Rockwell Collins (COL) Earnings Report: Q4 2015 Conference Call … · 2015. 11. 2. · Rockwell Collins (COL) Earnings Report: Q4 2015 Conference Call Transcript ... These slides

CompanyName:RockwellCollinsIncCompanyTicker:COLSector:IndustrialGoodsIndustry:Aerospace/Defense

EventDescription:Q42015EarningsCallMarketCapasofEventDate:11.72BPriceasofEventDate:86.72

©2014TheStreet,Inc.Al l R ightsReserved Page1of21

RockwellCollins(COL)EarningsReport:Q42015ConferenceCallTranscriptThefollowingRockwellCollinsconferencecalltookplaceonOctober30,2015,09:00AMET.Thisisatranscriptofthatearningscall:

CompanyPart icipants

RyanMiller;RockwellCollinsInc.;VPofIRKellyOrtberg;RockwellCollinsInc.;CEOandPresidentPatrickAllen;RockwellCollinsInc.;SVPandCFO

OtherPart icipants

RonEpstein;BofAMerrillLynch;AnalystSethSeifman;JPMorgan;AnalystCaivonRumohr;CowenandCompany;AnalystRobertStallard;RoyalBankofCanada;AnalystMylesWalton;DeutscheBank;AnalystSheilaKahyaoglu;Jefferies&Co.;AnalystSamPearlstein;WellsFargoSecuritiesLLC;AnalystDavidStrauss;UBS;AnalystRobertSpingarn;CreditSuisse;AnalystRichardSafran;BuckinghamResearchGroup;AnalystPeterArment;SterneAgeeCRTInc.;AnalystCarterCopeland;BarclaysCapital;AnalystGeorgeShapiro;ShapiroResearch;AnalystJasonGursky;Citigroup;AnalystKevinCiabatonnit;KeyBancCapitalMarkets;AnalystKenHerbert;CanaccordGenuity;AnalystPeteSkibitski;DrexelHamilton;Analyst

MANAGEMENTDISCUSSIONSECTION

Operator :

WelcometotheRockwellCollinsfourthquarterFY15earningsconferencecall.

Today'scallisbeingrecorded.

ForopeningremarksandmanagementintroductionsIwouldliketoturnthecallovertoRockwellCollinsVicePresidentofInvestorRelations,RyanMiller.

Pleasegoaheadsir.

RyanMiller (VPofIR):

Thankyou.Goodmorningtoallofyouonthecall.

WithmeonthelinethismorningareRockwellCollins,ChiefExecutiveOfficer;andPresident,KellyOrtberg;andSeniorVicePresidentandChiefFinancialOfficer,PatrickAllen.




Today'scallisbeingwebcastandyoucanviewtheslideswewillbepresentingtodayonourwebsiteatwww.rockwellcollins.comundertheInvestorRelationstab.Theseslidesincludecertainnon-GAAPfinancialinformationandourreconciliationtotherelatedGAAPmeasure.

Pleasenotetoday'spresentationandwebcastwillincludecertainprojectionsandstatementsthatareforward-looking.Actualresultsmaydiffermateriallyfromthoseprojectedasresultofcertainrisksanduncertainties,includingthosedetailedonSlide2ofthiswebcastpresentationandfromtimetotimeintheCompany'sSecuritiesandExchangeCommissionfilings.

Theseforward-lookingstatementsaremadeasoftodayandtheCompanyassumesnoobligationtoupdateanyforward-lookingstatements.

Withthat,I'llnowturnthecallovertoKelly.

KellyOrtberg (CEOandPresident):

Wellthanks,Ryan,andgoodmorning,everyone.LetmestartbysayingthatI'mverypleasedwithouroverallperformanceforFY2015,whichishighlightedbymid-single-digitsalesgrowthanddouble-digitgrowthinearningsandcashflowwhichisrightinlinewithourlong-termgoals.Andourabilitytodeliver13%operatingcashflowgrowthand15%earnings-per-sharegrowth,especiallyinayearwhenwewerenegativelyimpactedbyforeigncurrencyratesandaweakerthanexpectedcommercialaftermarketwasparticularlynotable.AsIreflectontheyear,ourperformancenotonlydeliveredstrongresults,butitalsopavedthewayforfuturegrowth.

WeannouncedanumberofnewprogramwinsandachievedsignificantmilestonesondevelopmentprogramsthatIexpectwillcontinuetodrivegrowthoverthenextdecade.ThiswasparticularlytrueinCommercialSystemswhereearlierintheyearweannouncedthatBoeinghadawardedusacontracttoprovideourdisplaysystems,integratedsurveillancesystems,andflightcontrolsystemsforthe777X,providinganimportantmarketsharegainandcompletingoursuiteoftheflightdecksforBoeing'snextgenerationairplane.

AndjustrecentlyweannouncedthatBoeinghadalsoselectedustoprovidetheAvionicsGatewayserverforthe777X,whichaddsanothercomponenttoourinformationmanagementstrategy.Asaresultofthesepositionsin777Xwillnowrivalthe787intheamountofRockwellCollinsequipmentperaircraft.

WealsoannouncedthatourProLineFusionflightdeckwasselectedbyTextronforitsnextgenerationKingAiraircraftincludingtheindustry'sfirsttouchscreenprimaryflightdisplays.Inaddition,wemarkedakeywinwithDassault,whochoseouradvancedcabinmanagementandentertainmentsystemsforitsnewFalconJet5Xand8Xaircraftcontinuingourroleasthesolecabinsupplierforitsentirenewaircraftfleet.

NowfromadevelopmentprogramperspectivewesawtheAirbusA350andtheEmbraerLegacy500eachachievetheirfirstdeliveriesduringtheyear.InadditiontheLegacy450wasrecentlycertified.We'realsoworkingonanumberofadditionaldevelopmentprogramsthatarenearingcompletionandwillenterserviceinthenearfuture.TheC-SeriesisnearlycompletewithitsflighttestandisexpectedtoenterserviceduringourFY16,andthe737Maxprogramappearstobeinreallygoodshape,asexpectedtoenterserviceduringourFY17with1.5timestheRockwellCollinscontentofthecurrentgeneration737.TheseareallveryimportantprogramsforourCompanyandareexpectedtodrivegrowthoverthenextseveralyears.

Wealsostrengthenedourportfolioofconnectivity-relatedofferingswithinCommercialSystemsduringtheyear.OurMarchacquisitionofPacificAvionicshelpstoensureRockwellCollinscanofferourcustomersadvancedwirelessdistributiononboardaircraft,strengtheningourabilitytodeliverleading




applicationsthroughourPAVESpassengerengagementsolution.AndinAugustweacquiredICGorInternationalCommunicationsGroup,addingthelatestgenerationofIridiumSATCOMterminalsandsmartrouterstoourexistingflightdeckandcabinconnectivityoffering.SoasyoucanseeourCommercialSystemsbusinessreallyhadabusyyear,andtheydeliveredstrongfinancialresultsaswell,posting6%salesgrowthandexpandingoperatingmarginsby70basispoints.

