsha A. Schulte—Vice President, Finance & Controller of Rockwell Collins since May 2006 | 55 | |
Kent L. Statler—Executive Vice President and Chief Operating Officer, Commercial Systems since February 2010; Executive Vice President, Rockwell Collins Services of Rockwell Collins prior thereto | 47 | |
Douglas E. Stenske—Vice President, Treasurer and Financial Planning of Rockwell Collins since March 2011; Vice President and General Auditor of Rockwell Collins from May 2008 to March 2011; Treasurer of Rockwell Collins prior thereto | 46 | |
Robert A. Sturgell—Senior Vice President, Washington Operations since April 2009; Acting Administrator of the Federal Aviation Administration (FAA) prior thereto | 53 |
PART II |
Item 5. | Market for the Company's Common Equity, Related Stockholder Matters and Company Purchases of Equity Securities. |
2012 | 2011 | |||||||||||||||
Fiscal Quarters | High | Low | High | Low | ||||||||||||
First | $ | 57.34 | $ | 50.04 | $ | 62.25 | $ | 54.10 | ||||||||
Second | 61.46 | 55.32 | 67.29 | 57.87 | ||||||||||||
Third | 58.94 | 46.78 | 65.20 | 58.57 | ||||||||||||
Fourth | 54.34 | 46.37 | 62.82 | 43.82 |
Fiscal Quarters | 2012 | 2011 | ||||||
First | $ | 0.24 | $ | 0.24 | ||||
Second | 0.24 | 0.24 | ||||||
Third | 0.30 | 0.24 | ||||||
Fourth | 0.30 | 0.24 |
Period | Total Number of Shares Purchased | Average Price Paid per Share | Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plans or Programs(1) | |||||||||
July 1, 2012 through July 31, 2012 | — | $ | — | — | $ | 502 million | |||||||
August 1, 2012 through August 31, 2012 | — | $ | — | — | $ | 502 million | |||||||
September 1, 2012 through September 30, 2012 | 400,000 | $ | 53.24 | 400,000 | $ | 481 million | |||||||
Total/Average | 400,000 | $ | — | 400,000 |
(1) | On July 23, 2012 our Board authorized the repurchase of an additional $500 million of our common stock, as reflected in the table above. The authorization has no stated expiration. |
Item 6. | Selected Financial Data. |
Years Ended September 30 | ||||||||||||||||||||
2012(a) | 2011(b) | 2010(c) | 2009(d) | 2008(e) | ||||||||||||||||
(dollars in millions, except per share amounts) | ||||||||||||||||||||
Statement of Operations Data: | ||||||||||||||||||||
Sales | $ | 4,726 | $ | 4,806 | $ | 4,631 | $ | 4,428 | $ | 4,734 | ||||||||||
Cost of sales | 3,324 | 3,427 | 3,353 | 3,118 | 3,308 | |||||||||||||||
Selling, general and administrative expenses | 543 | 533 | 476 | 457 | 484 | |||||||||||||||
Income from continuing operations | 609 | 615 | 557 | 589 | 673 | |||||||||||||||
Income from discontinued operations, net of taxes | — | 19 | 4 | 5 | 5 | |||||||||||||||
Net income | 609 | 634 | 561 | 594 | 678 | |||||||||||||||
Net income as a percent of sales | 12.9 | % | 13.2 | % | 12.1 | % | 13.4 | % | 14.3 | % | ||||||||||
Diluted earnings per share from continuing operations | 4.15 | 3.94 | 3.50 | 3.70 | 4.13 | |||||||||||||||
Statement of Financial Position Data: | ||||||||||||||||||||
Working capital(f) | $ | 1,347 | $ | 1,394 | $ | 1,237 | $ | 1,003 | $ | 598 | ||||||||||
Property | 773 | 754 | 707 | 719 | 680 | |||||||||||||||
Goodwill and intangible assets | 1,071 | 1,088 | 1,072 | 964 | 807 | |||||||||||||||
Total assets | 5,314 | 5,389 | 5,064 | 4,645 | 4,144 | |||||||||||||||
Short-term debt | — | — | 24 | — | 287 | |||||||||||||||
Long-term debt | 779 | 528 | 525 | 532 | 228 | |||||||||||||||
Shareowners' equity | 1,259 | 1,523 | 1,482 | 1,292 | 1,408 | |||||||||||||||
Other Data: | ||||||||||||||||||||
Capital expenditures | $ | 138 | $ | 152 | $ | 109 | $ | 153 | $ | 171 | ||||||||||
Depreciation and amortization | 174 | 159 | 167 | 151 | 138 | |||||||||||||||
Dividends per share | 1.08 | 0.96 | 0.96 | 0.96 | 0.80 | |||||||||||||||
Stock Price: | ||||||||||||||||||||
High | $ | 61.46 | $ | 67.29 | $ | 68.04 | $ | 51.37 | $ | 76.00 | ||||||||||
Low | 46.37 | 43.82 | 47.19 | 27.67 | 43.26 |
(a) | Net income includes $38 million of net restructuring and asset impairment charges ($58 million before income taxes), primarily related to employee severance costs and certain customer bankruptcy charges. Approximately $38 million of the pre-tax charge was recorded in cost of sales, $25 million was included within selling, general and administrative expenses, and $5 million was classified as a gain within Other income. Net income also includes a $19 million income tax benefit related to the favorable resolution of certain tax matters in 2012. |
(b) | Income from discontinued operations includes a $17 million gain ($27 million before income taxes) resulting from the sale of the Rollmet business. In addition, income from continuing operations includes $17 million of restructuring and asset impairment charges ($27 million before income taxes) primarily related to real estate lease and contract termination charges, asset impairment charges and employee severance costs. $26 million of the pre-tax restructuring and asset impairment charge was recorded in cost of sales and the remaining $1 million was included in selling, general and administrative expenses. Net income also includes a $16 million income tax benefit related to the retroactive reinstatement of the previously expired Federal Research and Development Tax Credit. |
(c) | Includes a $20 million income tax benefit related to the favorable resolution of certain tax matters in 2010. |
(d) | Includes $21 million of restructuring and asset impairment charges primarily related to reductions in workforce and decisions to implement certain facility rationalization actions ($14 million after taxes). Of the total restructuring and asset impairment charge, $19 million was recorded in cost of sales and the remaining $2 million was included in selling, general and administrative expenses. |
(e) | Includes a $22 million income tax benefit related to the favorable resolution of certain tax matters. |
(f) | Working capital consists of all current assets and liabilities, including cash and short-term debt. |
Item 7. | Management's Discussion and Analysis of Financial Condition and Results of Operations. |
OVERVIEW AND OUTLOOK |
• | sales of $4.73 billion |
• | diluted earnings per share from continuing operations of $4.15 |
• | operating cash flow of $534 million |
• | capital expenditures of $138 million |
• | total sales in the range of $4.6 billion to $4.7 billion |
• | diluted earnings per share from continuing operations in the range of $4.30 to $4.50 |
• | cash provided by operating activities in the range of $500 million to $600 million |
• | capital expenditures of about $140 million |
RESULTS OF OPERATIONS |
(in millions) | 2012 | 2011 | 2010 | |||||||||
U.S. | $ | 3,169 | $ | 3,356 | $ | 3,284 | ||||||
Non-U.S.(1) | 1,557 | 1,450 | 1,347 | |||||||||
Total | $ | 4,726 | $ | 4,806 | $ | 4,631 | ||||||
Percent increase (decrease) | (2 | )% | 4 | % |
(1) | Sales are attributed to geographic region based on the location of our customers. |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Total cost of sales | $ | 3,324 | $ | 3,427 | $ | 3,353 | ||||||
Percent of total sales | 70.3 | % | 71.3 | % | 72.4 | % |
• | $44 million decrease in cost of sales resulting from the $80 million reduction in sales volume, as discussed in the Government Systems and Commercial Systems Financial Results sections below |
• | $56 million reduction from lower employee incentive compensation costs |
• | $35 million reduction in company-funded R&D expense, as explained below |
• | above items were partially offset by |
◦ | $12 million increase from higher restructuring and asset impairment charges recorded in 2012 as compared to 2011. For 2012, $38 million of restructuring and asset impairment charges were classified within cost of sales, compared to $26 million in 2011, as discussed in Note 23 of the Notes to Consolidated Financial Statements |
◦ | $20 million increase primarily attributable to the $11 million increase in warranty cost detailed in Note 19 of the Notes to Consolidated Financial Statements and higher retirement benefit expenses, as described in the Retirement Plans section below |
• | $59 million increase resulted from the $175 million of net sales growth discussed in the Commercial Systems and Government Systems Financial Results sections below |
• | $27 million increase was attributable to higher employee incentive compensation expenses |
• | $26 million increase resulted from the restructuring and asset impairment charges recorded in 2011 which were classified within cost of sales, as discussed in Note 23 of the Notes to Consolidated Financial Statements |
• | above items were partially offset by a $31 million reduction to cost of sales attributable to lower defined benefit pension expense, as discussed in the Retirement Plans section below |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Customer-funded: | ||||||||||||
Government Systems | $ | 420 | $ | 460 | $ | 437 | ||||||
Commercial Systems | 83 | 90 | 79 | |||||||||
Total customer-funded | 503 | 550 | 516 | |||||||||
Company-funded: | ||||||||||||
Government Systems | 82 | 116 | 115 | |||||||||
Commercial Systems | 238 | 239 | 230 | |||||||||
Total company-funded | 320 | 355 | 345 | |||||||||
Total research and development expense | $ | 823 | $ | 905 | $ | 861 | ||||||
Percent of total sales | 17.4 | % | 18.8 | % | 18.6 | % |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Selling, general and administrative expenses | $ | 543 | $ | 533 | $ | 476 | ||||||
Percent of total sales | 11.5 | % | 11.1 | % | 10.3 | % |
• | $29 million due to higher bad debt expense resulting from the customer bankruptcies described in Note 5 of the Notes to Consolidated Financial Statements |
• | partially offset by a $19 million reduction from lower employee incentive compensation and other savings attributable to headcount reduction and restructuring actions |
• | $29 million from higher employee incentive compensation costs and merit pay increases |
• | $18 million increase resulting from the combined impact of pursuing international business opportunities (including the opening and staffing of new offices internationally), higher bid and proposal costs and an increase in other selling costs and activities |
• | $3 million of incremental SG&A expense from acquisitions, primarily Air Routing |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Interest expense | $ | 27 | $ | 19 | $ | 20 |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Other income, net | $ | (25 | ) | $ | (28 | ) | $ | (14 | ) |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Income tax expense | $ | 248 | $ | 240 | $ | 239 | ||||||
Effective income tax rate | 28.9 | % | 28.1 | % | 30.0 | % |
2012 | 2011 | 2010 | |||||||
Statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
State and local income taxes | 1.3 | 1.1 | 0.8 | ||||||
Research and development credit | (1.7 | ) | (4.7 | ) | (1.2 | ) | |||
Domestic manufacturing deduction | (2.1 | ) | (1.9 | ) | (1.1 | ) | |||
Tax settlements | (2.2 | ) | (0.4 | ) | (2.4 | ) | |||
Other | (1.4 | ) | (1.0 | ) | (1.1 | ) | |||
Effective income tax rate | 28.9 | % | 28.1 | % | 30.0 | % |
(in millions, except per share amounts) | 2012 | 2011 | 2010 | |||||||||
Income from continuing operations | $ | 609 | $ | 615 | $ | 557 | ||||||
Percent of sales | 12.9 | % | 12.8 | % | 12.0 | % | ||||||
Income from discontinued operations, net of taxes | — | 19 | 4 | |||||||||
Net income | $ | 609 | $ | 634 | $ | 561 | ||||||
Diluted earnings per share from continuing operations | $ | 4.15 | $ | 3.94 | $ | 3.50 | ||||||
Diluted earnings per share from discontinued operations | — | 0.12 | 0.02 | |||||||||
Diluted earnings per share | $ | 4.15 | $ | 4.06 | $ | 3.52 | ||||||
Weighted average diluted common shares | 146.8 | 156.1 | 159.2 |
• | approximately $100 million reduction resulting from programs transitioning out of the development phase, with full scale production not expected to occur until after 2013 |
• | lower product deliveries of our Defense Advanced GPS Receivers and satellite communication terminals |
• | delays in the Eurofighter Tranche III and reductions from lower sales of joint helmet mounted cueing systems for military fixed wing aircraft |
• | items above are expected to be partially offset by increased deliveries of Joint Tactical Radio System |
• | overall funding and prioritization of the U.S. and non-U.S. defense budgets, including unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011 that are set to be implemented in January 2013 |
• | delayed, reduced or canceled funding for programs we have won |
• | potential impact of geopolitical and economic events |
• | our ability to execute to our internal performance plans and cost reduction initiatives |
• | our ability to win new business, successfully develop products and execute on programs pursuant to contractual requirements |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Avionics | $ | 1,476 | $ | 1,434 | $ | 1,389 | ||||||
Communication products | 652 | 698 | 749 | |||||||||
Surface solutions | 226 | 377 | 408 | |||||||||
Navigation products | 237 | 304 | 315 | |||||||||
Total | $ | 2,591 | $ | 2,813 | $ | 2,861 | ||||||
Percent (decrease) | (8 | )% | (2 | )% |
• | $80 million increase resulting from the combined impact of development effort on the KC-46A, KC-10 and KC-390 tanker programs |
• | $49 million increase in sales on the Saudi F-15 fighter program |
• | partially offset by reductions to revenue of $87 million, primarily attributable to decreased sales for the KC-135 Global Air Traffic Management program and lower deliveries on C-17 transport, CH-53 rotary wing and P-3 special mission aircraft |
• | $21 million reduction due to the completion of a program to provide transportable cellular capabilities in Afghanistan |
• | $21 million decrease resulting from the combined impact of a program termination for Ground Mobile Radios and reduced funding authorizations on the U.S. Department of Defense FAB-T (Family of Advanced Beyond Line-of Sight terminals) initiative |
• | $52 million reduction attributable to the combined impact of two programs that were terminated for convenience by the U.S. Government during 2011 |
• | $52 million decrease resulting from the combined impact of fewer deliveries of iForce public safety vehicle systems as we exited this product line and a reduction in Joint Precision Approach and Landing System program revenues as it transitions from development into production |
• | remaining decrease of $47 million was due to a variety of items, including fewer deliveries of soldier optronics products and a decline in electronic warfare solution program revenues |
• | $69 million increase resulting from the combined impact of low-rate initial production sales on an E-6 special mission aircraft program and development effort on the recently awarded KC-46A Tanker program |
• | $43 million increase from higher rotary wing avionics sales on various platforms |
• | above items were partially offset by a $66 million reduction in sales from the completion of the KC-135 Global Air Traffic Management program |
• | $63 million reduction attributable to the combined impact of two programs that were terminated for convenience by the U.S. Government and lower sales of soldier system optronics products that were adversely impacted by delayed funding authorizations from the U.S. Government |
• | $13 million decrease resulting from lower deliveries of iForce public safety vehicle systems |
• | above items were partially offset by $48 million of increased development revenues for the Common Range Integrated Instrumentation System program |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Segment operating earnings | $ | 568 | $ | 592 | $ | 606 | ||||||
Percent of sales | 21.9 | % | 21.0 | % | 21.2 | % |
• | $222 million reduction in sales discussed in the Government Systems sales section above resulted in a $137 million decrease to costs and a reduction to earnings of $85 million. The variable gross margin of 38 percent reflects the absence of higher margin hardware sales for Navigation products that occurred last year |
• | partially offset by a $34 million benefit to operating earnings resulting from lower company-funded R&D expense, as explained in the Cost of Sales section above |
• | remaining variance of $27 million was primarily attributable to a benefit from lower employee headcount and incentive compensation costs, partially offset by higher warranty expense and an increase in employee medical and retirement benefit costs, as explained in the Cost of Sales section above |
• | $18 million reduction attributable to an increase in selling, general and administrative expenses driven by higher employee incentive compensation costs and merit pay increases as discussed in the SG&A section above |
• | $48 million reduction in sales volume discussed in the Government Systems Sales section above resulted in a $31 million reduction to costs and lower operating earnings of $17 million, at a variable gross margin of 35 percent |
• | above items were partially offset by a $21 million net benefit to operating earnings resulting from the combined impact of lower pension costs, as discussed in the Retirement Plans section below, and a $7 million reduction in warranty expenses primarily attributable to a favorable adjustment recorded in 2011 to reduce warranty reserves |
• | sales to aircraft OEMs are expected to increase by high single digits across both the air transport and business and regional markets. Sales to air transport aircraft OEMs should benefit from anticipated production rate increases for the Boeing 787 aircraft and other legacy Boeing and Airbus aircraft. Business and regional jet OEM sales should also improve as the result of modest production rate increases across most OEM customers |
