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Rockwell Collins’ Third Quarter Earnings Per Share Increase 13% to $1.01 on Relatively Flat Sales
Dépèche transmise le 22 juillet 2011 par Business Wire
Rockwell Collins’ Third Quarter Earnings Per Share Increase 13% to $1.01 on Relatively Flat Sales
CEDAR RAPIDS, Iowa--(BUSINESS WIRE)--Rockwell Collins, Inc. (NYSE: COL) today reported third quarter 2011 net income of $158 million, an increase of $16 million, or 11%, from the third quarter of fiscal year 2010 of $142 million. Earnings per share for the quarter were $1.01, an increase of $0.12, or 13%, from earnings per share of $0.89 for the same period in 2010.
“Indicative of our strong operating performance this quarter, Commercial Systems increased their operating margins by 420 basis points on double-digit revenue growth while Government Systems increased margins as well despite an 11% decrease in sales.”
The company reported a sales decrease of $18 million, or 1%, to $1.190 billion for its third quarter ended June 30, 2011 compared to sales of $1.208 billion for the same period a year ago. Total segment operating earnings increased 9% to $248 million, or 20.8% of sales, for the third quarter of 2011 compared to $227 million, or 18.8% of sales, for the third quarter of 2010.
”Very strong earnings growth in Commercial Systems more than offset the lingering impacts of the continuing resolution on our Government Systems business allowing the company to achieve a 13 percent increase in earnings per share on relatively flat sales,” said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. “Indicative of our strong operating performance this quarter, Commercial Systems increased their operating margins by 420 basis points on double-digit revenue growth while Government Systems increased margins as well despite an 11% decrease in sales.”
Jones went on to state, “The balance and diversity of our business is once again proving its value with continued strength in Commercial Systems fueling our growth as Government Systems adjusts to slower and dynamic market conditions. Our confidence in this business mix and unit operating performance enables us to narrow earnings guidance to the upper end of the previous range.”
Following is a discussion of fiscal year 2011 third quarter sales and earnings for each business segment. Commercial Systems’ segment results exclude the results of the Rollmet business for all periods presented. The divestiture is expected to close during the fourth quarter of fiscal year 2011 and is classified as a discontinued operation. The attached supplemental information includes a revised presentation of certain prior period disclosures, which have also been adjusted to reflect Rollmet as a discontinued operation.
Commercial Systems
Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved 2011 third quarter sales of $522 million, an increase of $68 million, or 15%, compared to sales of $454 million reported for the same period last year.
Sales related to aircraft original equipment manufacturers increased $45 million, or 19%, to $285 million driven by higher product deliveries for the Bombardier Global platform, increased air transport aircraft delivery rates and higher sales for customer-funded development programs. Aftermarket sales increased $28 million, or 15%, to $209 million primarily driven by increased service and support sales and higher air transport spare hardware revenue.
Commercial Systems third quarter operating earnings increased $33 million, or 45%, to $107 million, resulting in an operating margin of 20.5%, compared to operating earnings of $74 million, or an operating margin of 16.3%, for the same period a year ago. The increase in operating earnings and margin was primarily attributable to higher sales volume and a $9 million favorable adjustment to customer incentive reserves, partially offset by an increase in selling, general and administrative expense.
Government Systems
Government Systems, which provides communication and electronic systems, products and services for airborne and surface applications to the U.S. Department of Defense, state and local governments, other government agencies, civil agencies, defense contractors and foreign ministries of defense, achieved 2011 third quarter sales of $668 million, a decrease of $86 million, or 11%, compared to the $754 million reported for the same period last year. The decrease in sales was primarily driven by the adverse impacts to customer orders as a result of U.S. Government delayed funding authorizations and lower deliveries of iForceTM public safety vehicle systems.
Airborne solutions sales increased $28 million, or 6%, to $488 million driven by higher revenue for the E-6 aircraft upgrade, the Common Range Integrated Instrumentation System and KC-46A tanker programs as well as higher revenue for rotary wing platforms. These items were partially offset by lower sales on the KC-135 GATM program. Surface solutions sales decreased $114 million, or 39%, to $180 million driven by fewer deliveries of iForceTM systems, the adverse impact from delayed funding authorization and certain programs that were terminated by the government for convenience due to budget priorities.