MovingnowtoGovernmentSystems,Ireallyfeellikewehitaninflectionpointthisyear.Despitefacingalmost$100millionofheadwindsassociatedwiththeJTRSManpackprogram,aswellaswhatturneduptobeabout$40millionofforeigncurrencyimpact,Iwasextremelypleasedwithoursalesperformance.Infact,onaconstantcurrencybasis,weactuallygrewalittle[when]GovernmentSystemsthisyearandcontinuetomaintainourstrongoperatingmarginsofabout21%.

Duringtheyearweannouncedanumberofkeycontractwinsincludinga$420millionmulti-yearcontractforourR210advancedairbornesoftwaredefinedradiosfortheNavalAirSystemsCommand.Inadditionwewereawardeda$478millionmulti-yearcontractfortheproductionofmid-JTRSterminalsthroughourDataLinkSolutionsjointventure.Andwecontinuedoursuccessintherotarywingmarket,wherewe'vesecuredalmostallofthefutureAgustaWestlandhelicopterprograms,andwewerealsoselectedtoprovidetheavionicsandmissionequipmentforthenextgenerationUSAirForcecombatrescuehelicopter.

InGovernmentSystemswealsoachievedanumberofcriticalmilestonesindevelopmentprogramsthisyear.Forexample,weexecutedontimedevelopmentofequipmentfortheKC-46,theKC-390,bothofwhichachievedtheirfirstflightsthisyear.WealsodeliveredthefirstGeneration-3MonadisplaysystemfortheF-35toourRockwellCollinsEsaVisionSystemjointventure.SoallandallitwasareallygoodyearforGovernmentSystemsaswelooktothisbusinessgrowingnowinFY16.

ShiftingnowtoInformationManagementservicebusiness,wedelivereddouble-digitgrowthonthecoreaviationsideofthebusinessandexpandedsegmentoperatingmarginsby200basispoints.Wealsometoursalessynergygoalsfortheyear,andIcanseerealevidencethatwe'remakingprogressinexpandingourconnectivityoffering.SomeexamplesincludethelaunchofourlivecreditcardauthorizationcapabilitywithHongKongAirlines,andweunveiledourARINCMultiLinkflighttrackingservice,aswellasourARINCUrgentLinkdisastercommunicationnetwork.UrgentLinkactuallyhasanicesynergywithourGovernmentSystemsbusiness,usingourHFcommunicationtechnologytoprovideanationwidenetworkfordisasterrecoverycommunications.

NowturningtoFY16,we'regoingtoexperiencesomenear-termchallengesparticularlyinthefirsthalfoftheyear.OurGovernmentSystemsprogramtimingisgoingtoresultindeclinesinthefirsthalfandgrowthinthesecondhalfofthefiscalyear.AndinCommercialSystems,productioncutsontheBombardierGlobalswillimpactthewholefiscalyear,whilegrowthfromournewacquisitionswillprimarilybenefitthesecondhalf.Sowhileitwon'tbelinear,IstillexpectthatwewillcontinuetogrowouroverallbusinessduringFY16anddeliverstrongmarginsandcashflowperformance,andPatrickisgoingtocoverthisinalittlemoredetailashereviewsourguidanceforFY2016.

Soinsummary,2015wasagoodyearwhereweexecutedaccordingtoourplanacrossourthreebusinesses,acceleratedgrowthinwaysthatweexpectwillcontinuetoenhanceourlong-termoutlook,andwhile2016isgoingtobeabitofabumpintermsofouroverallgrowthrate,Iremainoptimisticconcerningourlong-termgrowthdriversforourCompanylookingforward.

Sowiththat,letmeturnitovertoPatricktowalkusthroughthefinancialdetails.

PatrickAllen (SVPandCFO):

Thanks,Kelly,andgoodmorningtoeveryoneaswell.I'dnowliketowalkyouthroughtoday's




presentationslidesthatsummarizeourresultsforthefourthquarterofFY15.

I'llbeginonSlide3wherewehighlightourtotalCompanyfourth-quartersales,earningspershare,incomefromcontinuingoperations,andsharesoutstanding.Totalcompanysalesforthequarterdecreased$18millionor1%comparedtofourthquarterlastyear,primarilyduetotheimpactofforeigncurrencyrates.Incomefromcontinuingoperationsincreased$11millionor6%,andearningspersharefromcontinuingoperationsincreased$0.11or9%comparedtothesameperiodlastyear.Therateofincreaseinearningspersharefromcontinuingoperationswasmorethantherateofincreaseinincomefromcontinuingoperations,becauseofthepayrollimpactsofoursharerepurchaseprogram.

AsweturntoSlide4,CommercialSystemsachievedrevenueof$636millioninthequarter,aboutflatwiththesameperiodlastyear.SalesrelatedtoaircraftOEMsdecreased$8millionor2%to$372million,primarilyduetolowersalesforChineseregionalaircraft.PartiallyoffsetbyhigherdeliveriesinsupportoftheA350andLegacy500entriesintoservice.

Aftermarketsalesincreased$8millionor3%primarilyduetohigherregulatorymandatesalespartiallyoffsetbylowersparesprovisioningfortheBoeing787program.CommercialSystemsoperatingearningsincreased$5millionor4%,withoperatingmarginsimproving90basispointsfrom22.1%to23%.

OperatingmarginbenefitedfromlowerCompany-fundedresearchanddevelopmentexpenseandcostsavingsandcostsavingsinitiatives.Partiallyoffsetbyhigheremployeeincentivecompensationexpense.

MovingontoSlide5,GovernmentSystemsrevenuedecreasedby4%to$581milliondrivenbylowerJTRSManpacksales,lowerrotarywinghardwaresales,andtheimpactofthestrongerUSdollar.AllpartiallyoffsetbyhighertankertransporthardwaredeliveriesandincreasedsalesfromdevelopmenteffortonmodernizedGPSproducts.

GovernmentSystemsfourth-quarteroperatingearningsdecreased$8millionto$129million.Resultinginanoperatingmarginof22.2%comparedto22.6%inthefourthquarterlastyear.Thedecreasedoperatingmargin--earningsandmarginresultedfromthelowersalesvolume,higherinvestmentresearchanddevelopmentexpense,andhigheremployeeincentivecompensationexpense,partiallyoffsetbyfavorablehardwareproductmixandcostsavingsinitiatives.

TurningnowtoSlide6,InformationManagementservicessalesincreased6%overtheprioryearasCommercialandBusinessAviationServicessalesincreasedlowdouble-digits,partialoffsetbylowersalesfromthenon-aviationrelatedbusinessesduetothetimingofcertainairportprogramsandtheexitofaGovernmentprogram.InformationManagementservicesfourthquarteroperatingearningsincreased$8millionto$29millionresultinginanoperatingmarginof17.4%comparedto13.3%inthefourthquarterlastyear.Theincreaseinoperatingearningsandmarginwasduetohighersalesvolume,averyfavorablemixofhighermarginaviationrelatedsales,andtheabsenceofcertainlicensingcostsincurredintheprioryear.