• | aftermarket sales for 2013 are expected to increase by low double-digits. The sales increase is expected to be driven by initial revenue from airspace mandates, business jet cockpit upgrades and higher service and support revenue across both market segments |
• | partially offset by an expected decrease of approximately 15 percent in sales of wide-body in-flight entertainment (IFE) products and services due to our decision in 2005 to cease investing in this product area. Wide-body IFE relates to sales of twin-aisle IFE products and systems to customers in the air transport market and also includes related revenue from wide-body service and support activities |
• | turbulence in global economic and financial markets could have a significant impact on demand for air travel, airline demand for new aircraft and the availability of financing for new aircraft |
• | occurrence of an unexpected geopolitical event, including terrorism or a pandemic, that could have a significant impact on demand for air travel and airline demand for new aircraft |
• | potential negative impact that fuel prices could have on the profitability of airline and other aircraft operator customers |
• | our ability to develop products and execute on programs pursuant to contractual requirements |
• | development and market segment acceptance of our products and systems |
• | potential adverse impact from delays or reductions in OEM aircraft production, including delays in the entry into service date for new aircraft |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Air transport aviation electronics: | ||||||||||||
Original equipment | $ | 574 | $ | 499 | $ | 439 | ||||||
Aftermarket | 474 | 431 | 380 | |||||||||
Wide-body in-flight entertainment | 91 | 119 | 145 | |||||||||
Total air transport aviation electronics | 1,139 | 1,049 | 964 | |||||||||
Business and regional aviation electronics: | ||||||||||||
Original equipment | 582 | 557 | 466 | |||||||||
Aftermarket | 414 | 387 | 340 | |||||||||
Total business and regional aviation electronics | 996 | 944 | 806 | |||||||||
Total | $ | 2,135 | $ | 1,993 | $ | 1,770 | ||||||
Percent increase | 7 | % | 13 | % |
• | air transport OEM sales increased $75 million, or 15 percent, driven primarily by higher sales to Boeing and Airbus as they increased aircraft production rates across various platforms, including the Boeing 787 and 737 aircraft and the Airbus A320 |
• | air transport aftermarket sales increased $43 million, or 10 percent. The increase was driven by higher spares revenues of $19 million, primarily for new Boeing 787 and 747-8 aircraft, and a $22 million increase in retrofit and service and support activities |
• | Wide-body IFE sales decreased $28 million, or 24 percent, due to the Company's strategic decision announced in 2005 to cease investment in this product area |
• | business and regional OEM sales increased $25 million, or 4 percent, primarily related to a $62 million increase in product deliveries for Bombardier Global, Cessna Citation and Gulfstream aircraft. This was partially offset by net reductions of $37 million, including a $27 million reduction in sales to Hawker Beechcraft who filed for Chapter 11 bankruptcy protection in May 2012, and lower sales to regional jet aircraft manufacturers as production rates declined for certain aircraft |
• | business and regional aftermarket sales increased $27 million, or 7 percent, driven by the combined impact of higher retrofit and service and support activities. Retrofit sales increased as customers upgraded aircraft systems in order to gain operational efficiencies, improve performance and modernize the cabin |
• | air transport OEM sales increased $60 million, or 14 percent, primarily from higher product deliveries to Boeing across multiple platforms, including Boeing 787 aircraft, and increased development effort on avionics packages for the new Commercial Aircraft Corporation of China, Ltd. (COMAC) C919 narrowbody aircraft |
• | air transport aftermarket sales increased $51 million, or 13 percent, primarily related to a $27 million increase in service and support sales and higher aftermarket hardware revenues of $24 million, driven by initial deliveries of spares for Boeing 747-8 aircraft and higher spare part sales to various airline customers as they restocked their inventories |
• | Wide-body IFE sales decreased $26 million, or 18 percent, due to the Company's strategic decision announced in 2005 to cease investment in this product area |
• | business and regional OEM sales increased $91 million, or 20 percent, primarily due to $64 million of higher sales to Bombardier for Bombardier Global and Challenger 300 aircraft and $14 million of higher avionics sales to Cessna resulting from our new position on the CJ-4 aircraft |
• | business and regional aftermarket sales increased $47 million, or 14 percent. Service and support revenues accounted for $17 million of the increase, driven by improved aircraft utilization. Higher spare parts revenues and increased sales of equipment for simulators primarily contributed an additional $18 million. The remaining increase of $12 million was primarily related to incremental sales from Air Routing and CTA acquisitions |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Segment operating earnings | $ | 440 | $ | 381 | $ | 287 | ||||||
Percent of sales | 20.6 | % | 19.1 | % | 16.2 | % |
• | incremental earnings from higher sales volume totaled $61 million, at a variable gross margin of 43 percent, which reflects the impact of lower margins on our Boeing 787 program revenues |
• | partially offset by a $10 million reduction to operating earnings due to the absence of favorable adjustments recorded in the prior year to reduce certain customer incentive reserves |
• | remaining variance of $8 million is primarily comprised of a net benefit from lower employee incentive compensation costs, partially offset by a $5 million bad debt charge recorded in the third quarter of fiscal year 2012 and higher warranty, employee medical and retirement benefit costs, as explained in the Cost of Sales section above |
• | $223 million sales increase discussed in the Commercial Systems sales section above resulted in a $109 million increase in costs and incremental operating earnings of $114 million, at a variable gross margin of 51 percent |
• | $18 million benefit to operating earnings related to a change in estimate recorded in 2011 to reduce the provision for certain customer incentives |
• | above items were partially offset by a $29 million reduction to operating earnings attributable to an increase in selling, general and administrative expenses as discussed in the SG&A section above |
• | additional $9 million reduction to operating earnings resulted from higher company-funded R&D expense, as explained in the Cost of Sales section above |
(in millions) | 2012 | 2011 | 2010 | |||||||||
General corporate, net | $ | 42 | $ | 48 | $ | 54 |
(in millions) | 2012 | 2011 | 2010 | ||||||||
Pension benefits | $ | (13 | ) | $ | (16 | ) | $ | 26 | |||
Other retirement benefits | 18 | 10 | 5 | ||||||||
Net benefit expense (income) | $ | 5 | $ | (6 | ) | $ | 31 |
• | in July of 2002, the pre-65 and post-65 retiree medical plans were amended to discontinue benefits for employees hired after September 30, 2006 and establish a fixed Company contribution. Additional premium contributions will be required from participants for all costs in excess of this fixed contribution amount. This amendment eliminated the risk to us related to health care cost escalations for retiree medical benefits going forward as additional contributions will be required from retirees for all costs in excess of our fixed contribution amount |
• | as a result of the Medicare Prescription Drug, Improvement and Modernization Act of 2003, we amended our retiree medical plans on June 30, 2004 to discontinue post-65 prescription drug coverage effective January 1, 2008. Post-65 retirees have the option of receiving these benefits through Medicare. We believe the Medicare prescription drug benefit is generally better than the benefit that was provided by our discontinued post-65 drug plan |
FINANCIAL CONDITION AND LIQUIDITY |
• | $714 million of cash payments for share repurchases |
• | $138 million of capital expenditures |
• | $157 million of dividend payments |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Cash provided by operating activities | $ | 534 | $ | 657 | $ | 711 |
• | cash receipts from customers decreased by $114 million to $4,685 million in 2012 compared to $4,799 million in 2011, primarily due to the lower sales volume in 2012 as discussed in the Results of Operations section above and lower collections of receivables from customers, partially offset by higher progress payments received in advance of revenue recognition |
• | payments for income taxes increased $112 million to $208 million in 2012 compared to $96 million in 2011 due to the differences in the timing of cash tax payments resulting from the retroactive extension of the Federal R&D tax credit |
• | payments for employee incentive pay increased $62 million. Incentive pay is expensed in the year it is incurred and paid in the first fiscal quarter of the following year. During 2012, $133 million was paid for employee incentive pay costs incurred during 2011 as compared to $71 million paid in 2011 for employee incentive pay costs incurred during 2010 |
• | above items were partially offset by a decrease in payments for inventory and other operating costs of $206 million to $3,672 million in 2012 compared to $3,878 million in 2011. The decrease was primarily due to lower costs associated with the lower sales volume in 2012 discussed in the Results of Operations section above |
• | payments for inventory and other operating costs increased $237 million to $3,878 million in 2011 compared to $3,641 million in 2010. The increase was primarily due to increased costs associated with the higher sales volume in 2011 discussed in the Results of Operations section above and an increase in inventory, primarily driven by: |
◦ | higher pre-production engineering costs resulting from increased effort on programs such as the Airbus A350, various Bombardier platforms in the business jet market, and several international rotary and fixed-wing programs within Government Systems |
◦ | additional increases to inventory resulting from the adverse impact of delayed funding authorizations from the U.S. Government, an increase to accommodate a transitional period of relocating certain production effort to other existing facilities and higher purchases of component parts to mitigate supply chain risks after the earthquake and tsunami in Japan |
• | payments for employee incentive pay increased $71 million. Incentive pay is expensed in the year it is incurred and paid in the first fiscal quarter of the following year. During 2011, $71 million was paid for employee incentive pay costs incurred during 2010. No incentive pay costs were incurred for the full year 2009; accordingly, there was no 2010 payment for incentive pay |
• | above items were partially offset by an increase in cash receipts from customers of $212 million to $4,799 million in 2011 compared to $4,587 million in 2010, primarily due to the higher sales volume in 2011 as discussed in the Results of Operations section above and higher collections of receivables from customers, including higher progress payments received in advance of revenue recognition |
• | payments for income taxes decreased $29 million to $96 million in 2011 compared to $125 million in 2010 primarily due to the timing of cash tax payments related to the retroactive extension of the Federal R&D Tax credit |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Cash used for investing activities | $ | (129 | ) | $ | (92 | ) | $ | (232 | ) |
• | cash proceeds received from the dispositions of property and businesses decreased by $44 million. The majority of this decrease is due to the absence of the Rollmet divestiture which occurred in 2011 |
• | the absence of proceeds of $20 million in 2011 from the sale of a short-term investment at a non-U.S. subsidiary |
• | partially offset by: |
◦ | lower payments for the acquisition of businesses of $17 million. In 2012, there were no business acquisitions as compared to $17 million in payments in 2011 for the acquisitions of Blue Ridge Simulation, Inc. and Computing Technologies for Aviation, Inc. |
◦ | a $14 million decrease in capital expenditures |
• | in 2011 we received $44 million in proceeds from the divestiture of the Rollmet business and $14 million in proceeds from the disposition of property compared to $1 million received from the disposition of property in 2010 |
• | in 2011 we acquired Blue Ridge Simulation, Inc. and Computing Technologies for Aviation, Inc. for $17 million compared to the 2010 acquisition of Air Routing for $91 million |
• | we received $20 million from the sale of a short-term investment at a non-U.S. subsidiary in 2011 which was purchased for $21 million in 2010 |
• | above items were partially offset by a $43 million increase in property additions |
(in millions) | 2012 | 2011 | 2010 | |||||||||
Cash used for financing activities | $ | (594 | ) | $ | (471 | ) | $ | (279 | ) |
• | cash repurchases of common stock increased $386 million to $714 million in 2012 from $328 million in 2011 |
• | partially offset by: |
◦ | net proceeds of $247 million from the issuance of long-term debt in November of 2011 |
◦ | absence of a $24 million repayment of short-term debt at a non-U.S. subsidiary that occurred during 2011 |
• | cash repurchases of common stock increased $145 million to $328 million in 2011 from $183 million in 2010 |
• | repayment of short-term borrowings increased by $24 million in 2011 as short-term debt of $24 million outstanding at the end of 2010 was repaid during 2011 |
• | cash proceeds from stock option exercises decreased $16 million to $22 million in 2011 from $38 million in 2010 |
(in millions, except per share amounts) | 2012 | 2011 | 2010 | |||||||||
Amount of share repurchases | $ | 723 | $ | 322 | $ | 182 | ||||||
Number of shares repurchased | 13.3 | 5.5 | 3.2 | |||||||||
Weighted average price per share | $ | 54.41 | $ | 58.50 | $ | 57.50 |
September 30 | |||||||
(in millions) | 2012 | 2011 | |||||
Cash and cash equivalents | $ | 335 | $ | 530 | |||
Long-term debt, net | (779 | ) | (528 | ) | |||
Net debt (1) | $ | (444 | ) | $ | 2 | ||
Total equity | $ | 1,264 | $ | 1,528 | |||
Debt to total capitalization (2) | 38 | % | 26 | % | |||
Net debt to total capitalization (3) | 26 | % | — | % |
(1) | Calculated as total of 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 | Negative | |||
Standard & Poor’s | A-1 | A | Stable |
The following table summarizes certain of our contractual obligations as of September 30, 2012, as well as when these obligations are expected to be satisfied. | ||||||||||||||||||||
Payments Due by Period | ||||||||||||||||||||
(in millions) | Total | Less than 1 Year | 1 - 3 Years | 4 - 5 Years | Thereafter | |||||||||||||||
Long-term debt | $ | 750 | $ | — | $ | 200 | $ | — | $ | 550 | ||||||||||
Interest on long-term debt | 199 | 33 | 52 | 48 | 66 | |||||||||||||||
Non-cancelable operating leases | 249 | 64 | 103 | 49 | 33 | |||||||||||||||
Purchase obligations: | ||||||||||||||||||||
Purchase orders | 991 | 811 | 150 | 5 | 25 | |||||||||||||||
Purchase contracts | 100 | 50 | 30 | 10 | 10 | |||||||||||||||
Total | $ | 2,289 | $ | 958 | $ | 535 | $ | 112 | $ | 684 |
Amount of Commitment Expiration by Period | ||||||||||||||||||||
(in millions) | Total Amount Committed | Less than 1 Year | 1 - 3 Years | 4 - 5 Years | Thereafter | |||||||||||||||
Letters of credit* | $ | 71 | $ | 57 | $ | 13 | $ | 1 | $ | — |
RECENTLY ISSUED ACCOUNTING STANDARDS |
ENVIRONMENTAL |
CRITICAL ACCOUNTING POLICIES |
September 30 | ||||||||
(in millions) | 2012 | 2011 | ||||||
Pre-production engineering costs | $ | 569 | $ | 446 | ||||
Up-front sales incentives | 186 | 173 | ||||||
Total Program Investments | $ | 755 | $ | 619 |
• | changes in market conditions may affect product sales under a program. In particular, the commercial aerospace market has been historically cyclical and subject to downturns during periods of weak economic conditions, which could be prompted or exacerbated by political or other domestic or international events |
• | bankruptcy or other significant financial difficulties of our customers |
• | our ability to produce products could be impacted by the performance of subcontractors, the availability of specialized materials and other production risks |
(in millions) | 2012 | 2011 | 2010 | ||||||||
Amortization of pre-production engineering | $ | 18 | $ | 15 | $ | 15 | |||||
Amortization of up-front sales incentives | 9 | 6 | 4 | ||||||||
Total amortization of Program Investments | $ | 27 | $ | 21 | $ | 19 |
(in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | |||||||||||||||||
Anticipated amortization expense for pre-production engineering costs | $ | 26 | $ | 42 | $ | 59 | $ | 70 | $ | 77 | $ | 295 | |||||||||||
Anticipated amortization expense for up-front sales incentives | 8 | 14 | 20 | 26 | 22 | 96 | |||||||||||||||||
Total anticipated amortization for Program Investments | $ | 34 | $ | 56 | $ | 79 | $ | 96 | $ | 99 | $ | 391 |
(in millions) | Change in Assumption | |||
Assumption | 25 Basis Point Increase | 25 Basis Point Decrease | ||
Pension obligation discount rate | $105 pension projected benefit obligation decrease | $108 pension projected benefit obligation increase | ||
Expected long-term rate of return on plan assets | $6 additional pension income | $6 decrease to pension income |
Item 7A. | Quantitative and Qualitative Disclosures about Market Risk. |
Item 8. | Financial Statements and Supplementary Data. |
