Rockwell Collins Reports 2013 Earnings Per Share Increased to $4.58

CEDAR RAPIDS, Iowa—(BUSINESS WIRE)—Rockwell Collins, Inc. (NYSE:COL) today reported fiscal year 2013 earnings per share of $4.58, an increase of 10% from 2012. Total company sales for fiscal year 2013 were $4.61 billion, a 2% decline from last year. The lower sales volume was driven by an 8% decrease in Government Systems sales, partially offset by a 4% increase in Commercial Systems sales. Cash provided by operating activities for fiscal year 2013 totaled $617 million, an increase of 16% compared to $534 million last year.

Fourth quarter fiscal year 2013 earnings per share increased to $1.28 compared to $1.06 in the same quarter last year as the company continued to execute its capital deployment strategy through its share repurchase program. The fourth quarter of 2013 benefited from the absence of a restructuring and asset impairment charge in 2012 partially offset by higher employee incentive compensation costs in 2013. The company reported sales of $1.25 billion for the fourth quarter of 2013, a decrease of 1%, compared to sales of $1.27 billion for the same period a year ago.

“Our focus on increasing efficiencies across our business drove strong operating performance, including 21% operating margins, a 16% improvement in operating cash flow, and a 10% improvement in earnings per share, while allowing us to sustain our investments in R&D in support of long-term growth objectives,” said Rockwell Collins Chief Executive Officer, Kelly Ortberg. “We addressed the uncertainty of sequestration by incorporating the anticipated impacts into our plan and taking early action on our cost structure. These actions should also generate the savings necessary to sustain margins despite another year of continued headwinds in our government business in fiscal 2014."

“In both our commercial and government businesses we made excellent progress on critical programs that will drive substantial revenue growth for years to come. These include the successful ramp-up of the 787, the on-time development of equipment for the KC-46 and KC-390 programs, equipment deliveries to support the first flight of the A350 and C-Series, and capturing the display system for the new 737MAX,” Ortberg added. “In addition, a significant number of new aircraft that include increased Rockwell Collins content will soon be entering service, and the pending acquisition of ARINC will accelerate our growth trajectory and add a well-established business in the fast growing information management space. With our proven operating model I’m confident we will convert these opportunities into long-term profitable growth."

Following is a discussion of fiscal year 2013 fourth quarter sales and earnings 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, achieved 2013 fourth quarter results as summarized below.

Sales to aircraft original equipment manufacturers increased from higher deliveries for the Bombardier Global and Challenger aircraft partially offset by fewer deliveries for Cessna business jets.
Aftermarket sales increased primarily due to regulatory mandate upgrades.
Operating margin decreased in the fourth quarter of 2013 as the benefit from higher sales volume was more than offset by higher employee incentive compensation cost and higher company-funded research and development expense.
Government Systems

Government Systems provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, other government agencies, civil agencies, defense contractors and ministries of defense around the world. Results from the fourth quarter of 2013 are summarized below.

Avionics sales increased primarily due to higher international tanker/transport hardware sales partially offset by the impact of lower simulator sales.
Communication product sales declined due to lower satellite and secure communication product sales, partially offset by increased deliveries of JTRS Manpack radios.
Surface solutions sales increased from higher international Firestorm targeting systems sales.
Navigation product sales declined due to lower deliveries of airborne and ground navigation products as a result of the withdrawal in Afghanistan and Iraq.
Operating earnings and margin decreased primarily due to lower sales and the impact of higher employee incentive compensation costs.
Corporate and Financial Highlights

Fourth quarter fiscal year 2013 general corporate expenses not allocated to the company’s business segments increased $8 million to $16 million primarily driven by increased employee incentive compensation costs, higher pension expense, and $3 million of transaction costs related to the pending acquisition of ARINC Incorporated (ARINC).

The company’s effective income tax rate was 29.7% for the fourth quarter of 2013 compared to a rate of 30.9% for the same period last year. The lower tax rate was due primarily to the reinstatement of the Research & Development Tax Credit in the second quarter of 2013.

During the fourth quarter of 2013, the company repurchased 0.9 million shares of common stock at a total cost of $62 million. The company also paid a dividend on its common stock of 30 cents per share, or $40 million, in the fourth quarter of 2013.

Fiscal Year 2014 Outlook

Full year income tax rate About 30%

This guidance range excludes the planned acquisition of ARINC, which is expected to close shortly after receiving regulatory approval. Guidance ranges will be updated after the transaction has closed.