LookingnexttoSlide7weshowourfull-yearFY15resultsforrevenue,incomefromcontinuingoperations,earnings-per-share,andoperatingcashflow.Ifthere'sanyslideI'dliketopauseandreflecton,thisistheslide.FY15wasagreatyearRockwellCollins.Inayearwhereweposteddouble-digitgrowthinincomeandearnings-per-share,Iwasparticularlypleasedwith13%growthandoperatingcashflow.WehadagreatfourthquarterthatledtoourhighesteveroperatingcashflowtotalforanyfiscalyearinourCompany'shistory.

Forthefullyearwegenerated$749millionofoperatingcashflowcomparedto$660millionlastyear.Theincreaseinoperatingcashflowwasduetohigherearningscoupledwithafocusonreceivablecollectionsandcontrollingproductioninventory,aswellaslowerpre-productionengineeringspend.




Slide8providesanupdateofourtotalR&Dinvestmentforthefullyear.Totalspendingincreasefrom$934millioninFY14to$986millioninFY15.Company-fundedR&Dincreased$4millionduetoincreasedspendassociatedwithpositioningGovernmentSystemsfornewgrowthopportunities,partiallyoffsetbylowerA350developmentcostsinCommercialSystems.Customer-fundedresearchanddevelopmentexpenseincreased$74millionduetohigherdevelopmentcostforinternationalprogramsandCommercialSystems,highercostsfornextgenerationavionicsprogramsandGovernmentSystems,andhigheramortizationofpre-productionengineeringcosts.Pre-productionengineeringinvestmentnetdecreasedduetolowerspendingontheA350program.

MovingtoSlide9weshowthestatusofourcapitalstructure.Duringthefourthquarterwewillpaydownourshort-termdebtof$287million,goingfrom$745millionattheendofthethirdquarterto$448millionattheendofthefourthquarter.Ourcurrentdebt-to-EBITDAratiostandsat1.7,asdetailedonSlide11.IbelievethislevelofdebtstillallowsusthenecessarycosteffectiveaccesstofundourcapitalneedsandexpecttomodestlydeclinebytheendofFY16aswebalanceourdebtpay-downwithsharerepurchases,dividends,andhopefullysomeacquisitionopportunities.

NowontoSlide10whereweprovideasummaryofourFY2016financialguidance,whichisunchangedfromourinitialFY16guidanceissuedinSeptember.CommercialSystemssalesareexpectedtogrowlow-singledigitsashigh-single-digitgrowthinairtransportisexpectedtobeoffsetbyadeclineinthemid-singledigitsforbusinessandregional,dueprimarilytotheproductioncutsontheGlobal5000and6000.

GovernmentSystemsalesareexpectedtobeuplow-singledigitspacedbymid-single-digitinternationalgrowthandarelativelyflatUSDoDsales.InformationManagementservicesareexpectedtogrowhigh-singledigits.NowbeforeImoveon,IwantedtotalkthroughsomedynamicsthatwillimpactoursalesbetweenthefirstandsecondhalfofFY2016inCommercialSystemsandGovernmentSystems.

WithinCommercialSystemsbecauseoftheimpactoflowerglobalproductionratesinthefirsthalf,andtimingofentriesintoservice,we'reexpectingarelativelyflatishfirsthalfofyearinCommercialSystems.Inthesecondhalfofyearweshouldgetsomeadditionalbenefitfromratesincreasingonthe787andnarrowbodyaircraftinAirbus.

Inaddition,wewillgetmorebenefitinthesecondhalfastheA350andEmbraerLegaciesacceleratetheirratesandwebegintoseeinitialC-Seriesproduction.Theacquisitionsthatwe'vecompletedinFY15,particularlythePacificAvionicswirelessdistributionbusiness,isalsoexpectedtorampitsproductioninthesecondhalfoftheyear.Sowhatdoesthismean?MostallofourgrowthfortheyearinCommercialSystemswillbeback-endweighted.

WithinGovernmentSystemsweexpecttankertransportsalestoberelativelyflatinthefirsthalfandaccelerateinthesecondhalf,primarilyduetoafewinternationalC-130upgradeprograms.Inotheravionicsprogramsweexpectthefirsthalftobedown,andthebackhalfofFY16willbenefitfromthetimingofsimulationandtrainingprograms,aswellasablackprogram.WealsoexpectsurfacesalestobedowninthefirsthalfoftheyearduetolowertargetingsystemrevenuesandelectronicintelligenceprogramsandexpecttheseprogramstoberelativelyflatinthesecondhalfofyearcomparedtoFY15.

WhatdoesthismeantooverallGovernmentSystems?Wewilllikelybedownmid-singledigitsinthefirsthalfoftheyearandexpectallofourgrowthwillbeinthebackhalfoftheyear.

AnotherareathatwillimpactourfirstandsecondhalfofFY2016isoureffectiveincometaxrate.AswenotedinourFY16guidanceissuedinSeptember,weexpecttheFY16effectivetaxratetobeabout28%,andweareexploringanumberofpotentialtaxsavingsopportunitiesthatwilllikelyimpactourtaxrateinthesecondhalfoftheyear.Asresult,weexpectsomelumpinessinthequarterlytaxratewithitbeingintherangeof33%forthefirsttwoquartersandlowerinthebackhalfoftheyear.Justasareminder,our




guidanceassumesthatwewillnotgetanybenefitfromtheFederalR&Dtaxcredit.

Thatcompletesmyreviewofthefinancialresultsandprojections,soRyan,backtoyoutokickofftheQ&ASession.


Inordertogiveeveryonetheopportunitytoaskquestions,weaskthatyoulimityourquestionstoonepercaller.Ifyouhavefurtherquestionssimplyreinsertyourselfintothequeueandwe'llanswerthoseadditionalquestionsastimepermits.Operator,wearenowreadytoopentheline.

QUESTIONS&ANSWERS

Operator :

RonEpstein,BankofAmerica.

RonEpstein (Analyst-BofAMerrillLynch):

Hey,goodmorning,everyone.Ifyoucouldreviewwhatmakesyoucomfortablewithyouraftermarketoutlookfor2016?Beitthataftermarketseemslikeit'sbeenallovertheplaceforeverybody,howdoyoufeelcomfortablewithyouroutlookandthenhowdoyoumakeusfeelcomfortablewithit?


Well,wecertainlyadjustedouroutlookbasedontheresultswe'veseenthroughFY15andthere'snoquestionthatwesawasofteraftermarketthanweoriginallyguidedtoinFY15,soifyoulookatwhatweareforecasting--inairtransportwe'vesaidhigh-single-digitoverallforairtransportgrowth.Ithinkthat'sgoingtoberelativelybalancedbetweenOEMandaftermarketintermsofgrowthrates.

We'vegotsomeprettygooddemand,goodvisibilityonHUDretrofitsintheairtransportmarket.Thatwilldrivesomeofthat,somewhatoffsetbyreduceddemandonsomeofthemandaterevenues.Wealsoseeinthesecondhalfthat,asPatricksaid,muchofthegrowthisin--oftheacquisitionsisinasecondhalfandmuchofthatcomesthroughtheaftermarketastheyaredoingaftermarketretrofits.