/s/ CLAYTON M. JONES | /s/ PATRICK E. ALLEN | |
Clayton M. Jones Chairman & Chief Executive Officer | Patrick E. Allen Senior Vice President & Chief Financial Officer |
/s/ CLAYTON M. JONES | /s/ PATRICK E. ALLEN | |
Clayton M. Jones Chairman & Chief Executive Officer | Patrick E. Allen Senior Vice President & Chief Financial Officer |
September 30 | |||||||
2012 | 2011 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 335 | $ | 530 | |||
Receivables, net | 971 | 969 | |||||
Inventories, net | 1,332 | 1,195 | |||||
Current deferred income taxes | 58 | 106 | |||||
Other current assets | 91 | 89 | |||||
Total current assets | 2,787 | 2,889 | |||||
Property | 773 | 754 | |||||
Goodwill | 780 | 780 | |||||
Intangible Assets | 291 | 308 | |||||
Long-term Deferred Income Taxes | 455 | 448 | |||||
Other Assets | 228 | 210 | |||||
TOTAL ASSETS | $ | 5,314 | $ | 5,389 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities: | |||||||
Accounts payable | $ | 475 | $ | 485 | |||
Compensation and benefits | 269 | 324 | |||||
Advance payments from customers | 288 | 269 | |||||
Accrued customer incentives | 174 | 128 | |||||
Product warranty costs | 126 | 148 | |||||
Other current liabilities | 108 | 141 | |||||
Total current liabilities | 1,440 | 1,495 | |||||
Long-term Debt, Net | 779 | 528 | |||||
Retirement Benefits | 1,693 | 1,633 | |||||
Other Liabilities | 138 | 205 | |||||
Equity: | |||||||
Common stock ($0.01 par value; shares authorized: 1,000; shares issued: 183.8) | 2 | 2 | |||||
Additional paid-in capital | 1,460 | 1,437 | |||||
Retained earnings | 3,708 | 3,288 | |||||
Accumulated other comprehensive loss | (1,607 | ) | (1,497 | ) | |||
Common stock in treasury, at cost (shares held: September 30, 2012, 41.6; September 30, 2011, 30.5) | (2,304 | ) | (1,707 | ) | |||
Total shareowners’ equity | 1,259 | 1,523 | |||||
Noncontrolling interest | 5 | 5 | |||||
Total equity | 1,264 | 1,528 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 5,314 | $ | 5,389 |
Year Ended September 30 | |||||||||||
2012 | 2011 | 2010 | |||||||||
Sales | $ | 4,726 | $ | 4,806 | $ | 4,631 | |||||
Costs, expenses and other: | |||||||||||
Cost of sales | 3,324 | 3,427 | 3,353 | ||||||||
Selling, general and administrative expenses | 543 | 533 | 476 | ||||||||
Interest expense | 27 | 19 | 20 | ||||||||
Other income, net | (25 | ) | (28 | ) | (14 | ) | |||||
Total costs, expenses and other | 3,869 | 3,951 | 3,835 | ||||||||
Income from continuing operations before income taxes | 857 | 855 | 796 | ||||||||
Income tax expense | 248 | 240 | 239 | ||||||||
Income from continuing operations | 609 | 615 | 557 | ||||||||
Income from discontinued operations, net of taxes | — | 19 | 4 | ||||||||
Net income | $ | 609 | $ | 634 | $ | 561 | |||||
Earnings per share: | |||||||||||
Basic | |||||||||||
Continuing operations | $ | 4.19 | $ | 3.99 | $ | 3.55 | |||||
Discontinued operations | — | 0.12 | 0.02 | ||||||||
Basic earnings per share | $ | 4.19 | $ | 4.11 | $ | 3.57 | |||||
Diluted | |||||||||||
Continuing operations | $ | 4.15 | $ | 3.94 | $ | 3.50 | |||||
Discontinued operations | — | 0.12 | 0.02 | ||||||||
Diluted earnings per share | $ | 4.15 | $ | 4.06 | $ | 3.52 | |||||
Weighted average common shares: | |||||||||||
Basic | 145.3 | 154.2 | 157.1 | ||||||||
Diluted | 146.8 | 156.1 | 159.2 | ||||||||
Cash dividends per share | $ | 1.08 | $ | 0.96 | $ | 0.96 |
Year Ended September 30 | |||||||||||
2012 | 2011 | 2010 | |||||||||
Operating Activities: | |||||||||||
Net income | $ | 609 | $ | 634 | $ | 561 | |||||
Adjustments to arrive at cash provided by operating activities: | |||||||||||
Restructuring, asset impairment and customer bankruptcy charges (adjustment) | 65 | 27 | (1 | ) | |||||||
Gain on sale of business | — | (27 | ) | — | |||||||
Depreciation | 117 | 108 | 115 | ||||||||
Amortization of intangible assets and pre-production engineering costs | 57 | 51 | 52 | ||||||||
Stock-based compensation expense | 24 | 24 | 24 | ||||||||
Compensation and benefits paid in common stock | 69 | 68 | 64 | ||||||||
Excess tax benefit from stock-based compensation | (9 | ) | (7 | ) | (17 | ) | |||||
Deferred income taxes | 105 | 93 | 86 | ||||||||
Pension plan contributions | (126 | ) | (113 | ) | (110 | ) | |||||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments: | |||||||||||
Receivables | (29 | ) | 49 | (32 | ) | ||||||
Production inventory | (63 | ) | (121 | ) | (16 | ) | |||||
Pre-production engineering costs | (141 | ) | (141 | ) | (95 | ) | |||||
Accounts payable | (28 | ) | 58 | 43 | |||||||
Compensation and benefits | (77 | ) | 61 | 64 | |||||||
Advance payments from customers | 22 | (55 | ) | (25 | ) | ||||||
Accrued customer incentives | 46 | (4 | ) | 10 | |||||||
Product warranty costs | (21 | ) | (35 | ) | (34 | ) | |||||
Income taxes | (68 | ) | 59 | 48 | |||||||
Other assets and liabilities | (18 | ) | (72 | ) | (26 | ) | |||||
Cash Provided by Operating Activities | 534 | 657 | 711 | ||||||||
Investing Activities: | |||||||||||
Property additions | (138 | ) | (152 | ) | (109 | ) | |||||
Acquisition of businesses, net of cash acquired | — | (17 | ) | (96 | ) | ||||||
Proceeds from the disposition of property | 17 | 14 | 1 | ||||||||
Acquisition of intangible assets | (4 | ) | (4 | ) | (7 | ) | |||||
Proceeds (sales price adjustment) from business divestiture | (3 | ) | 44 | — | |||||||
Cash provided to customer | — | (237 | ) | — | |||||||
Collection of cash provided to customer | — | 237 | — | ||||||||
Purchase of short-term investments | — | — | (21 | ) | |||||||
Proceeds from sale of short-term investments | — | 20 | — | ||||||||
Other investing activities | (1 | ) | 3 | — | |||||||
Cash Used for Investing Activities | (129 | ) | (92 | ) | (232 | ) | |||||
Financing Activities: | |||||||||||
Purchases of treasury stock | (714 | ) | (328 | ) | (183 | ) | |||||
Cash dividends | (157 | ) | (148 | ) | (151 | ) | |||||
Repayment of short-term borrowings | — | (24 | ) | — | |||||||
Increase in long-term borrowings | 247 | — | — | ||||||||
Proceeds from the exercise of stock options | 21 | 22 | 38 | ||||||||
Excess tax benefit from stock-based compensation | 9 | 7 | 17 | ||||||||
Cash Used for Financing Activities | (594 | ) | (471 | ) | (279 | ) | |||||
Effect of exchange rate changes on cash and cash equivalents | (6 | ) | 1 | — | |||||||
Net Change in Cash and Cash Equivalents | (195 | ) | 95 | 200 | |||||||
Cash and Cash Equivalents at Beginning of Period | 530 | 435 | 235 | ||||||||
Cash and Cash Equivalents at End of Period | $ | 335 | $ | 530 | $ | 435 |
Year Ended September 30 | ||||||||||||
2012 | 2011 | 2010 | ||||||||||
Common Stock | ||||||||||||
Beginning and ending balance | $ | 2 | $ | 2 | $ | 2 | ||||||
Additional Paid-In Capital | ||||||||||||
Beginning balance | 1,437 | 1,420 | 1,395 | |||||||||
Tax benefit from stock-based compensation | 11 | 7 | 17 | |||||||||
Shares issued under stock option and benefit plans | (12 | ) | (14 | ) | (16 | ) | ||||||
Stock-based compensation | 24 | 24 | 24 | |||||||||
Ending balance | 1,460 | 1,437 | 1,420 | |||||||||
Retained Earnings | ||||||||||||
Beginning balance | 3,288 | 2,816 | 2,444 | |||||||||
Net income | 609 | 634 | 561 | |||||||||
Cash dividends | (157 | ) | (148 | ) | (151 | ) | ||||||
Shares issued under stock option and benefit plans | (32 | ) | (14 | ) | (38 | ) | ||||||
Ending balance | 3,708 | 3,288 | 2,816 | |||||||||
Accumulated Other Comprehensive Loss | ||||||||||||
Beginning balance | (1,497 | ) | (1,259 | ) | (1,080 | ) | ||||||
Pension and other retirement benefit adjustment | (126 | ) | (217 | ) | (171 | ) | ||||||
Currency translation gain (loss) | 13 | (21 | ) | (8 | ) | |||||||
Unrealized gain from foreign currency cash flow hedges | 3 | — | — | |||||||||
Ending balance | (1,607 | ) | (1,497 | ) | (1,259 | ) | ||||||
Common Stock in Treasury | ||||||||||||
Beginning balance | (1,707 | ) | (1,497 | ) | (1,469 | ) | ||||||
Share repurchases | (723 | ) | (322 | ) | (182 | ) | ||||||
Shares issued from treasury | 126 | 112 | 154 | |||||||||
Ending balance | (2,304 | ) | (1,707 | ) | (1,497 | ) | ||||||
Total Shareowners' Equity | 1,259 | 1,523 | 1,482 | |||||||||
Noncontrolling Interest | ||||||||||||
Beginning balance | 5 | 4 | 3 | |||||||||
Other changes in equity attributable to noncontrolling interest | — | 1 | 1 | |||||||||
Ending balance | 5 | 5 | 4 | |||||||||
Total Equity | $ | 1,264 | $ | 1,528 | $ | 1,486 | ||||||
Comprehensive Income | ||||||||||||
Net income | $ | 609 | $ | 634 | $ | 561 | ||||||
Other comprehensive loss, net of taxes (2012, $73; 2011, $130; 2010, $95) | (110 | ) | (238 | ) | (179 | ) | ||||||
Comprehensive income | $ | 499 | $ | 396 | $ | 382 |
1. | Business Description and Basis of Presentation |
2. | Significant Accounting Policies |
3. | Acquisitions |
During the years ended September 30, 2012, 2011 and 2010, the Company completed three acquisitions that are summarized as follows: | ||||||||||||||||
Intangible Assets | ||||||||||||||||
(dollars in millions) | Fiscal Year Acquired | Cash Purchase Price(1) | Goodwill | Finite Lived | Weighted Average Life in Years | |||||||||||
Computing Technologies for Aviation, Inc. | 2011 | $ | 11 | $ | 10 | $ | 3 | 9 | ||||||||
Blue Ridge Simulation, Inc. | 2011 | 6 | 6 | 1 | 9 | |||||||||||
AR Group, Inc. | 2010 | 91 | 58 | 39 | 14 |
4. | Discontinued Operations |
Results of discontinued operations are as follows: | ||||||||||||
Year Ended September 30 | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Sales | $ | — | $ | 19 | $ | 34 | ||||||
Income from discontinued operations before income taxes | — | 4 | 6 |
5. | Receivables, Net |
Receivables, net are summarized as follows: | |||||||
(in millions) | September 30, 2012 | September 30, 2011 | |||||
Billed | $ | 810 | $ | 718 | |||
Unbilled | 366 | 404 | |||||
Less progress payments | (169 | ) | (143 | ) | |||
Total | 1,007 | 979 | |||||
Less allowance for doubtful accounts | (36 | ) | (10 | ) | |||
Receivables, net | $ | 971 | $ | 969 |
6. | Inventories, Net |
Inventories, net are summarized as follows: | |||||||
(in millions) | September 30, 2012 | September 30, 2011 | |||||
Finished goods | $ | 168 | $ | 180 | |||
Work in process | 254 | 265 | |||||
Raw materials, parts and supplies | 343 | 340 | |||||
Less progress payments | (2 | ) | (36 | ) | |||
Total | 763 | 749 | |||||
Pre-production engineering costs | 569 | 446 | |||||
Inventories, net | $ | 1,332 | $ | 1,195 |
Anticipated annual amortization expense for pre-production engineering costs is as follows: | |||||||||||||||||||||||
(in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | |||||||||||||||||
Anticipated amortization expense for pre-production engineering costs | $ | 26 | $ | 42 | $ | 59 | $ | 70 | $ | 77 | $ | 295 |
7. | Property |
Property is summarized as follows: | |||||||
(in millions) | September 30, 2012 | September 30, 2011 | |||||
Land | $ | 10 | $ | 14 | |||
Buildings and improvements | 383 | 372 | |||||
Machinery and equipment | 1,045 | 1,002 | |||||
Information systems software and hardware | 326 | 310 | |||||
Furniture and fixtures | 66 | 66 | |||||
Construction in progress | 88 | 89 | |||||
Total | 1,918 | 1,853 | |||||
Less accumulated depreciation | (1,145 | ) | (1,099 | ) | |||
Property | $ | 773 | $ | 754 |
8. | Goodwill and Intangible Assets |
Changes in the carrying amount of goodwill are summarized as follows: | |||||||||||
(in millions) | Government Systems | Commercial Systems | Total | ||||||||
Balance at September 30, 2010 | $ | 509 | $ | 257 | $ | 766 | |||||
Blue Ridge acquisition | 6 | — | 6 | ||||||||
CTA acquisition | — | 10 | 10 | ||||||||
Rollmet divestiture | — | (1 | ) | (1 | ) | ||||||
Foreign currency translation adjustments | (1 | ) | — | (1 | ) | ||||||
Balance at September 30, 2011 | 514 | 266 | 780 | ||||||||
Foreign currency translation adjustments | — | — | — | ||||||||
Balance at September 30, 2012 | $ | 514 | $ | 266 | $ | 780 |
Intangible assets are summarized as follows: | |||||||||||||||||||||||
September 30, 2012 | September 30, 2011 | ||||||||||||||||||||||
(in millions) | Gross | Accum Amort | Net | Gross | Accum Amort | Net | |||||||||||||||||
Intangible assets with finite lives: | |||||||||||||||||||||||
Developed technology and patents | $ | 221 | $ | (159 | ) | $ | 62 | $ | 219 | $ | (140 | ) | $ | 79 | |||||||||
Customer relationships: | |||||||||||||||||||||||
Acquired | 91 | (57 | ) | 34 | 90 | (48 | ) | 42 | |||||||||||||||
Up-front sales incentives | 212 | (26 | ) | 186 | 190 | (17 | ) | 173 | |||||||||||||||
License agreements | 13 | (8 | ) | 5 | 18 | (9 | ) | 9 | |||||||||||||||
Trademarks and tradenames | 15 | (13 | ) | 2 | 15 | (12 | ) | 3 | |||||||||||||||
Intangible assets with indefinite lives: | |||||||||||||||||||||||
Trademarks and tradenames | 2 | — | 2 | 2 | — | 2 | |||||||||||||||||
Intangible assets | $ | 554 | $ | (263 | ) | $ | 291 | $ | 534 | $ | (226 | ) | $ | 308 |
(in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | |||||||||||||||||
Anticipated amortization expense for up-front sales incentives | $ | 8 | $ | 14 | $ | 20 | $ | 26 | $ | 22 | $ | 96 | |||||||||||
Anticipated amortization expense for all other intangible assets | 22 | 19 | 15 | 12 | 12 | 23 | |||||||||||||||||
Total | $ | 30 | $ | 33 | $ | 35 | $ | 38 | $ | 34 | $ | 119 |
9. | Other Assets |
Other assets are summarized as follows: | |||||||
(in millions) | September 30, 2012 | September 30, 2011 | |||||
Long-term receivables | $ | 34 | $ | 32 | |||
Investments in equity affiliates | 19 | 11 | |||||
Exchange and rental assets (net of accumulated depreciation of $94 at September 30, 2012 and $104 at September 30, 2011) | 51 | 57 | |||||
Other | 124 | 110 | |||||
Other assets | $ | 228 | $ | 210 |
• | 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 that provides aircrew training services primarily for the United Kingdom Ministry of Defence |
10. | Debt |
Long-term debt and a reconciliation to the carrying amount is summarized as follows: | |||||||
(in millions) | September 30, 2012 | September 30, 2011 | |||||
Principal amount of 2021 Notes, net of discount | $ | 249 | $ | — | |||
Principal amount of 2019 Notes, net of discount | 299 | 299 | |||||
Principal amount of 2013 Notes | 200 | 200 | |||||
Fair value swap adjustment (Notes 17 and 18) | 31 | 29 | |||||
Long-term debt, net | $ | 779 | $ | 528 |
11. | Retirement Benefits |
The components of expense (income) for Pension Benefits and Other Retirement Benefits are summarized below: | |||||||||||||||||||||||
Pension Benefits | Other Retirement Benefits | ||||||||||||||||||||||
(in millions) | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | |||||||||||||||||
Service cost | $ | 8 | $ | 8 | $ | 6 | $ | 4 | $ | 4 | $ | 3 | |||||||||||
Interest cost | 153 | 159 | 159 | 10 | 11 | 12 | |||||||||||||||||
Expected return on plan assets | (213 | ) | (212 | ) | (210 | ) | (1 | ) | (1 | ) | (1 | ) | |||||||||||
Amortization: | |||||||||||||||||||||||
Prior service credit | (18 | ) | (19 | ) | (19 | ) | (6 | ) | (16 | ) | (22 | ) | |||||||||||
Net actuarial loss | 57 | 48 | 90 | 11 | 12 | 13 | |||||||||||||||||
Net benefit expense (income) | $ | (13 | ) | $ | (16 | ) | $ | 26 | $ | 18 | $ | 10 | $ | 5 |
The following table reconciles the projected benefit obligations (PBO), plan assets, funded status and net liability for the Company's Pension Benefits and the Other Retirement Benefits. | ||||||||||||||||
Pension Benefits | Other Retirement Benefits | |||||||||||||||
(in millions) | 2012 | 2011 | 2012 | 2011 | ||||||||||||
PBO at beginning of period | $ | 3,518 | $ | 3,354 | $ | 254 | $ | 265 | ||||||||
Service cost | 8 | 8 | 4 | 4 | ||||||||||||
Interest cost | 153 | 159 | 10 | 11 | ||||||||||||
Discount rate and other assumption changes | 408 | 134 | 25 | 7 | ||||||||||||
Actuarial losses (gains) | 57 | 15 | (7 | ) | (16 | ) | ||||||||||
Plan amendments | — | 14 | (16 | ) | — | |||||||||||
Plan participant contributions | — | — | 8 | 14 | ||||||||||||
Benefits paid | (175 | ) | (166 | ) | (24 | ) | (31 | ) | ||||||||
Other | (2 | ) | — | — | — | |||||||||||
PBO at end of period | 3,967 | 3,518 | 254 | 254 | ||||||||||||
Plan assets at beginning of period | 2,111 | 2,169 | 9 | 9 | ||||||||||||
Actual return on plan assets | 437 | (5 | ) | 2 | — | |||||||||||
Company contributions | 126 | 113 | 17 | 17 | ||||||||||||
Plan participant contributions | — | — | 8 | 14 | ||||||||||||
Benefits paid | (175 | ) | (166 | ) | (24 | ) | (31 | ) | ||||||||
Other | 2 | — | — | — | ||||||||||||
Plan assets at end of period | 2,501 | 2,111 | 12 | 9 | ||||||||||||
Funded status of plans | $ | (1,466 | ) | $ | (1,407 | ) | $ | (242 | ) | $ | (245 | ) | ||||
Funded status consists of: | ||||||||||||||||
Retirement benefits liability | $ | (1,461 | ) | $ | (1,397 | ) | $ | (231 | ) | $ | (232 | ) | ||||
Compensation and benefits liability | (11 | ) | (10 | ) | (11 | ) | (13 | ) | ||||||||
Other assets | 6 | — | — | — | ||||||||||||
Net liability | $ | (1,466 | ) | $ | (1,407 | ) | $ | (242 | ) | $ | (245 | ) |
The following table summarizes the amounts included in Accumulated other comprehensive loss before tax related to retirement benefits as of September 30, 2012 and 2011 and changes recognized in Other comprehensive loss before tax for the years ended September 30, 2012 and 2011: | ||||||||||||||||
Pension Benefits | Other Retirement Benefits | |||||||||||||||
(in millions) | Prior Service Cost (Credit) | Net Actuarial Loss | Prior Service Cost (Credit) | Net Actuarial Loss | ||||||||||||
Balance at September 30, 2010 | $ | (75 | ) | $ | 1,949 | $ | (33 | ) | $ | 177 | ||||||
Current year prior service cost | 14 | — | — | — | ||||||||||||
Current year net actuarial loss | — | 366 | — | (8 | ) | |||||||||||
Amortization of prior service cost | 19 | — | 16 | — | ||||||||||||
