Rockwell Collins Reports Third Quarter Fiscal Year 2005 Financial Results; Raises Full Year Financial Guidance.CEDAR RAPIDS Cedar Rapids, city (1990 pop. 108,751), seat of Linn co., E central Iowa, on the Cedar River; inc. as a city 1856. The second largest city in Iowa, it is named for the surging rapids in the river. , Iowa -- Rockwell Collins Rockwell Collins, Inc. (NYSE: COL) is a large United States-based international company headquartered in Cedar Rapids, Iowa, primarily providing aviation and information technology systems, solutions, and services to governmental agencies and aircraft manufacturers. , Inc. (NYSE NYSESee: New York Stock Exchange :COL): --Quarterly earnings per share improve 33% to 56 cents --Quarterly sales increase 20% to $890 million --Fiscal year 2005 EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. guidance range increased to $2.15 to $2.20 --Fiscal year 2005 sales guidance raised to approximately $3.45 billion --Fiscal year 2005 operating cash flow Operating cash flow Earnings before depreciation minus taxes. Measures the cash generated from operations, not counting capital spending or working capital requirements. expected to approximate $500 million Rockwell Collins, Inc. (NYSE:COL) today reported financial results for the third quarter of fiscal year 2005 which ended June 30, 2005. Net income for the quarter was $101 million, or 56 cents per share Cents per share The amount of a mutual fund's dividend or capital gains distributions that a shareholder will receive for each share owned. , a 33% increase over third quarter fiscal year 2004 net income of $76 million, or 42 cents per share. Total segment operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: for the third quarter was 18.1%, a 170 basis point improvement over the 16.4% reported for the same period last year. Sales for the third quarter of fiscal year 2005 were $890 million, an increase of $146 million, or 20% from the $744 million reported last year. TELDIX GmbH (TELDIX), acquired in March 2005, contributed $22 million, or 3 percentage points of the revenue growth. "Fiscal year 2005 is shaping up to be an outstanding year as both our Government and Commercial Systems businesses turned in a third consecutive quarter of double-digit organic revenue growth," said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. "I am particularly pleased that operating efficiencies being created by our people and the company's unique business model continue to drive levels of profitability growth that exceed our robust revenue growth rate." For the first nine months of fiscal year 2005, cash flow from operating activities totaled $345 million, an increase of $168 million over the $177 million generated by operating activities for the same period a year ago. The amounts for each period include voluntary contributions to the company's qualified pension plans; $100 million in the current fiscal year and $125 million in fiscal year 2004. "Our strong balance sheet and cash flow have provided us the flexibility to make voluntary contributions to our pension plans over the past few years with no effect on our ongoing capital deployment strategies," added Jones. Despite the pension plan contribution, the company now expects to generate approximately $500 million of operating cash flow for the full fiscal year; at the high end of its previous guidance range. Commenting further on the company's outlook for the full fiscal year, Jones said, "Market conditions for our products, systems and services continue to be favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. . This, combined with our outstanding performance over the first three quarters of the year, has enabled us to raise our expectations for full year earnings per share, sales and operating cash flow." Following is a discussion of sales and earnings for each business segment. Government Systems Government Systems, which provides communications, aviation electronics, navigation and precision guidance systems, products and services to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area. government, foreign militaries and manufacturers of military platforms, achieved third quarter sales of $462 million, an increase of $74 million, or 19%, compared to the $388 million reported for the same period last year. The higher sales were driven primarily by programs focused on military modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, and $22 million of incremental Additional or increased growth, bulk, quantity, number, or value; enlarged. Incremental cost is additional or increased cost of an item or service apart from its actual cost. revenues from TELDIX, acquired in March of this fiscal year. Sales of defense electronics products and systems increased 33% principally due to the incremental TELDIX revenues and higher revenues from global positioning system Global Positioning System: see navigation satellite. Global Positioning System (GPS) Precise satellite-based navigation and location system originally developed for U.S. military use. equipment production programs, electronics systems upgrades for fixed-wing aircraft "Airplane" and "Aeroplane" redirect here. For other uses, see Airplane (disambiguation). A fixed-wing aircraft is a heavier-than-air craft where movement of the wings in relation to the aircraft is not used to generate lift. and U.S. Army, Navy and Special Operations Forces Those Active and Reserve Component forces of the Military Services designated by the Secretary of Defense and specifically organized, trained, and equipped to conduct and support special operations. Also called SOF. helicopters, and U.S. Army helicopter