We'vebeenprettyconservativeinouroutlookfortheMROcomponent.IthinkasyouknowtheMROandvizabreallytrackswiththeutilization.Inairtransportwehaveseenrecyclingthispastyear.Ithinkthat'sgoingtocontinue.We'vegotthatfactoredintoourforecast,butweareseeingprettygooddemandbecausewearealsointheusedpartsbusinesswithourIntertrade.SoweareoffsettingsomeofthatsofterrecyclingMRObyactuallysellingusedcomponents.

SoIthinkwearegoingtoseeprettyflattolow-single-digitgrowthinoverallsparingfortheyearandIthinkwe'vetakenintoaccountourexperiencesherethispastyearandforecastedthoseinouroutlookheregoingforward.


Okay,great.Thankyouverymuch.

Operator :

SethSeifman.

SethSeifman (Analyst-JPMorgan):

Thanksverymuch.IwaswonderingifyoucouldtalkalittlebitaboutCapEx,andthisisnotmeanttopick




atall,butthenumberfortheyear$210millioncameinalittlehigherthanthe$200millionguidance.Youguidedfor$200millionagainthisyear,itisuparound4%ofsales,isthatmostlyintheARINCbusinessandifso,whatisthetrajectorylikeaswelookoutfurtherfromhere?


Seth,IwouldsaytheuptickhascertainlybeenintheARINCbusinessandIthinkwhatyouaregoingtoseeisprobablyholdingsteadyaround$200millionforthenextfewyears.We'vesubstantiallyincreasedtheinvestmentinARINCcomparedtowhattheywere--whattheyhadpriortoourownership.

Andit'sreallyfundinganumberofdifferentgrowthareasforus.AlthoughIdon'texpectthatspendingtodeclinematerially,Ialsodon'tseeitincreasingoverthecourseofthenextfewyears.SoIthinkof$200millionasbeingaprettygoodbenchmarkforthenextfewyears.

SethSeifman (Analyst-JPMorgan):

Great.Thanksverymuch.

Operator :

CaivonRumohr.

CaivonRumohr (Analyst-CowenandCompany):

Yes,thankyouverymuch.SorelatedBizJetquestionsfirst,BombardierIguesssaidthattheyarethrowinginthetowelontheLeer85.Whenwouldyouexpecttogetreimbursementforyourdeferredengineeringthere?Andsecondly,canweexpectanyannouncementofnewproductwinsonyourpartatNBAA?Thankyou.


Okaysowehaveabout$27milliononthebooksassociatedwiththeLeer85program.Thisterminationwilltriggerthereimbursementofthat.Idon'tknowoffthetopofmyheadthepaymenttermsofit,butwejustheardthataswellsowewillbeexercisingthathereoverthenextquarter.Secondquestion.


AnynewwinsatNBAA.


NothingthatI'mgoingtopreannounceinthecalltoday


Idon'twantyoutopreannounceit,butarewelikelytohaveannouncements?


Wealwayshaveannouncements,Cai,attheNBAA,.


Okay,terrific.Thankyouverymuch.

Operator :




RobertStallard.


Goodmorning.

RobertStallard (Analyst-RoyalBankofCanada):

Goodmorning.Kelly,IwaswonderingifyoucouldcommentontheGovernmentSystemsoutlookandwhatyoufactoredintothisinrelationtowhat'sgoingoninDC.Didyouimaginetherewasgoingtobeafull-yearCRorthisbudgetdealoranythingelselikethat?


Ourbaselineplanwasthatwewouldhaveaone-quarterCRandabudgetdealbeforeChristmas,andgenerallyaone-quarterCRdoesnothaveanyfull-yearimpacttoouroverallrevenueforecast.Ifyourecallacoupleyearsagothatwasextendedbeyondthequarterandwedidseesomeimpact,sothatwasthebaselineassumption.

Thebudgetdealisagoodoutcomehere.WenowneedtogettheappropriatorstogetherandgetthisCRorabudgetcompleteandappropriationscompletebeforeChristmas,whichitlookslikethatisgoingtohappen.Idon'tthinkthatthefactthatwe'vegotalittlebitofbudgetabovethesequesterlevelprobablynotgoingtohavemuchimpacttousin2016,butcertainlybolstersourlong-termoutlookforgrowthinourGovernmentbusinessfordomesticprograms.


Okay,quickfollow-upifImay.TheLRSBannouncementtheotherday,Idon'tknowifyoucancommentonthis,butdoesthathaveanyimpactonyourforecast?


Wecanmakenocommentonthat.


Okay.

Operator :

MylesWalton.MylesWalton?

MylesWalton (Analyst-DeutscheBank):

Sorry.Thanks.Goodmorning.FirstquestionIhadwason,youmentionedthe1.5xcontentontheMAXversustheNGandthe737.Youmadeacommentonthe777Xrivalingthe87,canyouputthe777Xrelativetothecurrent777?Isitasimilar50%increaseincontent?Oranymeasureyoucanputaroundit.


Itisroughly2xourcurrentcontent.


Okaygreat.Theotherone,fundedbacklogyouusuallyreportityear-endfordefense,andcuriouswhatdynamicthatsawatyourendtogiveusanindicatorforward-looking,andalsowhethertheblack




programthatPatrickmentionedisalreadyinthatbacklog?Thanks.


Actuallywhenyoulookatthe10-KdisclosureyouaregoingtoseethefundedbacklogontheGovernmentsideofthebusinesscomedownjustalittlebit,that'sactuallymaskingsomegrowthanditislargelyduetotheeffectofforeigncurrency.Ithinkabsenttheforeign-currencywewouldhavegrownbacklogalittlebit.Ithinkwiththeforeign-currencyinfactitshrankjustalittlebit.


Okay,great,thanks.

Operator :

SheilaKahyaoglu,Jefferies.

SheilaKahyaoglu (Analyst-Jefferies&Co.):

Goodmorning.CanyoumaybedelveintotheperformanceinINS?Youmentionedfavorablemixinthequarter,andmaybehowweshouldthinkabouttheprofitabilityoutlookforthesegmentgoingforward?


ThewayIdescribeit,Sheila,isthatwasanunusuallyprofitablequarterforus.Idon'tseethatrecurring.Wehadacoupleoffavorableadjustmentsonsomeprogramsinthenetworksbusinessthatyieldedveryhighprofitability,soIthinkprobablyacouplehundredbasispointsofthatwasrelatedto--Iwillsaythoserevenueadjustmentsonthoseprogramsthatarenotlikelytorecur.


Justaquickfollow-upifImay,onBusinessJetaftermarketitwasup7%.Whatdrovethestrengththere?


WedidseealittlebitbetterutilizationandwesawontheMROside--andonthediscretionarysideprettygooduptickinmandate-relatedupdates,TCASTparticularly.


Thankyou.

Operator :

SamPearlstein,WellsFargo.