Government Systems third quarter operating earnings decreased $12 million to $141 million, resulting in an operating margin of 21.1%, compared to operating earnings of $153, or an operating margin of 20.3%, for the same period last year. The decrease in operating earnings was primarily the result of lower sales and higher company-funded research and development costs, partially offset by the absence of certain facility closure costs incurred last year. The improvement in operating margins when compared to the prior year, primarily resulted from a more favorable product sales mix.
Corporate and Financial Highlights
General corporate expenses that are not allocated to the company’s business segments were $10 million for the third quarter 2011 compared to $12 million in the same period last year. The company’s effective income tax rate of 30.8% for the third quarter of 2011 was relatively flat when compared to the rate of 30.4% for the prior year.
Cash provided by operating activities for the first nine months of 2011 totaled $246 million compared to $440 million reported in the same period last year. The decrease in operating cash flow resulted from higher payments for employee incentive compensation of $71 million and $52 million related to increased pre-production engineering effort. The remaining $71 million was primarily driven by higher production inventory from government funding delays, increased safety stock purchases associated with the recent events in Japan, anticipated production volume increases and new programs.
During the third quarter of 2011 the company repurchased 1.1 million shares of its common stock at a total cost of $66 million, leaving $51 million available for authorized share repurchases. The company also paid dividends totaling $38 million, or 24 cents per share, on its common stock.
Discontinued Operations
During the third quarter of 2011, the company reached a definitive agreement to sell the Rollmet product line. The sale is expected to close during the fourth quarter of 2011. Rollmet has been accounted for as a discontinued operation for all periods presented and therefore certain prior period amounts have been reclassified to conform to the current year presentation. For the three and nine months ended June 30, 2010, Commercial Systems sales have been reduced by $6 million and $23 million, respectively, and Commercial Systems operating earnings have been reduced by $1 million and $4 million, respectively.
Fiscal Year 2011 Outlook
The following table is a complete summary of the company’s updated fiscal year 2011 financial guidance and reflects an approximately $35 million reduction to sales as a result of classifying Rollmet as a discontinued operation:
| -- Total sales | $4.80 Bil. to $4.85 Bil. | |
| -- Updated from | $4.8 Bil. to $5.0 Bil. | |
| -- Total segment operating margins | 20.0% to 20.5% | |
| -- Updated from | 19.5% to 20.5% | |
| -- Earnings per share from continuing operations | $4.00 to $4.10 | |
| -- Updated from | $3.90 to $4.10 | |
| -- Cash flow from operations | About $650 Million | |
| -- Updated from | $650 Mil. to $750 Mil. | |
| -- Research & development costs | About $925 Million | |
| -- Updated from | $900 Mil. to $950 Mil. | |
| -- Capital expenditures | About $150 Mil. | |
Business Highlights
Rockwell Collins selected for the KC-10 tanker cockpit upgrade program
The
U.S. Air Force awarded Rockwell Collins a contract to provide systems
integration and avionics for the KC-10 Cockpit Modernization Program.
The contract, valued at more than $160 million over the life of the
program, calls for Rockwell Collins to provide the flight management
system, displays, data link communications and surveillance capabilities.
Embraer selected Rockwell Collins advanced avionics system for
Brazilian Air Force KC-390 fleet
Embraer Defense and Security
selected Rockwell Collins to provide its Pro Line Fusion® flight
deck for the KC-390 tanker/transport aircraft. This is the first
application of the Pro Line Fusion architecture in the military market.
The Brazilian Air Force has committed to purchasing 28 KC-390 aircraft.
Rockwell Collins avionics and mission equipment selected for KC-46
Tanker
Rockwell Collins will provide a wide range of the most
advanced technologies for the warfighter to Boeing on the KC-46 Tanker.
A recently signed contract with Boeing calls for Rockwell Collins to
provide the flight deck, aircraft networks, surveillance/air traffic
management equipment, communications and navigation gear, as well as the
advanced situational awareness and vision systems required for aerial
refueling. The flight deck will utilize the same technology that
Rockwell Collins is supplying for Boeing's 787 Dreamliner jet.