simulator (1) Software that enables the execution of an application written for a different computer environment. Same as emulator. (2) Software that models the interactions of hypothetical or real-world objects or business processes. programs. Defense communications sales were slightly lower as increased ARC-210 radio, advanced data link and electronic warfare Noun 1. electronic warfare - military action involving the use of electromagnetic energy to determine or exploit or reduce or prevent hostile use of the electromagnetic spectrum EW military action, action - a military engagement; "he saw action in Korea" sales were more than offset by lower revenues primarily related to the completion of certain data link projects, including the Swedish RA-90 program. Government Systems' third quarter operating earnings Operating Earnings Profits after subtracting expenses such as marketing, cost of goods sold, administration and general operating costs from revenue. Notes: Tax and interest expenses are not subtracted - operating earnings are synonymous with EBIT (earnings before increased 19% to $82 million from the $69 million reported for the same period a year ago due to the higher sales. The current year third quarter operating margin of 17.7% was in line with last year's third quarter operating margin of 17.8%, as the impact of increased higher margin production program revenues were offset by the lower margin TELDIX revenues and higher employee 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 third quarter sales of $428 million, an increase of $72 million, or 20%, compared to sales of $356 million reported for the same period last year. Higher production rates of new air transport and business aircraft and increased demand for service and support activity fueled the revenue growth. Air transport aviation electronics sales increased 22% due to significantly higher sales to airlines and air transport original equipment manufacturers (OEMs) in support of new aircraft production coupled with continued growth in demand for retrofit ret·ro·fit v. ret·ro·fit·ted or ret·ro·fit, ret·ro·fit·ting, ret·ro·fits v.tr. 1. To provide (a jet, automobile, computer, or factory, for example) with parts, devices, or equipment not in and service and support activity. Business and regional aviation electronics sales increased 18% as significantly higher sales to business jet OEMs, as well as higher aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. service and support revenues, more than outweighed slightly lower retrofit and regional jet OEM (Original Equipment Manufacturer) The rebranding of equipment and selling it. The term initially referred to the company that made the products (the "original" manufacturer), but eventually became widely used to refer to the organization that buys the products and sales. Commercial Systems' third quarter operating earnings increased 49% to $79 million, or an operating margin of 18.5%, compared to $53 million, or an operating margin of 14.9% for the same period last year. The combination of the increased sales volume, cost containment cost containment, n the features of a dental benefits program or of the administration of the program designed to reduce or eliminate certain charges to the plan. and operational efficiency initiatives more than offset higher research and development and employee incentive compensation costs. Corporate General corporate, net expense was $16 million for the third quarter of fiscal year 2005 compared to $12 million for last year's third quarter. Higher employee incentive compensation costs contributed to the increase. During the third quarter, the company repurchased 3 million shares of its common stock for $144 million at an average cost of $47.26 per share. Fiscal Year 2005 Outlook Considering the company's strong performance during the first nine months of the year and continuing favorable market conditions, the company now anticipates fiscal year 2005 sales to be approximately $3.45 billion, as compared to its previous sales guidance range of $3.35 billion to $3.4 billion. The company also increased, and narrowed, its full year earnings per share guidance range. Full year earnings per share are now expected to be in the range of $2.15 to $2.20, as compared to its previous earnings per share guidance range of $2.05 to $2.15. Despite the $100 million voluntary pension plan contribution made in the third quarter, full year cash provided by operating activities is now expected to be approximately $500 million; at the upper end of the company's previous operating cash flow guidance range of $450 million to $500 million. Government Systems full fiscal year 2005 revenues are now expected to increase in the range of 17% to 18% (previously 15% to 17%) from fiscal year 2004 and represent approximately 52% of total company sales. Incremental revenues from TELDIX, acquired in March 2005, and Rockwell Collins Simulation and Training Solutions, acquired in December 2003, are expected to contribute 4 percentage points of the revenue growth. Commercial Systems revenues are also anticipated to increase in the range of 17% to 18% (previously 13% to 15%) from fiscal year 2004 and represent about 48% of the total. Government Systems segment operating margin is still projected to approximate 18% for the full 2005 fiscal year, despite the impact of lower margin revenues from TELDIX. Commercial Systems segment operating margin is now expected to be approximately 18.5% (previously 18%) for the full year, as the positive impact of increased sales volume is expected to more than offset higher research and development spending. Business Highlights: