Rockwell Collins reports EPS of $1.43 for Fiscal Year 2003; net income increases $22 million to $258 million

CEDAR RAPIDS, Iowa (November 11, 2003) - Rockwell Collins, Inc. (NYSE: COL) today reported net income for the fiscal year ended September 30, 2003 of $258 million. This represents an increase of $22 million, which is 9% greater than the $236 million reported for fiscal year 2002. Earnings per share for fiscal year 2003 were $1.43, an increase of 15 cents or 12% from the $1.28 reported last year.

Sales for fiscal year 2003 were $2.54 billion versus $2.49 billion last year. Cash provided by operating activities for fiscal year 2003 was $374 million versus $453 million reported last year. Free cash flow for fiscal year 2003 was $306 million versus $397 million reported last year. A table reconciling cash provided by operating activities to free cash flow is included in the condensed cash flow information in this release.

"Our 2003 financial results highlight the advantage that our balanced business model affords Rockwell Collins," said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. "The strength of our Government Systems business and our employees' continued focus on controlling costs offset the weakness we experienced in our Commercial Systems business this year."

The company's focus on financial efficiency and driving shareholder value in fiscal year 2003 was evidenced by a double-digit percentage improvement in full year earnings per share and $154 million in share repurchases.

"Despite unforeseen events during the year such as the war in Iraq and the SARS epidemic, we were able to meet the earnings per share expectation that we established at the beginning of the year," Jones added.

Net income for the fourth quarter of fiscal year 2003 was $73 million, or 40 cents per share, compared with net income of $70 million, or 38 cents per share, for the same period last year. Sales for the fourth quarter of fiscal year 2003 were $743 million versus $698 million for the fourth quarter of fiscal year 2002.

Following is a discussion of fourth quarter sales and operating margins 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, reported fourth quarter sales of $354 million, a decrease of $9 million or 2% from the same period last year. Airshow, Inc., acquired by Rockwell Collins in August of 2002, provided $6 million of incremental sales in the fourth quarter of 2003.

As anticipated, sales of commercial aviation electronics systems and products to the air transport, business and regional jet OEM's declined in the fourth quarter due to lower build rates. This decline was partially offset by higher business and regional jet aftermarket sales from retrofits and service and support activity. Aftermarket sales to the air transport market in the fiscal quarter were comparable to sales for the same period last year.

Commercial Systems' operating margin for the fourth quarter of fiscal year 2003 declined to 8.8%, compared with 12.1% for the same period in fiscal year 2002. This margin decline was primarily a result of recording a $9 million loss reserve related to in-flight entertainment contracts and higher development costs on our next generation in-flight entertainment system.

Government Systems
Government Systems, which provides aviation electronics, navigation and precision guidance and communications systems, products and services to the United States government, foreign militaries and manufacturers of military platforms, reported fourth quarter sales of $389 million, an increase of $54 million, or 16%, from the same period last year.

The sales increase is attributable to the Joint Tactical Radio System (JTRS) and the Joint Strike Fighter (JSF) development programs along with higher sales in data links, GPS products and in integrated avionics systems for the KC-135.

Government Systems' operating margin for the fourth quarter of fiscal year 2003 increased to 21.3% compared with 18.2% for the same period in fiscal year 2002. The increase in margins was a result of the business holding its operating expenses flat on higher sales volume along with the continued shift from company-funded to customer-funded research and development expenses, which more than offset the lower operating margins on the JTRS and JSF development contracts. In addition, favorable warranty experience of $7 million was partially offset by higher production start-up costs on several navigation and display programs.

Corporate
Share repurchases in the fourth quarter of fiscal year 2003 were 2.3 million shares at a cost of $61 million. For fiscal year 2003, share repurchases were 6.8 million shares at a cost of $154 million, or $22.56 per share.

In the fourth quarter of fiscal year 2002, the favorable resolution of a legal matter related to an acquisition, offset by reserves recorded for other legal matters, increased net income $5 million, or 3 cents per share.

Business Highlights

• The General Dynamics - Rockwell Collins team was selected by Boeing to provide the Integrated Computer System (ICS) for the U.S. Army's Future Combat System (FCS) program. The ICS will be the command, control, communications, computing, intelligence, surveillance and reconnaissance infrastructure used for the FCS family of advanced networked air and ground based systems for use by the Army's Objective Force. Rockwell Collins portion of the contract totals approximately $100 million, which extends through 2009.
  
