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) |
Large accelerated filer R | Accelerated filer £ | |
Non-accelerated filer £ | (Do not check if a smaller reporting company) | Smaller reporting company £ |
Page No. | |||
PART I. | FINANCIAL INFORMATION: | ||
Item 1. | Condensed Consolidated Financial Statements: | ||
Condensed Consolidated Statement of Financial Position (Unaudited) — March 31, 2014 and September 30, 2013 | |||
Condensed Consolidated Statement of Operations (Unaudited) — Three and Six Months Ended March 31, 2014 and 2013 | |||
Condensed Consolidated Statement of Other Comprehensive Income (Unaudited) — Three and Six Months Ended March 31, 2014 and 2013 | |||
Condensed Consolidated Statement of Cash Flows (Unaudited) — Six Months Ended March 31, 2014 and 2013 | |||
Notes to Condensed Consolidated Financial Statements (Unaudited) | |||
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | ||
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | ||
Item 4. | Controls and Procedures | ||
PART II. | OTHER INFORMATION: | ||
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | ||
Item 6. | Exhibits | ||
Signatures |
PART I. | FINANCIAL INFORMATION |
Item 1. | Condensed Consolidated Financial Statements |
March 31, | September 30, | ||||||
2014 | 2013 | ||||||
ASSETS | |||||||
Current Assets: | |||||||
Cash and cash equivalents | $ | 410 | $ | 391 | |||
Receivables, net | 1,126 | 1,058 | |||||
Inventories, net | 1,674 | 1,518 | |||||
Current deferred income taxes | 10 | 19 | |||||
Business held for sale | 69 | 17 | |||||
Other current assets | 128 | 91 | |||||
Total current assets | 3,417 | 3,094 | |||||
Property | 829 | 773 | |||||
Goodwill | 1,834 | 779 | |||||
Intangible Assets | 715 | 288 | |||||
Long-term Deferred Income Taxes | 50 | 245 | |||||
Other Assets | 238 | 221 | |||||
TOTAL ASSETS | $ | 7,083 | $ | 5,400 | |||
LIABILITIES AND EQUITY | |||||||
Current Liabilities: | |||||||
Short-term debt | $ | 866 | $ | 436 | |||
Accounts payable | 465 | 463 | |||||
Compensation and benefits | 245 | 293 | |||||
Advance payments from customers | 362 | 324 | |||||
Accrued customer incentives | 197 | 184 | |||||
Product warranty costs | 114 | 121 | |||||
Liabilities associated with business held for sale | 10 | 4 | |||||
Other current liabilities | 141 | 156 | |||||
Total current liabilities | 2,400 | 1,981 | |||||
Long-term Debt, Net | 1,658 | 563 | |||||
Retirement Benefits | 1,005 | 1,078 | |||||
Other Liabilities | 168 | 155 | |||||
Equity: | |||||||
Common stock ($0.01 par value; shares authorized: 1,000; shares issued: 183.8) | 2 | 2 | |||||
Additional paid-in capital | 1,474 | 1,469 | |||||
Retained earnings | 4,362 | 4,163 | |||||
Accumulated other comprehensive loss | (1,269 | ) | (1,287 | ) | |||
Common stock in treasury, at cost (shares held: March 31, 2014, 48.3; September 30, 2013, 48.7) | (2,722 | ) | (2,729 | ) | |||
Total shareowners’ equity | 1,847 | 1,618 | |||||
Noncontrolling interest | 5 | 5 | |||||
Total equity | 1,852 | 1,623 | |||||
TOTAL LIABILITIES AND EQUITY | $ | 7,083 | $ | 5,400 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31 | March 31 | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales: | |||||||||||||||
Product sales | $ | 1,065 | $ | 1,056 | $ | 2,059 | $ | 2,030 | |||||||
Service sales | 207 | 75 | 284 | 163 | |||||||||||
Total sales | 1,272 | 1,131 | 2,343 | 2,193 | |||||||||||
Costs, expenses and other: | |||||||||||||||
Product cost of sales | 744 | 742 | 1,444 | 1,429 | |||||||||||
Service cost of sales | 150 | 62 | 206 | 125 | |||||||||||
Selling, general and administrative expenses | 150 | 126 | 286 | 250 | |||||||||||
Interest expense | 16 | 8 | 28 | 14 | |||||||||||
Other income, net | (2 | ) | (4 | ) | (15 | ) | (10 | ) | |||||||
Total costs, expenses and other | 1,058 | 934 | 1,949 | 1,808 | |||||||||||
Income from continuing operations before income taxes | 214 | 197 | 394 | 385 | |||||||||||
Income tax expense | 67 | 36 | 116 | 92 | |||||||||||
Income from continuing operations | 147 | 161 | 278 | 293 | |||||||||||
Income from discontinued operations, net of taxes | 1 | — | 1 | — | |||||||||||
Net income | $ | 148 | $ | 161 | $ | 279 | $ | 293 | |||||||
Earnings per share: | |||||||||||||||
Basic | |||||||||||||||
Continuing operations | $ | 1.08 | $ | 1.18 | $ | 2.05 | $ | 2.13 | |||||||
Discontinued operations | 0.01 | — | 0.01 | — | |||||||||||
Basic earnings per share | $ | 1.09 | $ | 1.18 | $ | 2.06 | $ | 2.13 | |||||||
Diluted | |||||||||||||||
Continuing operations | $ | 1.07 | $ | 1.17 | $ | 2.03 | $ | 2.10 | |||||||
Discontinued operations | 0.01 | — | 0.01 | — | |||||||||||
Diluted earnings per share | $ | 1.08 | $ | 1.17 | $ | 2.04 | $ | 2.10 | |||||||
Weighted average common shares: | |||||||||||||||
Basic | 135.5 | 136.2 | 135.3 | 137.8 | |||||||||||
Diluted | 137.2 | 137.8 | 136.9 | 139.3 | |||||||||||
Cash dividends per share | $ | 0.30 | $ | 0.30 | $ | 0.60 | $ | 0.60 |
Three Months Ended | Six Months Ended | ||||||||||||||
March 31 | March 31 | ||||||||||||||
2014 | 2013 | 2014 | 2013 | ||||||||||||
Net income | $ | 148 | $ | 161 | $ | 279 | $ | 293 | |||||||
Unrealized foreign currency translation adjustments | (2 | ) | (11 | ) | (1 | ) | (11 | ) | |||||||
Pension and other retirement benefits adjustments (net of taxes for the three and six months ended March 31, 2014 of $5 and $10, respectively; net of taxes for the three and six months ended March 31, 2013 of $6 and $12, respectively) | 8 | 10 | 17 | 21 | |||||||||||
Cash flow hedge adjustments (net of taxes for the three and six months ended March 31, 2014 of $0 and $(1), respectively; net of taxes for the three and six months ended March 31, 2013 of $0 and $0, respectively) | — | — | 2 | (2 | ) | ||||||||||
Comprehensive income | $ | 154 | $ | 160 | $ | 297 | $ | 301 |
Six Months Ended | |||||||
March 31 | |||||||
2014 | 2013 | ||||||
Operating Activities: | |||||||
Net income | $ | 279 | $ | 293 | |||
Adjustments to arrive at cash provided by operating activities: | |||||||
Gain on sale of business | (10 | ) | — | ||||
Depreciation | 67 | 61 | |||||
Amortization of intangible assets and pre-production engineering costs | 37 | 27 | |||||
Stock-based compensation expense | 12 | 13 | |||||
Compensation and benefits paid in common stock | 24 | 29 | |||||
Excess tax benefit from stock-based compensation | (5 | ) | (3 | ) | |||
Deferred income taxes | 40 | 39 | |||||
Pension plan contributions | (63 | ) | (117 | ) | |||
Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments: | |||||||
Receivables | 57 | 2 | |||||
Production inventory | (83 | ) | (63 | ) | |||
Pre-production engineering costs | (103 | ) | (88 | ) | |||
Accounts payable | (33 | ) | (46 | ) | |||
Compensation and benefits | (76 | ) | 7 | ||||
Advance payments from customers | (19 | ) | 37 | ||||
Accrued customer incentives | 13 | 9 | |||||
Product warranty costs | (7 | ) | (5 | ) | |||
Income taxes | (47 | ) | 6 | ||||
Other assets and liabilities | (20 | ) | (22 | ) | |||
Cash Provided by Operating Activities | 63 | 179 | |||||
Investing Activities: | |||||||
Acquisition of business, net of cash acquired | (1,415 | ) | — | ||||
Property additions | (70 | ) | (61 | ) | |||
Acquisition of intangible assets | (1 | ) | (1 | ) | |||
Proceeds from business divestitures | 24 | — | |||||
Cash (Used for) Investing Activities | (1,462 | ) | (62 | ) | |||
Financing Activities: | |||||||
Purchases of treasury stock | (61 | ) | (437 | ) | |||
Cash dividends | (81 | ) | (83 | ) | |||
Proceeds from short-term commercial paper borrowings, net | 631 | 385 | |||||
Repayment of debt | (200 | ) | — | ||||
Net proceeds from long-term debt issuance | 1,089 | — | |||||
Proceeds from the exercise of stock options | 31 | 19 | |||||
Excess tax benefit from stock-based compensation | 5 | 3 | |||||
Cash Provided by (Used for) Financing Activities | 1,414 | (113 | ) | ||||
Effect of exchange rate changes on cash and cash equivalents | 4 | (2 | ) | ||||
Net Change in Cash and Cash Equivalents | 19 | 2 | |||||
Cash and Cash Equivalents at Beginning of Period | 391 | 335 | |||||
Cash and Cash Equivalents at End of Period | $ | 410 | $ | 337 |
1. | Business Description and Basis of Presentation |
2. | Recently Issued Accounting Standards |
3. | Acquisitions |
(in millions) | December 23, 2013 | ||
Restricted Cash(1) | $ | 61 | |
Receivables and Other current assets | 148 | ||
Building held for sale(2) | 81 | ||
Business held for sale(3) | 61 | ||
Property | 55 | ||
Intangible Assets | 443 | ||
Other Assets | 7 | ||
Total Identifiable Assets Acquired | 856 | ||
Payable to ARINC option holders(1) | (61 | ) | |
Current Liabilities | (131 | ) | |
Liability related to building held for sale(2) | (81 | ) | |
Liabilities associated with business held for sale(3) | (9 | ) | |
Long-term deferred income taxes | (168 | ) | |
Retirement Benefits and Other Long-term Liabilities | (45 | ) | |
Total Liabilities Assumed | (495 | ) | |
Net Identifiable Assets Acquired, excluding Goodwill | 361 | ||
Goodwill | 1,054 | ||
Net Assets Acquired | $ | 1,415 |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Pro-forma sales | $ | 1,272 | $ | 1,252 | $ | 2,449 | $ | 2,445 | ||||||||
Pro-forma net income attributable to common shareowners from continuing operations | $ | 148 | $ | 165 | $ | 281 | $ | 284 | ||||||||
Pro-forma basic earnings per share from continuing operations | $ | 1.09 | $ | 1.21 | $ | 2.08 | $ | 2.06 | ||||||||
Pro-forma diluted earnings per share from continuing operations | $ | 1.08 | $ | 1.20 | $ | 2.05 | $ | 2.04 |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Increases / (decreases) to pro-forma net income: | ||||||||||||||||
Net reduction to depreciation resulting from fixed asset purchase accounting adjustments(1) | $ | — | $ | 2 | $ | 2 | $ | 5 | ||||||||
Advisory, legal and accounting service fees(2) | 1 | — | 21 | (22 | ) | |||||||||||
Amortization of acquired ARINC intangible assets, net(3) | — | (4 | ) | (4 | ) | (9 | ) | |||||||||
Interest expense incurred on acquisition financing, net(4) | — | (2 | ) | — | (3 | ) |
4. | Discontinued Operations and Divestitures |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales | $ | 13 | $ | — | $ | 13 | $ | — | ||||||||
Income from discontinued operations before income taxes | 2 | — | 2 | — |
5. | Receivables, Net |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Billed | $ | 794 | $ | 823 | |||
Unbilled | 512 | 432 | |||||
Less progress payments | (171 | ) | (188 | ) | |||
Total | 1,135 | 1,067 | |||||
Less allowance for doubtful accounts | (9 | ) | (9 | ) | |||
Receivables, net | $ | 1,126 | $ | 1,058 |
6. | Inventories, Net |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Finished goods | $ | 211 | $ | 181 | |||
Work in process | 275 | 273 | |||||
Raw materials, parts and supplies | 392 | 358 | |||||
Less progress payments | (7 | ) | (8 | ) | |||
Total | 871 | 804 | |||||
Pre-production engineering costs | 803 | 714 | |||||
Inventories, net | $ | 1,674 | $ | 1,518 |
(in millions) | 2014 | 2015 | 2016 | 2017 | 2018 | Thereafter | |||||||||||||||||
Anticipated amortization expense for pre-production engineering costs | $ | 38 | $ | 61 | $ | 80 | $ | 87 | $ | 100 | $ | 451 |
7. | Property |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Land | $ | 16 | $ | 10 | |||
Buildings and improvements | 408 | 388 | |||||
Machinery and equipment | 1,130 | 1,066 | |||||
Information systems software and hardware | 354 | 344 | |||||
Furniture and fixtures | 67 | 65 | |||||
Construction in progress | 113 | 101 | |||||
Total | 2,088 | 1,974 | |||||
Less accumulated depreciation | (1,259 | ) | (1,201 | ) | |||
Property | $ | 829 | $ | 773 |
8. | Goodwill and Intangible Assets |
(in millions) | Government Systems | Commercial Systems | Information Management Services | Total | |||||||||||
Balance at September 30, 2013 | $ | 513 | $ | 266 | $ | — | $ | 779 | |||||||
ARINC acquisition | — | — | 1,054 | 1,054 | |||||||||||
Reclassification from Commercial Systems to Information Management Services | — | (4 | ) | 4 | — | ||||||||||
Foreign currency translation adjustments and other | 2 | — | (1 | ) | 1 | ||||||||||
Balance at March 31, 2014 | $ | 515 | $ | 262 | $ | 1,057 | $ | 1,834 |
March 31, 2014 | September 30, 2013 | ||||||||||||||||||||||
(in millions) | Gross | Accum Amort | Net | Gross | Accum Amort | Net | |||||||||||||||||
Intangible assets with finite lives: | |||||||||||||||||||||||
Developed technology and patents | $ | 340 | $ | (183 | ) | $ | 157 | $ | 222 | $ | (175 | ) | $ | 47 | |||||||||
Backlog | 8 | — | 8 | — | — | — | |||||||||||||||||
Customer relationships: | |||||||||||||||||||||||
Acquired | 374 | (68 | ) | 306 | 89 | (60 | ) | 29 | |||||||||||||||
Up-front sales incentives | 247 | (40 | ) | 207 | 241 | (35 | ) | 206 | |||||||||||||||
License agreements | 13 | (8 | ) | 5 | 13 | (8 | ) | 5 | |||||||||||||||
Trademarks and tradenames | 15 | (14 | ) | 1 | 15 | (14 | ) | 1 | |||||||||||||||
Intangible assets with indefinite lives: | |||||||||||||||||||||||
Trademarks and tradenames | 31 | — | 31 | — | — | — | |||||||||||||||||
Intangible assets | $ | 1,028 | $ | (313 | ) | $ | 715 | $ | 580 | $ | (292 | ) | $ | 288 |
(in millions) | 2014 | 2015 | 2016 | 2017 | 2018 | Thereafter | |||||||||||||||||
Anticipated amortization expense for up-front sales incentives | $ | 11 | $ | 17 | $ | 21 | $ | 23 | $ | 25 | $ | 115 | |||||||||||
Anticipated amortization expense for intangibles acquired in ARINC acquisition | 23 | 31 | 31 | 31 | 31 | 265 | |||||||||||||||||
Anticipated amortization expense for all other intangible assets | 19 | 17 | 14 | 8 | 6 | 19 | |||||||||||||||||
Total | $ | 53 | $ | 65 | $ | 66 | $ | 62 | $ | 62 | $ | 399 |
9. | Other Assets |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Long-term receivables | $ | 34 | $ | 32 | |||
Investments in equity affiliates | 17 | 22 | |||||
Exchange and rental assets (net of accumulated depreciation of $94 at March 31, 2014 and $91 at September 30, 2013) | 58 | 55 | |||||
Other | 129 | 112 | |||||
Other assets | $ | 238 | $ | 221 |
10. | Debt |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Short-term commercial paper borrowings | $ | 866 | $ | 235 | |||