Amortization of actuarial loss | — | (48 | ) | — | (12 | ) | ||||||||||
Balance at September 30, 2011 | (42 | ) | 2,267 | (17 | ) | 157 | ||||||||||
Current year prior service cost | — | — | (16 | ) | — | |||||||||||
Current year net actuarial loss | — | 241 | — | 18 | ||||||||||||
Amortization of prior service cost | 18 | — | 6 | — | ||||||||||||
Amortization of actuarial loss | — | (57 | ) | — | (11 | ) | ||||||||||
Balance at September 30, 2012 | $ | (24 | ) | $ | 2,451 | $ | (27 | ) | $ | 164 |
The estimated amounts that will be amortized from Accumulated other comprehensive loss into expense (income) for Pension Benefits and Other Retirement Benefits during the year ending September 30, 2013 are as follows: | ||||||||||||
(in millions) | Pension Benefits | Other Retirement Benefits | Total | |||||||||
Prior service cost | $ | (18 | ) | $ | (8 | ) | $ | (26 | ) | |||
Net actuarial loss | 79 | 12 | 91 | |||||||||
Total | $ | 61 | $ | 4 | $ | 65 |
The following table presents the significant assumptions used in determining the benefit obligations: | ||||||||||||||||||
Pension Benefits | Other Retirement Benefits | |||||||||||||||||
U.S. | Non-U.S. | U.S. | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||
Discount rate | 3.56 | % | 4.43 | % | 4.08 | % | 5.57 | % | 3.21 | % | 4.20 | % | ||||||
Compensation increase rate | — | — | 3.46 | % | 3.46 | % | — | — |
Significant assumptions used in determining the net benefit expense (income) are as follows: | ||||||||||||||||||
Pension Benefits | Other Retirement Benefits | |||||||||||||||||
U.S. | Non-U.S. | U.S. | ||||||||||||||||
2012 | 2011 | 2012 | 2011 | 2012 | 2011 | |||||||||||||
Discount rate | 4.43 | % | 4.85 | % | 5.57 | % | 4.94 | % | 4.20 | % | 4.52 | % | ||||||
Expected long-term return on plan assets* | 8.75 | % | 8.75 | % | 8.73 | % | 8.68 | % | 8.75 | % | 8.75 | % | ||||||
Compensation increase rate | — | — | 3.46 | % | 3.44 | % | — | — | ||||||||||
Health care cost gross trend rate** | — | — | — | — | 9.00 | % | 11.00 | % | ||||||||||
Ultimate trend rate** | — | — | — | — | 5.00 | % | 5.50 | % | ||||||||||
Year that trend reaches ultimate rate** | — | — | — | — | 2019 | 2016 |
* | In fiscal year 2013, the expected long-term rate of return on plan assets for both U.S. Pension Benefits and Other Retirement Benefits will be reduced to 8.25 percent. |
Target Mix | 2012 | 2011 | ||||||||
Equities | 40% | - | 70% | 61 | % | 60 | % | |||
Fixed income | 25% | - | 60% | 36 | % | 37 | % | |||
Alternative investments | —% | - | 15% | — | % | — | % | |||
Cash | —% | - | 5% | 3 | % | 3 | % |
The following table presents the fair value of the Company's pension plans' assets as of September 30, 2012 and 2011, by asset category segregated by level within the fair value hierarchy, as described in Note 17: | ||||||||||||||||||||||||||||||||
September 30, 2012 | September 30, 2011 | |||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Asset category: | ||||||||||||||||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
U.S. equity | $ | 859 | $ | 183 | $ | — | $ | 1,042 | $ | 772 | $ | 122 | $ | — | $ | 894 | ||||||||||||||||
Non-U.S. equity | 438 | 48 | — | 486 | 339 | 35 | — | 374 | ||||||||||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate | — | 545 | — | 545 | — | 468 | — | 468 | ||||||||||||||||||||||||
U.S. government | 139 | 133 | — | 272 | 122 | 128 | — | 250 | ||||||||||||||||||||||||
Emerging market | — | 72 | — | 72 | — | 56 | — | 56 | ||||||||||||||||||||||||
Mortgage and asset-backed | — | 3 | — | 3 | — | 6 | — | 6 | ||||||||||||||||||||||||
Other | — | 16 | — | 16 | — | 9 | — | 9 | ||||||||||||||||||||||||
Cash and cash equivalents | — | 58 | — | 58 | — | 49 | — | 49 | ||||||||||||||||||||||||
Sub-total | 1,436 | 1,058 | — | 2,494 | 1,233 | 873 | — | 2,106 | ||||||||||||||||||||||||
Net receivables related to investment transactions | 7 | 5 | ||||||||||||||||||||||||||||||
Total | $ | 2,501 | $ | 2,111 |
The following table presents the fair value of the Company's other retirement benefits plan assets as of September 30, 2012 and 2011, by asset category segregated by level within the fair value hierarchy, as described in Note 17: | ||||||||||||||||||||||||||||||||
September 30, 2012 | September 30, 2011 | |||||||||||||||||||||||||||||||
(in millions) | Level 1 | Level 2 | Level 3 | Total | Level 1 | Level 2 | Level 3 | Total | ||||||||||||||||||||||||
Asset category: | ||||||||||||||||||||||||||||||||
Equity securities: | ||||||||||||||||||||||||||||||||
U.S. equity | $ | 6 | $ | — | $ | — | $ | 6 | $ | 6 | $ | — | $ | — | $ | 6 | ||||||||||||||||
Fixed income securities: | ||||||||||||||||||||||||||||||||
Corporate | — | 1 | — | 1 | — | 1 | — | 1 | ||||||||||||||||||||||||
U.S. government | 2 | 1 | — | 3 | — | 1 | — | 1 | ||||||||||||||||||||||||
Mortgage and asset-backed | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||
Cash and cash equivalents | — | 2 | — | 2 | — | 1 | — | 1 | ||||||||||||||||||||||||
Total | $ | 8 | $ | 4 | $ | — | $ | 12 | $ | 6 | $ | 3 | $ | — | $ | 9 |
For the years ended September 30, 2012 and 2011, the Company made contributions to its pension plans as follows: | ||||||||
(in millions) | 2012 | 2011 | ||||||
Contributions to U.S. qualified plan | $ | 113 | $ | 100 | ||||
Contributions to U.S. non-qualified plan | 8 | 8 | ||||||
Contributions to non-U.S. plans | 5 | 5 | ||||||
Total | $ | 126 | $ | 113 |
The following table reflects estimated benefit payments to be made to eligible participants for each of the next five years and the following five years in aggregate: | ||||||||
(in millions) | Pension Benefits | Other Retirement Benefits | ||||||
2013 | $ | 176 | $ | 23 | ||||
2014 | 206 | 18 | ||||||
2015 | 198 | 18 | ||||||
2016 | 203 | 18 | ||||||
2017 | 208 | 18 | ||||||
2018 - 2022 | 1,121 | 86 |
The Company's expense related to the defined contribution savings plans for 2012, 2011 and 2010 was as follows: | |||||||||||||||||||||
2012 | 2011 | 2010 | |||||||||||||||||||
(in millions) | Shares | Expense | Shares | Expense | Shares | Expense | |||||||||||||||
Contribution in shares: | |||||||||||||||||||||
Defined contribution savings plans | 1.1 | $ | 58 | 1.0 | $ | 57 | 0.9 | $ | 53 | ||||||||||||
Contribution in cash: | |||||||||||||||||||||
Retirement contribution | 41 | 39 | 34 | ||||||||||||||||||
Other | 2 | 1 | 1 | ||||||||||||||||||
Total | $ | 101 | $ | 97 | $ | 88 |
12. | Shareowners' Equity |
The Company repurchased shares of its common stock as follows: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Amount of share repurchases | $ | 723 | $ | 322 | $ | 182 | ||||||
Number of shares repurchased | 13.3 | 5.5 | 3.2 |
Accumulated other comprehensive loss (AOCL) consists of the following: | ||||||||||||
September 30 | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Unamortized pension and other retirement benefits (net of taxes of $945 for 2012; $872 for 2011 and $742 for 2010) | $ | (1,619 | ) | $ | (1,493 | ) | $ | (1,276 | ) | |||
Foreign currency translation adjustment | 10 | (3 | ) | 18 | ||||||||
Foreign currency cash flow hedge adjustment | 2 | (1 | ) | (1 | ) | |||||||
Accumulated other comprehensive loss | $ | (1,607 | ) | $ | (1,497 | ) | $ | (1,259 | ) |
13. | Stock-Based Compensation and Earnings Per Share |
Stock-based compensation expense is recognized on a straight-line basis over the requisite service period. Total stock-based compensation expense and related income tax benefit included within the Consolidated Statement of Operations for 2012, 2011 and 2010 is as follows: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Stock-based compensation expense included in: | ||||||||||||
Cost of sales | $ | 7 | $ | 7 | $ | 7 | ||||||
Selling, general and administrative expenses | 17 | 17 | 17 | |||||||||
Total | $ | 24 | $ | 24 | $ | 24 | ||||||
Income tax benefit | $ | 8 | $ | 8 | $ | 8 |
The following summarizes the activity of the Company's stock options for 2012: | |||||||||||||
(shares in thousands) | Shares | Weighted Average Exercise Price | Weighted Average Remaining Life (in years) | Aggregate Intrinsic Value (in millions) | |||||||||
Outstanding at September 30, 2011 | 5,631 | $ | 42.26 | ||||||||||
Granted | 761 | 55.03 | |||||||||||
Exercised | (824 | ) | 27.35 | ||||||||||
Forfeited or expired | (48 | ) | 56.55 | ||||||||||
Outstanding at September 30, 2012 | 5,520 | $ | 46.13 | 5.5 | $ | 52 | |||||||
Vested or expected to vest (a) | 5,446 | $ | 46.01 | 5.5 | $ | 52 | |||||||
Exercisable at September 30, 2012 | 4,041 | $ | 42.88 | 4.4 | $ | 52 |
(a) | Represents outstanding options reduced by expected forfeitures |
2012 | 2011 | 2010 | ||||||||||
Weighted-average fair value per share of options granted | $ | 13.89 | $ | 14.77 | $ | 12.80 | ||||||
Intrinsic value of options exercised (in millions) | $ | 23 | $ | 26 | $ | 52 | ||||||
Tax deduction resulting from intrinsic value of options exercised (in millions) | $ | 7 | $ | 8 | $ | 18 |
The fair value of each option granted by the Company was estimated using a binomial lattice pricing model and the following weighted average assumptions: | ||||||||
2012 Grants | 2011 Grants | 2010 Grants | ||||||
Risk-free interest rate | 0.3% - 2.2% | 0.3% - 3.9% | 2.7 | % | ||||
Expected dividend yield | 1.6 | % | 1.7 | % | 2.3 | % | ||
Expected volatility | 27.0 | % | 27.0 | % | 27.0 | % | ||
Expected life | 8 years | 8 years | 7 years |
The following summarizes the Company's performance shares, restricted stock and restricted stock units for 2012: | |||||||||||||||||||||
Performance Shares | Restricted Stock | Restricted Stock Units | |||||||||||||||||||
(shares in thousands) | Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | Shares | Weighted Average Grant Date Fair Value | |||||||||||||||
Nonvested at September 30, 2011 | 655 | $ | 44.28 | 152 | $ | 39.13 | 187 | $ | 53.30 | ||||||||||||
Granted | 192 | 59.08 | — | — | 87 | 55.41 | |||||||||||||||
Vested | (282 | ) | 30.63 | (92 | ) | 30.43 | (6 | ) | 30.39 | ||||||||||||
Forfeited | (14 | ) | 54.68 | (4 | ) | 49.12 | (7 | ) | 51.40 | ||||||||||||
Nonvested at September 30, 2012 | 551 | $ | 54.74 | 56 | $ | 52.62 | 261 | $ | 54.59 |
(in millions, remaining life in years) | Performance Shares | Restricted Stock | Restricted Stock Units | |||||||||
Total unrecognized compensation costs at September 30, 2012 | $ | 9 | $ | — | $ | 4 | ||||||
Weighted-average life remaining at September 30, 2012 | 1.0 | 0.1 | 1.6 | |||||||||
Weighted-average fair value per share granted in 2011 | $ | 55.91 | $ | — | $ | 57.82 | ||||||
Weighted-average fair value per share granted in 2010 | $ | 53.18 | $ | 53.08 | $ | 53.70 |
The computation of basic and diluted earnings per share is as follows: | ||||||||||||
(in millions, except per share amounts) | 2012 | 2011 | 2010 | |||||||||
Numerator for basic and diluted earnings per share: | ||||||||||||
Income from continuing operations | $ | 609 | $ | 615 | $ | 557 | ||||||
Income from discontinued operations, net of taxes | — | 19 | 4 | |||||||||
Net income | $ | 609 | $ | 634 | $ | 561 | ||||||
Denominator: | ||||||||||||
Denominator for basic earnings per share – weighted average common shares | 145.3 | 154.2 | 157.1 | |||||||||
Effect of dilutive securities: | ||||||||||||
Stock options | 1.1 | 1.4 | 1.6 | |||||||||
Performance shares, restricted stock and restricted stock units | 0.4 | 0.5 | 0.5 | |||||||||
Dilutive potential common shares | 1.5 | 1.9 | 2.1 | |||||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion | 146.8 | 156.1 | 159.2 | |||||||||
Earnings per share: | ||||||||||||
Basic | ||||||||||||
Continuing operations | $ | 4.19 | $ | 3.99 | $ | 3.55 | ||||||
Discontinued operations | — | 0.12 | 0.02 | |||||||||
Basic earnings per share | $ | 4.19 | $ | 4.11 | $ | 3.57 | ||||||
Diluted | ||||||||||||
Continuing operations | $ | 4.15 | $ | 3.94 | $ | 3.50 | ||||||
Discontinued operations | — | 0.12 | 0.02 | |||||||||
Diluted earnings per share | $ | 4.15 | $ | 4.06 | $ | 3.52 |
14. | Company-Funded Research and Development |
15. | Other Income, Net |
Other income, net consists of the following: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Earnings from equity affiliates | $ | (11 | ) | $ | (13 | ) | $ | (10 | ) | |||
Interest income | (3 | ) | (5 | ) | (4 | ) | ||||||
Royalty income | (4 | ) | (2 | ) | (8 | ) | ||||||
Pension expense (a) | — | — | 12 | |||||||||
Other | (7 | ) | (8 | ) | (4 | ) | ||||||
Other income, net | $ | (25 | ) | $ | (28 | ) | $ | (14 | ) |
16. | Income Taxes |
The components of income tax expense from continuing operations are as follows: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Current: | ||||||||||||
U.S. federal | $ | 118 | $ | 128 | $ | 144 | ||||||
Non-U.S. | 22 | 16 | 11 | |||||||||
U.S. state and local | 3 | 3 | (2 | ) | ||||||||
Total current | 143 | 147 | 153 | |||||||||
Deferred: | ||||||||||||
U.S. federal | 103 | 83 | 74 | |||||||||
Non-U.S. | (8 | ) | — | 5 | ||||||||
U.S. state and local | 10 | 10 | 7 | |||||||||
Total deferred | 105 | 93 | 86 | |||||||||
Income tax expense | $ | 248 | $ | 240 | $ | 239 |
Net current deferred income tax benefits (liabilities) consist of the tax effects of temporary differences related to the following: | ||||||||
September 30 | ||||||||
(in millions) | 2012 | 2011 | ||||||
Inventory | $ | (95 | ) | $ | (49 | ) | ||
Product warranty costs | 38 | 46 | ||||||
Customer incentives | 51 | 31 | ||||||
Contract reserves | 11 | 14 | ||||||
Compensation and benefits | 33 | 42 | ||||||
Valuation allowance | (1 | ) | (1 | ) | ||||
Other | 18 | 21 | ||||||
Current deferred income taxes, net | $ | 55 | $ | 104 |
Net long-term deferred income tax benefits (liabilities) consist of the tax effects of temporary differences related to the following: | ||||||||
September 30 | ||||||||
(in millions) | 2012 | 2011 | ||||||
Retirement benefits | $ | 554 | $ | 537 | ||||
Intangibles | (42 | ) | (45 | ) | ||||
Property | (121 | ) | (114 | ) | ||||
Stock-based compensation | 30 | 27 | ||||||
Valuation allowance | (18 | ) | (13 | ) | ||||
Other | 51 | 44 | ||||||
Long-term deferred income taxes, net | $ | 454 | $ | 436 |
Current deferred income tax assets and liabilities and long-term deferred income tax assets and liabilities are included in the Consolidated Statement of Financial Position as follows: | ||||||||
September 30 | ||||||||
(in millions) | 2012 | 2011 | ||||||
Current deferred income taxes | $ | 58 | $ | 106 | ||||
Other current liabilities | (3 | ) | (2 | ) | ||||
Current deferred income taxes, net | $ | 55 | $ | 104 | ||||
Long-term deferred income taxes | $ | 455 | $ | 448 | ||||
Other liabilities | (1 | ) | (12 | ) | ||||
Long-term deferred income taxes, net | $ | 454 | $ | 436 |
The effective income tax rate from continuing operations differed from the U.S. statutory tax rate as detailed below: | |||||||||
2012 | 2011 | 2010 | |||||||
Statutory tax rate | 35.0 | % | 35.0 | % | 35.0 | % | |||
State and local income taxes | 1.3 | 1.1 | 0.8 | ||||||
Research and development credit | (1.7 | ) | (4.7 | ) | (1.2 | ) | |||
Domestic manufacturing deduction | (2.1 | ) | (1.9 | ) | (1.1 | ) | |||
Tax settlements | (2.2 | ) | (0.4 | ) | (2.4 | ) | |||
Other | (1.4 | ) | (1.0 | ) | (1.1 | ) | |||
Effective income tax rate | 28.9 | % | 28.1 | % | 30.0 | % |
Income tax expense from continuing operations was calculated based on the following components of income before income taxes: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
U.S. income | $ | 793 | $ | 778 | $ | 723 | ||||||
Non-U.S. income | 64 | 77 | 73 | |||||||||
Total | $ | 857 | $ | 855 | $ | 796 |
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended September 30 is as follows: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Beginning balance | $ | 100 | $ | 78 | $ | 98 | ||||||
Additions for tax positions related to the current year | 11 | 22 | 14 | |||||||||
Additions for tax positions of prior years | — | 6 | 5 | |||||||||
Additions for tax positions related to acquisitions | — | — | 2 | |||||||||
Reductions for tax positions of prior years | (54 | ) | (4 | ) | (21 | ) | ||||||
Reductions for tax positions of prior years related to lapse of statute of limitations | (2 | ) | (1 | ) | (2 | ) | ||||||
Reductions for tax positions related to settlements with taxing authorities | (13 | ) | (1 | ) | (18 | ) | ||||||
Ending balance | $ | 42 | $ | 100 | $ | 78 |
17. | 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 |
The fair value of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and September 30, 2011 are as follows: | |||||||||
September 30, 2012 | September 30, 2011 | ||||||||
(in millions) | Fair Value Hierarchy | Fair Value Asset (Liability) | Fair Value Asset (Liability) | ||||||
Deferred compensation plan investments | Level 1 | $ | 42 | $ | 37 | ||||
Interest rate swap assets | Level 2 | 31 | 29 | ||||||
Foreign currency forward exchange contract assets | Level 2 | 7 | 8 | ||||||
Foreign currency forward exchange contract liabilities | Level 2 | (5 | ) | (7 | ) |
The carrying amounts and fair values of the Company’s financial instruments are as follows: | |||||||||||||||
Asset (Liability) | |||||||||||||||
September 30, 2012 | September 30, 2011 | ||||||||||||||
(in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||
Cash and cash equivalents | $ | 335 | $ | 335 | $ | 530 | $ | 530 | |||||||
Long-term debt | (748 | ) | (837 | ) | (499 | ) | (565 | ) |
18. | Derivative Financial Instruments |
Fair values of derivative instruments in the Consolidated Statement of Financial Position as of September 30, 2012 and September 30, 2011 are as follows: | |||||||||
Asset Derivatives | |||||||||
(in millions) | Classification | September 30, 2012 | September 30, 2011 | ||||||
Foreign currency forward exchange contracts | Other current assets | $ | 7 | $ | 8 | ||||
Interest rate swaps | Other assets | 31 | 29 | ||||||