SamPearlstein (Analyst-WellsFargoSecuritiesLLC):

Goodmorning.CanyouguystalkalittlebitabouttheC-Seriesjustwiththeannouncementsyesterday?Iguesstwopieces,onetheCompanyhadtalkedabout15to20deliveriesinthenextyear.I'mjustwonderinghowdoesthatcomparetotheplansforproductionthatyouhaveinyour2016outlook?

Thenseparately,withregardstothepreproductionengineering--doesBombardier'swrite-downaffectyourassessmentofthosecapitalizedcostsandyourabilitytorecoupthosecostoverthesamenumberofunits?





WhatIwouldsayis,firstofallwithrespecttoourassumptionsandtheplan--IwouldsayBombardierannouncementscertainlysolidifiesthenumberofaircraftwehadintheplan.Ifthere'sanyupsideitisprettymodesttotheplanthere.

Andasitrelatestothedeferredengineering,itreallydoesn'tchangeourviewofthecollectibilityofthatdeferredengineering.AgainwehaddifferentassumptionswithrespecttothenumberofC-SeriesaircraftthanBombardiergoingintotheprogram,andsowehavenotreassessedthatatthispoint.

SamPearlstein (Analyst-WellsFargoSecuritiesLLC):

Okay.Thankyou.

Operator :

DavidStrauss.

DavidStrauss (Analyst-UBS):

Goodmorning.


Hello,David.


Twoquestions.Firstone,whenyouguysannouncedyourFY16guidanceyoutalkedaboutIthinkitwas$10millionto$15millioninrestructuring.Canyoudetailexactlywhatthat'sgoingto?Isthatactually--areanysavingsincludedinyourguidanceforthisyear?

Andthenthesecondquestion,Patrick,canyoujustwalkus--giveasabridgefromFY15toFY16?Operatingcashflowlookslikeyourforecastingrelatively,Iknowyouhavearange,butmidpointrelativelyflat?Thanks.


Asitrelatestorestructuring--Ithinkwedisclosedinourguidance$0.10to$0.15ofrestructuring,andthat'slargelyseverancecosts.Nowthereis--abitofthereasonwhywepostedarangeisthere'sabitofuncertaintywithrespecttothetake-uprateofavoluntaryearlyretirementprogramthatwearecurrentlyinthemiddleof,soalthoughitisdifficulttoassesstheimpactIwouldsaythetake-upratestodatehasbeenprettygood,andIwouldsaywe'regoingtobeatthehigh-endofthethat$0.10to$0.15range,maybeevenalittlebitabovethatrange.

Nowasitrelatestosavingsincorporated,wedidincorporatesomeestimatedsavingsinourguidanceaswell;however,obviouslythetake-uprate'shigher.Wemayhavelittlebitofincrementalsavingsaswellthatwecanflowintothenumbers,sowedidhaveanestimatedchargeplussomeestimatedsavingswhichwilltrue-uphereinthefirstquarter.AndIthinkbythetimewereleaseearningsforthefirstquarterweshouldbeableaprettygoodsenseastowherethatrestructuringchargeandtheresultingsavingsisgoingtobe.

Asarelatestocashflow,thenumberthatweposted--you'reright,themidpointisabout$750million,aboutflat,itdoesmasksomeimprovementparticularlyindeferredengineeringandwhat'scausingthattobemaskedislargelyanincometaxline.Wehad--asImentionedinmyremarks,wearenotassumingthebenefitsofourR&Dtaxcredit.ThatprovidedprettysubstantialbothearningsandcashbenefitinFY15,andalthoughwewereabletooffsettheearningsimpactthroughsometaxplanningstrategies




thatIreferenced,thosearenotgoingtocomewitharesultingcashbenefit,atleastnotimmediately.

Wewillgetthecashbenefitovertime.Sowe'regoingtohaveasubstantialincreaseincashtaxesyear-over-year,andthat'swhatmaskingthecashflowimprovement.


Patrick,intermsofourmodeling,soweshouldassumetherestructuringchargecomesthroughinQ1andthenthesavingsoccuraswegothroughouttheyear?


That'saverygoodassumption,wewillhavethechargeandthenwon'thavemuchofanysavingsinthefirstquarterandthesavingswillbleedoutoverthenextthreequarters.


Thankyou.

Operator :

RobertSpingarnSecurities.

RobertSpingarn (Analyst-CreditSuisse):

Hello,goodmorning.Kelly,Iwantedtoaskahigh-altitudequestionifIcould,butwithmanyofyourdevelopmentprogramsenteringserviceoverthenextfewyears--soI'vegottheA350,someoftheBoeingwork,MAX,777X,tanker--doweatsomepointenterintoabitofR&Dholiday,assumingthattherearenotalotofnewerprogramsbehindthoseandthatthiscouldchangetheslopeforyourearningsgrowthatsomepoint?


Wetalkedaboutthecashflowtailwindwearegoingtogetassociatedwiththatwherewearegoingtoseethereductionindeferredengineeringspendassociatedwithalotofthoseprograms.Soyes,thatisgoingtocomedown.

I'mexpectingourexpensedR&Dtocontinuetosaveprettylevelasapercentofsales.Rememberweareputtingthingslikethe777Xnow,weareexpensingthatsotherewillbesomeprogramexpensethere,butweareatechnology-differentiatingcompanyandwearegoingtocontinuetoinvestinnewfeaturesandfunctionsthatwecansellintotheaftermarketandstaycompetitivelyaheadofthegame.SoIdon'tthinkyouwillseefromanexpensedR&Danykindofatailwindthere.Ithinkwe'regoingtokeepthatrelativelyflat.


Okay.Thenjustanunrelated,notreallyafollow-upbutjustanotherquickquestion.WiththeactivitythatyouareseeingatIntertrade,doesthisgiveyouanykindofread-throughtowhat'sbeenplaguingaftermarket?

Andisthereanyindication,isthereapointatwhichIntertradeslowsdownenoughtosuggestthattheglutinthesurplusmarketmightreverttomorestrengthintraditionalaftermarket?


Ithasgivenusalotofvisibilitytowhat'sgoingon,anditisthepartsrecyclingandthere'sacouple




componentstothat.Ithinkwe'vegotaggregatorsinthemarketsandwhenyouhaveaggregators,theycanservicemoreaircraftwithfewerspares,andIthinkyouareseeingthatacrosstheindustrythattheaggregatorsarehavinganeffectonhistoricalsparessaleslevels.

ThenIthinkusingusedpartsinitiallystartedoutasaUS-basedcost-cuttingmeasure,Ithinkitisnowturnedintoabestpractice.Infact,inthelastquarterwehaveseensomeinternationalcustomerswhohistoricallyonlyboughtnewsparesnowusingrecycledcomponentsintheirMRO,soIthinkthat'sheretostay.AndIdon'tthinkwe'regoingtoseethatturnoffintheshortterm.

ThetrickforourIntertradebusinessisjustmakingsurethatwearebuyingtherightcomponentsthathavetherightdemand,andastheaircraftretire,we'regoingtocontinuetofocusonmakingsurewearebuyingthoserightcomponents.