Current portion of long-term debt | — | 200 | |||||
Current portion of fair value swap adjustment (Notes 16 and 17) | — | 1 | |||||
Short-term debt | $ | 866 | $ | 436 |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Principal amount of 2043 Notes, net of discount | $ | 398 | $ | — | |||
Principal amount of 2023 Notes, net of discount | 399 | — | |||||
Principal amount of 2021 Notes, net of discount | 249 | 249 | |||||
Principal amount of 2019 Notes, net of discount | 299 | 299 | |||||
Principal amount of 2016 Notes | 300 | — | |||||
Principal amount of 2013 Notes | — | 200 | |||||
Fair value swap adjustment (Notes 16 and 17) | 13 | 16 | |||||
Total | $ | 1,658 | $ | 764 | |||
Less current portion | — | 201 | |||||
Long-term debt, net | $ | 1,658 | $ | 563 |
11. | Retirement Benefits |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Service cost | $ | 3 | $ | 3 | $ | 5 | $ | 5 | ||||||||
Interest cost | 43 | 34 | 83 | 69 | ||||||||||||
Expected return on plan assets | (59 | ) | (50 | ) | (112 | ) | (101 | ) | ||||||||
Amortization: | ||||||||||||||||
Prior service credit | (3 | ) | (5 | ) | (6 | ) | (9 | ) | ||||||||
Net actuarial loss | 17 | 20 | 34 | 40 | ||||||||||||
Net benefit expense | $ | 1 | $ | 2 | $ | 4 | $ | 4 |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Service cost | $ | 2 | $ | 1 | $ | 2 | $ | 2 | ||||||||
Interest cost | 2 | 2 | 4 | 4 | ||||||||||||
Expected return on plan assets | — | (1 | ) | — | (1 | ) | ||||||||||
Amortization: | ||||||||||||||||
Prior service credit | (3 | ) | (2 | ) | (5 | ) | (4 | ) | ||||||||
Net actuarial loss | 2 | 3 | 4 | 6 | ||||||||||||
Net benefit expense | $ | 3 | $ | 3 | $ | 5 | $ | 7 |
12. | Stock-Based Compensation and Earnings Per Share |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Stock-based compensation expense included in: | ||||||||||||||||
Product cost of sales | $ | 2 | $ | 2 | $ | 4 | $ | 4 | ||||||||
Selling, general and administrative expenses | 5 | 5 | 8 | 9 | ||||||||||||
Total | $ | 7 | $ | 7 | $ | 12 | $ | 13 | ||||||||
Income tax benefit | $ | 2 | $ | 2 | $ | 4 | $ | 4 |
Options | Performance Shares | Restricted Stock Units | |||||||||||||||||||
(shares in thousands) | Number Issued | Weighted Average Fair Value | Number Issued | Weighted Average Fair Value | Number Issued | Weighted Average Fair Value | |||||||||||||||
Six months ended March 31, 2014 | 576.0 | $ | 18.53 | 149.1 | $ | 71.38 | 77.4 | $ | 72.20 | ||||||||||||
Six months ended March 31, 2013 | 875.8 | 12.45 | 200.1 | 54.40 | 82.9 | 55.56 |
2014 Grants | 2013 Grants | ||||
Risk-free interest rate | 0.3% - 3.0% | 0.3% - 2.9% | |||
Expected dividend yield | 1.9 | % | 2.0 | % | |
Expected volatility | 28.0 | % | 27.0 | % | |
Expected life | 7 years | 8 years |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions, except per share amounts) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Numerator for basic and diluted earnings per share: | ||||||||||||||||
Income from continuing operations | $ | 147 | $ | 161 | $ | 278 | $ | 293 | ||||||||
Income from discontinued operations, net of taxes | 1 | — | 1 | — | ||||||||||||
Net income | $ | 148 | $ | 161 | $ | 279 | $ | 293 | ||||||||
Denominator: | ||||||||||||||||
Denominator for basic earnings per share – weighted average common shares | 135.5 | 136.2 | 135.3 | 137.8 | ||||||||||||
Effect of dilutive securities: | ||||||||||||||||
Stock options | 1.3 | 1.2 | 1.2 | 1.1 | ||||||||||||
Performance shares, restricted stock and restricted stock units | 0.4 | 0.4 | 0.4 | 0.4 | ||||||||||||
Dilutive potential common shares | 1.7 | 1.6 | 1.6 | 1.5 | ||||||||||||
Denominator for diluted earnings per share – adjusted weighted average shares and assumed conversion | 137.2 | 137.8 | 136.9 | 139.3 | ||||||||||||
Earnings per share: | ||||||||||||||||
Basic | ||||||||||||||||
Continuing operations | $ | 1.08 | $ | 1.18 | $ | 2.05 | $ | 2.13 | ||||||||
Discontinued operations | 0.01 | — | 0.01 | — | ||||||||||||
Basic earnings per share | $ | 1.09 | $ | 1.18 | $ | 2.06 | $ | 2.13 | ||||||||
Diluted | ||||||||||||||||
Continuing operations | $ | 1.07 | $ | 1.17 | $ | 2.03 | $ | 2.10 | ||||||||
Discontinued operations | 0.01 | — | 0.01 | — | ||||||||||||
Diluted earnings per share | $ | 1.08 | $ | 1.17 | $ | 2.04 | $ | 2.10 |
13. | Other Comprehensive Loss |
Foreign Exchange Translation Adjustment | Pension and Other Postretirement Adjustments (1) | Change in the Fair Value of Effective Cash Flow Hedges (2) | Total | |||||||||||||
Balance at September 30, 2013 | $ | 12 | $ | (1,293 | ) | $ | (6 | ) | $ | (1,287 | ) | |||||
Other comprehensive income before reclassifications | (1 | ) | — | 2 | 1 | |||||||||||
Amounts reclassified from accumulated other comprehensive income | — | 17 | — | 17 | ||||||||||||
Net current period other comprehensive income | (1 | ) | 17 | 2 | 18 | |||||||||||
Balance at March 31, 2014 | $ | 11 | $ | (1,276 | ) | $ | (4 | ) | $ | (1,269 | ) |
14. | Other Income, Net |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Earnings from equity affiliates | $ | 1 | $ | 4 | $ | 4 | $ | 9 | ||||||||
Gain from business divestiture | — | — | 10 | — | ||||||||||||
Other | 1 | — | 1 | 1 | ||||||||||||
Other income, net | $ | 2 | $ | 4 | $ | 15 | $ | 10 |
15. | Income Taxes |
16. | Fair Value Measurements |
Level 1 - | quoted prices (unadjusted) in active markets for identical assets or liabilities |
Level 2 - | quoted prices for similar assets and liabilities in active markets or inputs that are observable for the asset or liability, either directly or indirectly through market corroboration, for substantially the full term of the financial instrument |
Level 3 - | unobservable inputs based on the Company’s own assumptions used to measure assets and liabilities at fair value |
March 31, 2014 | September 30, 2013 | ||||||||
(in millions) | Fair Value Hierarchy | Fair Value Asset (Liability) | Fair Value Asset (Liability) | ||||||
Deferred compensation plan investments | Level 1 | $ | 49 | $ | 49 | ||||
Interest rate swap assets | Level 2 | 13 | 16 | ||||||
Forward starting interest rate swap liabilities | Level 2 | — | (5 | ) | |||||
Foreign currency forward exchange contract assets | Level 2 | 4 | 6 | ||||||
Foreign currency forward exchange contract liabilities | Level 2 | (6 | ) | (6 | ) |
Asset (Liability) | |||||||||||||||
March 31, 2014 | September 30, 2013 | ||||||||||||||
(in millions) | Carrying Amount | Fair Value | Carrying Amount | Fair Value | |||||||||||
Cash and cash equivalents | $ | 410 | $ | 410 | $ | 391 | $ | 391 | |||||||
Short-term debt: | |||||||||||||||
2013 Notes | — | — | (200 | ) | (201 | ) | |||||||||
Commercial paper borrowings | (866 | ) | (866 | ) | (235 | ) | (235 | ) | |||||||
Long-term debt | (1,645 | ) | (1,725 | ) | (548 | ) | (586 | ) |
17. | Derivative Financial Instruments |
Asset Derivatives | |||||||||
(in millions) | Classification | March 31, 2014 | September 30, 2013 | ||||||
Foreign currency forward exchange contracts | Other current assets | $ | 4 | $ | 6 | ||||
Interest rate swaps | Other assets | 13 | 15 | ||||||
Interest rate swaps | Other current assets | — | 1 | ||||||
Total | $ | 17 | $ | 22 |
Liability Derivatives | |||||||||
(in millions) | Classification | March 31, 2014 | September 30, 2013 | ||||||
Foreign currency forward exchange contracts | Other current liabilities | $ | 6 | $ | 6 | ||||
Forward starting interest rate swaps | Other current liabilities | — | 5 | ||||||
Total | $ | 6 | $ | 11 |
Amount of Gain (Loss) | Amount of Gain (Loss) | ||||||||||||||||
Three Months Ended | Six Months Ended | ||||||||||||||||
March 31 | March 31 | ||||||||||||||||
(in millions) | Location of Gain (Loss) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Derivatives Designated as Hedging Instruments: | |||||||||||||||||
Fair Value Hedges | |||||||||||||||||
Interest rate swaps | Interest expense | $ | 2 | $ | 3 | $ | 4 | $ | 5 | ||||||||
Cash Flow Hedges | |||||||||||||||||
Foreign currency forward exchange contracts: | |||||||||||||||||
Amount of gain (loss) recognized in AOCL (effective portion, before deferred tax impact) | AOCL | $ | 2 | $ | — | $ | (1 | ) | $ | (2 | ) | ||||||
Amount of gain reclassified from AOCL into income | Cost of sales | 1 | — | — | — | ||||||||||||
Forward starting interest rate swaps: | |||||||||||||||||
Amount of gain recognized in AOCL (effective portion, before deferred tax impact) | AOCL | $ | — | $ | — | $ | 3 | $ | — |
18. | Guarantees and Indemnifications |
Six Months Ended | |||||||
March 31 | |||||||
(in millions) | 2014 | 2013 | |||||
Balance at beginning of year | $ | 121 | $ | 126 | |||
Warranty costs incurred | (23 | ) | (24 | ) | |||
Product warranty accrual | 25 | 21 | |||||
Changes in estimates for prior years | (9 | ) | (2 | ) | |||
Balance at March 31, 2014 | $ | 114 | $ | 121 |
19. | Environmental Matters |
20. | Legal Matters |
21. | Restructuring and Asset Impairment Charges, Net |
22. | Business Segment Information |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Sales: | ||||||||||||||||
Government Systems | $ | 567 | $ | 578 | $ | 1,099 | $ | 1,124 | ||||||||
Commercial Systems | 556 | 542 | 1,077 | 1,048 | ||||||||||||
Information Management Services | 149 | 11 | 167 | 21 | ||||||||||||
Total sales | $ | 1,272 | $ | 1,131 | $ | 2,343 | $ | 2,193 | ||||||||
Segment operating earnings: | ||||||||||||||||
Government Systems | $ | 109 | $ | 112 | $ | 210 | $ | 219 | ||||||||
Commercial Systems | 127 | 116 | 238 | 221 | ||||||||||||
Information Management Services | 18 | 1 | 20 | 2 | ||||||||||||
Total segment operating earnings | 254 | 229 | 468 | 442 | ||||||||||||
Interest expense(1) | (16 | ) | (8 | ) | (28 | ) | (14 | ) | ||||||||
Stock-based compensation | (7 | ) | (7 | ) | (12 | ) | (13 | ) | ||||||||
General corporate, net | (16 | ) | (17 | ) | (31 | ) | (30 | ) | ||||||||
Gain on divestiture of business | — | — | 10 | — | ||||||||||||
ARINC transaction costs(1) | (1 | ) | — | (13 | ) | — | ||||||||||
Income from continuing operations before income taxes | 214 | 197 | 394 | 385 | ||||||||||||
Income tax expense | (67 | ) | (36 | ) | (116 | ) | (92 | ) | ||||||||
Income from continuing operations | $ | 147 | $ | 161 | $ | 278 | $ | 293 |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Government Systems product categories: | ||||||||||||||||
Avionics | $ | 333 | $ | 324 | $ | 650 | $ | 639 | ||||||||
Communication products | 132 | 152 | 250 | 285 | ||||||||||||
Surface solutions | 56 | 57 | 114 | 107 | ||||||||||||
Navigation products | 46 | 45 | 85 | 93 | ||||||||||||
Government Systems sales | 567 | 578 | 1,099 | 1,124 | ||||||||||||
Commercial Systems product categories: | ||||||||||||||||
Air transport aviation electronics | 313 | 288 | 617 | 567 | ||||||||||||
Business and regional aviation electronics | 243 | 254 | 460 | 481 | ||||||||||||
Commercial Systems sales | 556 | 542 | 1,077 | 1,048 | ||||||||||||
Information Management Services sales | 149 | 11 | 167 | 21 | ||||||||||||
Total sales | $ | 1,272 | $ | 1,131 | $ | 2,343 | $ | 2,193 |
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations |
OVERVIEW AND OUTLOOK |
• | total sales in the range of $4.95 billion to $5.05 billion |
• | diluted earnings per share from continuing operations in the range of $4.40 to $4.55 (from $4.35 to $4.55) (1) |
• | cash provided by operating activities in the range of $600 million to $700 million |
• | capital expenditures of about $160 million |
• | total research and development investment of about $950 million (2) |
RESULTS OF OPERATIONS |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Total sales | $ | 1,272 | $ | 1,131 | ||||
Percent increase | 12 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Total cost of sales | $ | 894 | $ | 804 | ||||
Percent of total sales | 70.3 | % | 71.1 | % |
• | $102 million of inorganic cost of sales from the ARINC acquisition |
• | partially offset by $12 million of other net decreases to cost of sales, including lower employee incentive compensation costs, a reduction in company-funded R&D expense within Commercial Systems, and benefits from cost savings initiatives |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Customer-funded: | ||||||||
Government Systems | $ | 92 | $ | 101 | ||||
Commercial Systems | 27 | 25 | ||||||
Total customer-funded | 119 | 126 | ||||||
Company-funded: | ||||||||
Government Systems | 19 | 19 | ||||||
Commercial Systems | 48 | 52 | ||||||
Total company-funded | 67 | 71 | ||||||
Total research and development expense (1) | $ | 186 | $ | 197 | ||||
Percent of total sales | 14.6 | % | 17.4 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Selling, general and administrative expenses | $ | 150 | $ | 126 | ||||
Percent of total sales | 11.8 | % | 11.1 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Interest Expense | $ | 16 | $ | 8 | ||||
Percent increase | 100 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions, except per share amounts) | 2014 | 2013 | ||||||
Income from continuing operations, net of taxes | $ | 147 | $ | 161 | ||||
Percent of sales | 11.6 | % | 14.2 | % | ||||
Income from discontinued operations, net of taxes | 1 | — | ||||||
Net income | $ | 148 | $ | 161 | ||||
Percent of sales | 11.6 | % | 14.2 | % | ||||
Diluted earnings per share from continuing operations | $ | 1.07 | $ | 1.17 | ||||
Diluted earnings per share from discontinued operations | 0.01 | — | ||||||
Diluted earnings per share | $ | 1.08 | $ | 1.17 |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Avionics | $ | 333 | $ | 324 | ||||
Communication products | 132 | 152 | ||||||
Surface solutions | 56 | 57 | ||||||
Navigation products | 46 | 45 | ||||||
Total | $ | 567 | $ | 578 | ||||
Percent (decrease) | (2 | )% |
• | a $19 million increase from the combined impact of higher hardware deliveries and installations on the E-6B aircraft upgrade program and other international aircraft platforms |
• | partially offset by $10 million in other net decreases to revenue, including lower development revenues on the KC-46 and KC-10 programs |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 109 | $ | 112 | ||||
Percent of sales | 19.2 | % | 19.4 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Air transport aviation electronics: | ||||||||