Total | $ | 38 | $ | 37 |
Liability Derivatives | |||||||||
(in millions) | Classification | September 30, 2012 | September 30, 2011 | ||||||
Foreign currency forward exchange contracts | Other current liabilities | $ | 5 | $ | 7 |
The effect of derivative instruments on the Consolidated Statement of Operations for the fiscal year ended September 30 is as follows: | |||||||||
Amount of Gain (Loss) | |||||||||
(in millions) | Location of Gain (Loss) | September 30, 2012 | September 30, 2011 | ||||||
Derivatives Designated as Hedging Instruments: | |||||||||
Fair Value Hedges | |||||||||
Foreign currency forward exchange contracts | Cost of sales | $ | (3 | ) | $ | 2 | |||
Interest rate swaps | Interest expense | 9 | 10 | ||||||
Cash Flow Hedges | |||||||||
Foreign currency forward exchange contracts: | |||||||||
Amount of gain recognized in AOCL (effective portion, before deferred tax impact) | AOCL | $ | 2 | $ | 5 | ||||
Amount of gain (loss) reclassified from AOCL into income | Cost of sales | (1 | ) | 3 | |||||
Derivatives Not Designated as Hedging Instruments: | |||||||||
Foreign currency forward exchange contracts | Cost of sales | 1 | — |
19. | Guarantees and Indemnifications |
Changes in the carrying amount of accrued product warranty costs are summarized as follows: | |||||||||||
September 30 | |||||||||||
(in millions) | 2012 | 2011 | 2010 | ||||||||
Balance at beginning of year | $ | 148 | $ | 183 | $ | 217 | |||||
Warranty costs incurred | (47 | ) | (52 | ) | (55 | ) | |||||
Product warranty accrual | 46 | 34 | 34 | ||||||||
Changes in estimates for prior years | (21 | ) | (20 | ) | (13 | ) | |||||
Foreign currency translation adjustments | — | 3 | — | ||||||||
Balance at September 30 | $ | 126 | $ | 148 | $ | 183 |
20. | Contractual Obligations and Other Commitments |
The following table reflects certain of the Company's non-cancelable contractual commitments as of September 30, 2012: | ||||||||||||||||||||||||||||
Payments Due By Period | ||||||||||||||||||||||||||||
(in millions) | 2013 | 2014 | 2015 | 2016 | 2017 | Thereafter | Total | |||||||||||||||||||||
Non-cancelable operating leases | $ | 64 | $ | 55 | $ | 48 | $ | 35 | $ | 14 | $ | 33 | $ | 249 | ||||||||||||||
Purchase contracts | 50 | 25 | 5 | 5 | 5 | 10 | 100 | |||||||||||||||||||||
Long-term debt | — | 200 | — | — | — | 550 | 750 | |||||||||||||||||||||
Interest on long-term debt | 33 | 28 | 24 | 24 | 24 | 66 | 199 | |||||||||||||||||||||
Total | $ | 147 | $ | 308 | $ | 77 | $ | 64 | $ | 43 | $ | 659 | $ | 1,298 |
21. | Environmental Matters |
22. | Legal Matters |
23. | Restructuring and Asset Impairment Charges, Net |
Cost of Sales | Selling, General and Administrative Expense | Other Income, Net | Total | ||||||||||||
Employee separation costs | $ | 33 | $ | 2 | $ | — | $ | 35 | |||||||
Asset impairment charges | 5 | — | — | 5 | |||||||||||
Total restructuring and asset impairment charges | 38 | 2 | — | 40 | |||||||||||
Customer bankruptcy charges | — | 23 | — | 23 | |||||||||||
Gain on disposition of property | — | — | (5 | ) | (5 | ) | |||||||||
Total restructuring and asset impairment charges, net | $ | 38 | $ | 25 | $ | (5 | ) | $ | 58 |
24. | Business Segment Information |
The sales and results of continuing operations of the Company’s operating segments are summarized as follows: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Sales: | ||||||||||||
Government Systems | $ | 2,591 | $ | 2,813 | $ | 2,861 | ||||||
Commercial Systems | 2,135 | 1,993 | 1,770 | |||||||||
Total sales | $ | 4,726 | $ | 4,806 | $ | 4,631 | ||||||
Segment operating earnings: | ||||||||||||
Government Systems | $ | 568 | $ | 592 | $ | 606 | ||||||
Commercial Systems | 440 | 381 | 287 | |||||||||
Total segment operating earnings | 1,008 | 973 | 893 | |||||||||
Interest expense | (27 | ) | (19 | ) | (20 | ) | ||||||
Stock-based compensation | (24 | ) | (24 | ) | (24 | ) | ||||||
General corporate, net | (42 | ) | (48 | ) | (54 | ) | ||||||
Restructuring and asset impairment charges, net | (58 | ) | (27 | ) | 1 | |||||||
Income from continuing operations before income taxes | 857 | 855 | 796 | |||||||||
Income tax expense | (248 | ) | (240 | ) | (239 | ) | ||||||
Income from continuing operations | $ | 609 | $ | 615 | $ | 557 |
The following tables summarize the identifiable assets and investments in equity affiliates at September 30, 2012, 2011 and 2010 as well as the provision for depreciation and amortization, the amount of capital expenditures for property, and earnings from equity affiliates for each of the three years ended September 30, for each of the operating segments and Corporate: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Identifiable assets: | ||||||||||||
Government Systems | $ | 2,113 | $ | 2,139 | $ | 2,049 | ||||||
Commercial Systems | 2,233 | 2,110 | 1,994 | |||||||||
Corporate | 968 | 1,140 | 1,021 | |||||||||
Total identifiable assets | $ | 5,314 | $ | 5,389 | $ | 5,064 | ||||||
Investments in equity affiliates: | ||||||||||||
Government Systems | $ | 19 | $ | 11 | $ | 10 | ||||||
Commercial Systems | — | — | — | |||||||||
Total investments in equity affiliates | $ | 19 | $ | 11 | $ | 10 | ||||||
Depreciation and amortization: | ||||||||||||
Government Systems | $ | 87 | $ | 76 | $ | 85 | ||||||
Commercial Systems | 87 | 83 | 82 | |||||||||
Total depreciation and amortization | $ | 174 | $ | 159 | $ | 167 | ||||||
Capital expenditures for property: | ||||||||||||
Government Systems | $ | 76 | $ | 81 | $ | 55 | ||||||
Commercial Systems | 62 | 71 | 54 | |||||||||
Total capital expenditures for property | $ | 138 | $ | 152 | $ | 109 | ||||||
Earnings from equity affiliates: | ||||||||||||
Government Systems | $ | 11 | $ | 13 | $ | 10 | ||||||
Commercial Systems | — | — | — | |||||||||
Total earnings from equity affiliates | $ | 11 | $ | 13 | $ | 10 |
The following table summarizes sales by product category for the years ended September 30, 2012, 2011 and 2010: | ||||||||||||
(in millions) | 2012 | 2011 | 2010 | |||||||||
Government Systems product categories: | ||||||||||||
Avionics | $ | 1,476 | $ | 1,434 | $ | 1,389 | ||||||
Communication products | 652 | 698 | 749 | |||||||||
Surface solutions | 226 | 377 | 408 | |||||||||
Navigation products | 237 | 304 | 315 | |||||||||
Government Systems sales | 2,591 | 2,813 | 2,861 | |||||||||
Commercial Systems product categories: | ||||||||||||
Air transport aviation electronics | 1,139 | 1,049 | 964 | |||||||||
Business and regional aviation electronics | 996 | 944 | 806 | |||||||||
Commercial Systems sales | 2,135 | 1,993 | 1,770 | |||||||||
Total sales | $ | 4,726 | $ | 4,806 | $ | 4,631 |
The following table reflects sales for the years ended September 30, 2012, 2011 and 2010 by location of our customers and property at September 30, 2012, 2011 and 2010 by geographic region: | ||||||||||||||||||||||||
Sales | Property | |||||||||||||||||||||||
(in millions) | 2012 | 2011 | 2010 | 2012 | 2011 | 2010 | ||||||||||||||||||
U.S.(1) | $ | 3,169 | $ | 3,356 | $ | 3,284 | $ | 680 | $ | 658 | $ | 627 | ||||||||||||
Europe | 816 | 848 | 826 | 72 | 77 | 70 | ||||||||||||||||||
Asia-Pacific | 326 | 267 | 247 | 15 | 12 | 9 | ||||||||||||||||||
Canada | 287 | 241 | 166 | 1 | 1 | — | ||||||||||||||||||
Africa / Middle East | 65 | 54 | 68 | — | — | — | ||||||||||||||||||
Latin America | 63 | 40 | 40 | 5 | 6 | 1 | ||||||||||||||||||
International | $ | 1,557 | $ | 1,450 | $ | 1,347 | $ | 93 | $ | 96 | $ | 80 | ||||||||||||
Total | $ | 4,726 | $ | 4,806 | $ | 4,631 | $ | 773 | $ | 754 | $ | 707 |
25. | Quarterly Financial Information (Unaudited) |
Quarterly financial information for the years ended September 30, 2012 and 2011 is summarized as follows: | ||||||||||||||||||||
2012 Quarters | ||||||||||||||||||||
(in millions, except per share amounts) | First | Second | Third | Fourth | Total | |||||||||||||||
Sales | $ | 1,094 | $ | 1,161 | $ | 1,205 | $ | 1,266 | $ | 4,726 | ||||||||||
Gross profit (total sales less cost of sales) | 320 | 351 | 359 | 372 | 1,402 | |||||||||||||||
Income from continuing operations | 130 | 161 | 166 | 152 | 609 | |||||||||||||||
Income from discontinued operations, net of taxes | — | — | — | — | — | |||||||||||||||
Net income | $ | 130 | $ | 161 | $ | 166 | $ | 152 | $ | 609 | ||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | ||||||||||||||||||||
Continuing operations | $ | 0.87 | $ | 1.10 | $ | 1.16 | $ | 1.07 | $ | 4.19 | ||||||||||
Discontinued operations | — | — | — | — | — | |||||||||||||||
Basic earnings per share | $ | 0.87 | $ | 1.10 | $ | 1.16 | $ | 1.07 | $ | 4.19 | ||||||||||
Diluted | ||||||||||||||||||||
Continuing operations | $ | 0.86 | $ | 1.09 | $ | 1.14 | $ | 1.06 | $ | 4.15 | ||||||||||
Discontinued operations | — | — | — | — | — | |||||||||||||||
Diluted earnings per share | $ | 0.86 | $ | 1.09 | $ | 1.14 | $ | 1.06 | $ | 4.15 |
2011 Quarters | ||||||||||||||||||||
(in millions, except per share amounts) | First | Second | Third | Fourth | Total | |||||||||||||||
Sales | $ | 1,104 | $ | 1,216 | $ | 1,190 | $ | 1,296 | $ | 4,806 | ||||||||||
Gross profit (total sales less cost of sales) | 313 | 352 | 357 | 357 | 1,379 | |||||||||||||||
Income from continuing operations | 150 | 150 | 157 | 158 | 615 | |||||||||||||||
Income from discontinued operations, net of taxes | 1 | — | 1 | 17 | 19 | |||||||||||||||
Net income | $ | 151 | $ | 150 | $ | 158 | $ | 175 | $ | 634 | ||||||||||
Earnings per share: | ||||||||||||||||||||
Basic | ||||||||||||||||||||
Continuing operations | $ | 0.96 | $ | 0.97 | $ | 1.02 | $ | 1.03 | $ | 3.99 | ||||||||||
Discontinued operations | 0.01 | — | 0.01 | 0.11 | 0.12 | |||||||||||||||
Basic earnings per share | $ | 0.97 | $ | 0.97 | $ | 1.03 | $ | 1.14 | $ | 4.11 | ||||||||||
Diluted | ||||||||||||||||||||
Continuing operations | $ | 0.95 | $ | 0.96 | $ | 1.01 | $ | 1.02 | $ | 3.94 | ||||||||||
Discontinued operations | 0.01 | — | — | 0.11 | 0.12 | |||||||||||||||
Diluted earnings per share | $ | 0.96 | $ | 0.96 | $ | 1.01 | $ | 1.13 | $ | 4.06 |
Item 9. | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. |
Item 9A. | Controls and Procedures. |
Item 9B. | Other Information. |
PART III |
Item 10. | Directors, Executive Officers and Corporate Governance. |
Item 11. | Executive Compensation. |
Item 12. | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters. |
Plan Category | (a) Number Of Securities To Be Issued Upon Exercise Of Outstanding Options, Warrants And Rights | (b) Weighted-Average Exercise Price Of Outstanding Options, Warrants And Rights | (c) Number Of Securities Remaining Available For Future Issuance Under Equity Compensation Plans (Excluding Securities Reflected In Column (a)) | |||||||||
Equity Compensation Plans Approved By Security Holders(1) | 6,834,126 | (2) | $ | 46.13 | 10,887,317 | (3)(4) | ||||||
Equity Compensation Plans Not Approved By Security Holders | None | None | None | |||||||||
Total | 6,834,126 | $ | 46.13 | 10,887,317 |
(1) | Consists of the following equity compensation plans: 2001 Stock Option Plan, 2001 Long-Term Incentives Plan, Directors Stock Plan and 2006 Long-Term Incentives Plan. |
(2) | Includes 1,052,353 performance shares, which is the maximum number of shares that can be issued in the future if maximum performance is achieved under performance agreements granted in November 2010 and 2011. Of these performance shares, 153,863 will be issued in November 2012 based on performance shares granted in November 2009. Also includes 261,433 restricted stock units (RSUs). Such performance shares and RSUs are not included in the weighted average price calculation. |
(3) | Also includes 3,283,113 shares available under our Employee Stock Purchase Plan (ESPP), which allows employees to have withheld up to 15 percent of their base compensation toward the purchase of our common stock. Shares are purchased each month by participants at 95 percent of the fair market value on the last day of the month pursuant to the ESPP. |
(4) | Of the 7,604,204 shares available for future grant under the 2006 Long-Term Incentives Plan, each share issued pursuant to an award of restricted stock, restricted stock units, performance shares and performance units counts as 2.02 shares against this limit in accordance with the terms of the plan. |
Item 13. | Certain Relationships and Related Transactions, and Director Independence. |
Item 14. | Principal Accounting Fees and Services. |
PART IV |
Item 15. | Exhibits and Financial Statement Schedules. |
(a) | Financial Statements, Financial Statement Schedules and Exhibits. | ||||
(1 | ) | Financial Statements | |||
The financial statements are included under Item 8 of this Annual Report on Form 10-K: | |||||
Consolidated Statement of Financial Position, as of September 30, 2012 and 2011 | |||||
Consolidated Statement of Operations, years ended September 30, 2012, 2011 and 2010 | |||||
Consolidated Statement of Cash Flows, years ended September 30, 2012, 2011 and 2010 | |||||
Consolidated Statement of Equity and Comprehensive Income, years ended September 30, 2012, 2011 and 2010 | |||||
Notes to Consolidated Financial Statements | |||||
Report of Independent Registered Public Accounting Firm | |||||
(2 | ) | Financial Statement Schedule for the years ended September 30, 2012, 2011 and 2010 | |||
Report of Independent Registered Public Accounting Firm | |||||
Schedule II—Valuation and Qualifying Accounts | |||||
Schedules not filed herewith are omitted because of the absence of conditions under which they are required or because the information called for is shown in the financial statements or notes thereto. | |||||
(3 | ) | Exhibits | |||
3-a-1 | Restated Certificate of Incorporation of the Company, as amended, filed as Exhibit 3-a-1 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference. | ||||
3-a-2 | Certificate of Merger effecting name change of the Company from "New Rockwell Collins, Inc." to "Rockwell Collins, Inc.", filed as Exhibit 3-a-2 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference. | ||||
3-b-1 | By-Laws of the Company, as amended and restated effective September 20, 2012, filed as Exhibit 3-b-1 to the Company's Form 8-K dated September 20, 2012, is incorporated herein by reference. | ||||
4-a-1 | Indenture dated as of November 1, 2001 between the Company and Citibank, N.A., as Trustee, filed as Exhibit 4.b to the Company's Registration Statement on Form S-3 (No. 333-72914), is incorporated herein by reference. | ||||
4-a-2 | Form of certificate for the Company's 4 3/4% Notes due 2013, filed as Exhibit 4-a to the Company's current report on Form 8-K dated November 21, 2003, is incorporated herein by reference. | ||||
4-a-3 | Form of Supplemental Indenture dated as of December 4, 2006 between the Company and The Bank of New York Trust Company, N.A. (as incoming trustee), filed as Exhibit 4-a-4 to the Company's Form 8-K dated November 9, 2006, is incorporated herein by reference. | ||||
4-a-4 | Form of certificate for the Company's 5.25% Notes due July 15, 2019, filed as Exhibit 4 to the Company's Form 8-K dated May 1, 2009, is incorporated herein by reference. | ||||
4-a-5 | Underwriting Agreements, dated November 16, 2011, between the Company and Citigroup Global Markets Inc., Merril Lynch, Pierce, Fenner & Smith Incorporated and Wells Fargo Securities, LLC, as representatives of the several Underwriters named in Schedule 1 to the Underwriting Agreement, filed as Exhibit 1 to the Company's Form 8-K dated November 16, 2011, is incorporated herein by reference. | ||||
4-a-6 | Form of certificate for the Company's 3.100% notes due November 15, 2022, filed as Exhibit 4 to the Company's Form 8-K dated November 16, 2011, is incorporated herein by reference. | ||||
*10-a-1 | The Company's 2001 Long-Term Incentives Plan, as amended, filed as Exhibit 10-a-9 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||
*10-a-2 | Forms of Stock Option Agreements under the Company's 2001 Long-Term Incentives Plan, filed as Exhibit 10-a-2 to the Company's Form 10-K for year ended September 30, 2001, are incorporated herein by reference. |
*10-a-3 | Form of Restricted Stock Agreement under the Company's 2001 Long-Term Incentives Plan for restricted stock grants to the non-executive Chairman of the Board of Directors, filed as Exhibit 10-a-4 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference. | ||||||
*10-a-4 | The Company's 2006 Long-Term Incentives Plan, as amended, filed as Appendix A to the Company's Notice and Proxy Statement dated December 18, 2009, is incorporated herein by reference. | ||||||
*10-a-5 | The Company's First Amendment to the Amended and Restated 2006 Long-Term Incentives Plan, as amended, filed as Exhibit 10-a-1 to the Company's Form 10-Q for the quarter ended June 30, 2012, is incorporated herein by reference. | ||||||
*10-a-6 | Form of Restricted Stock Unit Award under the Company's 2006 Long-Term Incentives Plan, filed as Exhibit 10.1 to the Company's Form 8-K dated February 7, 2006, is incorporated herein by reference. | ||||||
*10-a-7 | Forms of Stock Option Agreements under the Company's 2006 Long-Term Incentives Plan filed as Exhibit 10-a-8 to the Company's Form 10-K for year ended September 30, 2006, is incorporated herein by reference. | ||||||
*10-a-8 | The Company's 2006 Annual Incentive Compensation Plan for Senior Executives, as amended, filed as Exhibit 10-a-11 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||||
*10-a-9 | Forms of Stock Option Agreements, adopted November 20, 2009, under the Company's 2006 Long-Term Incentives Plan, filed as Exhibit 10-a-9 to the Company's Form 10-K for year ended September 30, 2009, is incorporated herein by reference. | ||||||