Rockwell Collins awarded Phase 2 of U.S. Air Force GEMS program: Rockwell Collins has been selected by the U.S. Air Force as the prime contractor for Phase 2 of the Ground Element Minimum Essential Emergency Communications Network The transmission channels interconnecting all client and server stations as well as all supporting hardware and software. System (GEMS) program. GEMS will replace Air Force and Navy fixed and deployable communications for bomber, tanker, reconnaissance and other alert communications facilities by providing an upgraded networked infrastructure incorporating improved capabilities for aircrew alerting, message handling and the supporting communications links. The total program value is estimated at more than $350 million over six years. General Dynamics-Rockwell Collins team to field FCS FCS - Frame Check Sequence : A General Dynamics General Dynamics Corporation (NYSE: GD) is a defense conglomerate formed by mergers and divestitures, and as of 2006 it is the sixth largest defense contractor in the world[1]. The company has changed markedly in the post-Cold War era of defense consolidation. - Rockwell Collins team has been awarded a $154 million contract modification to accelerate technology development of the Integrated Computer System (ICS (1) (Internet Connection Sharing) A Windows feature that enables two or more computers to share one Internet connection. First introduced in Windows 98 Second Edition, sharing is accomplished with network address translation (NAT), which is the common method. ) into the U.S. Army's Current Force and to add support for previously deferred assets within the Future Combat Systems (FCS) program. The ICS is the common computing computing - computer environment for 17 of the 18 platforms in the FCS family of systems, which constitutes a network of sensors, unmanned air platforms, and both manned and unmanned ground platforms. The contract modification brings the total ICS contract value to $429 million for the team. Sweden FMV FMV - full-motion video selects Rockwell Collins to provide software-defined radios A software-defined radio (SDR) system is a radio communication system which can tune to any frequency band and receive any modulation across a large frequency spectrum by means of programmable hardware which is controlled by software. : Rockwell Collins has been awarded a $17 million contract to provide the Tactical Data Radio System (TDRS TDRS Tracking & Data Relay Satellite TDRS Tactical Data Radio System TDRS Tactical Disk Recording System TDRS Tracking and Data Relay Satellite ) to the Swedish military. The software-defined radio system will consist of modular, open architecture, hardware and software components and will host a customized, high-data rate networked waveform The shape of a signal. See wavelength, sine wave and square wave. to provide Swedish tactical forces with a wireless, mobile, ad-hoc network capable of simultaneous voice, data and video communications. The contract calls for the delivery of 76 Software Communications Architecture The Software Communications Architecture (SCA) is an open architecture framework that tells designers how elements of hardware and software are to operate in harmony within a software defined radio. SCA is a key element in the U.S. military's Joint Tactical Radio System (JTRS). (SCA (Single Connector Attachment) An 80-pin plug and socket used to connect peripherals. With a SCSI drive, it rolls three cables (power, data channel and ID configuration) into one connector for fast installation and removal. ) compliant multi-channel radios, documentation and training. U.S. Navy selects Rockwell Collins for P-3C HF replacement program: Rockwell Collins has been selected by the U.S. Navy to replace dual High Frequency (HF) radios and Link 11/TADIL-A Tactical Digital Data Link converters in support of the Navy P-3C Critical Obsolescence ob·so·les·cent adj. 1. Being in the process of passing out of use or usefulness; becoming obsolete. 2. Biology Gradually disappearing; imperfectly or only slightly developed. Program. Core technology to be incorporated into the replacement systems includes the Rockwell Collins HF-121C transceiver (TRANSmitter reCEIVER) An electronic device or circuit that transmits and receives analog or digital signals. It comes in many forms; for example, a transponder on a satellite, a network adapter in the computer or the circuits in a cellphone. , known as the AN/ARC-230, the system of choice for airborne command, control and patrol platforms. The contract is valued at $61 million over six years. Rockwell Collins Pro Line 21 selected for Navy T-44A Fleet upgrade: Rockwell Collins was selected by ARINC ARINC Aeronautical Radio, Inc. ARINC Aircraft Radio Incorporated ARINC Aeronautical Research Incorporated Engineering Services, LLC (Logical Link Control) See "LANs" under data link protocol. LLC - Logical Link Control to upgrade the Navy's fleet of 55 T-44A aircraft over four years with its Pro Line 21 integrated avionics avionics (ā'vēŏn`ĭks), electronic instruments used in air or space flight; also the design and production of such instruments. Early planes had few instruments, but as aviation and aircraft became more complex, so did instrumentation. system. The Pro Line 21 integrated avionics system aircraft upgrade solution provides enhanced efficiency and functionality to the customer in the areas of reduced pilot workload, weight, and installation cost. Airlines / business jet operators select Rockwell Collins to provide aircraft fleet aviation service solutions: Newly awarded long-term service & support solutions to be provided by Collins Aviation