Original equipment | $ | 171 | $ | 154 | ||||
Aftermarket | 124 | 116 | ||||||
Wide-body in-flight entertainment | 18 | 18 | ||||||
Total air transport aviation electronics | 313 | 288 | ||||||
Business and regional aviation electronics: | ||||||||
Original equipment | 146 | 158 | ||||||
Aftermarket | 97 | 96 | ||||||
Total business and regional aviation electronics | 243 | 254 | ||||||
Total | $ | 556 | $ | 542 | ||||
Percent increase | 3 | % |
• | OEM sales increased $17 million, or 11 percent primarily due to increased product deliveries from higher aircraft production rates for the Boeing 787 aircraft |
• | aftermarket sales increased $8 million, or 7 percent, driven primarily by higher regulatory airspace mandates and increased service and support activities |
• | OEM sales decreased $12 million, or 8 percent, driven by a reduction in sales at the light-end of the business jet market |
• | aftermarket sales increased $1 million, or 1 percent, as a result of higher service and support activities |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 127 | $ | 116 | ||||
Percent of sales | 22.8 | % | 21.4 | % |
• | voice and data communication services, such as GLOBALink voice and data services, which enable satellite, VHF and HF transmissions between the cockpit, the FAA and airline operation centers ensuring safety and efficiency for commercial airlines. These communications are enabled through ARINC's legacy ACARS® analog system and through the FAA's next generation VDLM2 digital technology |
• | pre-flight and in-flight planning services and communications, such as ARINC Direct and ASCEND®, which provide business aircraft operators with cockpit and cabin voice and data communication capabilities, around the clock flight planning and support, flight tracking, weather information and ground services |
• | airport communications and information systems designed to ease congestion and improve airport efficiency via airline agent and passenger-facing check-in, baggage, boarding and access control solutions |
• | train dispatching and information systems including solutions to support positive train control as mandated by the 2008 Railroad Safety Improvement Act |
• | mission critical security systems including intrusion detection, access control, video and credential management and vehicle identification for nuclear power plants and defense-related facilities |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Sales | $ | 149 | $ | 11 |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 18 | $ | 1 | ||||
Percent of sales | 12.1 | % | 9.1 | % |
Three Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
General corporate, net | $ | 16 | $ | 17 |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Total sales | $ | 2,343 | $ | 2,193 | ||||
Percent increase | 7 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Total cost of sales | $ | 1,650 | $ | 1,554 | ||||
Percent of total sales | 70.4 | % | 70.9 | % |
• | $106 million of inorganic cost of sales from the ARINC acquisition |
• | partially offset by a $10 million reduction in company-funded R&D expense, as explained below |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Customer-funded: | ||||||||
Government Systems | $ | 181 | $ | 199 | ||||
Commercial Systems | 49 | 47 | ||||||
Total customer-funded | 230 | 246 | ||||||
Company-funded: | ||||||||
Government Systems | 35 | 36 | ||||||
Commercial Systems | 97 | 106 | ||||||
Total company-funded | 132 | 142 | ||||||
Total research and development expense (1) | $ | 362 | $ | 388 | ||||
Percent of total sales | 15.5 | % | 17.7 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Selling, general and administrative expenses | $ | 286 | $ | 250 | ||||
Percent of total sales | 12.2 | % | 11.4 | % |
• | $20 million of SG&A costs from the recently acquired ARINC business |
• | $13 million of transaction costs for legal, accounting and advisory fees resulting from the ARINC acquisition |
• | $3 million of other net increases, including higher bid and proposal activities |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Interest Expense | $ | 28 | $ | 14 | ||||
Percent increase | 100 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions, except per share amounts) | 2014 | 2013 | ||||||
Income from continuing operations, net of taxes | $ | 278 | $ | 293 | ||||
Percent of sales | 11.9 | % | 13.4 | % | ||||
Income from discontinued operations, net of taxes | 1 | — | ||||||
Net income | $ | 279 | $ | 293 | ||||
Percent of sales | 11.9 | % | 13.4 | % | ||||
Diluted earnings per share from continuing operations | $ | 2.03 | $ | 2.10 | ||||
Diluted earnings per share from discontinued operations | 0.01 | — | ||||||
Diluted earnings per share | $ | 2.04 | $ | 2.10 |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Avionics | $ | 650 | $ | 639 | ||||
Communication products | 250 | 285 | ||||||
Surface solutions | 114 | 107 | ||||||
Navigation products | 85 | 93 | ||||||
Total | $ | 1,099 | $ | 1,124 | ||||
Percent (decrease) | (2 | )% |
• | a $31 million increase from the combined impact of higher hardware deliveries and installations on the E-6B aircraft upgrade program and other international aircraft platforms |
• | partially offset by $20 million in other net decreases to revenue, including lower development revenues on the KC-46 and KC-10 programs |
• | $18 million increase attributable to higher international sales of Firestorm targeting systems |
• | partially offset by other net decreases to revenue of $11 million, including a reduction of effort on the Common Range Integrated Instrumentation Systems development program |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 210 | $ | 219 | ||||
Percent of sales | 19.1 | % | 19.5 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Air transport aviation electronics: | ||||||||
Original equipment | $ | 328 | $ | 294 | ||||
Aftermarket | 252 | 228 | ||||||
Wide-body in-flight entertainment | 37 | 45 | ||||||
Total air transport aviation electronics | 617 | 567 | ||||||
Business and regional aviation electronics: | ||||||||
Original equipment | 275 | 300 | ||||||
Aftermarket | 185 | 181 | ||||||
Total business and regional aviation electronics | 460 | 481 | ||||||
Total | $ | 1,077 | $ | 1,048 | ||||
Percent increase | 3 | % |
• | OEM sales increased $34 million, or 12 percent primarily due to increased product deliveries from higher aircraft production rates for the Boeing 787 aircraft |
• | aftermarket sales increased $24 million, or 11 percent, primarily driven by higher revenue from regulatory airspace mandates, increased service and support activities, and a large delivery of spare parts for 787 aircraft |
• | wide-body IFE sales decreased $8 million, or 18 percent, resulting from the absence of a $7 million last-time buy order for spare parts that was delivered to an airline customer last year |
• | OEM sales decreased $25 million, or 8 percent, driven by a reduction in sales at the light-end of the business jet market |
• | aftermarket sales increased $4 million, or 2 percent, as a result of higher service and support activities |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 238 | $ | 221 | ||||
Percent of sales | 22.1 | % | 21.1 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Sales | $ | 167 | $ | 21 |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Segment operating earnings | $ | 20 | $ | 2 | ||||
Percent of sales | 12.0 | % | 9.5 | % |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
General corporate, net | $ | 31 | $ | 30 |
Three Months Ended | Six Months Ended | |||||||||||||||
March 31 | March 31 | |||||||||||||||
(in millions) | 2014 | 2013 | 2014 | 2013 | ||||||||||||
Pension benefits | $ | 1 | $ | 2 | $ | 4 | $ | 4 | ||||||||
Other retirement benefits | 3 | 3 | 5 | 7 | ||||||||||||
Net benefit expense | $ | 4 | $ | 5 | $ | 9 | $ | 11 |
FINANCIAL CONDITION AND LIQUIDITY |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Cash provided by operating activities | $ | 63 | $ | 179 |
• | payments for production inventory and other operating costs increased by $173 million to $2,013 million during the first half of 2014, compared to $1,840 million during the first half of 2013. The increased payments for operating costs primarily resulted from the higher sales volume associated with our recently completed acquisition of ARINC. In addition, the operating cost payments for 2014 include approximately $13 million of payments that relate to ARINC transaction closing costs |
• | payments for employee incentive pay increased $60 million. Incentive pay is expensed in the year it is incurred and is paid in the first fiscal quarter of the following year. During the six months ended March 31, 2014, $114 million was paid for employee incentive pay costs expensed during fiscal year 2013. This compares to $54 million paid during the six months ended March 31, 2013 for employee incentive pay costs expensed during fiscal year 2012 |
• | cash payments for income taxes increased $69 million to $114 million during the first six months of 2014 compared to $45 million paid during the same period last year. The increase in cash used for income tax payments is primarily due to differences in the availability of the Federal R&D Tax Credit and the timing of tax deductions, including lower contributions to our pension plan in fiscal year 2014 as compared to fiscal 2013 |
• | the above items were partially offset by higher cash receipts from customers which increased by $140 million to $2,380 million during the first half of 2014, compared to $2,240 million during the first half of 2013. The increase was primarily attributable to higher sales volume from our acquisition of ARINC |
• | in addition, payments to our pension plan were lower by $54 million as we made contributions of $63 million during the six months ended March 31, 2014 as compared to $117 million during the same period in the prior year |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Cash used for investing activities | $ | (1,462 | ) | $ | (62 | ) |
• | in December 2013, we acquired ARINC for $1.415 billion. We had no business acquisitions during the same period of the prior year |
• | partially offset by the proceeds from the divestiture of our KOSI business in November 2013. We had no business divestitures during the same period of the prior year |
Six Months Ended | ||||||||
March 31 | ||||||||
(in millions) | 2014 | 2013 | ||||||
Cash provided by (used for) financing activities | $ | 1,414 | $ | (113 | ) |
• | we received net proceeds of $1.089 billion from the issuance of long-term debt in December 2013. A portion of these proceeds were used to finance the acquisition of ARINC and the remainder was used to repay $200 million of long-term debt that matured in December 2013 |
• | net proceeds from short-term commercial paper borrowing increased by $246 million. During the first six months of 2014, net proceeds from short-term commercial paper borrowings were $631 million, compared to net proceeds of $385 million during the same period last year. The increase in short-term commercial paper borrowings was driven by our financing of the ARINC acquisition |
• | cash repurchases of common stock decreased $376 million to $61 million during the six months ended March 31, 2014, compared to $437 million repurchased during the same period last year |
(in millions) | March 31, 2014 | September 30, 2013 | |||||
Cash and cash equivalents | $ | 410 | $ | 391 | |||
Short-term debt(1) | (866 | ) | (436 | ) | |||
Long-term debt, net | (1,658 | ) | (563 | ) | |||
Net debt (2) | $ | (2,114 | ) | $ | (608 | ) | |
Total equity | $ | 1,852 | $ | 1,623 | |||
Debt to total capitalization (3) | 58 | % | 38 | % | |||
Net debt to total capitalization (4) | 53 | % | 27 | % |
(1) | Short-term debt at March 31, 2014 is comprised of short-term commercial paper borrowings. Short-term debt at September 30, 2013 includes $235 million of short-term commercial paper borrowings, $200 million of unsecured debt that matured on December 1, 2013 (the 2013 Notes) and a $1 million fair value swap adjustment related to the 2013 Notes |
(2) | Calculated as total of short-term and long-term debt, net (Total debt), less cash and cash equivalents |
(3) | Calculated as Total debt divided by the sum of Total debt plus Total equity |
(4) | 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 | Negative | |||
Moody’s Investors Service | P-2 | A3 | Stable | |||
Standard & Poor’s | A-2 | A- | Stable |
ENVIRONMENTAL |
CRITICAL ACCOUNTING POLICIES |
CAUTIONARY STATEMENT |
Item 3A. | Quantitative and Qualitative Disclosures about Market Risk. |
March 31, 2014 | ||||||||||
(in millions) | Interest Rate | Carrying Value | Fair Value | |||||||
$400 Notes due 2043 | 4.80% | $ | 398 | $ | 425 | |||||
$400 Notes due 2023 | 3.70% | 399 | 409 | |||||||
$250 Notes due 2021 | 3.10% | 249 | 251 | |||||||
$300 Notes due 2019 | 5.25% | 299 | 340 | |||||||
$300 Notes due 2016 | 3 month LIBOR plus 0.35% | 300 | 300 |
Item 4A. | Controls and Procedures. |
PART II | OTHER INFORMATION |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
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) | |||||||||
January 1, 2014 through January 31, 2014 | — | $ | — | — | $ | 395 million | |||||||
February 1, 2014 through February 28, 2014 | 225,000 | $ | 81.51 | 225,000 | $ | 376 million | |||||||
March 1, 2014 through March 31, 2014 | 250,000 | $ | 81.62 | 250,000 | $ | 356 million | |||||||
Total/Average | 475,000 | $ | 81.57 | 475,000 |
(1) | On February 7, 2013 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. | Exhibits |
(a) | Exhibits |
Exhibit Number | Description | ||
10-f-1 | Rockwell Collins 2005 Deferred Compensation Plan, Amended and Restated | ||
10-n-2 | Schedule identifying executives of the Company who are party to a Change of Control Agreement | ||
10-p-2 | Consulting Agreement between the Company and Gary R. Chadick dated February 6, 2014 | ||
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. | |||
(Registrant) | |||
Date: | April 17, 2014 | By | /s/ Tatum J. Buse |
Tatum J. Buse | |||
Vice President, Finance and Controller | |||