*10-b-1 | The Company's Directors Stock Plan, adopted by the Company's Board of Directors on June 1, 2001 and approved by the Company's shareowners at the 2002 Annual Meeting of Shareowners, filed as Exhibit 10.2 to the Company's Registration Statement on Form 10 (File No. 001-16445) (the "Form 10"), is incorporated herein by reference. | ||||||
*10-b-2 | Form of Stock Option Agreement under the Company's Directors Stock Plan, filed as Exhibit 10-b-2 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference. | ||||||
*10-b-3 | Form of Restricted Stock Agreement under the Company's Directors Stock Plan, filed as Exhibit 10-b-3 to the Company's Form 10-K for year ended September 30, 2001, is incorporated herein by reference. | ||||||
*10-d-1 | The Company's Incentive Compensation Plan, as amended, filed as Exhibit 10-d-2 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||||
*10-f-1 | The Company's Deferred Compensation Plan, as amended, filed as Exhibit 10-f-2 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||||
*10-f-2 | The Company's 2005 Deferred Compensation Plan, as amended and restated, filed as Exhibit 10-f-3 to the company's Form 10-K for year ended September 30, 2010, is incorporated herein by reference. | ||||||
*10-g-1 | The Company's Non-Qualified Savings Plan, as amended, filed as Exhibit 10-g-2 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||||
*10-g-2 | The Company's 2005 Non-Qualified Retirement Savings Plan, as amended, filed as Exhibit 10-g-3 to the Company's Form 10-Q for quarter ended December 31, 2010, is incorporated herein by reference. | ||||||
*10-h-1 | The Company's 2005 Non-Qualified Pension Plan, as amended, filed as Exhibit 10-h-1 to the Company's Form 10-Q for quarter ended June 30, 2012, is incorporated herein by reference. | ||||||
*10-h-2 | The Company's Non-Qualified Pension Plan, as amended, filed as Exhibit 10-h-3 to the Company's Form 10-K for the year ended September 30, 2008, is incorporated herein by reference. | ||||||
*10-i-1 | The Company's Master Trust, as amended, filed as Exhibit 10-i-2 to the Company's Form 10-K for year ended September 30, 2007, is incorporated herein by reference. | ||||||
10-k-1 | Distribution Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, the Company and Rockwell Scientific Company LLC, filed as Exhibit 2.1 to the Company's current report on Form 8-K dated July 11, 2001, is incorporated herein by reference. | ||||||
10-l-1 | Employee Matters Agreement dated as of June 29, 2001 by and among Rockwell International Corporation, the Company and Rockwell Scientific Company LLC, filed as Exhibit 2.2 to the Company's current report on Form 8-K dated July 11, 2001, is incorporated herein by reference. | ||||||
10-m-1 | Tax Allocation Agreement dated as of June 29, 2001 by and between Rockwell International Corporation and the Company, filed as Exhibit 2.3 to the Company's current report on Form 8-K dated July 11, 2001, is incorporated herein by reference. |
*10-n-1 | Form of Change of Control Agreement between the Company and certain executives of the Company (Three-Year Agreement), as amended, filed as Exhibit 10-n-1 to the Company's Form 8-K dated April 21, 2009, is incorporated herein by reference. | |||||||
*10-n-2 | Schedule identifying executives of the Company who are party to a Change of Control Agreement | |||||||
10-o-1 | Five-Year Credit Agreement dated as of May 26, 2011 among the Company, the Banks listed therein, JPMorgan Chase Bank, N.A., as Administrative Agent, and Citibank, N.A., as Syndication Agent, filed as Exhibit 99 to the Company's Form 8-K dated May 26, 2011, is incorporated herein by reference. | |||||||
*10-q-7 | Forms of Three-Year Performance Share Agreements, adopted on November 20, 2009, filed as Exhibit 10-q-7 to the Company's Form 10-K for year ended September 30, 2009, is incorporated herein by reference. | |||||||
*10-q-8 | Forms of Three-Year Performance Share Agreements, adopted on November 14, 2011, filed as Exhibit 10-q-8 to the Company's Form 10-K for year ended September 30, 2011, is incorporated herein by reference. | |||||||
*10-s-1 | Non-Employee Directors' Compensation Summary, filed as Exhibit 10-s-1 to the Company's Form 10-Q for quarter ended June 30, 2012, is incorporated herein by reference. | |||||||
10-s-2 | Letter agreement between the Company and Donald R. Beall dated March 19, 2008, filed as Exhibit 10-s-2 to the Company's Form 10-Q for quarter ended March 31, 2008, is incorporated herein by reference. | |||||||
10-u-1 | Memorandum of Agreement dated April 20, 2011 between the Company and Bombardier, Inc., filed as Exhibit 10-u-1 to the Company's Form 10-Q for the quarter ended June 30, 2011, is incorporated herein by reference. | |||||||
12 | Statement re: Computation of Ratio of Earnings to Fixed Charges. | |||||||
21 | List of subsidiaries of the Company. | |||||||
23 | Consent of Independent Registered Public Accounting Firm. | |||||||
24 | Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of the Company. | |||||||
31.1 | Section 302 Certification of Chief Executive Officer. | |||||||
31.2 | Section 302 Certification of Chief Financial Officer. | |||||||
32.1 | Section 906 Certification of Chief Executive Officer. | |||||||
32.2 | Section 906 Certification of Chief Financial Officer. | |||||||
101.INS | XBRL Instance Document. | |||||||
101.SCH | XBRL Taxonomy Extension Schema. | |||||||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | |||||||
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | |||||||
101.LAB | XBRL Taxonomy Extension Label Linkbase. | |||||||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
ROCKWELL COLLINS, INC. | |||
By | /s/ GARY R. CHADICK | ||
Gary R. Chadick Senior Vice President, General Counsel and Secretary |
/s/ CLAYTON M. JONES | Chairman of the Board and Chief Executive Officer (principal executive officer) | |||
Clayton M. Jones | ||||
DONALD R. BEALL* | Director | |||
ANTHONY J. CARBONE* | Director | |||
CHRIS A. DAVIS* | Director | |||
RALPH E. EBERHART* | Director | |||
DAVID LILLEY* | Director | |||
ANDREW J. POLICANO* | Director | |||
CHERYL L. SHAVERS* | Director | |||
JEFFREY L. TURNER* | Director | |||
/s/ PATRICK E. ALLEN | Senior Vice President and Chief Financial Officer (principal financial officer) | |||
Patrick E. Allen | ||||
/s/ MARSHA A. SCHULTE | Vice President, Finance and Controller (principal accounting officer) | |||
Marsha A. Schulte | ||||
*By | /s/ GARY R. CHADICK | |||
Gary R. Chadick, Attorney-in-fact** |
Description | Balance at Beginning of Year | Charged to Costs and Expenses | Other | Deductions (a) | Balance at End of Year | |||||||||||||||||
Year ended September 30, 2012: | ||||||||||||||||||||||
Allowance for doubtful accounts | $ | 10 | $ | 30 | $ | — | $ | (4 | ) | $ | 36 | |||||||||||
Valuation allowance on deferred tax assets | 14 | 5 | — | — | 19 | |||||||||||||||||
Year ended September 30, 2011: | ||||||||||||||||||||||
Allowance for doubtful accounts | 10 | 1 | — | (1 | ) | 10 | ||||||||||||||||
Valuation allowance on deferred tax assets | 15 | (1 | ) | — | — | 14 | ||||||||||||||||
Year ended September 30, 2010: | ||||||||||||||||||||||
Allowance for doubtful accounts | 11 | 2 | — | (3 | ) | 10 | ||||||||||||||||
Valuation allowance on deferred tax assets | 11 | 2 | 2 | (b) | — | 15 |
Exhibit Number | Description | ||
*10-n-2 | Schedule identifying executives of the Company who are party to a Change of Control Agreement. | ||
12 | Statement re: Computation of Ratio of Earnings to Fixed Charges. | ||
21 | List of subsidiaries of the Company. | ||
23 | Consent of Independent Registered Public Accounting Firm. | ||
24 | Powers of Attorney authorizing certain persons to sign this Annual Report on Form 10-K on behalf of certain directors and officers of the Company. | ||
31.1 | Section 302 Certification of Chief Executive Officer. | ||
31.2 | Section 302 Certification of Chief Financial Officer. | ||
32.1 | Section 906 Certification of Chief Executive Officer. | ||
32.2 | Section 906 Certification of Chief Financial Officer. | ||
101.INS | XBRL Instance Document. | ||
101.SCH | XBRL Taxonomy Extension Schema. | ||
101.CAL | XBRL Taxonomy Extension Calculation Linkbase. | ||
101.DEF | XBRL Taxonomy Extension Definition Linkbase. | ||
101.LAB | XBRL Taxonomy Extension Label Linkbase. | ||
101.PRE | XBRL Taxonomy Extension Presentation Linkbase. |
1. | Clayton M. Jones |
2. | Barry M. Abzug |
3. | Patrick E. Allen |
4. | John-Paul E. Besong |
5. | Gary R. Chadick |
6. | Gregory S. Churchill |
7. | Bruce M. King |
8. | Ronald W. Kirchenbauer |
9. | Nan Mattai |
10. | Robert K. Ortberg |
11. | Kent L. Statler |
12. | Robert A. Sturgell |
1. | David H. Brehm |
2. | Philip J. Jasper |
3. | Marsha A. Schulte |
4. | Douglas E. Stenske |
2012 | 2011 | 2010 (b) | 2009 (b) | 2008 (b) | ||||||||||||||||
Earnings available for fixed charges: | ||||||||||||||||||||
Income before income taxes | $ | 857 | $ | 855 | $ | 796 | $ | 858 | $ | 945 | ||||||||||
Add / (Deduct): | ||||||||||||||||||||
Earnings from equity affiliates, net of distributions | (8 | ) | — | — | (1 | ) | 1 | |||||||||||||
Gain on sale of equity affiliate | — | (3 | ) | — | — | — | ||||||||||||||
849 | 852 | 796 | 857 | 946 | ||||||||||||||||
Add fixed charges included in earnings: | ||||||||||||||||||||
Interest expense | 27 | 19 | 20 | 18 | 21 | |||||||||||||||
Interest element of rentals | 24 | 24 | 20 | 20 | 16 | |||||||||||||||
Total earnings available for fixed charges | $ | 900 | $ | 895 | $ | 836 | $ | 895 | $ | 983 | ||||||||||
Fixed charges: | ||||||||||||||||||||
Fixed charges included in earnings | $ | 51 | $ | 42 | $ | 40 | $ | 38 | $ | 37 | ||||||||||
Capitalized interest | — | — | — | — | — | |||||||||||||||
Total fixed charges | $ | 51 | $ | 42 | $ | 40 | $ | 38 | $ | 37 | ||||||||||
Ratio of earnings to fixed charges (a) | 18 | 21 | 21 | 24 | 27 |
State/Country of | ||
Name | Incorporation | |
Air Routing International, L.P. | Texas | |
Air Routing LP, LLC | Delaware | |
AR Group GP, L.L.C. | Texas | |
Collins Radio Company | Iowa | |
Collins Aviation Maintenance Services Shanghai Limited | China | |
Ensambladores Electronicos de Mexico, S. de R.L. de C.V. | Mexico | |
Flight Services de Mexico, S. de R.L. de C.V. | Mexico | |
Intertrade Limited | Iowa | |
Kaiser Optical Systems, Inc. | Michigan | |
Kaiser Optical Systems SARL | France | |
Maine Electronics, Inc. | Delaware | |
NLX Holding Corporation | Delaware | |
RICOMP Claims Management Corp. | Delaware | |
Rockwell Collins Asia-PAC Holdings LLC | Delaware | |
Rockwell Collins Australia Pty Limited | Australia | |
Rockwell Collins Business Services, LLC | Delaware | |
Rockwell Collins Canada Inc. | Canada | |
Rockwell Collins Charitable Corporation | Delaware | |
Rockwell Collins Control Technologies, Inc. | Delaware | |
Rockwell Collins Employee Disaster Assistance Corporation | Delaware | |
Rockwell Collins do Brasil Ltda. | Brazil | |
Rockwell Collins Deutschland GmbH | Germany |
State/Country of | ||
Name | Incorporation | |
Rockwell Collins Deutschland Holdings GmbH | Germany | |
Rockwell Collins Deutschland Services GmbH | Germany | |
Rockwell Collins EUMEA Holdings SAS | France | |
Rockwell Collins European Holdings S.à r.l. | Luxembourg | |
Rockwell Collins Flight Services, Inc. | Delaware | |
Rockwell Collins France SAS | France | |
Rockwell Collins Global Logistics Solutions LLC | Delaware | |
Rockwell Collins Hong Kong Limited | Hong Kong | |
Rockwell Collins (India) Enterprises Private Limited | India | |
Rockwell Collins India Private Limited | India | |
Rockwell Collins In-Flight Network Company | Delaware | |
Rockwell Collins International Financing S.à r.l. | Luxembourg | |
Rockwell Collins International Holdings S.à r.l. | Luxembourg | |
Rockwell Collins International, Inc. | Texas | |
Rockwell Collins Leasing LLC | Delaware | |
Rockwell Collins (Shanghai) Avionics Trading Company Limited | China | |
Rockwell Collins Simulation & Training Solutions LLC | Delaware | |
Rockwell Collins Systems International, Inc. | Delaware | |
Rockwell Collins Network Enabling Software, Inc. | Pennsylvania | |
Rockwell Collins Optronics, Inc. | California | |
Rockwell Collins Prescription Center, Inc. | Delaware | |
Rockwell Collins Public Safety Solutions, Inc. | Delaware |
State/Country of | ||
Name | Incorporation | |
Rockwell Collins Satellite Communications Systems, Inc. | Georgia | |
Rockwell Collins Services Company | Delaware | |
Rockwell Collins Southeast Asia Pte. Ltd. | Singapore | |
Rockwell Collins Support Company | Delaware | |
Rockwell Collins Sweden AB | Sweden | |
Rockwell Collins Technologies LLC | Delaware | |
Rockwell Collins UK Financing LLP | United Kingdom | |
Rockwell Collins UK Limited | United Kingdom | |
Rockwell Collins Vision Systems, Inc. | California | |
Rockwell Collins, Inc. | Nevada | |
Wilkens Weather Technologies, L.P. | Texas | |
ZAO Rockwell Collins | Russia |
Signature | Title | Date | ||
/s/ Donald R. Beall | Director | November 13, 2012 | ||
Donald R. Beall | ||||
/s/ Anthony J. Carbone | Director | November 13, 2012 | ||
Anthony J. Carbone | ||||
/s/ Chris A Davis | Director | November 13, 2012 | ||
Chris A. Davis | ||||
/s/ Ralph E. Eberhart | Director | November 13, 2012 | ||
Ralph E. Eberhart | ||||
/s/ David Lilley | Director | November 13, 2012 | ||
David Lilley | ||||
/s/ Andrew J. Policano | Director | November 13, 2012 | ||
Andrew J. Policano | ||||
/s/ Cheryl L. Shavers | Director | November 13, 2012 | ||
Cheryl L. Shavers | ||||
/s/ Jeffrey L. Turner | Director | November 13, 2012 | ||
Jeffrey L. Turner |
1. | I have reviewed the annual report on Form 10-K for the fiscal year ended September 30, 2012 of Rockwell Collins, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 13, 2012 | /s/ Clayton M. Jones |
Clayton M. Jones | |
Chairman and Chief Executive Officer |
1. | I have reviewed the annual report on Form 10-K for the fiscal year ended September 30, 2012 of Rockwell Collins, Inc.; |
2. | Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
3. | Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report; |
4. | The registrant's other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have: |
a) | Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
b) | Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
c) | Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and |
d) | Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; |
5. | The registrant's other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions): |
a) | All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and |
b) | Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting. |
Date: November 13, 2012 | /s/ Patrick E. Allen |
Patrick E. Allen | |
Senior Vice President and | |
Chief Financial Officer |
(1) | The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 13, 2012 | /s/ Clayton M. Jones |
Clayton M. Jones | |
Chairman and Chief Executive Officer |
(1) | The Company’s Report fully complies with the requirements of section 13(a) or 15(d) of the Securities Exchange Act of 1934; and |
(2) | The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: November 13, 2012 | /s/ Patrick E. Allen |
Patrick E. Allen | |
Senior Vice President and | |
Chief Financial Officer |
Property (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Property |
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Quarterly Financial Information (Unaudited) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
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Sep. 30, 2012
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Jun. 30, 2012
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Mar. 31, 2012
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Dec. 31, 2011
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Sep. 30, 2011
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Jun. 30, 2011
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Mar. 31, 2011
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Dec. 31, 2010
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Sep. 30, 2012
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Sep. 30, 2011
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Sep. 30, 2010
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Tax Benefit From Resolution of Certain Tax Matters | $ 19 | ||||||||||
Sales | 1,266 | 1,205 | 1,161 | 1,094 | 1,296 | 1,190 | 1,216 | 1,104 | 4,726 | 4,806 | 4,631 |
Gross profit (total sales less cost of sales) | 372 | 359 | 351 | 320 | 357 | 357 | 352 | 313 | 1,402 | 1,379 | |
Income from continuing operations | 152 | 166 | 161 | 130 | 158 | 157 | 150 | 150 | 609 | 615 | 557 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 0 | 17 | 1 | 0 | 1 | 0 | 19 | 4 |
Net income | 152 | 166 | 161 | 130 | 175 | 158 | 150 | 151 | 609 | 634 | 561 |
Basic Earnings per Share | |||||||||||
Continuing operations | $ 1.07 | $ 1.16 | $ 1.10 | $ 0.87 | $ 1.03 | $ 1.02 | $ 0.97 | $ 0.96 | $ 4.19 | $ 3.99 | $ 3.55 |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.11 | $ 0.01 | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.12 | $ 0.02 |
Basic earnings per share | $ 1.07 | $ 1.16 | $ 1.10 | $ 0.87 | $ 1.14 | $ 1.03 | $ 0.97 | $ 0.97 | $ 4.19 | $ 4.11 | $ 3.57 |
Diluted Earnings per Share | |||||||||||
Continuing operations | $ 1.06 | $ 1.14 | $ 1.09 | $ 0.86 | $ 1.02 | $ 1.01 | $ 0.96 | $ 0.95 | $ 4.15 | $ 3.94 | $ 3.50 |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.11 | $ 0.00 | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.12 | $ 0.02 |
Diluted earnings per share | $ 1.06 | $ 1.14 | $ 1.09 | $ 0.86 | $ 1.13 | $ 1.01 | $ 0.96 | $ 0.96 | $ 4.15 | $ 4.06 | $ 3.52 |
Restructuring and Asset Impairment Charges, Net of Taxes | 23 | 17 | |||||||||
Restructuring and Asset Impairment Charges, Pre-tax | 34 | 40 | 27 | ||||||||
Provision For Doubtful Accounts, Net of Taxes | 14 | ||||||||||
Provision for Doubtful Accounts, Pre-tax | 23 | 23 | |||||||||