Services include: --Avionics maintenance repair and technical support for NetJets Europe's fleet of Hawker 400 XP aircraft under a 10-year contract. --On-board maintenance for Air New Zealand Parameter not given Error... ''Template needs its first parameter as beg[in], mid[dle], or end. Parameter not given Error... of Rockwell Collins' eTES(TM) in-flight entertainment In-flight entertainment (IFE) refers to the entertainment available to aircraft passengers during a flight. After World War II commercial aviation flights became a daily event in which entertainment was requested by passengers to help the time pass. systems on 15 wide-body aircraft, with an option for 40 additional aircraft, under a five-year agreement. --Spares ownership, maintenance repair, and technical support of Rockwell Collins avionics on GoJet's fleet of Bombardier Canadair Regional Jet aircraft under a 16-year Dispatch Plus(SM) agreement. Conference Call and Webcast Details: Rockwell Collins Chairman, President and CEO (1) (Chief Executive Officer) The highest individual in command of an organization. Typically the president of the company, the CEO reports to the Chairman of the Board. Clay Jones and Senior Vice President and CFO See Chief Financial Officer. Patrick Allen For other persons named Patrick Allen, see Patrick Allen (disambiguation). John Keith Patrick Allen (March 17 1927 - July 28 2006) was a British actor and voice actor. Allen was born in Nyasaland (now Malawi), where his father was a tobacco farmer. will conduct an earnings conference call at 11:00 a.m. Eastern Time on July 28, 2005. Individuals may listen to the call on the Internet at www.rockwellcollins.com. Listeners are encouraged to go to the Investor Relations Investor relations The process by which the corporation communicates with its investors. 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 August 27, 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 forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. , 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 The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and of 1995. Statements in the future tense future tense n. A verb tense expressing future time. Noun 1. future tense - a verb tense that expresses actions or states in the future future including all statements in the "Fiscal Year 2005 Outlook" section 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 Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. protection of the securities laws. The company cautions investors that actual results may differ materially from those projected in our forward-looking statements 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 Military communications, or Signals, is a field of military activities, tactics and equipment dealing with communications. First of all, military communications are battlefield (combat) communications, including intercommunication with a higher command or country's and electronics industry; domestic and foreign government spending Government spending or government expenditure consists of government purchases, which can be financed by seigniorage, taxes, or government borrowing. It is considered to be one of the major components of gross domestic product. , budgetary and trade policies or priorities including the impact of continued hostilities in Iraq on funding for existing defense programs; market acceptance of new and existing products and services; performance of our products and services; potential cancellation, restructuring or termination of contracts; delay of orders or changes in procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. 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 Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor ; risk of significant and prolonged pro·long tr.v. pro·longed, pro·long·ing, pro·longs 1. To lengthen in duration; protract. 2. To lengthen in extent. 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 An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called 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 to reflect subsequent events, actual results or changes in the company's projections or assumptions.
ROCKWELL COLLINS, INC.
SEGMENT SALES AND EARNINGS INFORMATION
(Unaudited)
(in millions, except per share amounts)
Three Months Nine Months
Ended Ended
June 30 June 30
------------- ---------------
2005 2004 2005 2004
------ ------ ------- -------
Sales
Government Systems...................... $462 $388 $1,278 $1,076
Commercial Systems...................... 428 356 1,204 1,015
------ ------ ------- -------
Total sales........................ $890 $744 $2,482 $2,091
====== ====== ======= =======
Segment operating earnings
Government Systems...................... $82 $69 $228 $201
Commercial Systems...................... 79 53 224 141
------ ------ ------- -------
Total segment operating earnings... 161 122 452 342
Interest expense........................ (3) (2) (8) (6)
Earnings from corporate-level equity
affiliate.............................. 2 - 2 1
General corporate, net (1).............. (16) (12) (40) (30)
------ ------ ------- -------
Income before income taxes.............. 144 108 406 307
Income tax provision.................... (43) (32) (120) (92)
------ ------ ------- -------
Net income.............................. $101 $76 $286 $215
====== ====== ======= =======
Diluted earnings per share.............. $0.56 $0.42 $1.58 $1.19
Average diluted shares outstanding...... 180.7 179.3 181.1 179.9
(1) General corporate, net for the nine months ended June 30, 2004
includes a gain of $5 million ($3 million after tax) related to
favorable settlements of insurance matters.