(Principal Accounting Officer and an Authorized Officer) | |||
1.010 | Account means one of the accounts established for the purpose of measuring and determining a Participant’s interest in this Plan, such accounts being the Participant’s Salary Deferral Account, Company Match Account, Incentive Compensation Deferral Account, and Performance Award Account. |
1.020 | Account Balance means, with respect to each Participant, an account in the records of the Company equal to the sum of the Participant’s: |
(a) | Salary Deferral Account balance; |
(b) | Company Match Account balance; |
(c) | Incentive Compensation Deferral Account balance; and |
(d) | Performance Award Account balance. |
1.030 | Affiliate means: |
(a) | any corporation incorporated under the laws of one of the United States of America of which the Company owns, directly or indirectly, eighty percent (80%) or more of the combined voting power of all classes of stock or eighty percent (80%) or more of the total value of the shares of all classes of stock (all within the meaning of Code Section 1563); |
(b) | any partnership or other business entity organized under such laws, of which the Company owns, directly or indirectly, eighty percent (80%) or more of the voting power or eighty |
(c) | any other company deemed to be an Affiliate by the Company’s Board of Directors. |
1.040 | Annual Company Match Amount for any Plan Year means the amount determined in accordance with Section 3.030. |
1.050 | Annual Deferral Amount means that portion of a Participant’s Base Annual Salary which a Participant elects to have deferred, in accordance with Article III, for any one Plan Year. In the event of a Participant’s Retirement, Disability, death or a Separation from Service prior to the end of a Plan Year, such year’s Annual Deferral Amount will be the actual amount withheld prior to such event. |
1.060 | Annual Installment Method means a benefit payment method involving a series of annual installment payments over the number of years selected by the Participant in accordance with this Plan, which will be calculated in the manner set forth in this Section. The Account Balance of the Participant will be determined as of the close of business on the last business day of the calendar year. The annual installment will be calculated by multiplying this balance by a fraction, the numerator of which is one (1), and the denominator of which is the remaining number of annual payments due the Participant. (By way of example, if a Participant were to elect a 10-year payment under the Annual Installment Method, the first payment would be one-tenth (1/10) of the Account Balance, calculated as described in this definition. The following year, the payment would be one-ninth (1/9) of the Account Balance, calculated as described in this definition.) Each annual installment will be paid within the first sixty (60) days of the calendar year following the applicable year. |
1.070 | Base Annual Salary means the Employee’s annualized salary rate for services performed by such Employee on behalf of the Company or an Affiliate, whether or not paid to him in such calendar year or included on the Federal Income Tax Form W‑2 for such calendar year, excluding bonuses, commissions, overtime, fringe benefits, stock options, stock appreciation rights, restricted stock, restricted stock units, relocation expenses, incentive payments, Performance Awards, non-monetary awards, directors fees and other fees, automobile and other allowances (whether or not such allowances are included in the Employee’s gross income) paid to a Participant for employment services rendered. Base Annual Salary will be calculated before reduction for compensation voluntarily deferred or contributed by the Participant pursuant to all qualified or non‑qualified plans of the Company or any Affiliate and will be calculated to include amounts not otherwise included in the Participant’s gross income under Code Section 125, 129, 223, 402(e)(3), 402(h), 403(b) or similar provision, pursuant to plans established by the Company or an Affiliate; provided, however, that all such amounts will be included in compensation only to the extent that, had there been no such plan, the amount would have been payable in cash to the Participant. |
1.080 | Beneficiary means one or more persons, trusts, estates or other entities, designated in accordance with Article XI who or which are entitled to receive benefits under this Plan upon the death of a Participant. |
1.090 | Beneficiary Designation Form means the written or electronic form established from time to time by the Committee or its delegate that a Participant completes, signs and returns to the Committee or its delegate, in order to designate one or more Beneficiaries. |
1.100 | Board of Directors means the Company’s Board of Directors. |
1.110 | Change of Control means any of the following: |
(a) | The acquisition by any individual, entity or group (within the meaning of Section 13(d)(3) or Section 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (a “Person”) of beneficial ownership (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of 20% or more of either (1) the then outstanding shares of common stock of the Company (the “Outstanding Company Common Stock”) or (2) the combined voting power of the then outstanding voting securities of the Company entitled to vote generally in the election of directors (the “Outstanding Company Voting Securities”); provided, however, that for purposes of this subsection (a), the following acquisitions shall not constitute a Change of Control: (w) any acquisition directly from the Company, (x) any acquisition by the Company, (y) any acquisition by any employee benefit plan (or related trust) sponsored or maintained by the Company or any corporation controlled by the Company or (z) any acquisition pursuant to a transaction which complies with clauses (1), (2) and (3) of subsection (c) of this Section 1.110; or |
(b) | Individuals who, as of the date hereof, constitute the Board of Directors of the Company (the “Incumbent Board”) cease for any reason to constitute at least a majority of the Board of Directors; provided, however, that any individual becoming a director subsequent to that date whose election, or nomination for election by the Company’s shareowners, was approved by a vote of at least a majority of the directors then comprising the Incumbent Board shall be considered as though such individual were a member of the Incumbent Board, but excluding, for this purpose, any such individual whose initial assumption of office occurs as a result of an actual or threatened election contest with respect to the election or removal of directors or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board of Directors; or |
(c) | Consummation of a reorganization, merger or consolidation or sale or other disposition of all or substantially all of the assets of the Company or the acquisition of assets of another entity (a “Company Transaction”), in each case, unless, following such Company Transaction, (1) all or substantially all of the individuals and entities who were the beneficial owners, respectively, of the Outstanding Company Common Stock and Outstanding Company Voting Securities immediately prior to such Company Transaction beneficially own, directly or indirectly, more than 50% of, respectively, the then outstanding shares of common stock and the combined voting power of the then outstanding voting securities entitled to vote generally in the election of directors, as the case may be, of the corporation resulting from such Company Transaction (including, without limitation, a corporation which as a result of such transaction owns the Company or all or substantially all of the Company’s assets either directly or through one or more subsidiaries) in substantially the same proportions as their ownership, immediately prior to such Company Transaction of the Outstanding Company Common Stock and Outstanding Company Voting Securities, as the case may be, (2) no Person (excluding any employee benefit plan (or related trust) of the Company or of such corporation resulting from such Company Transaction) beneficially owns, directly or indirectly, 20% or more of, respectively, the then outstanding shares of common stock of the corporation resulting from such Company Transaction or the combined voting power of the then outstanding voting securities of such corporation except to the extent that such ownership existed prior to the Company Transaction and (3) at least a majority of the members of the board of |
(d) | Approval by the Company’s shareowners of a complete liquidation or dissolution of the Company. |
1.120 | Code means the Internal Revenue Code of 1986, as from time to time amended. |
1.130 | Committee means the Compensation Committee of the Board of Directors. |
1.140 | Company means Rockwell Collins, Inc., a Delaware corporation. |
1.150 | Company Match Account means: |
(a) | the sum of all of a Participant’s Annual Company Match Amounts, |
(b) | adjusted by amounts credited or debited (gains or losses) thereto, in accordance with the provisions of Section 4.020(b), as such provisions relate to such Company Match Account, and |
(c) | reduced by any amount debited thereon equal to the amount of all distributions made to the Participant or his Beneficiary pursuant to this Plan which are related to such Company Match Account. |
1.160 | Deduction Limitation means the following described limitation on a benefit that may otherwise be distributable pursuant to the provisions of this Plan. Except as otherwise provided, this limitation will be applied to all distributions that are “subject to the Deduction Limitation” under this Plan. If the Company determines in good faith prior to a Change of Control that it is reasonably anticipated that any compensation paid to a Participant for a taxable year of the Company would not be deductible by the Company solely by reason of the limitation under Code Section 162(m), then, to the extent deemed necessary by the Company to ensure that the entire amount of any distribution to the Participant pursuant to this Plan prior to the Change of Control is deductible, the Company may defer all or any portion of a distribution under this Plan. Any amounts deferred pursuant to this limitation will continue to be credited/debited with additional amounts in accordance with Section 4.020(b), even if such amount is being paid out in installments. The amounts so deferred and amounts credited thereon will be distributed to the Participant or his Beneficiary (in the event of the Participant’s death) at the earlier of (a) the earliest possible date in the calendar year, as determined in good faith by the Company, on which the deductibility of compensation paid or payable to the Participant for the taxable year of the Company during which the distribution is made will not be limited by Section 162(m), or (b) the Participant’s Separation from Service or Retirement. Notwithstanding anything to the contrary in this Plan, the Deduction Limitation will not apply to any distributions made after a Change of Control. |
1.170 | Deferral Election means a written or electronic election made pursuant to Article III by a Participant to defer receipt of a part of his Base Annual Salary, or to defer receipt of all or a part of his Incentive Compensation or any Performance Award. |
1.180 | Deferral Election Form means the form established from time to time by the Committee or its delegate that a Participant completes, signs and returns to the Committee or its delegate to make a |
1.190 | Disability has the meanings set forth in Section 409A. Specifically, for purposes of this Plan and Section 409A, a Participant will be considered to have incurred a Disability if the Participant is: |
(a) | unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months; or |
(b) | by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under an accident or health plan covering employees of the Company or any Affiliate. |
1.200 | Effective Date means January 1, 2005. |
1.210 | Eligible Employee means: |
(a) | For the Plan Year commencing January 1, 2005, any Employee who is employed in the United States by the Company or any Affiliate whose Base Annual Salary for 2005 is greater than or equal to $110,000. |
(b) | For the Plan Year commencing January 1, 2006, any Employee who is employed in the United States by the Company or any Affiliate whose Base Annual Salary for 2006 is greater than or equal to $120,000. |
(c) | For Plan Years commencing on or after January 1, 2007, any Employee who is employed in the United States by the Company or an Affiliate whose salary band on or after January 1, 2007 is equal to D5, E6, M0, or M5 through M9 before July 23, 2007, or is equal to D5, E6, M0, M1, or M6 through M9 on or after July 23, 2007. |
(d) | For Plan Years commencing on or after January 1, 2014, any Employee who is employed in the United States by the Company or an Affiliate whose salary band is equal to D5, E6, M0, M1, or M6 through M9 prior to May 31, 2014, or is equal to D5, G7, G8, G9, M0, M1, or M6 through M9 on or after May 31, 2014. |
1.220 | Employee means any person who is employed by the Company or by an Affiliate. |
1.230 | ERISA means the Employee Retirement Income Security Act of 1974, as from time to time amended. |
1.240 | Exchange Act means the Securities Exchange Act of 1934, as amended. |
1.245 | 409A Change of Control means a “Change of Control Event” as defined in Treasury Regulation Section 1.409A-3(i)(5)(i) and set forth in Treasury Regulation Section 1.409A-3(i)(5)(v)-(vii), applying the default rules and percentages set forth in such Treasury Regulation. |
1.250 | Incentive Compensation means any award payable to a Participant under an incentive compensation plan sponsored by the Company or an Affiliate which, but for a Deferral Election under the Plan, would be paid to the Participant and considered to be “wages” for purposes of United States federal income tax withholding, including without limitation any incentive compensation payable pursuant to the Company’s incentive payment plan(s) and annual incentive compensation plan(s) for Senior Executives, and any change of control agreement entered into between the Company and a Participant. |
