Rockwell Collins Sales Increase 20% for the Third Quarter of Fiscal Year 2004; Fiscal Year 2004 EPS Guidance Raised to $1.60 to $1.65.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 NYSE See: New York Stock Exchange :COL col (kol) a depression in the interdental tissues just below the interproximal contact area, connecting the buccal and lingual papillae. col n. ) today reported earnings per share of 42 cents for the fiscal year 2004 third quarter ended June 30, 2004. Excluding a 7 cent per share gain related to a favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. tax ruling on an over funded life insurance reserve fund from the 43 cent per share results reported for the same period last year, earnings per share increased by 6 cents, or 17%, over comparable prior year third quarter earnings per share of 36 cents. Net income was $76 million compared to $77 million reported for the third quarter of fiscal year 2003, which included $12 million related to the favorable tax ruling gain. Third quarter sales were $744 million, an increase of $124 million, or 20%, over last year's third quarter sales of $620 million. NLX (hardware, standard) NLX - A low-profile, low TCO motherboard design created jointly by Intel Corp., IBM, DEC and other PC vendors. In contrast to the traditional single-board design, NLX uses a riser card to carry PCI, ISA and AGP bus data (despite Intel's stated intent to rid PC , a simulation and training business acquired in December 2003, accounted for $32 million, or 5 percentage points of the sales growth while organic sales grew by 15%. Cash provided by operating activities for the first nine months of fiscal year 2004 was $177 million including $125 million in voluntary pension contributions to the company's qualified pension plans. This compares to prior year cash provided by operating activities of $203 million which included $40 million in voluntary pension contributions to the company's qualified pension plans. Excluding the impact of the pension contributions in each period, year-to-date cash provided by operating activities would have been $302 million in the current fiscal year, a $59 million increase over the comparable prior year amount of $243 million. "The strong sales and profit growth reported this quarter demonstrates the high level of performance our company is designed to deliver, especially as the market segments served by both of our businesses now appear to be in growth cycles," said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. "The balance between our Commercial and Government Systems businesses and the cost effective shared service approach applied throughout our company have been key factors to our success and will continue to be as we move through this cycle. "The operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: posted by Commercial Systems of nearly 15% demonstrates the ability of this business to convert increased sales and productivity improvement initiatives into higher levels of profitability," added Jones. 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 In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. , 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 $388 million, an increase of $59 million, or 18%, from sales of $329 million reported for the same period last year. Sales from NLX accounted for $32 million, or 10 percentage points of the sales growth, while organic sales increased by 8%, primarily due to higher sales on the KC-135 aircraft 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 F-22 production programs, various advanced communication programs, and the Joint Tactical Radio System (JTRS JTRS Joint Tactical Radio System JtRS Just The Right Shoe JTRS Just the Right Size JTRS Johnson Technical Reports Server JTRS Joint Tenancy with Right of Survivorship JTRS Jefferson Township Rescue Squad ), Joint Strike Fighter A strike fighter is a fighter aircraft which is also capable of attacking surface targets, including ships. It differs from an attack aircraft in that the aircraft remains a capable fighter. (JSF (JavaServerFaces) A standard framework of components for building rich user interfaces for Java applications. JavaServer Faces run on the server, but are displayed on the client. JSF - JavaServer Faces ) and Future Combat Systems (FCS FCS - Frame Check Sequence ) development contracts. 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 by $5 million to $69 million from the $64 million reported last year, principally due to the higher sales volume. As anticipated, the current quarter operating margin decreased to 17.8% from the 19.5% operating margin reported for the same period a year ago due to lower margin sales from NLX and the JTRS, JSF and FCS development contracts comprising a higher proportion of current year revenues partially offset by Government Systems incurring lower operating expenses Operating expenses The amount paid for asset maintenance or the cost of doing business, excluding depreciation. Earnings are distributed after operating expenses are deducted. as a percent of sales. 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 $356 million, an increase of $65 million, or 22%, over the $291 million reported for the same period a year ago. Total original equipment sales increased by 24% while total aftermarket Aftermarket See: Secondary market. aftermarket See secondary market. sales increased by 21%. Higher Commercial Systems original equipment sales were driven by increased customer demand for aviation electronics products and systems in all of its served markets, particularly related to new business jets. The significant year-over-year improvement in flight hours in all geographic regions of the world coupled with improving airline profitability, especially in Asia, contributed to the increase in aftermarket sales. Commercial Systems third quarter operating earnings increased 51% to $53 million, compared to $35 million for the same period a year ago. Operating margin for the current year third quarter improved to 14.9% as compared to 12.0% for the same period last year. This