U.S. Navy ordered $25 million of 5th Generation ARC-210 radios
Rockwell
Collins received $25 million in orders for ARC-210 Gen5 radios,
providing much-needed networking and interoperability solutions to
warfighters. In the wake of the first production delivery to the Program
Office in April, this order will provide hundreds of production
terminals featuring software defined networking capabilities that
provide a growth path to host the Soldier Radio Waveform, and
eventually, Mobile User Objective System waveforms.
Rockwell Collins Pro Line Fusion® granted Transport Canada
certification on Bombardier’s Global Vision flight deck
Rockwell
Collins announced that its Pro Line Fusion integrated avionics system
was granted certification from Transport Canada on Bombardier
Aerospace’s Global Vision flight deck. This marks the first
certification of Pro Line Fusion on a customer aircraft. The Global
Vision flight deck with Pro Line Fusion will be featured on Bombardier’s
Global 5000 and Global 6000 business jets.
LAN Airlines selected Rockwell Collins avionics for 80 Airbus A320s
Chile-based
LAN Airlines selected a full suite of Rockwell Collins avionics,
including its WXR-2100 MultiScan™ Threat Detection System and GLU-925
Multi-Mode Receiver, for 80 Airbus A320s, which is one of the largest
aircraft orders for an airline in South America. Deliveries will begin
later this year and continue through 2016.
Rockwell Collins initiated a project to validate ADS-B airworthiness
requirements for helicopters in Europe
Rockwell Collins, in
collaboration with multiple helicopter operators, the European Aviation
Safety Agency (EASA), Eurocontrol, and the Netherlands Civil Aviation
Administration, completed an operational evaluation to successfully
validate automatic dependent surveillance broadcast (ADS-B) out
airworthiness requirements for helicopters operating over the North Sea.
The multi-year project, of which Rockwell Collins was a leading
participant, consisted of flight tests using Rockwell Collins TDR-94D
transponder and, in some instances, the Rockwell Collins GPS-4000S GPS
Sensor. Based on the project’s results, Rockwell Collins and its
collaborators proposed new ADS-B equipment configurations for
helicopters to EASA and approval is expected later this year.
Rockwell Collins brings the safety benefits of head-up flying to
light business aircraft
Rockwell Collins introduced its
HGS-3500™, the industry’s first Head-up Guidance System available for
light- to mid-size business aircraft. The new HGS-3500 empowers flight
crews to achieve greater precision at all times by presenting
information in the pilot’s forward field of view, eliminating the need
to continually transition from head-down instruments to a head-up,
out-the window view during critical phases of flight.
Rockwell Collins divested Rollmet business
Rockwell Collins
has reached an agreement to sell its Rollmet product line to Precision
Castparts Corp. The sale is expected to close during the fiscal fourth
quarter of 2011.
Conference Call and Webcast Details
Rockwell Collins Chairman, President and CEO Clay Jones and Senior Vice President and CFO Patrick Allen will conduct an earnings conference call at 9:00 a.m. Eastern Time on July 22, 2011. Individuals may listen to the call and view management’s supporting slide presentation on the Internet at www.rockwellcollins.com. Listeners are encouraged to go to the Investor Relations portion of the web site at least 15 minutes prior to the call to download and install any necessary software. The call will be available for replay on the Internet at www.rockwellcollins.com through September 22, 2011.
Rockwell Collins is a pioneer in the development and deployment of innovative communication and aviation electronics solutions for both commercial and government applications. Our expertise in flight deck avionics, cabin electronics, mission communications, information management and simulation and training is delivered by 20,000 employees through a global service and support network that crosses 27 countries. To find out more, please visit www.rockwellcollins.com.