1.260 | Incentive Compensation Deferral means a deferral by a Participant of part or all of his Incentive Compensation otherwise payable to him with respect to a particular fiscal year of the Company. In the event of a Participant’s Retirement, Disability, death or a Separation from Service prior the completion of the fiscal year for which the Incentive Compensation is payable, such year’s Incentive Compensation Deferral will be zero and any Incentive Compensation payable with respect to such partial fiscal year will be paid at the same time Incentive Compensation is paid to employees who did not elect to make a deferral of Incentive Compensation. |
1.270 | Incentive Compensation Deferral Account means: |
(a) | the sum of all of a Participant’s Incentive Compensation Deferrals, |
(b) | adjusted by amounts credited or debited (gains or losses) thereto, in accordance with the provisions of Section 4.020(b) which are related to such Incentive Compensation Deferral Account, and |
(c) | reduced by any amount debited thereon equal to the amount of all distributions made to the Participant or his Beneficiary pursuant to this Plan which are related to such Incentive Compensation Deferral Account. |
1.280 | Measurement Funds means the investment vehicles offered under this Plan which are identified and described in communication materials made available to Participants by the Company. |
1.290 | Named Fiduciary means the Committee, its delegates, the Trustee and, following the occurrence of a Change of Control, the third-party fiduciary described in Section 14.020 of this Plan. |
1.300 | Non-Qualified Savings Plan means the Rockwell Collins 2005 Non-Qualified Retirement Savings Plan, as amended from time to time. |
1.310 | Participant means any Eligible Employee: |
(a) | who is an employee of Rockwell Collins, Inc. (or one of its Affiliates); |
(b) | who elects to participate in the Plan; |
(c) | who completes a Participation Agreement and a Beneficiary Designation Form; |
(d) | whose completed Participation Agreement and Beneficiary Designation Form are accepted by the Committee or its delegate; |
(e) | who commences participation in the Plan; and |
(f) | who has not elected to terminate participation in the Plan. |
1.320 | Participation Agreement means a written or electronic agreement, as may be amended from time to time, which is provided to an Eligible Employee or Participant by the Committee or its delegate. The Participation Agreement bearing the latest date by the Committee or its delegate will supersede all previous such Participation Agreements in their entirety and will govern the Eligible Employee’s or Participant’s entitlement to benefits hereunder. The terms of any such Participation Agreement may be different for a particular Participant. |
1.325 | Performance Award means any Performance Share or Performance Unit awarded under (and as defined in) the Company’s 2001 Long-Term Incentives Plan or 2006 Long-Term Incentives Plan. |
1.326 | Performance Award Deferral means any deferral of a Performance Award made pursuant to and in accordance with the terms of this Plan. In the event of a Participant’s Retirement, Disability, death or a Separation from Service prior to the end of the performance period for which the Performance Award was granted, such Performance Award Deferral will be zero and any Performance Award payable with respect to such partial performance period will be paid at the same time it is paid to employees who did not elect to make a deferral of a Performance Award. |
1.328 | Performance Award Account means: |
(a) | the sum of all of a Participant’s Performance Award Deferrals; |
(b) | adjusted by amounts credited or debited (gains or losses) thereto, in accordance with the provisions of Section 4.020(b), as such provisions relate to such Performance Award Account; and |
(c) | reduced by any amount debited thereon equal to the amount of all distributions made to the Participant or his Beneficiary pursuant to this Plan which are related to such Performance Award Account. |
1.330 | Plan means this Amended and Restated Rockwell Collins 2005 Deferred Compensation Plan, which is evidenced by this instrument and by the forms associated with the said instrument, as they may be amended from time to time. |
1.340 | Plan Year means each twelve-month period ending on the last day of December. |
1.350 | Pre-Retirement Survivor Benefit means the benefit set forth in Article VII. |
1.360 | Qualified Savings Plan means the Rockwell Collins Retirement Savings Plan, as amended from time to time. |
1.370 | Retirement, Retire(s) or Retired means, with respect to an Employee, “separation from service” with the Company and all of its Affiliates, within the meaning of Section 409A, on or after the attainment of age 55, other than for reasons of Disability or death. |
1.380 | Retirement Benefit means the benefit set forth in Article VI. |
1.390 | Salary Deferral Account means: |
(a) | the sum of all of a Participant’s Base Annual Salary deferral amounts, |
(b) | adjusted by amounts credited or debited (gains or losses) thereto, in accordance with the provisions of Section 4.020(b), as such provisions relate to such Salary Deferral Account, and |
(c) | reduced by any amount debited thereon equal to the amount of all distributions made to the Participant or his Beneficiary pursuant to this Plan which are related to such Salary Deferral Account. |
1.400 | Section 409A means Section 409A of the Code and any regulations or other guidance issued thereunder. |
1.410 | Separation from Service means a “separation from service” from the Company and all of its Affiliates, within the meaning of Section 409A, other than for reasons of Retirement or death. |
1.420 | Short-Term In-Service Payout means the payout set forth in Section 5.010 of the Plan. |
1.430 | Specified Employee has the meaning set forth in Section 409A, as determined each year in accordance with procedures established by the Company. |
1.440 | Termination Benefit means the benefit set forth in Article VIII. |
1.450 | Third-Party Administrator means an independent third party selected by the Trustee and approved by the individual who, immediately prior to a Change of Control, was the Company’s Chief Executive Officer or, if not so identified, the Company’s highest ranking officer immediately prior to the Change of Control (the “Ex-CEO”). |
1.460 | Trust means the master trust established by agreement between the Company and the Trustee, which will be a grantor trust. |
1.470 | Trustee means Wells Fargo Bank N.A., or any successor trustee of the Trust described in Section 1.460 of this Plan. |
1.480 | Unforeseeable Financial Emergency has the meaning set forth in Section 409A. Specifically, for purposes of this Plan and Section 409A, an Unforeseeable Financial Emergency means a severe financial hardship to the Participant resulting from an illness or accident of the Participant, the Participant’s spouse, or a dependent (as defined in Section 152(a) of the Code) of the Participant, loss of the Participant’s property due to casualty, or other similar extraordinary or unforeseeable circumstances arising as a result of events beyond the control of the Participant. The requirements |
2.010 | Select Group Defined. Since participation in the Plan is intended to be limited to a select group of management and highly compensated Employees, the Plan is only available to Eligible Employees of the Company and its Affiliates. |
2.020 | Commencement of Participation. As a condition to initial participation in this Plan, each Eligible Employee who wishes to participate in the Plan will be required to complete, execute and return to the Committee or its delegate a written or electronic Deferral Election Form. |
2.030 | Termination of Participation and/or Deferrals. If the Committee or its delegate determines in good faith that a Participant no longer qualifies as a member of a select group of management or highly compensated employees, as membership in such group is determined in accordance with ERISA Sections 201(2), 301(a)(3) and 401(a)(1), the Committee will have the right, in its sole discretion, to prevent the Participant from making future deferral elections. |
3.010 | Base Annual Salary Deferral. Each Plan Participant will be permitted to make an irrevocable election to defer (such Deferral Election to be made in whole percentages) receipt of an amount equal to one percent (1%) through fifty percent (50%) of his Base Annual Salary. |
(a) | For each Plan Year, a Participant, will be permitted, in his sole discretion, to make an irrevocable election to defer Base Annual Salary for the following Plan Year and must deliver such Deferral Election to the Company or an Affiliate on a new Deferral Election Form before December 31st of the Plan Year immediately preceding the Plan Year for which the deferral is intended. If no such Deferral Election Form is timely delivered for a Plan Year, the Annual Deferral Amount will be zero for that Plan Year. |
(b) | Notwithstanding the foregoing, any Participant who first becomes eligible to participate in the Plan (taking into account the aggregation rules set forth in Section 409A) within the first nine months of a Plan Year may, within thirty (30) days after first becoming eligible to participate in the Plan (taking into account the plan aggregation rules set forth in Section 409A), make an irrevocable election to defer Base Annual Salary for the Plan Year commencing as soon as administratively practicable following the Deferral Election. |
(c) | During each Plan Year, the Base Annual Salary Deferral Amount will be withheld from each regularly scheduled Base Annual Salary payroll in equal amounts, as adjusted from time to time for increases and decreases in Base Annual Salary. |
3.020 | Incentive Compensation Deferral. In addition to the Base Annual Salary deferral described in the preceding Section, each Participant will be permitted to irrevocably elect to defer receipt of an amount equal to one percent (1%) through one hundred percent (100%), such Deferral Election to be made in whole percentages, of the amount of any Incentive Compensation which he might be awarded. |
(a) | In general, such Deferral Election will be made on a Deferral Election Form and will apply to Incentive Compensation to which the Participant might be entitled for the fiscal year commencing immediately following such Deferral Election. |
(b) | Except as otherwise permitted by Section 409A, any election made pursuant to this Section 3.020 must be made by the close of the fiscal year immediately preceding the fiscal year to which such Incentive Compensation relates commences. Notwithstanding the foregoing, to the extent permitted under Section 409A, if the Company in its sole discretion determines that the Incentive Compensation (or any portion thereof) meets the requirements for “performance-based compensation” within the meaning of Section 409A, the Committee may permit such election to be made after the start of the fiscal year for which the |
(a) | In general, such Deferral Election will be made on a Deferral Election Form and will apply to Performance Awards to which the Participant might be granted for the fiscal year commencing immediately following such Deferral Election. |
(b) | Except as otherwise permitted by Section 409A, any election made pursuant to this Section 3.025 must be made by the close of the fiscal year immediately preceding the first fiscal year for which the Performance Award is granted. Notwithstanding the foregoing, to the extent permitted under Section 409A, if the Company in its sole discretion determines that the Performance Award (or any portion thereof) meets the requirements for “performance-based compensation” within the meaning of Section 409A, the Committee may permit such election to be made after the Performance Award is granted for the portion that qualifies as performance-based compensation, but any such election must be made at least six months prior to the end of the performance period to which the Performance Award relates. A Participant will not be permitted to make an election under the preceding sentence unless the Participant is in service with the Company or an Affiliate continually from the later of the beginning of the performance period or the date performance criteria are established through the date of the election, and no such election may be made with respect to compensation that has become readily ascertainable. |
(a) | In the event of a Participant’s Retirement or death, the Participant’s Company Match Account will be credited with the Annual Company Match Amount for the Plan Year in which he retires or dies; and |
(b) | If a Participant is not employed by the Company or an Affiliate as of the last day of a Plan Year for any reason other than the Participant’s Retirement or death, the Annual Company Match for such Plan Year will be zero. |
(a) | A Participant will have a one hundred percent (100%) vested interest in his Account Balance. |
(b) | Notwithstanding anything to the contrary contained in this Plan, in the event of a Change of Control, a Participant’s Account Balance and any other interest of his under this Plan at |
4.020 | Crediting/Debiting of Account Balances. In accordance with, and subject to, the rules and procedures that are established from time to time by the Committee or its delegate, in its sole discretion, amounts will be credited or debited to a Participant’s Account Balance in the manner set forth in the provisions of this Section. |
(a) | Allocation to Measurement Funds. A Participant, in connection with his initial Deferral Election in accordance with Section 3.010 or 3.020 above, will be permitted to also elect to have one or more Measurement Funds used to determine the amounts to be credited to his Account Balance and his election will continue to be in effect thereafter, unless it should be changed in accordance with subsection (c). If it is determined by the Committee or its delegate that an investment election made by a Participant is invalid or defective, the Participant’s election, until duly corrected by him, will be deemed to have been made in favor of the Fidelity Puritan® Fund or such other Measurement Fund as may be designated by the Vice President of Compensation and Benefits from time to time. |