improved operating performance was primarily due to the higher sales volume combined with the effects of 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 productivity improvement initiatives put in place over the last few years which enabled Commercial Systems to hold operating expenses at about the same level as a year ago. Corporate General corporate, net was $12 million of expense for the third quarter of fiscal year 2004 compared to $11 million of income for the third quarter of fiscal year 2003. Third quarter fiscal year 2003 benefited from a pre-tax gain of $20 million related to a favorable tax ruling on an over funded life insurance reserve fund. Current year general corporate, net expense includes a pre-tax charge of $7 million related to a write down of the company's equity investment in Tenzing Communications Tenzing Communications of Seattle was founded in 1999 by software developer Simon "Symonty" Gresham, with the backing of Airbus. The firm had intended to launch in-flight data services, including text messaging, instant messaging, and email using broadband satellite receivers using . This charge was offset by a pre-tax gain of $7 million related to the resolution of a legal matter brought by the company that existed prior to the company's spin off. Financial Highlights: Based on the strength of the company's balance sheet and demonstrated ability to generate strong 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. , the company announced several actions during the third quarter targeted at providing additional value to its shareowners: --The company increased the amount of its regular quarterly per share dividend by 33% to 12 cents from 9 cents effective with the next dividend payable on September 7, 2004. --On June 30, 2004, the company's Board of Directors authorized au·thor·ize tr.v. au·thor·ized, au·thor·iz·ing, au·thor·iz·es 1. To grant authority or power to. 2. To give permission for; sanction: the repurchase re·pur·chase tr.v. re·pur·chased, re·pur·chas·ing, re·pur·chas·es To buy (something) again. n. The act of buying something that one previously sold or owned. Noun 1. of an additional $200 million of company common stock, raising the total authorized share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. remaining as of June 30, 2004 to $210 million. During the third quarter ended June 30, 2004, the company repurchased 2 million shares of its common stock at a total cost of $61 million. Business Highlights: --Rockwell Collins, as a member of the 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. team, has been selected to develop small, lightweight 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. for use by all of the branches of the U.S. military under the U.S Army's Joint Tactical Radio System (JTRS) Cluster 5 program. Based on a common Software Communication Architecture, the JTRS is a family of software-programmable tactical radios that will allow the use of common software waveform The shape of a signal. See wavelength, sine wave and square wave. applications ensuring interoperability The capability of two or more hardware devices or two or more software routines to work harmoniously together. For example, in an Ethernet network, display adapters, hubs, switches and routers from different vendors must conform to the Ethernet standard and interoperate with each other. with current and future force radios. By delivering three different device types - power-efficient manpack, handheld and "small-form-factor" applications - the program will meet future warfighting needs for decades to come. Potential future revenues to Rockwell Collins under the JTRS Cluster 5 program is $46 million related to the initial contract for the systems design and development phase of the program expected to be performed over the next four years, and about $2 billion in total through 2020. Coupled with the fiscal year 2002 win on the JTRS Cluster 1 program, Rockwell Collins now anticipates potential future revenues in excess of $5 billion from JTRS-related programs. --The U.S. Air Force authorized Rockwell Collins to begin the $36.9 million Lot II, the first phase of full rate production, as part of the C/KC-135 Global Air Traffic Management (GATM GATM Global Air Traffic Management GATM L-Arginine:glycine Amidinotransferase ) program. This first full rate production phase calls for the build, delivery and installation of 30 additional R-model aircraft ship sets with deliveries beginning in April 2005. Fully executed, the GATM program could generate $600 million in revenue for Rockwell Collins. --The U.S. Air Force selected Rockwell Collins as a prime contractor for a five-month study of potential solutions for 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. (MEECN MEECN Minimum Essential Emergency Communications Network ) System (GEMS) program. The initial contract for the Concept and Technology Demonstration (C&TD) phase is valued at approximately $2 million. The System Design and Development phase of the program is expected to be awarded in 2005. --The Boeing Company selected Rockwell Collins to provide the pilot controls for Boeing's new 7E7 Dreamliner aircraft. This award is in addition to Boeing's previous selection of Rockwell Collins as the provider of display, communication and surveillance systems and the core network cabinet for this new aircraft. Rockwell Collins is also assisting Smiths Aerospace by providing certain elements of the common data network that will be used on the 7E7. In total, these selections have the potential to provide the company with up to $3.5 billion in revenues over the life of the program. --Air New Zealand New Zealand (zē`lənd), island country (2005 est. pop. 4,035,000), 104,454 sq mi (270,534 sq km), in the S Pacific Ocean, over 1,000 mi (1,600 km) SE of Australia. The capital is Wellington; the largest city and leading port is Auckland. provided a letter of intent selecting the company's eTES(TM) product to provide 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. on seven Boeing 747-400 aircraft (plus one option aircraft). The