Rockwell Collins reports second quarter fiscal year 2005 financial results; boosts full year sales and earnings per share
guidance
CEDAR RAPIDS, Iowa (April 27, 2005) - Rockwell Collins reports second quarter fiscal year 2005 financial results; boosts full year sales and earnings per share
guidance
- Quarterly earnings per share improve 33% to 52 cents
- Quarterly sales increase 15% to $829 million
- Fiscal year 2005 EPS expected in the range of $2.05 to $2.15
- Fiscal year 2005 sales expected in the range of $3.35 billion to $3.40 billion
Rockwell Collins, Inc. (NYSE: COL) today reported earnings per share for the second quarter of fiscal year 2005 ended March
31, 2005 of 52 cents, an increase of 13 cents, or 33% from the 39 cents reported last year. Net income was 34% higher at
$95 million, an increase of $24 million over last year’s second quarter net income. Total segment operating margins for the
current year second quarter were 18%, a 200 basis point improvement over the 16% reported for the same period a year ago.
Sales for the fiscal year 2005 second quarter were $829 million, an increase of $110 million, or 15% from the $719 million
reported last year. For the first six months of fiscal year 2005, cash flow from operating activities amounted to $200 million,
of which $154 million was generated in the second quarter. This compares to $34 million of cash provided by operating activities
for the first six months of fiscal year 2004, which included a $125 million use of cash for voluntary contributions made to
the company’s qualified pension plans.
Clay Jones, Rockwell Collins Chairman, President and Chief Executive Officer said, “Our long-standing commitment to significant
investment in new product development, maintaining a sharp focus on the requirements of our customers, and continuous improvement
in operational performance have enabled us to once again deliver outstanding across-the-board financial results.”
Commenting on the company’s outlook for the reminder of the current fiscal year, Jones continued, “Industry market conditions
remain strong, particularly in the areas in which our diverse portfolio of military and commercial product and service offerings
are positioned. Accordingly, we have raised our full year revenue and earnings expectations,” concluded Jones, noting that
the revised guidance calls for a full year earnings growth rate of 26% on projected revenue growth of 15%, based on the mid
points of the new guidance ranges.
Following is a discussion of sales and earnings for each business segment.
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, achieved second
quarter sales of $426 million, an increase of $49 million, or 13%, compared to the $377 million reported for the same period
last year. Higher sales from programs focused on military modernization contributed to the revenue growth.
Sales of defense electronics products and systems increased 21% principally due to higher revenues from electronics systems
upgrades for fixed-wing aircraft and U.S. Army, Navy and Special Operations Forces helicopters, U. S. Army helicopter simulator
programs, Global Positioning System equipment production programs, and avionics systems for maritime production programs.
Defense communications sales were unchanged as increased sales of ARC-210 radios were offset by lower revenues related to
certain other legacy communications programs, and Joint Tactical Radio System development program revenues were flat.
Government Systems’ second quarter operating earnings increased to $76 million from the $69 million reported for the same
period a year ago due to the higher sales. The current year second quarter operating margin of 17.8% was slightly lower than
last year’s 18.3% due to higher incentive compensation costs.
Commercial Systems
Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional
aircraft manufacturers and airlines worldwide, achieved second quarter sales of $403 million, an increase of $61 million,
or 18%, compared to sales of $342 million reported for the same period last year. Continued strong aftermarket activity and
increasing demand for new business jet and air transport aircraft fueled the revenue growth.
Air transport aviation electronics sales increased 11% due to higher retrofit and service and support activity coupled with
increased sales to airlines and original equipment manufacturers (OEMs) in support of higher air transport aircraft production
rates. Business and regional aviation electronics sales increased 27% as significantly higher business jet OEM sales and
aftermarket revenues, particularly related to retrofit and modification program activities, more than outweighed the impact
of anticipated lower sales to regional jet OEMs.
Commercial Systems’ second quarter operating earnings increased 59% to $73 million, or an operating margin of 18.1%, compared
to $46 million, or an operating margin of 13.5% for the same period last year. The combination of the increased sales volume,
including higher margin aftermarket revenues, and the continuing impact of cost containment and operational efficiency initiatives
more than offset higher research and development and incentive compensation costs.
Financial Highlights:
During the second quarter of fiscal year 2005, the company repurchased 1.7 million shares of its common stock at a total cost
of $79 million.
On April 15, 2005 the company’s Board of Directors authorized the repurchase of $400 million of company common stock; raising
the total amount of share repurchases authorized by the company’s Board since the inception of the program in December 2001
to $1 billion. The strength of the company’s balance sheet and operating cash flow allows the company to utilize this flexible
method of providing additional value to shareowners while continuing to execute on its growth strategies.
Including this additional authorization, total authorized share repurchases remaining available beyond the end of the second
quarter stand at $458 million.
Fiscal Year 2005 Outlook
Considering the company’s strong fiscal year 2005 first half performance, the prevailing strength of our core government and
commercial markets, and the acquisition of TELDIX GmbH, the company now anticipates fiscal year 2005 sales to be in the range
of $3.35 billion to $3.40 billion; an increase of $75 million to $100 million from our previous sales guidance range. The
company also raised its earnings per share guidance range by 5 cents and is now anticipating earnings per share will be in
the range of $2.05 to $2.15. Cash provided from operating activities is expected to be between $450 million and $500 million,
unchanged from the company’s previous guidance.
Government Systems revenues are now expected to grow in the range of 15% to 17% (previously 10% to 12%) from fiscal year 2004
and represent approximately 53% of total company sales. Revenues from TELDIX are expected to contribute approximately $45
million, or 3% of the Government Systems revenue growth. Commercial Systems revenues are now anticipated to increase in the
range of 13% to 15% (previously 11% to 13%) from fiscal year 2004 and represent about 47% of the total.