(b) | Crediting or Debiting Method. The performance (either positive or negative) of each elected Measurement Fund will be determined by the Committee or its delegate, based on the performance of the Measurement Funds themselves. A Participant’s Account Balance will be credited or debited on a daily basis based on the performance of each Measurement Fund selected by the Participant, as determined by the Committee or its delegate in its sole discretion, as though: |
(1) | a Participant’s Account Balance were actually invested in the Measurement Fund(s) selected by the Participant as of the close of business on any business day, at the closing price on that day; |
(2) | the portion of the amount actually deferred during any pay period was invested in the Measurement Fund(s) selected by the Participant, in the percentages applicable on such day, no later than the close of business on the first business day after the day on which such amounts are actually deferred, at the closing price on such date; and |
(3) | any distribution made to a Participant that decreases such Participant’s Account Balance ceased being invested in the Measurement Fund(s), in the applicable percentages, no earlier than one business day prior to the distribution, at the closing price on such date. |
(c) | Transfers among Measurement Funds. The Participant will be permitted to change, on a daily basis, any previous Measurement Fund election or elections he has made with regard to his Account Balance. The elections and changes to such elections which a Participant makes pursuant to this subsection will be made by means of any method (including any available telephonic or electronic method which is acceptable to the Committee or its delegate at the time the election or change is made by the Participant), and may be made at any time and will be effective as of the New York Stock Exchange closing immediately following the making of that election or change. |
(d) | No Actual Investment. Notwithstanding any other provision of this Plan that may be interpreted to the contrary, the Measurement Funds are to be used for measurement purposes only, and a Participant’s election of any such Measurement Fund, the allocation to his Account Balance thereto, the calculation of additional amounts and the crediting or debiting of such amounts to a Participant’s Account Balance will not be considered or construed in any manner as an actual investment of his Account Balance in any such Measurement Fund. In the event that the Company or the Trustee, in its own discretion, decides to invest funds in any or all of the Measurement Funds, no Participant will have any rights in or to such investments themselves. Without limiting the foregoing, a Participant’s Account Balance will at all times be a bookkeeping entry only and will not represent any investment made on his behalf by the Company or the Trust. The Participant will at all times remain an unsecured creditor of the Company. |
(e) | Company Reservation of Rights. Consistent with the preceding sentence, nothing to the contrary in this Plan or any of its forms or communication material, nor in any document associated with the Trust, should be interpreted or understood to provide Participants or their Beneficiaries with any current, direct rights with respect to the assets held by the Trustee in the Trust. |
(a) | Deferral Amounts. For each Plan Year, the Company or any Affiliate employing the Participant will withhold from that portion of the Participant’s Base Annual Salary, Incentive Compensation, or Performance Award which is being deferred the Participant’s share of FICA and other employment taxes on such deferrals. |
(b) | Annual Company Match Amounts. For each Plan Year in which Company Match Amount is credited to the Participant, the Company or any Affiliate employing the Participant will withhold the Participant’s share of FICA and other employment taxes on the amount credited to such Company Match Account. |
(c) | Distributions. The Company or any Affiliate employing the Participant, or the Trustee of the Trust, will withhold from any payments made to a Participant under this Plan all federal, state and local income, employment and other taxes required to be withheld in connection with such payments, in amounts and in a manner to be determined in the sole discretion of the Company and the trustee of the Trust. |
5.010 | Short-Term In-Service Payouts. In connection with each election to defer, a Participant may irrevocably elect to receive a future Short-Term In -Service Payout from the Plan with respect to such Salary Deferral Account, Company Match Account, Incentive Compensation Deferral Account, and Performance Award Account. Any such election must be made no later than (i) December 31st of the Plan Year immediately preceding the Plan Year to which the Base Annual Salary deferral relates and (ii) the close of the fiscal year immediately preceding the first fiscal year to which the Incentive Compensation or Performance Award relates; provided, however, that if the Incentive Compensation or Performance Award qualifies as “performance-based compensation” within the meaning of Section 409A, the Committee may permit such election to |
(a) | Subject to the Deduction Limitation, the said Short-Term In-Service Payout will be a lump sum payment in an amount that is equal to the sum of the deferrals and Annual Company Match Amount, as adjusted for amounts credited or debited in the manner provided in Section 4.020 on that amount. |
(b) | Subject to the Deduction Limitation and the other terms and conditions of this Plan, each Short‑Term In-Service Payout elected will be paid out during a sixty (60) day period commencing immediately after the last day of any Plan Year designated by the Participant that is at least three Plan Years after the Plan Year in which the deferral occurred. By way of example, if a three-year Short-Term In-Service Payout is elected for amounts that are deferred in the Plan Year commencing January 1, 2008, the three-year Short-Term In-Service Payout would become payable during a sixty (60) day period commencing January 1, 2012. |
(c) | Should an event occur that triggers a benefit under Article VI, VII, or VIII any deferrals, plus amounts credited or debited thereon, that is subject to a Short-Term In-Service Payout election under this Section will not be paid in accordance with this Section, but will instead be paid in accordance with the other applicable Article. |
5.020 | Withdrawal for Unforeseeable Financial Emergencies. In the event that any Participant should encounter an Unforeseeable Financial Emergency, such Participant may: |
(a) | petition the Committee or its delegate to suspend any deferrals required to be made on his behalf, and/or |
(b) | petition the Committee or its delegate to permit him to receive a partial or full payout from the Plan. Such a payout will not exceed the lesser of: |
(1) | the Participant’s Account Balance, calculated as if the Participant were receiving a Termination Benefit; and |
(2) | the amount reasonably needed to satisfy the Unforeseeable Financial Emergency. |
5.030 | 409A Change of Control Payments. Notwithstanding any other provision of this Plan to the contrary, a Participant may elect to have his interest in and to Accounts hereunder paid in a lump sum, in the event of the occurrence of a 409A Change of Control, subject to the following: |
(a) | To be effective, the election of a Participant pursuant to this Section 5.030 must be made in writing and filed with the Committee or filed electronically on or before the latest of (1) December 31, 2008, (2) December 31st of the calendar year immediately preceding the first Plan Year with respect to which the Participant has deferred Base Annual Salary, Incentive Compensation, Performance Award and/or Annual Company Match Amounts, or (3) the thirtieth day after initial eligibility for the Plan or any similar Company deferred |
(b) | Any lump sum payments which are to be made on account of the occurrence of a 409A Change of Control shall be made within forty-five (45) days following such 409A Change of Control. |
(c) | Notwithstanding the foregoing, if the Participant does not file a timely written or electronic election in accordance with Section 5.030(a) to receive or not receive his or her Accounts under the Plan in a lump sum upon a 409A Change of Control, then such Participant’s Accounts under the Plan will automatically be paid in a lump sum upon a 409A Change of Control. |
6.010 | Retirement Benefit. Subject to the Deduction Limitation, a Participant who Retires will receive, as a Retirement Benefit, his Account Balance. |
6.020 | Payment of Retirement Benefit. A Participant, in connection with his commencement of participation in the Plan, may elect to receive the Retirement Benefit in a lump sum or pursuant to an Annual Installment Method of periods of from two (2) through fifteen (15) years. The Participant may change any election he has previously made to a different payout period permitted hereunder, but only one such a change may be made with respect to any single election. Such change will be accomplished by the Participant notifying the Committee or its delegate, but such change will not be valid, unless it has been submitted by the Participant and accepted by the Committee or its delegate (in the Committee’s or delegate’s discretion) in accordance with the rules set forth in Section 10.020. The Participant’s most recent election accepted by the Committee or its delegate shall govern the payout of the Retirement Benefit. If a Participant does not make any election with respect to the payment of the Retirement Benefit, then such benefit shall be payable in a lump sum. The lump sum payment shall be made, or installment payments shall commence, within the first sixty (60) days following the Plan Year in which the Participant Retires. Any payment made shall be subject to the Deduction Limitation. |
6.030 | Death Prior to Completion of Retirement Benefit. If a Participant dies after Retirement distributions commence but before the Retirement Benefit is paid in full, the Participant’s unpaid Retirement Benefit payments shall continue and shall be paid to the Participant’s Beneficiary over the remaining number of years and in the same amounts and form and time of payment as that benefit would have been paid to the Participant had the Participant survived. |
7.010 | Pre-Retirement Survivor Benefit. Subject to the Deduction Limitation, the Participant’s Beneficiary shall receive a Pre-Retirement Survivor Benefit equal to the Participant’s Account Balance if the Participant dies before he Retires or experiences a Separation from Service. |
7.020 | Payment of Pre-Retirement Survivor Benefit. Any Pre-Retirement Survivor Benefit payable pursuant to Section 7.010 will be paid in a lump sum within the first sixty days of the calendar year following the year which includes the Participant’s death. Such lump sum payment will be |
8.010 | Separation from Service Benefit. Subject to the Deduction Limitation, the Participant will receive a Separation from Service Benefit, which will be equal to the Participant’s Account Balance if a Participant experiences a Separation from Service prior to his Retirement or death. |
8.020 | Payment of Separation from Service Benefit. The form of payment of a Participant’s Account Balance, if such payment is due to the Participant’s Separation from Service, will in all cases be a lump sum in cash. Payment of such Separation from Service Benefit will be paid within the first sixty (60) days of the calendar year immediately following the Plan Year which includes the Participant’s Separation from Service. |
9.010 | Disability Waiver. |
(a) | Waiver of Deferral. A Participant who is determined by the Committee or its delegate to be suffering from a Disability will be excused from fulfilling deferrals that would otherwise have been withheld from his Base Annual Salary, Incentive Compensation or Performance Awards after he is determined to have suffered a Disability. During the period of Disability, such Participant will continue to be considered a Participant for all other purposes of this Plan. |
(b) | Return to Work. If a Participant returns to employment after a Disability ceases, subject to Section 409A, the Participant may continue to defer amounts for the remainder of the Plan Year and for every Plan Year thereafter while he is a Participant in the Plan. |
10.010 | Section 409A Generally. This Plan is intended to comply with Section 409A. Notwithstanding any other provision of this Plan to the contrary, the Company makes no representation that this Plan or any amounts payable or benefits provided under this Plan will be exempt from or comply with Section 409A and makes no undertaking to preclude Section 409A from applying to this Plan. |
10.020 | Changes in Elections. Notwithstanding any other provision of this Plan to the contrary, once an election is made pursuant to this Plan it shall be irrevocable unless all of the following conditions are met: |
(a) | the election to change the time or form of payment will not become effective until the date that is one year after the date on which the election to make the change is made; |
(b) | except with respect to any payment to be made upon the death of a Participant, the form of payment, as changed, will defer payment for the Plan Year for a minimum of five (5) years later than the date that payment of such Participant’s Account Balances would otherwise have been made under this Plan; and |
(c) | with respect to a payment that is to be made upon a fixed date or schedule of dates, the election to change the form of payment is made no less than twelve (12) months before the date that payment of the Account Balances for that Plan Year was otherwise scheduled to be paid. |