Tax Benefit from Retroactive Reinstatement of Federal Research and Development Tax Credit | 16 | ||||||||||
Gain on sale of business, net of tax | 17 | ||||||||||
Gain on sale of business, pre-tax | 0 | (27) | 0 | ||||||||
Cost of Sales [Member]
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Diluted Earnings per Share | |||||||||||
Restructuring and Asset Impairment Charges, Pre-tax | 38 | 26 | |||||||||
Provision for Doubtful Accounts, Pre-tax | $ 0 |
Quarterly Financial information (Unaudited) (Tables)
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12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Sep. 30, 2011
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Quarterly Financial Information |
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Fair Value Measurements (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Assets and Liabilities at Fair Value on Recurring Basis |
|
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Financial Instruments at Fair Value and Carrying Value |
|
Debt (Long-Term Debt) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | 2 Months Ended | 1 Months Ended | 7 Months Ended | 2 Months Ended | ||
---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Nov. 16, 2011
2021 Notes [Member]
|
Jan. 31, 2010
2019 Notes [Member]
|
May 06, 2009
2019 Notes [Member]
|
Nov. 20, 2003
2013 Notes [Member]
|
|
Long-term Debt | |||||||
Face amount | $ 250 | $ 300 | $ 200 | ||||
Interest rate | 3.10% | 5.25% | 4.75% | ||||
Discount | 1 | 2 | |||||
Issuance cost | 2 | 2 | |||||
Proceeds from Issuance of Unsecured Debt | 247 | 296 | |||||
Derivative amount of hedged item | 150 | 100 | |||||
Derivative variable rate basis | six-month LIBOR | six-month LIBOR | |||||
Derivative basis spread on variable rate | 1.235% | ||||||
Derivative basis spread on LIBOR rate | 0.075% | ||||||
Issuance date | Nov. 16, 2011 | May 06, 2009 | Nov. 20, 2003 | ||||
Maturity date | November 15, 2021 | 7/15/2019 | December 1, 2013 | ||||
Derivative, Inception Date | Nov. 20, 2003 | ||||||
Interest paid | $ 21 | $ 18 | $ 19 |
Business Description and Basis of Presentation (Details)
|
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Companys Fiscal Year Period | |||
Operating Cycle | 52/53 weeks | ||
Current Year Fiscal Period | P52W | P52W | P52W |
Retirement Benefits (Contributions) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | 1 Months Ended | 12 Months Ended | 12 Months Ended | |||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
|
Oct. 31, 2012
U.S. Qualified Pension Plan [Member]
|
Sep. 30, 2012
U.S. Qualified Pension Plan [Member]
|
Sep. 30, 2011
U.S. Qualified Pension Plan [Member]
|
Sep. 30, 2012
U.S. Non-qualified Pension Plan [Member]
|
Sep. 30, 2011
U.S. Non-qualified Pension Plan [Member]
|
Sep. 30, 2012
Foreign Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Foreign Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2012
Non-U.S. Plans and U.S. Non-Qualified Plan [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
|
Defined Benefit Plan Disclosure | |||||||||||||||
Pension Contributions | $ 126 | $ 113 | $ 110 | $ 126 | $ 113 | $ 55 | $ 113 | $ 100 | $ 8 | $ 8 | $ 5 | $ 5 | $ 17 | $ 17 | |
Defined Benefit Plan, Estimated Future Employer Contributions in Next Fiscal Year | $ 110 | $ 14 | $ 23 |
Other Income, Net (Tables)
|
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Nonoperating Income (Expense) [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Other Income, Net |
|
Schedule II
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Valuation and Qualifying Accounts [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Valuation and Qualifying Accounts Disclosure [Text Block] |
(a) Amounts written off. (b) Amounts relate to acquisition of DataPath and foreign currency fluctuations for non-U.S. dollar denominated balances. |
Retirement Benefits (Components of Expense (Income)) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Pension Plans, Defined Benefit [Member]
|
|||
Components of Expense (Income) | |||
Service cost | $ 8 | $ 8 | $ 6 |
Interest cost | 153 | 159 | 159 |
Expected return on plan assets | (213) | (212) | (210) |
Amortization of prior service credit | (18) | (19) | (19) |
Amortization of net actuarial loss | 57 | 48 | 90 |
Net benefit expense (income) | (13) | (16) | 26 |
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
|||
Components of Expense (Income) | |||
Service cost | 4 | 4 | 3 |
Interest cost | 10 | 11 | 12 |
Expected return on plan assets | (1) | (1) | (1) |
Amortization of prior service credit | (6) | (16) | (22) |
Amortization of net actuarial loss | 11 | 12 | 13 |
Net benefit expense (income) | $ 18 | $ 10 | $ 5 |
Other Income, Net (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
||||||
Other Income, Net | ||||||||
Earnings from equity affiliates | $ (11) | $ (13) | $ (10) | |||||
Interest income | (3) | (5) | (4) | |||||
Royalty income | (4) | (2) | (8) | |||||
Pension expense (a) | 0 | [1] | 0 | [1] | 12 | [1] | ||
Other | (7) | (8) | (4) | |||||
Other income, net | $ (25) | $ (28) | $ (14) | |||||
|
Acquisitions (Details) (USD $)
|
12 Months Ended | 12 Months Ended | 12 Months Ended | ||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
Computing Technologies for Aviation, Inc. [Member]
|
Jan. 10, 2011
Computing Technologies for Aviation, Inc. [Member]
|
Sep. 30, 2012
Blue Ridge Simulation, Inc. [Member]
|
Dec. 20, 2010
Blue Ridge Simulation, Inc. [Member]
|
Sep. 30, 2012
AR Group, Inc. [Member]
|
Dec. 31, 2009
AR Group, Inc. [Member]
|
||||||
Acquisitions | |||||||||||
Purchase price for acquisition, net of cash acquired | $ 11,000,000 | [1] | $ 6,000,000 | [1] | $ 91,000,000 | [1] | |||||
Goodwill | 10,000,000 | 6,000,000 | 58,000,000 | ||||||||
Amortizable intangible assets | 3,000,000 | 1,000,000 | 39,000,000 | ||||||||
Intangible asset weighted average life, in years | 9 years | 9 years | 14 years | ||||||||
Goodwill, expected tax deductible amount | $ 0 | $ 6,000,000 | $ 0 | ||||||||
|
Retirement Benefits (Actuarial Assumptions) (Details)
|
12 Months Ended | ||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2011
|
Sep. 30, 2010
|
Sep. 30, 2013
United States Pension Plans of US Entity, Defined Benefit [Member]
|
Sep. 30, 2012
United States Pension Plans of US Entity, Defined Benefit [Member]
|
Sep. 30, 2011
United States Pension Plans of US Entity, Defined Benefit [Member]
|
Sep. 30, 2012
Foreign Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Foreign Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2013
United States Postretirement Benefit Plans of US Entity, Defined Benefit [Member]
|
Sep. 30, 2012
United States Postretirement Benefit Plans of US Entity, Defined Benefit [Member]
|
Sep. 30, 2011
United States Postretirement Benefit Plans of US Entity, Defined Benefit [Member]
|
||||||||||
Defined Benefit Plan Disclosure | |||||||||||||||||||
Discount rate | 3.56% | 4.43% | 4.08% | 5.57% | 3.21% | 4.20% | |||||||||||||
Compensation increase rate | 3.46% | 3.46% | |||||||||||||||||
Discount rate | 4.43% | 4.85% | 5.57% | 4.94% | 4.20% | 4.52% | |||||||||||||
Expected long-term return on plan assets | 8.25% | [1] | 8.75% | [1] | 8.75% | 8.73% | 8.68% | 8.25% | [1] | 8.75% | [1] | 8.75% | |||||||
Compensation increase rate | 3.46% | 3.44% | |||||||||||||||||
Health care cost gross trend rate | 9.00% | [2] | 11.00% | [2] | |||||||||||||||
Ultimate trend rate | 5.00% | [2] | 5.50% | [2] | |||||||||||||||
Year that trend reaches ultimate rate | 2019 | [2] | 2016 | [2] | |||||||||||||||
Actuarial gains losses amortization threshold | 10.00% | ||||||||||||||||||
Average remaining service period of active participants | 11 years | ||||||||||||||||||
Expected Future Lifetime Of Inactive Participants | 28 years | ||||||||||||||||||
|
Shareowners' Equity (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Shareowners' Equity | |||
Common Stock, Shares Authorized | 1,000 | 1,000 | |
Common Stock, Par Value | $ 0.01 | $ 0.01 | |
Preferred Stock, Shares Authorized | 25 | ||
Preferred Stock Designated As Junior Preferred Stock | 2.5 | ||
Amount of share repurchases | $ 723 | $ 322 | $ 182 |
Number of shares repurchased | 13.3 | 5.5 | 3.2 |
Treasury Stock Repurchase Authorization | 481 | ||
Treasury Share Repurchases Included In Accounts Payable | 16 | 0 | |
Unamortized pension and other retirement benefits (net of taxes of $945 for 2012; $872 for 2011 and $742 for 2010) | (1,619) | (1,493) | (1,276) |
Foreign currency translation adjustment | 10 | (3) | 18 |
Foreign currency cash flow hedge adjustment | 2 | (1) | (1) |
Accumulated other comprehensive loss | (1,607) | (1,497) | (1,259) |
Unamortized pension and other retirement benefits income tax expense | $ 945 | $ 872 | $ 742 |
Stock-Based Compensation and Earnings Per Share (Earnings Per Share and Diluted Share Equivalents) (Details) (USD $)
In Millions, except Per Share data, unless otherwise specified |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Computation of Basic and Diluted Earnings Per Share | |||||||||||
Income from continuing operations | $ 152 | $ 166 | $ 161 | $ 130 | $ 158 | $ 157 | $ 150 | $ 150 | $ 609 | $ 615 | $ 557 |
Income from discontinued operations, net of taxes | 0 | 0 | 0 | 0 | 17 | 1 | 0 | 1 | 0 | 19 | 4 |
Net income | $ 152 | $ 166 | $ 161 | $ 130 | $ 175 | $ 158 | $ 150 | $ 151 | $ 609 | $ 634 | $ 561 |
Denominator: | |||||||||||
Denominator for basic earnings per share - weighted average common shares | 145.3 | 154.2 | 157.1 | ||||||||
Stock options | 1.1 | 1.4 | 1.6 | ||||||||
Performance shares, restricted shares and restricted stock units | 0.4 | 0.5 | 0.5 | ||||||||
Dilutive potential common shares | 1.5 | 1.9 | 2.1 | ||||||||
Denominator for diluted earnings per share - adjusted weighted average shares and assumed conversion | 146.8 | 156.1 | 159.2 | ||||||||
Basic | |||||||||||
Continuing operations | $ 1.07 | $ 1.16 | $ 1.10 | $ 0.87 | $ 1.03 | $ 1.02 | $ 0.97 | $ 0.96 | $ 4.19 | $ 3.99 | $ 3.55 |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.11 | $ 0.01 | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.12 | $ 0.02 |
Basic earnings per share | $ 1.07 | $ 1.16 | $ 1.10 | $ 0.87 | $ 1.14 | $ 1.03 | $ 0.97 | $ 0.97 | $ 4.19 | $ 4.11 | $ 3.57 |
Diluted | |||||||||||
Continuing operations | $ 1.06 | $ 1.14 | $ 1.09 | $ 0.86 | $ 1.02 | $ 1.01 | $ 0.96 | $ 0.95 | $ 4.15 | $ 3.94 | $ 3.50 |
Discontinued operations | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.00 | $ 0.11 | $ 0.00 | $ 0.00 | $ 0.01 | $ 0.00 | $ 0.12 | $ 0.02 |
Diluted earnings per share | $ 1.06 | $ 1.14 | $ 1.09 | $ 0.86 | $ 1.13 | $ 1.01 | $ 0.96 | $ 0.96 | $ 4.15 | $ 4.06 | $ 3.52 |
Stock Options Excluded From Dilutive EPS Calculation | 2.2 | 0.3 | 0.8 |
Retirement Benefits (Plan Assets) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2012
Equity Securities [Member]
|
Sep. 30, 2011
Equity Securities [Member]
|
Sep. 30, 2012
Debt Securities [Member]
|
Sep. 30, 2011
Debt Securities [Member]
|
Sep. 30, 2012
Alternative Investments [Member]
|
Sep. 30, 2011
Alternative Investments [Member]
|
Sep. 30, 2012
Cash and Cash Equivalents [Member]
|
Sep. 30, 2011
Cash and Cash Equivalents [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2010
Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Non-U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Corporate [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Corporate [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Corporate [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
U.S. government [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Emerging Market [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Other [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Other [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Other [Member]
Level 3 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 1 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 1 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 2 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 2 [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 3 [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
Sep. 30, 2010
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. Equity [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Corporate [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
U.S. government [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Mortgage and asset-backed [Member]
Level 3 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 1 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 1 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 2 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 2 [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 3 [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Cash and Cash Equivalents [Member]
Level 3 [Member]
|
|
Defined Benefit Plan Disclosure | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan, Fair Value of Plan Assets | $ 2,513 | $ 2,120 | $ 2,501 | $ 2,111 | $ 2,169 | $ 1,042 | $ 894 | $ 859 | $ 772 | $ 183 | $ 122 | $ 0 | $ 0 | $ 486 | $ 374 | $ 438 | $ 339 | $ 48 | $ 35 | $ 0 | $ 0 | $ 545 | $ 468 | $ 0 | $ 0 | $ 545 | $ 468 | $ 0 | $ 0 | $ 272 | $ 250 | $ 139 | $ 122 | $ 133 | $ 128 | $ 0 | $ 0 | $ 72 | $ 56 | $ 0 | $ 0 | $ 72 | $ 56 | $ 0 | $ 0 | $ 3 | $ 6 | $ 0 | $ 0 | $ 3 | $ 6 | $ 0 | $ 0 | $ 16 | $ 9 | $ 0 | $ 0 | $ 16 | $ 9 | $ 0 | $ 0 | $ 58 | $ 49 | $ 0 | $ 0 | $ 58 | $ 49 | $ 0 | $ 0 | $ 12 | $ 9 | $ 9 | $ 8 | $ 6 | $ 4 | $ 3 | $ 0 | $ 0 | $ 6 | $ 6 | $ 6 | $ 6 | $ 0 | $ 0 | $ 0 | $ 0 | $ 1 | $ 1 | $ 0 | $ 0 | $ 1 | $ 1 | $ 0 | $ 0 | $ 3 | $ 1 | $ 2 | $ 0 | $ 1 | $ 1 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 0 | $ 2 | $ 1 | $ 0 | $ 0 | $ 2 | $ 1 | $ 0 | $ 0 | ||||||||||||||
Defined Benefit Plan, Target Plan Asset Allocations Range Minimum | 40.00% | 25.00% | 0.00% | 0.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan, Target Plan Asset Allocations Range Maximum | 70.00% | 60.00% | 15.00% | 5.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan, Target Plan Asset Allocations | 61.00% | 60.00% | 36.00% | 37.00% | 0.00% | 0.00% | 3.00% | 3.00% | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Defined Benefit Plan, Amount of Employer and Related Party Securities Included in Plan Assets | 0 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Subtotal Pension Securities At Fair Value | 2,494 | 2,106 | 1,436 | 1,233 | 1,058 | 873 | 0 | 0 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Receivables Related To Investment Transactions | $ 7 | $ 5 |
Debt (Summary of long-term debt and a reconciliation to the carrying amount) (Details) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Sep. 30, 2011
|
---|---|---|
Long-term Debt | ||
Long-term Debt, Net | $ 779 | $ 528 |
2021 Notes [Member]
|
||
Long-term Debt | ||
Principal amount of notes | 249 | 0 |
2019 Notes [Member]
|
||
Long-term Debt | ||
Principal amount of notes | 299 | 299 |
2013 Notes [Member]
|
||
Long-term Debt | ||
Principal amount of notes | 200 | 200 |
Other Assets [Member]
|
||
Long-term Debt | ||
Fair value swap adjustment (Note 17 and 18) | $ 31 | $ 29 |
Derivative Financial Instruments
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Derivative Instruments and Hedging Activities Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Financial Instruments | Derivative Financial Instruments Interest Rate Swaps The Company manages its exposure to interest rate risk by maintaining an appropriate mix of fixed and variable rate debt, which over time should moderate the costs of debt financing. When considered necessary, the Company may use financial instruments in the form of interest rate swaps to help meet this objective. In January 2010, the Company entered into two interest rate swap contracts (the 2019 Swaps) which expire on July 15, 2019 and effectively converted $150 million of the 2019 Notes to floating rate debt based on six-month LIBOR plus 1.235 percent. On November 20, 2003, the Company entered into two interest rate swap contracts (the 2013 Swaps) which expire on December 1, 2013 and effectively converted $100 million of the 2013 Notes to floating rate debt based on six-month LIBOR less 0.075 percent. The Company has designated the 2019 and 2013 Swaps (the Swaps) as fair value hedges. At September 30, 2012 and September 30, 2011, interest rate swaps were recorded within Other Assets at a fair value of $31 million and $29 million, respectively, offset by a fair value adjustment to Long-term Debt (Note 10) of $31 million and $29 million, respectively. Cash payments or receipts between the Company and the counterparties to the Swaps are recorded as an adjustment to interest expense. Foreign Currency Forward Exchange Contracts The Company transacts business in various foreign currencies which subjects the Company’s cash flows and earnings to exposure related to changes in foreign currency exchange rates. These exposures arise primarily from purchases or sales of products and services from third parties and intercompany transactions. Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. As of September 30, 2012 and September 30, 2011, the Company had outstanding foreign currency forward exchange contracts with notional amounts of $393 million and $502 million, respectively. These notional values consist primarily of contracts for the European euro, British pound sterling and Japanese yen, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates. Fair Value of Derivative Instruments
The fair values of derivative instruments are presented on a gross basis as the Company does not have any derivative contracts which are subject to master netting arrangements. As of September 30, 2012 and September 30, 2011, $0 and $1 million, respectively, of foreign currency forward exchange contracts, classified within Other current assets, were not designated as hedging instruments.