Government Systems segment operating margin is still projected to approximate 18% for the full 2005 fiscal year, despite the
impact of initially lower margin revenues from TELDIX. Commercial Systems segment operating margin is also projected to be
approximately 18% for the full year.
Business Highlights:
Rockwell Collins completes TELDIX acquisition: At the end of the second quarter, Rockwell Collins broadened its European presence by completing the acquisition of Heidelberg,
Germany based TELDIX GmbH. With more than 40 years of engineering and manufacturing experience, TELDIX supplies a broad portfolio
of complex military aircraft computer products, advanced mechanical space mechanisms and related support services to major
prime contractors throughout Europe. TELDIX has leading positions on major European programs such as the Eurofighter Typhoon,
the multi-role combat fighter Tornado, and the NH90 and Tiger helicopters.
Data Link Solutions (DLS) awarded contract for MIDS JTRS: DLS, a joint venture company owned by Rockwell Collins and BAE SYSTEMS, received an $82 million not-to-exceed contract for
a product improvement program for the migration of the Multifunctional Information Distribution System (MIDS) to a Joint Tactical
Radio System (JTRS) software communications compliant architecture. The improved product, called MIDS JTRS, is scheduled
to be completed within 29 months and will represent the next generation of MIDS products. By using software applications
for expanded capability, the MIDS JTRS terminal enables enhanced operational effectiveness without consuming additional space,
weight or power.
Northrop Grumman selects Rockwell Collins for E-8C aircraft avionics upgrade: Rockwell Collins was awarded a $50 million contract to provide avionics upgrades for 18 E-8C Joint STARS aircraft. The upgrades
will enable the aircraft to meet Communication, Navigation, Surveillance/Air Traffic Management (CNS/ATM) requirements and
provides an open system avionics architecture, including Rockwell Collins’ new Flight Information Management System implementing
electronic flight bag technologies. This new system will provide pilots with maintenance data recorder functionality and
enable growth to moving maps, electronic charts, real-time graphical weather, live video feeds via data link as well as aircraft
management applications.
Airlines continue selection of Rockwell Collins avionics equipment: Rockwell Collins was selected by Air Asia, Air Berlin, Air China Cargo, Air Sahara, and Hainan Airlines to provide avionics
equipment on a total of 129 Airbus and Boeing aircraft, with options for provisioning equipment on 95 additional aircraft.
Deliveries of equipment are expected to commence this year for each of these airlines. Equipment selections included the
company’s advanced GLU-920 Multi-Mode Receiver and the fully automatic WRX-2100 MultiScan Weather Radar. These products provide
the airlines with enhanced operational efficiency, safety and passenger comfort through reducing pilot work load and increasing
pilot situational awareness.
Rockwell Collins’ Flight Dynamics Head-Up Guidance System (HGS®) 4000 selected by All Nippon Airways and Southwest Airlines: The Flight Dynamics HGS®-4000 was selected by All Nippon Airways for installation on its fleet of 45 new Boeing 737-700 aircraft with deliveries beginning
in late 2005 and by Southwest Airlines for installation on all future deliveries of Boeing 737-700 aircraft. HGS presents
critical flight information in the pilot's forward field of view enhancing situational awareness, improving energy management
and increasing touchdown precision. New features of the HGS®-4000 include runway remaining, tailstrike avoidance and unusual attitude recovery as well as providing a platform for new
technologies, such as enhanced vision and surface guidance, which will further improve safety of operations.
Rockwell Collins delivers eFlight information management solution to easyJet: Rockwell Collins and easyJet signed an agreement to develop a fleet-wide electronic flight bag (EFB) and supporting software
solution for easyJet’s fleet of 54 Boeing 737 aircraft, using Rockwell Collins eFlight™ information management program. Rockwell
Collins will supply Civil Aviation Authority Class 2 EFB functionality for easyJet’s aircraft as well as a ground-based server
and integration. This EFB solution moves easyJet towards a paperless cockpit and is designed to increase the airline’s operational
efficiency.
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 April 27, 2005. Individuals may listen to the call 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 May 25, 2005.
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.
This press release contains forward-looking statements, including certain projections and assumptions, that Rockwell Collins
believes to be within the definition of forward-looking statements as defined in the Private Securities Litigation Reform
Act of 1995. Statements in the future tense and all statements accompanied by terms such as “believe”, “project”, “will”,
“expect”, “anticipate”, and variations thereof are intended to be qualified by this cautionary statement and to be subject
to the safe harbor protection of the federal securities laws. Actual results may differ materially from those projected as
a result of certain risks and uncertainties, including but not limited to the health of the global economy, the continued
recovery of the commercial aerospace industry and the continued strength of the military communications and electronics industry;
domestic and foreign government spending, budgetary and trade policies; market acceptance of new and existing products and
services; performance of our products and services; potential cancellation or termination of contracts, delay of orders or
changes in procurement practices or program priorities by our customers; customer bankruptcies and profitability; recruitment
and retention of qualified personnel; performance of our suppliers and subcontractors; risks inherent in fixed price contracts,
particularly the risk of cost overruns; risk of significant and prolonged disruption to air travel; our ability to execute
to our internal performance plans such as our productivity improvement and cost reduction initiatives; achievement of our
acquisition and related integration plans; continuing to maintain our planned effective tax rates; favorable outcomes of certain
customer procurements, congressional approvals and regulatory mandates; and the uncertainties of the outcome of litigation,
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
expressly disclaims any duty to update any forward-looking statement contained in this press release even if new data becomes
available or estimates change after the date of this release.
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