Inmostcaseswe'vegotagoodportionofourbusinesscasesoldbeforeweactuallybytheaircraftandstarttearingitdown.


Giventheglobalexpansionofthatactivityisthisabusinessyouwouldliketogrow?


Yes.That'swhywehaveit.Ithinkitisagoodoffset.Itdoesn'tcomewith--nearthemarginthatsellingnewsparesandcomponentrydoes,butithasbeengrowingdoubledigitandI'mexpectingit'sgoingtogrowdoubledigitherein2016aswell,soitisabigcomponentofouroverallaftermarketstrategy.


Okay.Thanks,Kelly

Operator :

RichardSafran,BuckinghamResearch.

RichardSaf ran (Analyst-BuckinghamResearchGroup):

Hello,goodmorning.


Morning.


Ijustwantedtoknowifyoucoulddiscussmaybetheprogressyouaremakinginconnectivitysolutionswithrespecttoyourpartners,GlobalXpress,OneWeb,andIridium.In2015,Kelly,youtalkedalotabouttheflighttrackerandthein-flightcreditcardreader.Doyouhaveanythingthat'scroppedupthatyouwouldliketohighlighthereasameaningfulopportunityyouareseeingfor2016?


Yes,letmegiveyouanupdateonGXbecausethat'scomingintothe--thisisthenewbroadbandserviceprovidedbyInmarsat--we'vecapturedourfirsttwocustomersasaserviceprovider,wherewewillbeputtingtheequipmentontheaircraft,gettingtheSDC,andthenhavetheservice,sothat'swellunderway.I'mprettyexcitedaboutthat,Ithinkthat'soneofthesesynergyareasthat'sgoingtocontinuetogrow.




We'vegotalotofproposalsinworksprovidingconnectivitysolutionsandservices,soboththeequipmentandtheconnectivitygoingforward.SoIthinkthat'splayingoutaboutasweexpected,anditisgoingtobeabigcomponentofthesynergygrowth.

Ifyourecall,wehavesaidabout$10millionofsynergylastyearoutofourIMSbusiness.Infactweachievedabout$12million.Nextyearthatgoesto$20million,sowe'vegotastepup$10million.Ithinkconnectivityisgoingtobeabigcomponentofthat.

Wealso--asImentionedinmycomments,acquiredICG.ICGprovidesthenewradiosetthatwealsoareavalue-addedreselleroftheservice,sowewillbeabletogotomarketforfull-endsolutionswithourcustomersthereaswell,andwe'vegotalotofproposalactivityunderway.

Wehavetransitionedfromatrialphaseonourglobaltrackingtoarevenue-generatingphase.Wedidaboutalittlelessthanasix-monthtrialwithnineleadingcustomers,airlines,andwearenowthroughthat.That'sbeenverysuccessfulandwewillmovethattotherevenue-generatingphaseoftheprogramgoingforward.


That'sgreatcolor,thankyou.

Operator :

PeterArment,SterneAgeeCRT.

PeterArment (Analyst-SterneAgeeCRTInc.):

Thanks,goodmorning,Kelly,Patrick,Ryan.Kelly,IguessonIMS,youcontinuetomakegreatprogressthereontheaviation-relatedbusinesses.Youkindoflabelthemasnon-aviationportionisholdingoratleastoffsettingsomeofthatgrowth.Arethesenon-corebusinessesoraretheyjustcomplimentingtotheoverallIMSbusiness?


Theywerenotthesubjectoftheacquisition.Letmeputitthatway.Whatwehavebeendoingthispastyearisfocusingonhowwecanmakethosebusinesseslesslumpy,lessproject-based,andmoresustainedrevenue.SotheyhavenotgrownquiteasfastasIhadexpectedwhenwefirstmadetheacquisition.

Thisisgoingtobeabigyearforusbecausewe'vegotoutofsomeactivitythatwedidnotwanttocontinue.Werefocusedthosebusinesses.We'renowoffsellingpositivetraincontrolasaserviceasopposedtoaone-timeNREproject.SoIthinkthisisgoingtobeabigyearforus.AndI'mexpectingtoseethosesegmentshavebettergrowththanwhatyousawherethispastyear.

PeterArment (Analyst-SterneAgeeCRTInc.):

Okay.Thankyou.

Operator

CarterCopeland,Barclays.

CarterCopeland (Analyst-BarclaysCapital):

Goodmorning,guys.





Morning.


Patrick,IwonderedifyoucouldgiveusjustalittlebitofcolorontheIMSmoregranulartrends?Ithinkyouhadatoughcompareintheairportandrailpieceforthisquarter,butobviouslytheaggregatenumberwasgood.

Iwonderedifyoumightjustgiveussomedetailonwhatthosepieceslooklikeandwiththetrendslooklike,especiallyintheBizJetflightplanningstuff,givenwhatweareseeingintermsofutilizationinthemarketrightnow.Thanks.


Carter,whatIthinkyouwillseenextyearisprobablyamoresteadygrowthfromtheIMSbusiness.You'reright,we'veseenalotoflumpinesswithrespecttothenon-aviationbusiness,andaswe'vesortoflinedoutIMSbyquarter,unliketheothertwobusinesses,itisgoingtobeprettysteadygrowthquarter-to-quarter,year-over-year.AndthewayI'dcharacterizeitasbeinghighsingle-digitgrowth,againstillstrongergrowthinthebusinessandairtransportaviation-relatedsegmentandslightlylowergrowthinthenon-aviation-related--theairport,railandsecurity,overFY16.


Carter,I'djustaddtothatthatwe'vehadthatgoodgrowthinspiteofsomeprettysignificantheadwindsandanumberofinternationaltripsgoinginandoutofChina,Russia,andBrazil.Boththoseareashavebeenheadwindsjustbecauseoftheeconomicsituationineachofthoseregions,butwe'vecontinuedtogrowthatbusinessinspiteofthat,andweexpectthatwillcontinue.


That'sgreatcolor.AndKelly,asafollow-uptoRob'squestion,wereyouhappyonTuesdaynightorcouldyouhavebeenhappier?


Nocomment


(laughter).Allright,thanks.

Operator :

GeorgeShapiro.

GeorgeShapiro (Analyst-ShapiroResearch):

Yes,Iwantedtopursue,itlookedlikeyourfirst--your2015revenuegrowthwasslightlybelowthelow-endoftheguidancethatyougaveinmid-September.Itwouldseemthatthat'sduetotheBusinessJetOEandifthat'strueIwasjustwonderingwhathappenedthatyouwerenotabletoforeseeitwithonlyacoupleofweeksleftintheyear?

Thenthefollow-upisthatsinceyoudidn'tchangeyourrevenuegrowthfor2016versus2015,doesthatimplyatthispointthatweareprobablyatthelowerendoftheguidancerangethatyouputout?Thanks.





George,asweclosetheyearifthere'ssomethingthatdidnotmeetmyexpectationsitwasnotthebusinessaviationrevenueitwasactuallyGovernmentSystems.WehadacontractfortheinstallationandequipmentassociatedwiththeKC-135block45update,thatwasavery--plannedtobeaverylateintheyearaward,andthenimmediatesaleoftheequipment.Wedidgetthecontractbutitcameinatalowernumberofaircraftthanwehadanticipated.

