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Rockwell Collins reports 3QFY2013 financial highlights

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Rockwell Collins reports 3QFY2013 financial highlights

19-Jul-2013

Rockwell Collins third quarter 2013 earnings per share increased 5% to $1.20

  • Increased full year earnings per share guidance to between $4.55 and $4.60 per share
  • Increased full year cash flow guidance to about $600 million

CEDAR RAPIDS, Iowa (July 19, 2013) - Rockwell Collins, Inc. (NYSE: COL) today reported third quarter fiscal year 2013 earnings per share of $1.20, $0.06 higher than earnings per share of $1.14 in the same quarter last year. The 5% increase in earnings per share was due to improved operating performance and the benefit of share repurchases. Net income for the third quarter of 2013 was $164 million, compared with $166 million in the same quarter last year.

For the third quarter of 2013, the company reported a 3% reduction in total sales, to $1.17 billion compared with $1.21 billion last year with Commercial Systems sales increasing 7%, while Government Systems revenue declined 11%. Total segment operating earnings increased $8 million to $261 million, or 22.4 percent of sales this quarter, compared to $253 million, or 21.0 percent in the third quarter of the prior year.

Cash provided by operating activities for the first nine months of 2013 totaled $309 million, an increase of $117 million compared to $192 million last year. The improvement in cash from operations was primarily driven by improved inventory performance, lower tax payments and lower compensation payments.

"Despite the lingering impact of defense budget reductions, I believe the operating performance of our company was outstanding in the third quarter," said Rockwell Collins Chairman and Chief Executive Officer, Clay Jones. "Segment operating margins were up 140 basis points driven by a Commercial Systems increase of 340 basis points while Government Systems held roughly flat on declining sales. Additionally, operating cash flow generation is 61% greater than this point last year. This earnings and cash performance was driven by double-digit growth in commercial aftermarket revenue and our continued focus on cost containment, program performance and asset management."

Jones went on to state, "Although near-term visibility remains difficult as the U.S. Department of Defense incorporates the impacts of sequestration, we see continued strength in our commercial business. Based on our performance to-date, we are increasing our guidance for earnings per share and operating cash flow toward the high end of our previous range."

Following is a discussion of fiscal year 2013 third quarter sales and earnings for each business segment.

Commercial Systems

Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved 2013 third quarter results as summarized below.

  • Sales to aircraft original equipment manufacturers increased from higher deliveries for the Bombardier Global and Challenger aircraft, and a full quarter of production for Beechcraft King Air aircraft, which was partially offset by fewer deliveries for Cessna business jets.
  • Aftermarket sales increased from higher spares sales and increased retrofits related to airspace mandates.
  • Operating earnings and margin increased primarily due to higher sales volume and lower company-funded research and development expense. Although company-funded research and development expense declined $10 million, total research and development investment, which includes pre-production engineering programs, increased $3 million primarily driven by the Boeing 737 MAX program.

Government Systems

Government Systems provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, other government agencies, civil agencies, defense contractors and ministries of defense around the world. Results from the third quarter of 2013 are summarized below.

  • Avionics revenue decreased from lower sales for development programs which are completing or transitioning to production, simulator award delays, and reduced sales for Eurofighter and helmet mounted displays for various fixed wing aircraft.
  • Communication product sales declined due to lower satellite communication and datalink product sales, partially offset by increased deliveries of JTRS Manpack radios.
  • Surface solutions sales increased from higher international Firestorm targeting systems sales.
  • Navigation product sales declined due to fewer deliveries of Defense Advanced GPS Receivers.
  • Operating earnings and margin decreased primarily due to lower sales, which was partially offset by the benefit from cost reduction actions.

Corporate and Financial Highlights

General corporate expenses not allocated to the company's business segments increased $4 million to $14 million primarily driven by increased compensation and pension expenses.

The company's effective income tax rate was 29.9% for the third quarter of 2013 compared to a rate of 27.8% for the same period last year. The higher tax rate was due to the absence of a favorable adjustment to tax reserves made in the prior year.