There was no significant impact to the Company’s earnings related to the ineffective portion of any hedging instruments during the fiscal year ended September 30, 2012. In addition, there was no significant impact to the Company’s earnings when a hedged firm commitment no longer qualified as a fair value hedge or when a hedged forecasted transaction no longer qualified as a cash flow hedge during the fiscal year ended September 30, 2012. The Company did not have any hedges with credit-risk-related contingent features or that required the posting of collateral as of September 30, 2012. The cash flows from derivative contracts are recorded in operating activities in the Consolidated Statement of Cash Flows. Cash flow hedges are designated as fair value hedges once the underlying transaction is recorded on the balance sheet, or approximately 60 days from the maturity date of the hedge. The Company expects to reclassify approximately $2 million of net gains into earnings over the next 12 months. The maximum duration of a foreign currency cash flow hedge contract at September 30, 2012 was 94 months. |
Guarantees and Indemnifications (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Guarantees and Indemnifications Abstract | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Changes in Accrued Product Warranty Costs |
|
Debt (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Debt Reconciliation to Carrying Amount |
|
Retirement Benefits (Other Comprehensive Loss) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2013
|
Sep. 30, 2013
Pension Plans, Defined Benefit [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Prior Service Cost (Credit) [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Prior Service Cost (Credit) [Member]
|
Sep. 30, 2012
Pension Plans, Defined Benefit [Member]
Net Actuarial Loss [Member]
|
Sep. 30, 2011
Pension Plans, Defined Benefit [Member]
Net Actuarial Loss [Member]
|
Sep. 30, 2013
Other Postretirement Benefit Plans, Defined Benefit [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Prior Service Cost (Credit) [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Prior Service Cost (Credit) [Member]
|
Sep. 30, 2012
Other Postretirement Benefit Plans, Defined Benefit [Member]
Net Actuarial Loss [Member]
|
Sep. 30, 2011
Other Postretirement Benefit Plans, Defined Benefit [Member]
Net Actuarial Loss [Member]
|
|
Defined Benefit Plan Disclosure | |||||||||||
Accumulated Other Comprehensive Loss Balance | $ (42) | $ (75) | $ 2,267 | $ 1,949 | $ (17) | $ (33) | $ 157 | $ 177 | |||
Current year prior service cost | 0 | 14 | 0 | 0 | (16) | 0 | 0 | 0 | |||
Current year net actuarial loss | 0 | 0 | 241 | 366 | 0 | 0 | 18 | (8) | |||
Amortization of prior service cost | 18 | 19 | 0 | 0 | 6 | 16 | 0 | 0 | |||
Amortization of actuarial loss | 0 | 0 | (57) | (48) | 0 | 0 | (11) | (12) | |||
Accumulated Other Comprehensive Loss Balance | (24) | (42) | 2,451 | 2,267 | (27) | (17) | 164 | 157 | |||
Prior service cost | (26) | (18) | (8) | ||||||||
Net actuarial loss | 91 | 79 | 12 | ||||||||
Total | $ 65 | $ 61 | $ 4 |
Income Taxes (Reconciliation of Unrecognized Tax Benefits) (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Reconciliation of Unrecognized Tax Benefits, Excluding Amounts Pertaining to Examined Tax Returns | |||
Beginning balance | $ 100 | $ 78 | $ 98 |
Additions for tax positions related to the current year | 11 | 22 | 14 |
Additions for tax positions of prior years | 0 | 6 | 5 |
Additions for tax positions related to acquisitions | 0 | 0 | 2 |
Reductions for tax positions of prior years | (54) | (4) | (21) |
Reductions for tax positions of prior years related to lapse of statute of limitations | (2) | (1) | (2) |
Reductions for tax positions related to settlements with taxing authorities | (13) | (1) | (18) |
Ending balance | $ 42 | $ 100 | $ 78 |
Receivables, Net (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
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Receivables [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Accounts Receivable |
|
Restructuring and Asset Impairment Charges (Tables)
|
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
|
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Restructuring Costs and Asset Impairment Charges [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Restructuring and Asset Impairment Charges | The restructuring and asset impairment charges, net are summarized as follows:
|
Other Assets (Summary of other assets) (Details) (USD $)
In Millions, unless otherwise specified |
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
---|---|---|---|
Other Assets | |||
Long-term receivables | $ 34 | $ 32 | |
Investments in equity affiliates | 19 | 11 | 10 |
Exchange and rental assets (net of accumulated depreciation of $94 at September 30, 2012 and $104 at September 30, 2011) | 51 | 57 | |
Other | 124 | 110 | |
Other Assets | 228 | 210 | |
Accumulated depreciation, exchange and rental assets | $ 94 | $ 104 |
Business Segment Information (Sales and Property by Geographic Region) (Details) (USD $)
In Millions, unless otherwise specified |
3 Months Ended | 12 Months Ended | ||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Sep. 30, 2012
|
Jun. 30, 2012
|
Mar. 31, 2012
|
Dec. 31, 2011
|
Sep. 30, 2011
|
Jun. 30, 2011
|
Mar. 31, 2011
|
Dec. 31, 2010
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
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||||||
Revenues from External Customers and Property | ||||||||||||||||
Total sales | $ 1,266 | $ 1,205 | $ 1,161 | $ 1,094 | $ 1,296 | $ 1,190 | $ 1,216 | $ 1,104 | $ 4,726 | $ 4,806 | $ 4,631 | |||||
Property | 773 | 754 | 773 | 754 | 707 | |||||||||||
U.S. [Member]
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 3,169 | [1] | 3,356 | [1] | 3,284 | [1] | ||||||||||
Property | 680 | 658 | 680 | 658 | 627 | |||||||||||
Europe [Member]
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 816 | 848 | 826 | |||||||||||||
Property | 72 | 77 | 72 | 77 | 70 | |||||||||||
Asia-Pacific [Member]
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 326 | 267 | 247 | |||||||||||||
Property | 15 | 12 | 15 | 12 | 9 | |||||||||||
Canada [Member]
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 287 | 241 | 166 | |||||||||||||
Property | 1 | 1 | 1 | 1 | 0 | |||||||||||
Africa / Middle East [Member]
|
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 65 | 54 | 68 | |||||||||||||
Property | 0 | 0 | 0 | 0 | 0 | |||||||||||
Latin America [Member]
|
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 63 | 40 | 40 | |||||||||||||
Property | 5 | 6 | 5 | 6 | 1 | |||||||||||
International [Member]
|
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | 1,557 | 1,450 | 1,347 | |||||||||||||
Property | 93 | 96 | 93 | 96 | 80 | |||||||||||
Foreign Military [Member]
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Revenues from External Customers and Property | ||||||||||||||||
Total sales | $ 162 | $ 114 | $ 110 | |||||||||||||
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Property (Details) (USD $)
In Millions, unless otherwise specified |
12 Months Ended | ||
---|---|---|---|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Property | |||
Property, Total | $ 1,918 | $ 1,853 | |
Less accumulated depreciation | (1,145) | (1,099) | |
Property | 773 | 754 | 707 |
Gain (Loss) on Sale of Property Plant Equipment | 5 | ||
Property additions in accounts payable | 23 | 21 | 15 |
Land [Member]
|
|||
Property | |||
Property, Total | 10 | 14 | |
Building and Building Improvements [Member]
|
|||
Property | |||
Property, Total | 383 | 372 | |
Machinery and Equipment [Member]
|
|||
Property | |||
Property, Total | 1,045 | 1,002 | |
Information Systems Software and Hardware [Member]
|
|||
Property | |||
Property, Total | 326 | 310 | |
Furniture and Fixtures [Member]
|
|||
Property | |||
Property, Total | 66 | 66 | |
Construction in Progress [Member]
|
|||
Property | |||
Property, Total | 88 | 89 | |
Irvine Facility [Member] | Land, Buildings and Improvements [Member]
|
|||
Property | |||
Property, Total | $ 8 |
Income Taxes (Tables)
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12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Sep. 30, 2012
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule Of Components Of Income Tax Expense |
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Schedule Of Net Current Deferred Income Tax Benefits (Liabilities) From Tax Effects Of Temporary Differences |
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Schedule Of Net Long-Term Deferred Income Tax Benefits (Liabilities) From Tax Effects Of Temporary Differences |
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Schedule of Current and Long-Term Deferred Income Tax Assets and Liabilities Included In Statement of Financial Position |
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Effective Income Tax Rate Continuing Operations Tax Rate Reconciliation |
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Components of Income Before Income Taxes |
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Summary of Income Tax Contingencies |
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Significant Accounting Policies
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12 Months Ended |
---|---|
Sep. 30, 2012
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Accounting Policies [Abstract] | |
Significant Accounting Policies | Significant Accounting Policies Consolidation The consolidated financial statements include the accounts of the Company and all majority-owned subsidiaries. The Company has one consolidated subsidiary with income attributable to a noncontrolling interest. The net income and comprehensive income attributable to the noncontrolling interest is insignificant. The Company's investments in entities it does not control but over which it has the ability to exercise significant influence are accounted for under the equity method and are included in Other Assets. All intercompany transactions are eliminated. Foreign Currency Translation and Transactions The functional currency for significant subsidiaries operating outside the United States is typically their respective local currency. Assets and liabilities of subsidiaries operating outside the United States with a functional currency other than the U.S. dollar are translated into U.S. dollars using the exchange rate at the balance sheet date. Sales, costs and expenses are translated at the average exchange rates in effect during the period. Foreign currency translation gains and losses are included as a component of Accumulated other comprehensive loss within the Consolidated Statement of Equity and Comprehensive Income. Foreign exchange transaction gains and losses due to the remeasurement of account balances in foreign currencies are included within the Consolidated Statement of Operations and were not material to the Company's results of operations for 2012, 2011 and 2010. Revenue Recognition The Company enters into sales arrangements that may provide for multiple deliverables to a customer. The Company identifies all goods and/or services that are to be delivered separately under a sales arrangement and allocates revenue to each deliverable based on relative fair values. Fair values are generally established based on the prices charged when sold separately by the Company. In general, revenues are separated between hardware, engineering services, maintenance services and installation services. The allocated revenue for each deliverable is then recognized using appropriate revenue recognition methods. Sales related to long-term contracts requiring development and delivery of products over several years are accounted for under the percentage-of-completion method of accounting in accordance with the Construction-Type and Production-Type Contracts subtopic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification. The percentage-of-completion method is predominately used in the Government Systems segment and sales and earnings under qualifying contracts are recorded either as products are shipped under the units-of-delivery method (for production effort), or based on the ratio of actual costs incurred to total estimated costs expected to be incurred related to the contract under the cost-to-cost method (for development effort). Purchase options and change orders are accounted for either as an integral part of the original contract or separately depending upon the nature and value of the item. Sales and costs related to profitable purchase options are included in estimates only when the options are exercised whereas sales and costs related to unprofitable purchase options are included in estimates when exercise is determined to be probable. Sales related to change orders are included in estimates only if they can be reliably estimated and collectability is reasonably assured. Anticipated losses on contracts are recognized in full in the period in which losses become probable and estimable. Changes in estimates of profit or loss on contracts are included in earnings on a cumulative basis in the period the estimate is changed. Cumulative catch-up adjustments resulting from changes in estimates did not have a material effect on our results of operations during the years ended September 30, 2012, 2011 or 2010. Sales related to long-term separately priced product maintenance or warranty contracts are accounted for based on the terms of the underlying agreements. Certain contracts are fixed-price contracts with sales recognized ratably over the contractual life, while other contracts have a fixed hourly rate with sales recognized based on actual labor or flight hours incurred. The cost of providing these services is expensed as incurred. The Company recognizes sales for most other products or services when all of the following criteria are met: an agreement of sale exists, product delivery and acceptance has occurred or services have been rendered, pricing is fixed or determinable and collection is reasonably assured. Cash and Cash Equivalents Cash and cash equivalents include time deposits, certificates of deposit with original maturity dates of three months or less and money market funds. Allowance for Doubtful Accounts Allowances are established in order to report receivables at net realizable value on the Company's Consolidated Statement of Financial Position. The determination of these allowances requires management of the Company to make estimates and judgments as to the collectability of customer account balances. These allowances are estimated for customers who are considered credit risks by reviewing the Company's collection experience with those customers as well as evaluating the customers' financial condition. The Company also considers both current and projected economic and market conditions. Special attention is given to accounts with invoices that are past due. Past due is defined as any invoice for which payment has not been received by the due date specified on the billing invoice. Inventories Inventories are stated at the lower of cost or market using costs which approximate the first-in, first-out method, less related progress payments received. Inventoried costs include direct costs of manufacturing, certain engineering costs and allocable overhead costs. The Company regularly compares inventory quantities on hand on a part level basis to estimated forecasts of product demand and production requirements as well as historical usage. Based on these comparisons, management establishes an excess and obsolete inventory reserve as needed. Inventory valuation reserves were $86 million and $93 million at September 30, 2012 and 2011, respectively. The Company defers certain pre-production engineering costs during the development phase of a program in connection with long-term supply arrangements that contain contractual guarantees for reimbursement from customers. Such customer guarantees generally take the form of a minimum order quantity with quantified reimbursement amounts if the minimum order quantity is not taken by the customer. These costs are deferred to the extent of the contractual guarantees and are amortized over their estimated useful lives using a units-of-delivery method, up to 15 years. This amortization expense is included as a component of cost of sales. Amortization is based on the Company’s expectation of delivery rates on a program-by-program basis and begins when the Company starts recognizing revenue as the Company delivers equipment for the program. The estimated useful life is limited to the amount of time the Company is virtually assured to earn revenues through a contractually enforceable right included in long-term supply arrangements with the Company’s customers. Pre-production engineering costs incurred pursuant to supply arrangements that do not contain customer guarantees for reimbursement are expensed as incurred. Progress Payments Progress payments relate to both receivables and inventories and represent cash collected from government-related contracts whereby the governments have a legal right of offset related to the receivable or legal title to the work-in-process inventory. Property Property is stated at acquisition cost, net of accumulated depreciation. Depreciation of property is generally provided using straight-line methods over the following estimated useful lives: buildings and improvements, 15-40 years; machinery and equipment, 6-15 years; information systems software and hardware, 5-10 years; and furniture and fixtures, 6-12 years. Depreciation methods and lives are reviewed periodically with any changes recorded on a prospective basis. Significant renewals and betterments are capitalized and replaced units are written off. Maintenance and repairs, as well as renewals of minor amounts, are charged to expense in the period incurred. The fair value of liabilities associated with the retirement of property is recorded when there is a legal or contractual requirement to incur such costs and the costs are reasonably estimable. Upon the initial recognition of a contractual or legal liability for an asset retirement obligation, the Company capitalizes the asset retirement cost by increasing the carrying amount of the property by the same amount as the liability. This asset retirement cost is then depreciated over the estimated useful life of the underlying property. The Company did not have any significant asset retirement obligations at September 30, 2012 and 2011. Goodwill and Intangible Assets Goodwill and intangible assets generally result from business acquisitions. The purchase price of the acquisition is assigned to tangible and intangible assets and liabilities assumed based on fair value. The excess of the purchase price over the amounts assigned is recorded as goodwill. Assets acquired and liabilities assumed are allocated to the Company's reporting units based on the Company's integration plans and internal reporting structure. Purchased intangible assets with finite lives are amortized over their estimated useful lives. Goodwill and intangible assets with indefinite lives are not amortized, but reviewed at least annually for impairment. Customer Relationship Up-Front Sales Incentives Rockwell Collins provides up-front sales incentives prior to delivering products or performing services to certain commercial customers in connection with sales contracts. Up-front sales incentives are recorded as a Customer relationship intangible asset and are amortized using a units-of-delivery method over the period the Company has received a contractually enforceable right related to the incentives, up to 15 years. Amortization is based on the Company’s expectation of delivery rates on a program-by-program basis. Amortization begins when the Company starts recognizing revenue as the Company delivers equipment for the program. Up-front sales incentives consisting of cash payments or customer account credits are amortized as a reduction of sales, whereas incentives consisting of free products are amortized as cost of sales. Accrued Customer Incentives Incentives earned by customers based on purchases of Company products or services are recognized as a liability when the related sale is recorded. Incentives consisting of cash payments or customer account credits are recognized as a reduction of sales while incentives consisting of free products and account credits where the customer's use is restricted to future purchases are recognized as cost of sales. Impairment of Long-Lived Assets Long-lived assets are reviewed for impairment when management plans to dispose of assets or when events or circumstances indicate that the carrying amount of a long-lived asset is more likely than not unrecoverable. Assets held for disposal are reported at the lower of the carrying amount or fair value less cost to sell. Management determines fair value using a discounted future cash flow analysis or other accepted valuation techniques. Long-lived assets held for use are reviewed for impairment by comparing the carrying amount of an asset to the undiscounted future cash flows expected to be generated by the asset over its remaining useful life. If an asset is considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the asset exceeds its fair value. See Note 23 for discussion of certain asset impairments recorded in 2012 and 2011. Goodwill and indefinite-lived intangible assets are tested annually for impairment with more frequent tests performed if indications of impairment exist. The Company's annual impairment testing date is in the second quarter of each fiscal year. Impairment for intangible assets with indefinite lives exists if the carrying value of the intangible asset exceeds its fair value. Goodwill is potentially impaired if the carrying value of a reporting unit exceeds its estimated fair value. Management determines fair value using a discounted future cash flow analysis and other accepted valuation techniques. The Company's annual impairment testing performed in the second quarter of 2012, 2011 and 2010 yielded no impairments of goodwill or indefinite-lived intangible assets. Advance Payments from Customers Advance payments from customers represent cash collected from customers in advance of revenue recognition. Environmental Liabilities for environmental matters are recorded in the period in which it is probable that an obligation has been incurred and the cost can be reasonably estimated. At environmental sites in which more than one potentially responsible party has been identified, the Company records a liability for its estimated allocable share of costs related to its involvement with the site as well as an estimated allocable share of costs related to the involvement of insolvent or unidentified parties. At environmental sites in which the Company is the only responsible party, the Company records a liability for the total estimated costs of remediation. Income Taxes Current tax liabilities and assets are based upon an estimate of taxes payable or refundable in the current year for each of the jurisdictions in which the Company is subject to tax. As part of the determination of its tax liability, management exercises considerable judgment in evaluating tax positions taken by the Company in determining the income tax provision and establishes reserves for uncertain tax positions in accordance with the Income Taxes topic of the FASB Accounting Standards Codification. Deferred tax assets and liabilities are recorded for the estimated future tax effects attributable to temporary differences between the carrying amounts of assets and liabilities used for financial reporting purposes and their respective carrying amounts for income tax purposes. Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. Derivative Financial Instruments The Company uses derivative financial instruments in the form of foreign currency forward exchange contracts and interest rate swap contracts for the purpose of minimizing exposure to changes in foreign currency exchange rates on business transactions and interest rates, respectively. The Company's policy is to execute such instruments with banks the Company believes to be creditworthy and not enter into derivative financial instruments for speculative purposes or to manage exposure for net investments in non-U.S. subsidiaries. These derivative financial instruments do not subject the Company to undue risk as gains and losses on these instruments generally offset gains and losses on the underlying assets, liabilities or anticipated transactions that are being hedged. All derivative financial instruments are recorded at fair value in the Consolidated Statement of Financial Position. For a derivative that has not been designated as an accounting hedge, the change in fair value is recognized immediately through earnings. For a derivative that has been designated as an accounting hedge of an existing asset or liability (a fair value hedge), the change in the fair value of both the derivative and underlying asset or liability is recognized immediately through earnings. For a derivative designated as an accounting hedge of an anticipated transaction (a cash flow hedge), the change in the fair value is recorded on the Consolidated Statement of Financial Position in Accumulated other comprehensive loss to the extent the derivative is effective in mitigating the exposure related to the anticipated transaction. The change in the fair value related to the ineffective portion of the hedge, if any, is immediately recognized in earnings. The amount recorded within Accumulated other comprehensive loss is reclassified into earnings in the same period during which the underlying hedged transaction affects earnings. The Company does not exclude any amounts from the measure of effectiveness for both fair value and cash flow hedges. Use of Estimates The financial statements of the Company have been prepared in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates. Estimates are used in accounting for, among other items, long-term contracts, allowances for doubtful accounts, inventory obsolescence, product warranty cost liabilities, customer incentives, retirement benefits, income taxes, environmental matters, pre-production engineering costs, recoverability of long-lived assets and contingencies. Estimates and assumptions are reviewed periodically and the effects of changes, if any, are reflected in the Consolidated Statement of Operations in the period they are determined. Concentration of Risks The Company's products and services are concentrated within the aerospace and defense industries with customers consisting primarily of military and commercial aircraft manufacturers, commercial airlines and the U.S. Government and non-U.S. governments. As a result of this industry focus, the Company's current and future financial performance is largely dependent upon the overall economic conditions within these industries. In particular, the commercial aerospace market has been historically cyclical and subject to downturns during periods of weak economic conditions, which could be prompted by or exacerbated by political or other domestic or international events. The defense market may be affected by changes in budget appropriations, procurement policies, political developments both domestically and abroad and other factors. The Budget Control Act of 2011 (BCA) imposes spending caps and certain reductions in security spending over a ten-year period through 2021. Absent additional Congressional action, further budget cuts (or sequestration) as outlined in the BCA will be implemented on January 3, 2013. Future reductions in U.S. Government security spending could have a significant adverse impact on the financial results of the Company's Government Systems operating segment. While management believes the Company's product offerings are well positioned to meet the needs of its customer base, any material deterioration in the economic and environmental factors that impact the aerospace and defense industries could have a material adverse effect on the Company's results of operations, financial position or cash flows. In addition to the overall business risks associated with the Company's concentration within the aerospace and defense industries, the Company is also exposed to a concentration of collection risk on credit extended to commercial airlines and business jet aircraft manufacturers. At September 30, 2012, accounts receivable due from U.S. and international commercial airlines were approximately $31 million and $37 million, respectively. At September 30, 2012, accounts receivable due from business jet aircraft manufacturers were approximately $125 million. The Company performs ongoing credit evaluations on the financial condition of all of its customers and maintains allowances for uncollectible accounts receivable based on expected collectability. Although management believes its allowances are adequate, the Company is not able to predict with certainty the changes in the financial stability of its customers. Any material change in the financial status of any one or group of customers could have a material adverse effect on the Company's results of operations, financial position or cash flows. See Note 5 for further discussion on customer bankruptcy charges. As of September 30, 2012, approximately 10 percent of the Company's employees were represented by collective bargaining agreements, which are generally set to expire between May 2013 and September 2015. Recently Adopted Accounting Standards In May 2011, the FASB amended the guidance regarding fair value measurement and disclosure. The amended guidance clarifies the application of existing fair value measurement and disclosure requirements. The amendment became effective for the Company in the second quarter of 2012 with no significant impact to the Company's financial statements. Recently Issued Accounting Standards In June 2011, the FASB amended requirements for the presentation of other comprehensive income (OCI), requiring presentation of comprehensive income in either a single, continuous statement of comprehensive income or on separate but consecutive statements, the statement of operations and the statement of OCI. The amendment is effective for the Company at the beginning of fiscal year 2013. The adoption of this guidance will not impact the Company's financial position, results of operations or cash flows and will only impact the presentation of OCI on the financial statements. |
Goodwill and Intangible Assets (Narrative) (Details) (USD $)
|
1 Months Ended | 12 Months Ended | ||
---|---|---|---|---|
Sep. 30, 2011
|
Sep. 30, 2012
|
Sep. 30, 2011
|
Sep. 30, 2010
|
|
Goodwill and Intangible Assets | ||||
Asset Impairment Charges | $ 11,000,000 | $ 5,000,000 | $ 7,000,000 | |
Goodwill, Impairment Loss | 0 | 0 | 0 | |
Intangible Assets, Amortization Expense | 39,000,000 | 36,000,000 | 37,000,000 | |
Up-front sales incentives weighted average amortization period remaining, in years | 9 years | |||
Cost of Sales [Member]
|
||||
Goodwill and Intangible Assets | ||||
Asset Impairment Charges | 5,000,000 | |||
Licensing Agreements [Member] | Cost of Sales [Member]
|
||||
Goodwill and Intangible Assets | ||||
Asset Impairment Charges | $ 4,000,000 |