  
• The U.S. Naval Inventory Control Point (NAVICP) selected Rockwell Collins to provide management, support and repair services for the F/A-18A/B/C/D and F-14D tactical cockpit displays. The five-year contract has an estimated value of $130 million.
  
  
• Vision Systems International (VSI), a joint venture between Rockwell Collins and Elbit Systems Ltd., was awarded an $85 million contract from Lockheed Martin for the development of VSI's Helmet Mounted Display (HMD) system for the F-35 Joint Strike Fighter.
  
  
• Rockwell Collins announced eXchange, a broadband connectivity solution for business aircraft which will provide aircraft passengers with two-way cable-quality connectivity worldwide. Certification of the system is expected in early 2005 and the entire Bombardier Global family of aircraft will be the launch customer.
  
  
• Raytheon Aircraft has selected Rockwell Collins' Pro Line 21 integrated avionics system for the King Air 350 and B200 aircraft. The Pro Line 21 system has already received FAA certification and will be the standard product offering on the aircraft.
  
  
• Air China selected Rockwell Collins to provide avionics for 20 new Airbus A319 aircraft along with the option for 10 additional aircraft. The avionics will include weather radar, multi-mode receiver, transceiver, altimeter, transponder VHF radio and satellite communications.

Fiscal Year 2004 Outlook
For fiscal year 2004, the company continues to anticipate revenues of approximately $2.7 billion and earnings per share between $1.40 and $1.50. Cash provided by operating activities is expected to be $200 million to $250 million after a $125 million company contribution to Rockwell Collins' pension plans. Operating margins for fiscal year 2004 are estimated to be approximately 17% to 18% for Government Systems and 13% to 14% for Commercial Systems. Capital expenditures for fiscal year 2004 are projected to be approximately $95 million. The fiscal year 2004 revenues and earnings per share estimates are based on the following assumptions:

• Government Systems is forecasting a 13% increase in revenue and is projected to represent approximately 53% of total company revenues for fiscal year 2004. The company anticipates significant growth from electronic warfare, future combat systems, Joint Tactical Radio System and Joint Strike Fighter development contracts, service and support for the F-14 and F-18 cockpit displays and integrated applications for the special operations helicopter program.
  
  
• Commercial Systems is forecasting flat revenue in fiscal year 2004 versus 2003 and is projected to represent approximately 47% of total company revenues for fiscal year 2004. Higher revenues from the air transport, business and regional jet aftermarket are anticipated to offset a decline in air transport and business jet OEM revenues for the year. Regional jet OEM revenues are anticipated to be flat compared to the prior year.

The aforementioned guidance does not include the impact of Rockwell Collins pending acquisition of NLX, LLC, a leader in integrated training and simulation systems for military and commercial customers which was announced in October 2003. This acquisition is subject to customary closing conditions, including regulatory approvals, and is expected to be completed prior to December 31, 2003. The acquisition is anticipated to be slightly accretive to earnings for the fiscal year ending September 30, 2004.

Conference Call and Webcast Details
Rockwell Collins' Chairman, President and CEO Clay Jones and Senior Vice President and CFO Larry Erickson will conduct an earnings conference call at 9 a.m. EDT on November 11, 2003. Individuals may listen 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 December 11, 2003.

This press release contains statements (including certain projections and business forecasts) 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, uncertainty following the war in Iraq; the consequence of past and future terrorist attacks; political turmoil in the Middle East; the timing related to restoring consumer confidence in air travel; the health of the global economy as well as the commercial aerospace industry; domestic and foreign government spending, budgetary and trade policies; economic and political changes in international markets where the company competes; demand for and market acceptance of new and existing products; performance of our products; potential cancellation, delay of orders, or changes in procurement practices by our customers; customer bankruptcies; labor work stoppages; recruitment and retention of qualified personnel; performance of our major suppliers and subcontractors; our ability to successfully execute to our internal performance plans; achieving our planned effective tax rate; favorable outcomes of certain customer procurements and Congressional approvals; changes to government policies and regulations; changes to new aircraft build rates; product reliability and cost of repairs; successful execution of our acquisition, strategic and integration plans; and the uncertainties of the outcome of litigation, as well as other risks and uncertainties, including but not limited to those detailed from time to time in the company's 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 is a leader in the design, production and support of communications and aviation electronics solutions for commercial and government customers worldwide. Additional information is available at www.rockwellcollins.com.

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