This press release contains statements, including certain projections and business trends, that are forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including but not limited to the financial condition of our customers; the health of the global economy, including potential deterioration in economic and financial market conditions; the rate of recovery of the commercial aftermarket; the impacts of the earthquakes, tsunami and nuclear reactor disruptions in Japan, including potential supply shortages and other economic impacts; delays related to the award of domestic and international contracts; the continued support for military transformation and modernization programs; potential adverse impact of oil prices on the commercial aerospace industry; the impact of terrorist events on the commercial aerospace industry; potential declining defense budgets resulting from budget deficits in the U.S. and abroad; impact from the delay in the resolution of program funding in the 2011 U.S. defense budget; changes in domestic and foreign government spending, budgetary, procurement and trade policies adverse to our businesses; market acceptance of our new and existing technologies, products and services; reliability of and customer satisfaction with our products and services; favorable outcomes on or potential cancellation or restructuring of contracts, orders or program priorities by our customers; customer bankruptcies and profitability; recruitment and retention of qualified personnel; regulatory restrictions on air travel due to environmental concerns; effective negotiation of collective bargaining agreements by us and our customers; performance of our customers and subcontractors; risks inherent in development and fixed-price contracts, particularly the risk of cost overruns; risk of significant reduction to air travel or aircraft capacity beyond our forecasts; our ability to execute to our internal performance plans such as our productivity and quality improvements and cost reduction initiatives; achievement of our acquisition and related integration plans; continuing to maintain our planned effective tax rates; our ability to develop contract compliant systems and products on schedule and within anticipated cost estimates; risk of fines and penalties related to noncompliance with laws and regulations including export control and environmental regulations; risk of asset impairments; our ability to win new business and convert those orders to sales within the fiscal year in accordance with our annual operating plan; and the uncertainties of the outcome of lawsuits, claims and legal proceedings, as well as other risks and uncertainties, including but not limited to those detailed herein and from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof and the company assumes no obligation to update any forward-looking statement.
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ROCKWELL COLLINS, INC. |
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SEGMENT SALES AND EARNINGS INFORMATION |
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(Unaudited) |
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(in millions, except per share amounts) |
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Results for the company’s Rollmet product line business are
reported as discontinued operations for all |
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| Three Months Ended | Nine Months Ended | |||||||||||||||
| June 30 | June 30 | |||||||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||||||
|
Sales |
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| Government Systems | $ | 668 | $ | 754 | $ | 2,034 | $ | 2,063 | ||||||||
| Commercial Systems | 522 | 454 | 1,476 | 1,297 | ||||||||||||
| Total sales | $ | 1,190 | $ | 1,208 | $ | 3,510 | $ | 3,360 | ||||||||
|
Segment operating earnings |
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| Government Systems | $ | 141 | $ | 153 | $ | 422 | $ | 437 | ||||||||
| Commercial Systems | 107 | 74 | 280 | 208 | ||||||||||||
| Total segment operating earnings | 248 | 227 | 702 | 645 | ||||||||||||
| Interest expense | (5 | ) | (5 | ) | (14 | ) | (15 | ) | ||||||||
| Stock-based compensation | (6 | ) | (6 | ) | (18 | ) | (17 | ) | ||||||||
| General corporate, net | (10 | ) | (12 | ) | (34 | ) | (36 | ) | ||||||||
| Restructuring adjustment | 0 | 0 | 0 | 1 | ||||||||||||
|
Income from continuing operations before taxes |
227 | 204 | 636 | 578 | ||||||||||||
| Income tax provision | (70 | ) | (62 | ) | (179 | ) | (169 | ) | ||||||||
| Income from continuing operations | 157 | 142 | 457 | 409 | ||||||||||||
|
Income from discontinued operations, net of taxes |
1 | 0 | 2 | 2 | ||||||||||||
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Net income |
$ | 158 | $ | 142 | $ | 459 | $ | 411 | ||||||||
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Diluted earnings per share: |
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| Continuing operations | $ | 1.01 | $ | 0.89 | $ | 2.92 | $ | 2.57 | ||||||||