The following table summarizes sales by product category for the three
and nine months ended June 30, 2005 and 2004 (unaudited, in millions):
Three Months Nine Months
Ended Ended
June 30 June 30
--------------- ---------------
2005 2004 2005 2004
------- ------- ------- -------
Defense electronics.................... $316 $238 $869 $669
Defense communications................. 146 150 409 407
Air transport aviation electronics..... 241 198 665 582
Business and regional aviation
electronics........................... 187 158 539 433
------- ------- ------- -------
Total.................................. $890 $744 $2,482 $2,091
======= ======= ======= =======
ROCKWELL COLLINS, INC.
SUMMARY BALANCE SHEET
(Unaudited)
(in millions)
June 30, Sept. 30,
2005 2004
------- -------
Assets
Cash................................................. $220 $196
Receivables.......................................... 676 616
Inventories.......................................... 690 650
Current deferred income taxes........................ 162 165
Income taxes receivable.............................. 5 10
Other current assets................................. 34 26
------- -------
Total current assets............................ 1,787 1,663
Property............................................. 445 418
Goodwill and intangible assets....................... 593 550
Other assets......................................... 201 243
------- -------
Total assets....................................$3,026 $2,874
======= =======
Liabilities and shareowners' equity
Accounts payable..................................... $251 $240
Compensation and benefits............................ 261 235
Income taxes payable................................. 5 18
Product warranty costs............................... 170 154
Other current liabilities............................ 378 317
------- -------
Total current liabilities....................... 1,065 964
Long-term debt....................................... 202 201
Retirement benefits.................................. 446 521
Other liabilities.................................... 54 55
Shareowners' equity.................................. 1,259 1,133
======= =======
Total liabilities and shareowners' equity.......$3,026 $2,874
======= =======
ROCKWELL COLLINS, INC.
CONDENSED CASH FLOW INFORMATION
(Unaudited)
(in millions)
Nine Months Ended
June 30
--------------------
2005 2004
---------- ---------
Operating Activities:
Net income........................................ $286 $215
Adjustments to arrive at cash provided by
operating activities:
Depreciation.................................... 64 69
Amortization of intangible assets............... 14 12
Pension plan contributions...................... (105) (130)
Compensation and benefits paid in common stock.. 58 48
Deferred income taxes........................... 51 30
Tax benefit from the exercise of stock options.. 31 7
Changes in assets and liabilities, excluding
effects of acquisitions and foreign currency
adjustments:
Receivables................................ (45) (38)
Inventories................................ (13) (68)
Accounts payable........................... 15 (26)
Income taxes............................... (15) 34
Compensation and benefits.................. 18 11
Other assets and liabilities............... (14) 13
---------- ---------
Cash Provided by Operating Activities.... 345 177
---------- ---------
Investing Activities:
Acquisition of businesses, net of cash acquired... (18) (126)
Property additions................................ (67) (50)
Proceeds from the disposition of property......... 2 1
Acquisition of intangible assets.................. (7) (11)
---------- ---------
Cash Used for Investing Activities....... (90) (186)
---------- ---------
Financing Activities:
Net proceeds from issuance of long-term debt...... - 198
Net decrease in short-term borrowings............. - (42)
Purchases of treasury stock....................... (250) (134)
Cash dividends.................................... (64) (48)
Proceeds from exercise of stock options........... 86 30
---------- ---------
Cash (Used for) Provided by Financing
Activities.............................. (228) 4
---------- ---------
Effect of exchange rate changes on cash........... (3) (4)
---------- ---------
Net Change in Cash................................ 24 (9)
Cash at Beginning of Period....................... 196 66
---------- ---------
Cash at End of Period............................. $220 $57
========== =========
Certain prior year amounts have been reclassified to conform to the
current year presentation.
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