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Rockwell Collins Third Quarter 2013 Earnings Per Share Increased 5% To $1.20

Stocks in this article: COL

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 jetsRockwell Collins was selected by Bombardier to provide enhancements to its Pro Line 21 TM 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 ventureRockwell 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 ChinaRockwell 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 radiosRockwell 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 IIBristow 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 programRockwell 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 upgradeRockwell Collins' Flight2 TM 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 Venue TM HD cabin system selected for a Boeing Business JetRockwell 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.

Conference Call and Webcast Details

Rockwell Collins Chairman 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 19, 2013. 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 19, 2013.

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 19,000 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, including bankruptcies; the health of the global economy, including potential deterioration in economic and financial market conditions; the rate of recovery of the commercial OEM production rates and the aftermarket; the impacts of natural disasters, including operational disruption, potential supply shortages and other economic impacts; cybersecurity threats, including the potential misappropriation of assets or sensitive information, corruption of data or operational disruption; delays related to the award of domestic and international contracts; unanticipated impacts of sequestration and other provisions of the Budget Control Act of 2011; the discontinuance of 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; declining defense budgets resulting from budget deficits in the U.S. and abroad; 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; timing of international contract awards; 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.

ROCKWELL COLLINS, INC.

SEGMENT SALES AND EARNINGS INFORMATION

(Unaudited)

(in millions, except per share amounts)

   
Three Months Ended Nine Months Ended
June 30 June 30
2013   2012 2013   2012
Sales
Government Systems $ 602 $ 679 $ 1,726 $ 1,890
Commercial Systems 563   526   1,632   1,570  
Total sales $ 1,165   $ 1,205   $ 3,358   $ 3,460  
 
Segment operating earnings
Government Systems $ 129 $ 148 $ 348 $ 393
Commercial Systems 132   105   355   318  
Total segment operating earnings 261 253 703 711
 
Interest expense (7 ) (7 ) (21 ) (20 )
Stock-based compensation (6 ) (6 ) (19 ) (19 )
General corporate, net (14 ) (10 ) (44 ) (35 )
Income before income taxes 234 230 619 637
Income tax expense (70 ) (64 ) (162 ) (180 )
 
Net income $ 164   $ 166   $ 457   $ 457  
 
Diluted earnings per share $ 1.20 $ 1.14 $ 3.30 $ 3.09
 
Weighted average diluted shares outstanding 137.2 145.0 138.5 147.9
 

The following tables summarize sales by product category for the three and nine months ended June 30, 2013 and 2012 (unaudited, in millions):

  Three Months Ended   Nine Months Ended
June 30 June 30
2013   2012 2013   2012
Government Systems sales:
Avionics $ 341 $ 393 $ 980 $ 1,082
Communication products 153 178 438 476
Surface solutions 62 50 169 168
Navigation products 46   58   139   164
Total Government Systems sales $ 602   $ 679   $ 1,726   $ 1,890
 
Commercial Systems sales:
Air transport aviation electronics:
Original equipment $ 151 $ 150 $ 445 $ 415
Aftermarket 128 109 357 351
Wide-body in-flight entertainment 19   23   64   72
Total air transport aviation electronics 298   282   866   838
 
Business and regional aviation electronics:
Original equipment 158 145 458 434
Aftermarket 107   99   308   298
Total business and regional aviation electronics 265   244   766   732
Total Commercial Systems sales $ 563   $ 526   $ 1,632   $ 1,570
 
Commercial Systems sales:
Total original equipment $ 309 $ 295 $ 903 $ 849
Total aftermarket 235 208 665 649
Wide-body in-flight entertainment 19   23   64   72
Total Commercial Systems sales $ 563   $ 526   $ 1,632   $ 1,570
 

The following table summarizes total Research & Development Investment by segment and funding type for the three and nine months ended June 30, 2013 and 2012 (unaudited, dollars in millions):

  Three Months Ended   Nine Months Ended
June 30 June 30
2013   2012 2013   2012
Research and Development Investment:
Customer-funded:
Government Systems $ 97 $ 102 $ 296 $ 322
Commercial Systems 25   20   72   61  
Total Customer-funded 122   122   368   383  
 
Company-funded:
Government Systems 18 20 54 63
Commercial Systems 49   59   155   178  
Total Company-funded 67   79   209   241  
Total Research and Development Expense 189 201 577 624
 
Increase in Pre-production Engineering Costs, Net 37   32   113   88  
Total Research and Development Investment $ 226   $ 233   $ 690   $ 712  
 
Percent of Total Sales 19.4 % 19.3 % 20.5 % 20.6 %
 

ROCKWELL COLLINS, INC.