SoifIlookatwherewefinishedupourrevenuewasalittlelight,alittledisappointingfromourGovernmentbusinessgoingforward.That'salsogoingtohavelittlebitofachallengeforusin2016becausewhattheychosetodoismodifylessoftheaircraft.Thisisamulti-yearmodprogram,andtheyhaveputthoseaircraftattheendoftheprogram--KC-46Acanaccelerate--thosemaygoaway,whichintheendIdon'tknowthatthatwouldnotbethatgoodnewsforus.Butitisgoingtopushsomeaircrafttotheright--itreallywasnotasurpriseinthebizav,itwasmoreasurpriseinGovernmentbusiness.


IwouldjustaddIwouldnotreadtoomuchintotheimpactonFY2016guidance.Itwasn'taverysignificantmissforus,andIthinkwearestillwellwithintherangeofwhatwecommunicatedinSeptember.


Okay,thankyou.

Operator :

JasonGursky,Citi

JasonGursky(Analyst-Citigroup):

Goodmorning,everyone.JustgoingbacktotheIMSsegment.Kelly,you'vespokeninthepastaboutbandwidthbeingagatingfactortogrowth,andtheexpectationsinthelongertermwerethattherewouldbemoreavailabilityasbandwidth--foryoutoprovideevenmoreinterestingservices.

Canyoutalkalittlebitaboutwherewearewithregardtothatbandwidth?Iknowtherewasalaunchduringthethirdquarter.I'mjustwonderingifthat'sgoingtohaveanymaterialimpactforthatbusinessoverthenextyearortwo?Thanks.


ThatwasmycommentontheGlobalXpress,thatisthebroadbandcommunicationcapabilitythat'sjustcomingonline.Wearejustgoingthroughtheprocessofwinningthelaunchcustomers,asImentionedthetwo,butwhatwehavetodoiswehaveto--itisanewradiothatgoesontheairplane.Beforewecaninitiateservicewehavetogogetthatradiointegratedandcertifiedoneachaircrafttype.Sothatwillhappenthroughouttheyear,andbythewaywearenottheonlyonedoingthat.

Honeywellisdoingthatforexampleaswell,allbringingthisbroadbandconnectivityintothemarket,soyouwillseethatgrowoverthenextcoupleyears.Itisnotgoingtobeabigbank,becauseitdoestaketimetofirstofall,gogettheSDC'sinplaceandthensecondofall,gettheretrofitsalllinedupandgettheairlineslineduptodothoseretrofits.


Kelly,whatpointwillallnewaircraftgooutthedoorattheOEMlevelwiththoseradiosalreadyinstalled?





Itisgoingtobeafewyearsyet.TheOEMsarelookingataforward-fitorline-fitcertificationofthiskindofcapability,butcurrentlytheyarenotoperableasstandardequipmentonanyoftheforward-fitaircraft.Iwouldguess--andthisisjustaroughguess,Iwouldguessoverthenextthreeyearsthatwillallchange.

Andtheywillbecutinandwewillbedeliveringthoseasselectableequipment.Typically,broadbandconnectivityeventodayhasbeenselectablebytheairline,itisnotnecessarilystandard.


Great.Thankyou.

Operator :

KevinCiabatonni,KeybancCapitalMarkets.

KevinCiabatonnit (Analyst-KeyBancCapitalMarkets):

Goodmorning.Kelly,howareyouthinkingaboutthe777atthispointasarelatestoapotentialratecut?Inyouroutlookforthisyearandlonger-term?WehadBoeingsayitcouldpossiblygoaslowas7%amonth.

IknowyoumentionedyouhavekindofdifferentassumptionsabouttheC-SeriesversuswhatBombardierhad,justwonderingifthatappliesto777aswell?


Forthisyearwe'veassumedthattheysustainedratesforFY16--andbythewaytheywouldhavetocutratesherewithinthenextquarterprobablytohaveanyimpactonour2016-sotherealquestionishowmanyaircraftinourFY17,andwe'vegotalittletimebeforewe'reproviding2017guidanceonthat.Isuspectwewillhaveabetterhandlewhenwedoputthatguidanceout.

Typically,thisisanareawherewedoalignprettycloselytowhattheOEMissaying.Wedon'tfindmuchvariability,soI'dlistentowhatBoeingsaysandassumethat'sgoingtoflow-throughtous.


Bytheway,the777is,theexisting777isaprettyhighBFE-contentairplaneforus,soit'snot--aratecutwillhavesomeimpactonus.

KevinCiabatonnit (Analyst-KeyBancCapitalMarkets):

Thankyou,guys.

Operator :

KenHerbert.

KenHerbert (Analyst-CanaccordGenuity):

Goodmorning,Kelly.Ijustwantedtofollow-upontheBusinessJetdiscussion.IknowwhenyouprovidedguidanceforBusinessJetOEdownlow-double-digit,youhadafairamountofconservatismandprobablyrealismbakedintoyourguidanceevenjustbeyondobviouslywhatwe'veseenatBombardier.

Hasanythinghappenedinthelastmonthathalf,twomonths,sinceyougavetheguidancethatmay




haveeatenintosomeofthisconservatismorsomeofthebufferyouhad,orareyoustillseeingthingsasyousawthemontheOEside,specificallywithBusinessJet,consideringallthenewswe'vehadrecentlyrelativetotwomonthsago?


Firstofall,thepredominanceofthelowdouble-digitdeclinewastheGlobals.Thenaswesaidweprovidedsomeadditional--whatIwillcallgeneraldiscounttothemid-to-lightgoingintotheyear.

No,Ihaven'tseenthatnecessarilyconsumed,butI'malso--wearejuststartingandmarketconditionshavebeengenerallysoft.Iwillsaythattheannouncementsortheearningscallssinceweputoutguidancehaven'tindicatedsignificantweaknessinproductionrates,sohopefullyI'mwrongandwon'tneedthediscount,butIthinkitisprudentgiventhehistorywehaveseen--andutilizationratesjusthavenotbeenverystrongandbacklogsstillarerelativelyweak--wewillhavetoseehowthatplaysout.


Okay,that'shelpful.Andjustthenasafollow-up,youhadagoodquarterandIknowyoutalkedaboutthisforBusinessJetaftermarket.Werethereanyspecificone-timeitemsinthequarterthatmaybepulledthatforwardalittlebit?AndIknowobviouslyyou'restillstickingtothelow-single-digitoutlookfor2016,butanycommentaryinmoredetailonthequarterwouldbehelpful.


Whatreallydroveinthequarterwasmandate-relatedactivity.We'vegotacouplenewFANSwhicharenavigationsystemupdatesthatwe'vegotcertifiedandwillenterintothemarket.Westartedtoseealittlebitofthat.ButIwouldsaythegoodquarterwas,fromadiscretionaryperspective,waspredominantlythemandate-relatedactivity.

Thatmandateactivityisgoing--isnotgoingtogrowin2016,thatwillprobablybealittlebitofaheadwindforusgoingforwardinto2016.


