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Rockwell Collins' CEO Discusses Q1 2012 Results - Earnings Call Transcript

Stocks in this article: COL

I would also note that this performance was delivered without the benefit of any meaningful overall business jet OEM market recovery.

Now meanwhile, Government Systems was able to maintain their industry-leading operating margins above 20% despite a 10% or $67 million decline in sales. In an environment where our top line has become more difficult to predict, I'm really proud of our team's focus on the things within our control as we continue to take aggressive actions to rightsize the infrastructure of this business based on market conditions.

Now as we've been predicting, we face one more quarter of difficult comparability in Government Systems as the effects of program cancellations and a large slowdown in procurement of our Defense Advanced GPS Receiver play through our top line. However, I am increasingly confident that the significant improvements we forecast for the second half of the fiscal year will happen. And here's why.

We expect sales of the KC-46, KC-10 and KC-390 tanker programs to continue accelerate through the year, along with the F-15 foreign military sale through Boeing to Saudi Arabia. We should also see growing sales of the fifth generation ARC-210 airborne radio system, as well as increased deliveries of our FireStorm targeting system to international customers.

With the risk of an extending -- extended continuing resolution behind this and our backlog strengthening, we believe Government Systems can achieve mid-single-digit growth in the second half of the year.

Now as I look out beyond the current fiscal year, I also see opportunities to accelerate growth in both segments. In Commercial Systems, these include 787 production ramp-up, the introduction of the CSeries, the A350 and multiple international regional jets, and a market recovery for business jets. In Government Systems, I expect selected growth opportunities in areas such as tankers, UAVs, the JTRS HMS program, ARC-210 radios, our next-generation GPS products for the MGUE program and international opportunities, including the Saudi F-15 I mentioned earlier, helicopter retrofits, FireStorm targeting systems, KC-390, C-130 upgrades, and various communication programs.

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