During the third quarter of 2013, the company repurchased 1.4 million shares of common stock at a total cost of $90 million. The company also paid a dividend on its common stock of 30 cents per share, or $41 million, in the third quarter of 2013.

Fiscal Year 2013 Outlook

The following table is a complete summary of the company's updated fiscal year 2013 financial guidance:

  • Total sales
About $4.65 billion (From $4.6 billion to $4.7 billion)
  • Total segment operating margins
21% to 22%
  • Earnings per share
$4.55 to $4.60 (From $4.45 to $4.65)
  • Cash flow from operations
About $600 million (From $500 mil. to $600 mil.)
  • Total research & development investment
About $950 million
  • Capital expenditures
About $125 million (From about $140 million)
  • Full year income tax rate
About 27%

Business Highlights

Rockwell Collins will expand avionics capability for Bombardier Challenger 300 and Challenger 350 business jets
Rockwell Collins was selected by Bombardier to provide enhancements to its Pro Line 21TM avionics. The avionics system, which Bombardier will market as Pro Line 21 Advanced, significantly enhances mission performance, increases airport access and enables future airspace operations. Pro Line 21 Advanced is available on both the recently launched Challenger 350 and Challenger 300 jets.

Rockwell Collins and China Leihua Electronic Technology Research Institute established a joint venture
Rockwell Collins and China Leihua Electronic Technology Research Institute, a subsidiary of Aviation Industry Corporation of China (AVIC), announced the formal incorporation and grand opening of their joint venture - AVIC Leihua Rockwell Collins Avionics Company. The new joint venture will initially develop, manufacture and deliver integrated surveillance systems products for the C919 program in China.

Rockwell Collins and Bluesky Aviation Technology to create a commercial simulation joint venture in China
Rockwell Collins and Beijing Bluesky Aviation Technology, an AVIC subsidiary, signed a Memorandum of Agreement towards establishing a joint venture that will design, manufacture and market commercial aviation flight simulators. The venture will initially focus on airlines and aircraft manufactures in China, with future plans to address the global commercial simulation and training market segment.

Brazilian Army Aviation Command selected Rockwell Collins airborne tactical radios
Rockwell Collins was selected by the Brazilian Army Aviation Command to provide its Talon radio for a variety of rotary aircraft. The Rockwell Collins Talon radio is designed to provide the best value in features, technology and growth capabilities, including a digital radio architecture that allows easy reprogramming with different waveforms and operating modes.

Bristow Group to equip helicopters with Rockwell Collins TCAS II
Bristow Group, which provides helicopter transport services for offshore oil and gas and government operations, is retrofitting a fleet of 44 helicopters with Rockwell Collins' Traffic Collision Avoidance System.

L-3 selected Rockwell Collins for U.S. Air Force EC-130H avionics upgrade program
Rockwell Collins was selected by L-3 Platform Integration for the communication, navigation and surveillance/air traffic management upgrade for the U.S Air Force EC-130H aircraft program.

Rockwell Collins selected for Oman C-130 upgrade
Rockwell Collins' Flight2TM avionics system was selected for the Royal Air Force of Oman's C-130 upgrade program.

Rockwell Collins avionics selected by the following airlines:
- China Southern Airlines for 66 aircraft including Airbus A320, Boeing 777 and Boeing 737 NG aircraft
- EVA Air for 7 firm, with an option for 4 additional, Boeing 777 aircraft
- Xiamen Airlines for 12 Boeing 737NG aircraft

Rockwell Collins VenueTM HD cabin system selected for a Boeing Business Jet
Rockwell Collins announced that its Venue cabin management and high-definition entertainment system was recently selected for installation aboard a Boeing Business Jet. This represents the fifth selection on a narrow-body VIP aircraft in the last nine months.

Rockwell Collins selected to upgrade avionics in preparation for Link 2000+ European mandate
- Iberia Airlines will upgrade entire single-aisle fleet.
- SunExpress will retrofit entire Boeing 737 NG fleet.

Refer to full documentation in attachments box, located at the top left, below the headline.

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