| Discontinued operations | 0.00 | 0.00 | 0.01 | 0.01 | ||||||||||||
|
Diluted earnings per share |
$ | 1.01 | $ | 0.89 | $ | 2.93 | $ | 2.58 | ||||||||
|
Weighted average diluted shares outstanding |
155.9 | 159.5 | 156.6 | 159.3 | ||||||||||||
Use of Non-GAAP Financial Information
The total segment operating earnings and margin information referenced in the headline and also in the second paragraph of this press release may be considered non-GAAP financial information and is believed to be useful to investors’ understanding and assessment of our business and results of operations. The company evaluates performance and allocates resources based upon, among other considerations, total segment operating earnings and margins. The reference to total segment operating earnings and margins is intended to clarify the impact this measure had on our year-over-year comparative results. The table above reconciles total segment operating earnings to Income from continuing operations before taxes. In addition, the table below provides a further reconciliation of total segment operating margins (unaudited, in millions):
| Three months ended | ||||||||
| June 30 | ||||||||
| 2011 | 2010 | Change | ||||||
| Total sales | $ | 1,190 | $ | 1,208 | ||||
| Total segment operating earnings | $ | 248 | $ | 227 | ||||
| As a percent of total sales | 20.8% | 18.8% | +200 basis points | |||||
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Income from continuing operations before taxes |
$ | 227 | $ | 204 | ||||
| As a percent of total sales | 19.1% | 16.9% | +220 basis points | |||||
The following tables summarize total sales by product category and Commercial Systems sales by type of product or service for the three and nine months ended June 30, 2011 and 2010 (unaudited, in millions):
| Three Months Ended | Nine Months Ended | |||||||||||
| June 30 | June 30 | |||||||||||
| 2011 | 2010 | 2011 |
2010 |
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| Government Systems sales by product category: | ||||||||||||
| Airborne solutions | $ | 488 | $ | 460 | $ | 1,423 | $ | 1,325 | ||||
| Surface solutions | 180 | 294 | 611 | 738 | ||||||||
| Total | $ | 668 | $ | 754 | $ | 2,034 | $ | 2,063 | ||||
| Commercial Systems sales by product category and type of product or service: | ||||||||||||
| Air transport aviation electronics: | ||||||||||||
| Original equipment | $ | 126 | $ | 114 | $ | 373 | $ | 325 | ||||
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Aftermarket1 |
109 | 86 | 319 | 272 | ||||||||
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Wide-body in-flight entertainment products and services2 |
28 | 33 | 84 | 111 | ||||||||
| Total air transport aviation electronics | 263 | 233 | 776 | 708 | ||||||||
| Business and regional aviation electronics: | ||||||||||||
| Original equipment | 159 | 126 | 415 | 349 | ||||||||
| Aftermarket | 100 | 95 | 285 | 240 | ||||||||
| Total business and regional aviation electronics | 259 | 221 | 700 | 589 | ||||||||
| Total | $ | 522 | $ | 454 | $ | 1,476 | $ | 1,297 | ||||
| Commercial Systems sales by type of product or service: | ||||||||||||
| Total original equipment | $ | 285 | $ | 240 | $ | 788 | $ | 674 | ||||
|
Total aftermarket1 |
209 | 181 | 604 | 512 | ||||||||
|
Wide-body in-flight entertainment products and services2 |
28 | 33 | 84 | 111 | ||||||||
| Total Commercial Systems sales | $ | 522 | $ | 454 | $ | 1,476 | $ | 1,297 | ||||
1For the three and nine months ended June 30, 2010, air transport aviation electronics aftermarket sales have been reduced by $6 million and $23 million, respectively to reflect the impact of classifying Rollmet as a discontinued operation.
2For the three and nine months ended June 30, 2010, $23 million and $72 million have been reclassified from air transport aftermarket sales to wide-body in-flight entertainment products and services to conform to current year presentation. Reclassified amounts relate to revenue from twin-aisle IFE services and support activities.
The following tables summarize total Research & Development expenses by segment and funding type for the three and nine months ended June 30, 2011 and 2010 (unaudited, in millions):
| Three Months Ended | Nine Months Ended | |||||||||||
| June 30 | June 30 | |||||||||||
| 2011 | 2010 | 2011 | 2010 | |||||||||
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Research & Development Expense: |
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| Customer-funded: | ||||||||||||
| Government Systems | $ | 110 | $ | 108 | $ | 336 | $ | 318 | ||||
| Commercial Systems | 27 | 19 | 70 | 57 | ||||||||
| Total Customer-funded | $ | 137 | $ | 127 | $ | 406 | $ | 375 | ||||
| Company-funded: | ||||||||||||
| Government Systems | $ | 33 | $ | 29 | $ | 82 | $ | 82 | ||||
| Commercial Systems | 57 | 58 | 175 | 172 | ||||||||
| Total Company-funded | $ | 90 | $ | 87 | $ | 257 | $ | 254 | ||||
|
Total Research and Development Expense |
$ | 227 | $ | 214 | $ | 663 | $ | 629 | ||||
| Percent of Total Sales | 19.1% | 17.7% | 18.9% | 18.7% | ||||||||
