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Rockwell Collins Management Discusses Q3 2012 Results - Earnings Call Transcript

Stocks in this article: COL

Please note that today's presentation and webcast will include certain projections and statements that are forward-looking. Actual results may differ materially from those projected as a result of certain risks and uncertainties, including those detailed on Slide 2 of this webcast presentation, and from time to time, in the company's Securities and Exchange Commission filings. These forward-looking statements are made as of today and the company assumes no obligation to update any forward-looking statement.

With that, I'll turn the call over to Clay.

Clayton M. Jones

Thanks, Steve, and good morning, everybody.

Of the 3 primary markets we addressed, government, air transports and business jets, 2 of them have followed a relatively predictable course so far this year. We felt government was going to be weak and following a decline in first half with growth in the second half. Results this quarter indicate that's exactly what's happened. We forecast its strong growth in the air transport sectors, Boeing and Airbus increased production rates, no backlog. And despite a slower aftermarket growth this quarter, air transport is up across the board in double-digits for the year-to-date. However, the market that has proven to be the most unpredictable for a variety of reasons is business jets. Our original guidance for Commercial Systems at the beginning of the year was low double-digit growth, we now expect high single-digit growth with all of the reduction resulting from the Hawker Beechcraft bankruptcy and the slowdown in the business jet aftermarket. Neither of which was expected when we set guidance for the year last September.

Most of this market is in a recovery mode. And we continue to expect deliveries -- increased deliveries at all of the OEMs except Hawker. That said, the recovery is not as robust as we and the OEMs thought it would be at this point, which I believe is a reflection of the state of the global economy. This has had a particularly significant impact at the light end of the market where OEMs are still struggling to fill orders and build backlog. As a result, we are revising our guidance for the year to reflect the updated realities of this market. First, we are lowering our cash flow from operations to about $600 million due to lower collections of accounts receivable from Hawker Beechcraft and higher expected tax payments. Second, we're revising our revenue guidance to about $4.8 billion, which incorporates the updated outlook for business jets. This includes a $25 million reduction to OEM revenue for the Hawker Beechcraft temporary production shutdown and revised build rate, which I disclosed earlier this quarter, and lower expectations for aftermarket growth by $25 million, driven by a slower global economic recovery that has limited discretionary spending and business jet utilization.

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