Great,thankyouverymuch.

Operator :

GeorgeShapiro.


Yes,justtwoquickfollow-ups.WhatwouldthegrowthhavebeeninthelargeOEaftermarketifyoutookoutthe787provisioning?


Idon'tknow.Iguessaboutmid-singledigits.


BecauseIwillthinkin2016thatnegativeissueisnotgoingtobetherebecauseIwillassume--


Iwouldagree.Ithinkwe'vereachedasteady-staterunrateon787sparing,soIagreewithyou,Idon't




thinkthat'sgoingtobeheadwindnextyearforus.


Thenjustonequickone,Patrick.HowmuchhigherwasincentivecomproughlyattheCommercialandGovernmentareas?


Itwas$16millionintotal,George,splitbasically50/50betweenthetwobusinesses,so$8millioneach.


Thanksverymuch.


Sure.

Operator :

DavidStrauss.


Thanksfortakingthefollow-up.Patrick,theQ1restructuring,willthatrunthroughCommercialSystems?


No,wewilltreatitas--therestructuringchargeitselfwe'lltreatasoutsideofSigmundoperatingearnings--that'swhatwetypicallydo.


Okay.Andthenjustaquestiononthepreproduction.Ithinkawhilebackyouhadachartthatshowedpreproductioncomingdownafairamountin2016.Itlookslikeitisnotgoingtocomedownasmuchnow.Canyoutalkaboutwhattheadditionalspendingisgoingtowards?


Itiscomingdownabout$40millionyear-over-year.I'mstrugglingtorememberthechartyouaretalkingabout.IsuspectthereisincrementalspendinglargelyonthingsliketheC-SeriesandGlobals.Becausebothofthoseprogramshavebeendelayed.


Yes,thechartyouhadIthinkthiswasfromyourInvestorDaywheneveryouhadyourlastone.Itlookedlikethespendwasaround$100million,andnowthespendlookslikeit's--withXamortization,lookslikeitisaround$150million.Isthatright?


Iwasthinkingmorelike$140million,butyes,butIdothinkthelarge--thevastmajorityoftheadditionalspendisrelatedtothoseBombardierprograms.





Okay.Thanks.

Operator :

PeteSkibitski.

PeteSkibitski(Analyst-DrexelHamilton):

Goodmorning,guys.JustacouplequestionsonGovernment.TheJTRSManpackprogramIthinkissetforanawardintheJanuaryorFebruarytimeframe.YouguyshaveasenseofhowmanyawardeestherearegoingtobeandwouldawinpositivelyimpactyourFY16?AndIwasjustwonderingifthereareanyothermeaningfulcompetitiveopportunitiesontheGovernmentsidethatweshouldlookoutfor?


Thatoneisaverymeaningfulcompetitionforusbutnotfor2016.Theyaregoingtoselectmultiplesuppliers--bythewaytheproposalshavebeensubmittedsotheyareinthesourceselectionprocessrightnow.

Theywillselectmultiplesuppliers.Twoorthreeistheindicationthatwehavethatsomewhatisdependentonthecomplianceleveloftheproposalsthatgoin.Butpartofthatprogramincludesonceyouareselected,youprovideprototyperadiostotheArmy,andthentheygothroughatestandevaluationprogrambeforetheyturnaroundandbuyquantitiesofradios,soalltherevenueswillbeoutsideofourFY16.

IntermsofotherbigprogramsinGovernmentSystems,we'vegotquiteafewInternationalC-130updateprogramsthatshouldcometosourceselectionhereinthenextsixmonths,sothat'saspacetowatchbecauseweareanticipatingsomeofthatwilldrivegrowthforusinasecondhalf.Andthenwehavejustthesignificantquantityofsmaller-levelprograms.

IwillsayitwasnicetogetboththeR210andtheMIDSIDIQsinplacesothatwecangettheannualbuysboughtagainstthose.Andagainthoseare--R210sgoingtodrivesomegrowthforusaswellasthedatalink,theMIDSisadatalink.Thatwilldrivesomegrowthforusin2016aswell.We'vegotthebasecontractbutweneedtogettheIDI--ortheannualbuysdoneinplaceagainstthosebasecontracts.WearealsoseeingsomeuptickinGPS--modernizedGPSawards,andsothat'sanotherspacetowatchovertheyearbecauseI'manticipatingsomeprettygoodgrowthinthatareaaswell.

PeteSkibitski(Analyst-DrexelHamilton):

Thankyou.

Operator :

RobertSpingarn.


Helloagain.Ijustwantedtoaskabout757,767cockpitretrofitandwhattheactivitylevelhasbeenthere.


Wehadgoodgrowthlastyearwithsomelaunchcustomers.We'reworkingacouplecampaignsrightnow,nothingyetthatIcanannouncebutweareexpectingtocontinuetoalsoseegrowthin2016withthatlarge-formatdisplayretrofitprogram.





Okay,thankyou.

Operator :

RonEpstein,BankofAmerica.


Thanksforthefollow-up,guys.Kelly,inyourpreparedremarksyoutalkedaboutyou'remakingsomeinvestmentsfornewopportunitiesindefense,sothatbegsthequestionifyoucananswerit,doesalong-rangestrikebomberbenefityouguysornot,andthenwhatotherfutureopportunitiesareyouinvestingin?


Nocommentonthefirstprogram.Obviously,theJTRSprogramwhichis--we'vegottobringprettymuchanon-developmentitemradiotothetablesothat'squiteaninvestment.Andthenwearecontinuingtoalwaysinvestinnextgenerationcapability,particularlyaswearebringingcommercialflightdecksintothemilitarymarket.SoforexamplesomeoftherotarywingapplicationsthatItalkedabout,typicallywhatweneedtodoisbringFusioncomponentsbutmilitarizethose,andwewillspendR&Ddoingthatmilitarizationworksothatwecanbecompetitiveinbringingthosecommercialtechnologiesintothatmilitarymarket.


Okay,great,thankyou.


Operator,wehavetimeforonemorequestion.

Operator :

MylesWalton.


Thanksforthefollow-up.Thequestionisin2016ifyoucancommentonCommercialSystems'growth.Itlooksorganicallylikemaybeitisflat.XBombardier,whatwouldthegrowthlooklike?Andnumbertwo,proformafor2016,howmuchofyourrevenueisBombardieratthispoint?Thanks.


IwouldsayXBombardierwearetalkingaboutmid-single-digitgrowthforCommercialSystemsonanorganicbasis.AsitrelatestototalBombardierrevenues,itisprobablyunder5%ofthetotal--ourtotalrevenueatthispoint.


Great,thankyou.

Operator :

Therearenofurtherquestionsatthistime.IturnthecallbacktoMr.Millerforanyclosingremarks.





Thankyou,Sean.Weplantofileourform10-Kinaboutthreeweeks,sopleasereviewthatdocumentforadditionaldisclosures.Thankyouforjoiningustodayandparticipatingontheconferencecall.

Operator :

Thisconcludestoday'sconference.

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