retrofit installations will begin in the middle of next year and will provide interactive audio and video on-demand (AVOD AVOD Audio/Video On Demand AVOD Audio Video on Demand ) throughout the cabin. --Rockwell Collins and LogisTechs, Inc. entered into a 10-year spare parts Spare parts, also referred to as Service Parts is a term used to indicate extra parts available and in proximity to the mechanical item, such as a automobile, boat, engine, for which they might be used. Spare parts are also called “spares. service agreement to support Mesa Air Group Mesa Air Group (NASDAQ: MESA) is a Nevada Corporation[1] commercial aviation holding company with headquarters in Phoenix, Arizona. The company operates three regional airline subsidiaries: Mesa Airlines, Freedom Airlines, and Air Midwest, and five supporting , Inc. Collins Aviation Services (CAS) will perform repair chain management of Collins and non-Collins rotable components on Mesa's CRJ CRJ Canadair Regional Jet CRJ Chiropractic Research Journal CRJ Commission for Racial Justice CRJ Cylinder Reduction Jumper 100/200 regional aircraft at a fixed rate per flying hour. This represents the company's first Rotable Total Service Solution contract. Fiscal Year 2004 Outlook Taking into account the strength of the company's third quarter sales, it is now anticipated that fiscal year 2004 revenues will be approximately $2.9 billion. The company had previously forecast fiscal year 2004 revenues to be in the range of $2.8 billion to $2.85 billion. As a result of this higher level of expected sales, the company is increasing its fiscal year 2004 earnings per share guidance by five cents to be in the range of $1.60 to $1.65. Government Systems sales are expected to represent approximately 53% of total fiscal year 2004 company sales and are still projected to increase by about 21% over fiscal year 2003, with approximately 8 percentage points of the increase coming from NLX. Commercial Systems sales are expected to represent about 47% of total fiscal year 2004 company sales on expected growth in the high single digit range over fiscal year 2003 sales. As anticipated, Government Systems operating margin is projected to decrease from the 18.7% posted for the first nine months of fiscal year 2004 to be approximately 18% for the full fiscal year due to an expected increase in lower margin revenues from NLX and an expected increase in the proportion of lower margin development contract sales. Commercial Systems full year operating margin is projected to be approximately 14% for fiscal year 2004. Cash provided from operating activities for the fiscal year is projected to be in the range of $275 million to $325 million, including the $125 million in voluntary contributions to our qualified pension plans in October 2003. The company had previously forecast fiscal year 2004 cash from operating activities to be in the range of $225 million to $275 million. 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. Larry Erickson will conduct an earnings conference call at 9:00 a.m. Eastern Time on July 27, 2004. 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 To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary software. The call will be available for replay on the Internet at www.rockwellcollins.com through August 27, 2004. 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 statements, including certain projections and business trends, that are 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. 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. 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 as well as the commercial aerospace 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; demand for and 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 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; 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 ; risks inherent in developing new technologies and products for our customers; 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 disruption /dis·rup·tion/ (dis-rup´shun) a morphologic defect resulting from the extrinsic breakdown of, or interference with, a developmental process. to air travel (including any future terrorist attacks); our ability to execute to our internal performance plans as well as our acquisition, strategic and integration plans; achieving our planned effective tax rates; favorable outcomes of certain customer procurements and congressional approvals; changes to new aircraft build rates; product reliability; 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 from time to time in our Securities and Exchange Commission filings. These forward-looking statements are made only as of the date hereof here·of adv. Of this. hereof Adverb Formal or law of or concerning this Adv. 1. hereof - of or concerning this; "the twigs hereof are physic" 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 Nine Months
Ended Ended
June 30 June 30
--------------- ---------------
2004 2003 2004 2003
------- ------- ------- -------
Sales
Government Systems.................... $ 388 $ 329 $1,076 $ 881
Commercial Systems.................... 356 291 1,015 918
------- ------- ------- -------
Total sales...................... $ 744 $ 620 $2,091 $1,799
======= ======= ======= =======
Segment operating earnings
Government Systems.................... $ 69 $ 64 $ 201 $ 167
Commercial Systems.................... 53 35 141 106
------- ------- ------- -------
Total segment operating earnings. 122 99 342 273
Interest expense...................... (2) (1) (6) (3)
Earnings from corporate-level equity
affiliate............................ - 1 1 3
General corporate, net................ (12) 11 (30) (9)
------- ------- ------- -------
Income before income taxes............ 108 110 307 264
Income tax provision.................. (32) (33) (92) (79)
------- ------- ------- -------
Net income............................ $ 76 $ 77 $ 215 $ 185
======= ======= ======= =======
Diluted earnings per share............ $ 0.42 $ 0.43 $ 1.19 $ 1.03
Average diluted shares outstanding.... 179.3 179.1 179.9 180.0
ROCKWELL COLLINS, INC.