10.030 | Six Month Wait for Specified Employees. Notwithstanding any other provision of this Plan to the contrary, to the extent that any Account payable under the Plan constitute an amount payable upon Separation from Service or Retirement to any Participant under the Plan who is deemed to be a Specified Employee, then such amount will not be paid during the six (6) month period following such Separation from Service or Retirement. If the provisions of this Section 10.030 apply to a Participant who incurs a Separation from Service or Retirement, within the first six (6) months of the calendar year, then such amount will be paid within the first sixty (60) days following the close of the calendar year which includes the Participant’s Separation from Service or Retirement. If the provisions of this Section 10.030 apply to a Participant who incurs a Separation from Service or Retirement within the last six (6) months of the calendar year, then such amount will be paid within the first sixty (60) days after June 30th of the calendar year following the year in which includes the Participant’s Separation from Service or Retirement. |
11.010 | Beneficiary. Each Participant will have the right, at any time, to designate his Beneficiary or Beneficiaries (both primary and contingent) to receive any benefits payable under the Plan to a beneficiary upon the death of a Participant. The Beneficiary designated under this Plan may be the same as or different from the Beneficiary designation under any other plan of an Employer in which the Participant participates. |
11.020 | Beneficiary Designation or Change of Designation. A Participant will be permitted to designate his Beneficiary by completing and signing a written or electronic Beneficiary Designation Form, and returning it to the Committee or its delegate. A Participant will have the right to change a Beneficiary by completing, signing and otherwise complying with the terms of the written or electronic Beneficiary Designation Form and the Committee’s or its delegate’s rules and procedures, as in effect from time to time. Upon the acceptance by the Committee or its delegate of a new written or electronic Beneficiary Designation Form, all Beneficiary designations previously filed will be canceled. The Committee or its delegate will be entitled to rely on the last written or electronic Beneficiary Designation Form filed by the Participant and accepted by the Committee or its delegate prior to the Participant’s death. |
11.030 | Spousal Consent Required. If a Participant names someone other than his spouse as a Beneficiary, a spousal consent, in the written or electronic form designated by the Committee or its delegate, must be signed by that Participant’s spouse and returned to the Committee or its delegate. |
11.040 | Acknowledgment. No designation or change in designation of a Beneficiary will be effective until received and acknowledged by the Committee or its delegate. |
11.050 | Absence of Valid Beneficiary Designation. If a Participant fails to designate a Beneficiary as provided in the preceding Sections or, if all designated Beneficia-ries predecease the Participant or die prior to complete distribution of the Participant’s benefits, then the Participant’s designated Beneficiary will be deemed to be his surviving spouse. If the Participant has no surviving spouse, the benefits remaining under the Plan to be paid to a Beneficiary will be payable to the executor or personal representative of the Participant’s estate. |
11.060 | Doubt as to Beneficiary. Subject to and in accordance with Section 409A, if the Committee or its delegate has any doubt as to the proper Beneficiary to receive payments pursuant to this Plan, the Committee or its delegate will have the right, exercisable in its discretion, to withhold such payments until this matter is resolved to the Committee’s or the delegate’s satisfaction. |
11.070 | Discharge of Obligations. The payment of benefits under the Plan to a Beneficiary will fully and completely discharge the Company and all of its Affiliates and the Committee from all further obligations under this Plan with respect to the Participant, and that Participant’s participation in this Plan will terminate upon such full payment of benefits. |
12.010 | Paid Leave of Absence. Subject to Section 409A, if a Participant is authorized by the Company or the Affiliate employing the Participant for any reason to take a company-paid leave of absence, the Participant will continue to be considered to be an Eligible Employee and deferrals will continue to be withheld during such paid leave of absence. Notwithstanding the foregoing, such withholding will cease on the date such paid leave of absence is deemed to be a Separation from Service for purposes of Section 409A. |
12.020 | Unpaid Leave of Absence. Subject to Section 409A, if a Participant is authorized by the Company or the Affiliate employing the Participant to take an unpaid leave of absence, the Participant will continue to be considered an Eligible Employee and the Participant will not be permitted to make deferrals until the Participant returns to a paid employment status. Upon such return, deferrals will resume for the remaining portion of the Plan Year in which the return occurs, based on the deferral election, if any, made for that Plan Year. If no election was made for that Plan Year, no deferral will be withheld. |
13.010 | Termination. Although the Company and each Affiliate anticipates that it will continue the Plan for an indefinite period of time, there is no guarantee that the Company or any such Affiliate will continue the Plan or will not terminate the Plan at any time in the future. Accordingly, the Company reserves the right to discontinue sponsorship of the Plan and/or to terminate the Plan at any time with respect to any or all of its participating Employees, by action of the Board of Directors. Notwithstanding the foregoing, except as otherwise permitted by Section 409A, in the |
13.020 | Amendment. The Company may, at any time, amend or modify the Plan in whole or in part by action of the Board of Directors; provided, however, that: |
(a) | no amendment or modification shall be effective to decrease or restrict the value of a Participant’s Account Balance in existence at the time the amendment or modification is made, calculated as if the Participant had experienced a Separation from Service as of the effective date of the amendment or modification or, if the amendment or modification occurs after the date upon which the Participant was eligible to Retire, the Participant had Retired as of the effective date of the amendment or modification; |
(b) | no amendment or modification of this Section 13.020 Plan shall be effective; and |
(c) | the amendment or modification of the Plan shall not affect any Participant or Beneficiary who has become entitled to the payment of benefits under the Plan as of the date of the amendment or modification. |
13.030 | Effect of Payment. The full payment of all applicable benefits hereunder shall completely discharge all obligations to a Participant and his Beneficiaries under this Plan. |
14.010 | Committee Duties. Except as otherwise provided in this Article, this Plan will be administered by the Committee and its delegates. Members of the Committee may be Participants under this Plan. The Committee will also have the discretion and authority to: |
(a) | make, amend, interpret, and enforce all appropriate rules and regulations for the administration of this Plan, and |
(b) | decide or resolve any and all questions including interpretations of this Plan, as may arise in connection with the Plan. |
14.020 | Administration Upon Change of Control. Notwithstanding any other provision of this Plan to the contrary, upon and after the occurrence of a Change of Control, the Plan will be administered by the Third-Party Administrator. The Third-Party Administrator so selected will have the discretionary power to determine all questions arising in connection with the administration of the Plan and the interpretation of the Plan and Trust including, but not limited to, benefit entitlement determinations; provided, however, upon and after the occurrence of a Change of Control, such administrator will have no power to direct the investment of Plan or Trust assets or select any investment manager or custodial firm for the Plan or Trust. |
(a) | pay all reasonable administrative expenses and fees of the Third-Party Administrator; |
(b) | indemnify the Third-Party Administrator against any costs, expenses and liabilities including, without limitation, attorney’s fees and expenses arising in connection with the performance of such administrator hereunder, except with respect to matters resulting from the gross negligence or willful misconduct of the said administrator or its employees or agents; and |
(c) | supply full and timely information to the Third-Party Administrator on all matters relating to the Plan, the Trust, the Participants and their Beneficiaries, the Account Balances of the Participants, the date of circumstances of the Retirement, Disability, death or Separation from Service of the Participants, and such other pertinent information as the Third-Party Administrator may reasonably require. |
14.030 | Agents. In the administration of this Plan, the Committee may, from time to time, employ agents and delegate to them such administrative duties as it sees fit (including acting through a duly appointed representative) and may from time to time consult with counsel who may be counsel to the Company or any Affiliate. The Company’s Vice President, Compensation and Benefits will at all times, unless otherwise determined by the Committee, be deemed to be and shall be specifically referred to herein as the Committee’s delegate for all purposes herein. |
14.040 | Binding Effect of Decisions. The decision or action of the Committee or its delegate with respect to any question arising out of or in connection with the administration, interpretation and application of the Plan and the rules and regulations promulgated hereunder will be final and conclusive and binding upon all persons having any interest in the Plan. |
14.050 | Indemnity of Committee. The Company and its Affiliates shall indemnify and hold harmless the members of the Committee, any Employee to whom the duties of the Committee may be delegated, and the Committee or its delegate against any and all claims, losses, damages, expenses or liabilities arising from any action or failure to act with respect to this Plan, except in the case of willful misconduct by the Committee, any of its members, or such Employee. |
14.060 | Employer Information. To enable the Committee and its delegates to perform their functions, the Company will supply full and timely information to the Committee and delegates on all matters relating to the compensation of its Participants, the date and circum-stances of the Retirement, Disability, death or circumstances of the Retirement, Disability, death or Separation from Service of its Participants, and such other pertinent information as the Committee or its delegate may reasonably require. |
16.010 | Presentation of Claim. Any Participant or Beneficiary of a deceased Participant (such Participant or Beneficiary being referred to below as a “Claimant”) may deliver to the Committee or its delegate a written claim for a determination with respect to the amounts distributable to such Claimant from the Plan. If such a claim relates to the contents of a notice received by the Claimant, the claim must be made within sixty (60) days after such notice was received by the Claimant. All other claims must be made within one hundred and eighty (180) days of the date on which the event that caused the claim to arise occurred. The claim must state with particularity the determination desired by the Claimant. |
16.020 | Notification of Decision. The Committee or its delegate will consider a Claimant’s claim within a reasonable time, and will notify the Claimant in writing: |
(a) | that the Claimant’s requested determination has been made, and that the claim has been allowed in full; or |
(b) | that the Committee or its delegate has reached a conclusion contrary, in whole or in part, to the Claimant’s requested determination, and such notice must set forth in a manner calculated to be understood by the Claimant; |
(c) | the specific reason(s) for the denial of the claim, or any part of it; |
(1) | specific reference(s) to pertinent provisions of the Plan upon which such denial was based; |
(2) | a description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and |
(3) | an explanation of the claim review procedure set forth in Section 16.030 below. |
16.030 | Review of a Denied Claim. Within sixty (60) days after receiving a notice from the Committee or its delegate that a claim has been denied, in whole or in part, a Claimant (or the Claimant’s duly authorized representative) may file with the Committee or its delegate a written request for a review of the denial of the claim. Thereafter, but not later than thirty (30) days after the review procedure began, the Claimant (or the Claimant’s duly authorized representative): |
(a) | may review pertinent documents; |
(b) | may submit written comments or other documents; and/or |
(c) | may request a hearing, which the Committee or its delegate, in its sole discretion, may grant. |
16.040 | Decision on Review. The Committee or its delegate will render any decision on review promptly, and not later than 60 days after the filing of a written request for review of the denial, unless a hearing is held or other special circumstances require additional time, in which case the Committee’s or its delegate’s decision must be rendered within one hundred and twenty (120) days after such date. Such decision must be written in a manner calculated to be understood by the Claimant, and it must contain: |
(a) | specific reasons for the decision; |
(b) | specific reference(s) to the pertinent Plan provisions upon which the decision was based; and |
(c) | such other matters as the Committee or its delegate deems relevant. |