SUMMARY BALANCE SHEET

(Unaudited)

(in millions)

   
June 30, September
2013 30, 2012
Assets
Cash and cash equivalents $ 354 $ 335
Receivables, net 969 971
Inventories, net (1) 1,509 1,332
Current deferred income taxes 14 58
Other current assets 99   91
Total current assets 2,945 2,787
 
Property 757 773
Goodwill 778 780
Intangible assets 287 291
Long-term deferred income taxes 407 455
Other assets 223   228
Total assets $ 5,397   $ 5,314
 
Liabilities and equity
Short-term debt $ 602 $
Accounts payable 379 475
Compensation and benefits 271 269
Advance payments from customers 298 288
Accrued customer incentives 167 174
Product warranty costs 119 126
Other current liabilities 99   108
Total current liabilities 1,935 1,440
 
Long-term debt, net 563 779
Retirement benefits 1,534 1,693
Other liabilities 157 138
Equity 1,208   1,264
Total liabilities and equity $ 5,397   $ 5,314
 

(1) Inventories, net is comprised of the following:

 
June 30, September
2013 30, 2012
Inventories, net:
Production inventory $ 827 $ 763
Pre-production engineering costs 682   569
Total inventories, net $ 1,509   $ 1,332
 

Pre-production engineering costs include costs incurred during the development phase of a program in connection with long-term supply arrangements that contain contractual guarantees for reimbursement from customers. These costs are deferred in Inventories, net to the extent of the contractual guarantees and are amortized to customer-funded research and development expense within cost of sales over their estimated useful lives using a units-of-delivery method, up to 15 years.

ROCKWELL COLLINS, INC.

CONDENSED CASH FLOW INFORMATION

(Unaudited)

(in millions)

 
Nine Months Ended
June 30
2013   2012
Operating Activities:
Net income $ 457 $ 457
Adjustments to arrive at cash provided by operating activities:
Depreciation 91 86
Amortization of intangible assets and pre-production engineering costs 41 42
Stock-based compensation expense 19 19
Compensation and benefits paid in common stock 42 53
Excess tax benefit from stock-based compensation (7 ) (7 )
Deferred income taxes 75 119
Pension plan contributions (120 ) (120 )

Changes in assets and liabilities, excluding effects of acquisitions and foreign currency adjustments:

Receivables 2 3
Production inventory (99 ) (112 )
Pre-production engineering costs (131 ) (101 )
Accounts payable (67 ) (71 )
Compensation and benefits 3 (92 )
Advance payments from customers 11 12
Accrued customer incentives (7 ) 27
Product warranty costs (7 ) (21 )
Income taxes 14 (85 )
Other assets and liabilities (8 ) (17 )
Cash Provided by Operating Activities 309   192  
 
Investing Activities:
Property additions (85 ) (102 )
Proceeds from disposition of property 1 17
Acquisition of intangible assets (1 ) (2 )
Other investing activities   (4 )
Cash Used for Investing Activities (85 ) (91 )
 
Financing Activities:
Purchases of treasury stock (524 ) (710 )
Cash dividends (124 ) (114 )
Increase in short-term commercial paper borrowings, net 400 201
Increase in long-term borrowings 247
Proceeds from the exercise of stock options 38 17
Excess tax benefit from stock-based compensation 7   7  
Cash Used for Financing Activities (203 ) (352 )
 
Effect of exchange rate changes on cash and cash equivalents (2 ) (14 )
 
Net Change in Cash and Cash Equivalents 19 (265 )
Cash and Cash Equivalents at Beginning of Period 335   530  
Cash and Cash Equivalents at End of Period $ 354   $ 265  
 




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