SUMMARY BALANCE SHEET
(Unaudited)
(in millions)
June 30, September 30,
2004 2003
------------ -------------
Assets
Cash....................................... $ 57 $ 66
Receivables................................ 600 525
Inventories................................ 688 618
Current deferred income taxes.............. 179 178
Income taxes receivable.................... 6 17
Other current assets....................... 34 23
------------ -------------
Total current assets.................. 1,564 1,427
Property................................... 395 401
Goodwill and intangible assets............. 567 440
Other assets............................... 287 323
------------ -------------
Total assets.......................... $ 2,813 $ 2,591
============ =============
Liabilities and shareowners' equity
Short-term debt............................ $ - $ 42
Accounts payable........................... 186 198
Compensation and benefits.................. 221 216
Income taxes payable....................... 24 3
Product warranty costs..................... 151 144
Other current liabilities.................. 363 298
------------ -------------
Total current liabilities............. 945 901
Long-term debt............................. 196 -
Retirement benefits........................ 708 824
Other liabilities.......................... 26 33
Shareowners' equity........................ 938 833
------------ -------------
Total liabilities and shareowners'
equity............................... $ 2,813 $ 2,591
============ =============
ROCKWELL COLLINS, INC.
CONDENSED CASH FLOW INFORMATION
(Unaudited)
(in millions)
Nine Months Ended
June 30
-----------------
2004 2003
-------- --------
Operating Activities:
Net income.......................................... $ 215 $ 185
Adjustments to arrive at cash provided by operating
activities:
Depreciation...................................... 69 70
Amortization of intangible assets................. 12 9
Pension plan contributions........................ (130) (45)
Compensation and benefits paid in common stock.... 48 30
Deferred income taxes............................. 30 67
Tax benefit from the exercise of stock options.... 7 5
Changes in assets and liabilities, excluding
effects of acquisitions and foreign currency
adjustments:
Receivables.................................. (39) 43
Inventories.................................. (68) (17)
Accounts payable............................. (27) (56)
Income taxes................................. 34 (41)
Compensation and benefits.................... 4 (22)
Other assets and liabilities................. 22 (25)
-------- --------
Cash Provided by Operating Activities...... 177 203
-------- --------
Investing Activities:
Acquisition of businesses, net of cash acquired..... (126) 2
Property additions.................................. (50) (44)
Proceeds from the disposition of property........... 1 4
Acquisition of intangible assets.................... (11) -
Investment in equity affiliates..................... - (5)
-------- --------
Cash Used for Investing Activities......... (186) (43)
-------- --------
Financing Activities:
Proceeds from issuance of long-term debt............ 198 -
Net decrease in short-term borrowings............... (42) (18)
Purchases of treasury stock......................... (134) (93)
Cash dividends...................................... (48) (48)
Proceeds from the exercise of stock options......... 30 15
-------- --------
Cash Provided by (Used for) Financing
Activities................................ 4 (144)
-------- --------
Effect of exchange rate changes on cash............. (4) (7)
-------- --------
Net Change in Cash.................................. (9) 9
Cash at Beginning of Period......................... 66 49
-------- --------
Cash at End of Period............................... $ 57 $ 58
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