16.050 | Legal Action. A Claimant’s compliance with the foregoing provisions of this Article XVI is a mandatory prerequisite to a Claimant’s right to commence any legal action with respect to any claim for benefits under this Plan. |
17.010 | Establishment of the Trust. The Company shall establish the Trust (which may be referred to herein as a “Rabbi Trust”). The Trust shall become irrevocable upon a Change of Control (to the extent not then irrevocable). Notwithstanding any other provision of this Plan to the contrary, the Trust shall not become irrevocable or funded with respect to this Plan upon the occurrence of an event described in Section 1.110(d). After the Trust has become irrevocable with respect to the Plan, except as otherwise provided in Section 12 of the Trust, the Trust shall remain irrevocable with respect to the Plan until all benefits due under the Plan and benefits and account balances due to participants and beneficiaries under any other plan covered by the Trust have been paid in full. Upon establishment of the Trust, the Company shall provide for funding of the Trust in accordance with the terms of the Trust. |
17.020 | Interrelationship of the Plan and the Trust. The provisions of the Plan and each Participant’s Participation Agreement will govern the rights of a Participant to receive distributions pursuant to the Plan. The provisions of the Trust will govern the rights of the Company and its Affiliates, Participants and the creditors of the Company and its Affiliates to the assets transferred to the Trust. The Company and each of its Affiliates employing any Participant will at all times remain liable to carry out their obligations under the Plan. |
17.030 | Distributions From the Trust. The Company’s and each of its Affiliate’s obligations under the Plan may be satisfied with Trust assets distributed pursuant to the terms of the Trust, and any such distribution will reduce their obligations under this Plan. |
(a) | be a non-qualified grantor trust which satisfies in all material respects the requirement of Revenue Procedure 92-64, 1992-2 CB 122 (or any successor Revenue Procedure or other applicable authority); |
(b) | become irrevocable upon a Change of Control, to the extent not then irrevocable (other than an event described in Section 1.110(d)); and |
(c) | provide that any successor trustee shall be a bank trust department or other party that may be granted corporate trustee powers under state law. |
18.010 | Status of Plan. The Plan is intended to be a plan that is not qualified within the meaning of Code Section 401(a) and that “is unfunded and is maintained by an employer primarily for the purpose |
18.020 | Unsecured General Creditor. Participants and their Bene-ficiaries, heirs, successors and assigns shall have no legal or equitable rights, interests or claims in any property or assets of the Company or its Affiliates. For purposes of the payment of benefits under this Plan, any and all of the Company’s or Affiliate’s assets shall be, and remain, the general, unpledged unrestricted assets of the Company or Affiliate. The Company or Affiliate’s obligation under the Plan shall be merely that of an unfunded and unsecured promise to pay money in the future. |
18.030 | Company Liability. The Company’s or an Affiliate’s liability for the payment of benefits will be defined only by the Plan and the Participant’s specific Participation Agreement. The Company and its Affiliates will have no obliga-tion to a Participant under the Plan, except as expressly provided in the Plan and the Participant’s Participation Agreement. |
18.040 | Nonassignability. Neither a Participant nor any other person will have any right to commute, sell, assign, transfer, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, alienate or convey in advance of actual receipt, the amounts, if any, payable hereunder, or any part thereof, which are, and all rights to which are expressly declared to be, unassignable and non-transfer-able. No part of the amounts payable will, prior to actual payment, be subject to seizure, attachment, garnishment or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by a Participant or any other person, be transferable by operation of law in the event of a Participant’s or any other person’s bankruptcy or insolvency or be transferable to a spouse as a result of a property settlement or otherwise. |
18.050 | Not a Contract of Employment. The terms and conditions of this Plan shall not be deemed to constitute a contract of employment between the Company or any of its Affiliates and the Participant. Such employment is hereby acknowledged to be an “at will” employment relationship that can be terminated at any time for any reason, or no reason, with or without cause, and with or without notice, unless expressly provided in a written employment agreement. Nothing in this Plan shall be deemed to give a Participant the right to be retained in the service of the Company or an Affiliate or to interfere with the right of the Company or an Affiliate to discipline or discharge the Participant at any time. |
18.060 | Furnishing Information. A Participant or his Beneficiary will cooperate with the Committee or its delegate by furnishing any and all information requested by the Committee or its delegate and take such other actions as may be requested in order to facilitate the administra-tion of the Plan and the payments of benefits hereunder. |
18.070 | Terms. Whenever any words are used herein in the masculine, they should be construed as though they were in the feminine in all cases where they would so apply; and whenever any words are used herein in the singular or in the plural, they should be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. |
18.080 | Captions. The captions of the articles, sections and paragraphs of this Plan are for convenience only and do not control or affect the meaning or construction of any of its provisions. |
18.090 | Governing Law. Subject to ERISA, the provisions of this Plan shall be construed and interpreted according to the laws of the State of Iowa. |
18.100 | Notice. Any notice or filing required or permitted to be given to the Committee under this Plan shall be sufficient if in writing and hand-delivered, or sent by registered or certified mail, to the address below: |
18.110 | Successors. The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns and the Participant and the Participant’s designated Beneficiaries. |
18.120 | Spouse’s Interest. The interest in the benefits hereunder of a spouse of a Participant who has predeceased the Participant will automatically pass to the Participant and will not be transferable by such spouse in any manner, including but not limited to such spouse’s will, nor will such interest pass under the laws of intestate succession. |
18.130 | Validity. In case any provision of this Plan should be found to be illegal or invalid for any reason, said illegality or invalidity will not affect the remaining parts hereof, but this Plan should be construed and enforced as if such illegal or invalid provision had never been inserted herein. |
18.140 | Minors, Incompetent Persons, etc. If the Committee or its delegate determines that a benefit under this Plan is to be paid to a minor, a person declared incompetent or to a person incapable of handling the disposition of that person’s property, the Committee or its delegate may direct payment of such benefit to the guardian, legal representative or person having the care and custody of such minor, incompetent or incapable person. The Committee or its delegate may require proof of minority, incompetence, incapacity or guardianship, as it may deem appropriate prior to distribution of the benefit. Any payment of a benefit shall be a payment for the account of the Participant and the Participant’s Beneficiary, as the case may be, and will be a complete discharge of any liability under the Plan for such payment amount. |
18.150 | Qualified Domestic Relations Order. The Committee or its delegate is authorized to make any payments directed by court order that qualifies as a “qualified domestic relations order” under Section 414(p) in any action in which the Plan or the Committee has been named as a party. |
(a) | In General. Subject to and in accordance with Section 409A, if, for any reason, all or any portion of a Participant’s benefits under this Plan becomes taxable to the Participant under Section 409A prior to receipt, a Participant may petition the Committee or its delegate before a Change of Control, or the Trustee of the Trust after a Change of Control, for a |
(b) | Trust. If the Trust terminates in accordance with provisions thereof and benefits are distributed from the Trust to a Participant in accordance therewith, the Participant’s benefits under this Plan will be reduced to the extent of such distributions. |
18.170 | Insurance. The Company, on its own behalf or on behalf of the trustee of the Trust, and, in its discretion, may apply for and procure insurance on the life of the Participant, in such amounts and in such forms as the Trust may choose. The Company or the trustee of the Trust, as the case may be, will be the sole owner and beneficiary of any such insurance. The Participant will have no interest whatsoever in any such policy or policies, and at the request of the Company will submit to medical examinations and supply such information and execute such documents as may be required by the insurance company or companies to which the Company has applied for insurance. |
18.180 | Requirement for Release. Any payment to any Participant or a Participant’s present, future or former spouse or Beneficiary in accordance with the provisions of this Plan will, to the extent thereof, be in full satisfaction of all claims against the Plan, the Trustee and the Company, and the Trustee may require such Participant or Beneficiary, as a condition precedent to such payment to execute a receipt and release to such effect. |
1. | Barry M. Abzug |
2. | Patrick E. Allen |
3. | John-Paul E. Besong |
4. | Bruce M. King |
5. | Nan Mattai |
6. | Robert K. Ortberg |
7. | Kent L. Statler |
8. | Robert A. Sturgell |
1. | Tatum J. Buse |
2. | Philip J. Jasper |
3. | Colin R. Mahoney |
4. | Martha L. May |
5. | Robert J. Perna |
6. | Jeffrey A. Standerski |
7. | Douglas E. Stenske |
ROCKWELL COLLINS, INC. | |||
By: | /s/ Martha May | ||
Name: | Martha May | ||
Title: | SVP, Human Resources | ||
/s/ Gary R. Chadick | |||
By: | Gary R. Chadick |
2. | I have reviewed the quarterly report on Form 10-Q for the quarter ended March 31, 2014 of Rockwell Collins, Inc.; |
3. | 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: April 17, 2014 | /s/ Robert K. Ortberg |
Robert K. Ortberg | |
Chief Executive Officer and President |
1. | I have reviewed the quarterly report on Form 10-Q for the quarter ended March 31, 2014 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: April 17, 2014 | /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 Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 17, 2014 | /s/ Robert K. Ortberg |
Robert K. Ortberg | |
Chief Executive Officer and President |
(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 Form 10-Q fairly presents, in all material respects, the financial condition and results of operations of the Company. |
Date: April 17, 2014 | /s/ Patrick E. Allen |
Patrick E. Allen | |
Senior Vice President and | |
Chief Financial Officer |
Retirement Benefits (Tables)
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Mar. 31, 2014
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Pension Plans, Defined Benefit [Member]
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Defined Benefit Plan Disclosure | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | The components of expense for Pension Benefits for the three and six months ended March 31, 2014 and 2013 are as follows:
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Other Postretirement Benefit Plans, Defined Benefit [Member]
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Defined Benefit Plan Disclosure | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Net Benefit Costs | The components of expense for Other Retirement Benefits for the three and six months ended March 31, 2014 and 2013 are as follows:
|
Acquisitions (Details) (USD $)
|
3 Months Ended | 6 Months Ended | 1 Months Ended | 3 Months Ended | 6 Months Ended | 3 Months Ended | ||||||||||||||||
---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|---|
Mar. 31, 2014
|
Mar. 31, 2013
|
Mar. 31, 2014
|
Mar. 31, 2013
|
Sep. 30, 2013
|
Mar. 31, 2014
ARINC [Member]
|
Mar. 31, 2014
ARINC [Member]
|
Dec. 31, 2013
ARINC [Member]
|
Mar. 31, 2014
ARINC [Member]
|
Dec. 23, 2013
ARINC [Member]
|
Mar. 31, 2014
ARINC [Member]
Selling, General and Administrative Expenses [Member]
|
Mar. 31, 2014
ARINC [Member]
Interest Expense [Member]
Bridge Credit Agreement [Member]
|
Sep. 30, 2013
ARINC [Member]
Interest Expense [Member]
Bridge Credit Agreement [Member]
|
||||||||||
Acquisitions | ||||||||||||||||||||||
Percentage of Common Stock and Voting Interests Acquired | 100.00% | |||||||||||||||||||||
Payments to Acquire Business | $ 1,415,000,000 | |||||||||||||||||||||
Goodwill | 1,834,000,000 | 1,834,000,000 | 779,000,000 | 1,054,000,000 | 1,054,000,000 | 1,054,000,000 | 1,054,000,000 | |||||||||||||||
Business Acquisition, Goodwill, Expected Tax Deductible Amount | 0 | 0 | ||||||||||||||||||||
Total sales | 1,272,000,000 | 1,131,000,000 | 2,343,000,000 | 2,193,000,000 | 137,000,000 | 143,000,000 | ||||||||||||||||
Net Income (Loss) Attributable to Parent | 9,000,000 | 10,000,000 | ||||||||||||||||||||
Real Estate Held-for-sale | 81,000,000 | [1] | ||||||||||||||||||||
Liabilities for Real Estate Held-for-sale | 81,000,000 | [1] | ||||||||||||||||||||
Payments for (Proceeds from) Real Estate Held-for-investment | 81,000,000 | 81,000,000 | ||||||||||||||||||||
Acquisition Related Costs | 1,000,000 | [2] | 0 | [2] | 13,000,000 | [2] | 0 | [2] | 1,000,000 | 16,000,000 | 13,000,000 | |||||||||||
Debt Instrument, Fee Amount | $ 0 | $ 0 | $ 0 | $ 3,000,000 | $ 3,000,000 | |||||||||||||||||
|
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