Rockwell Collins reports 2012 earnings per share increased to $4.15
Rockwell Collins reports 2012 earnings per share increased to $4.15
•Fourth quarter results include $0.26 per share of restructuring and asset impairment charges
•Fiscal year 2013 guidance reiterated
CEDAR RAPIDS, Iowa (October 26, 2012) - Rockwell Collins, Inc. (NYSE: COL) today reported fiscal year 2012 earnings per share of $4.15, an increase of 5% from earnings per share from continuing operations of $3.94 in 2011. Earnings per share for 2012 include net restructuring and asset impairment charges of $0.26 per share, compared to an $0.11 per share restructuring charge recorded last year. Excluding the impact of the net restructuring and asset impairment charges in both years, 2012 earnings per share increased 9% to $4.41 per share. The increase in earnings per share resulted from improved total segment operating earnings and the favorable impact from share repurchases.
Total company sales for fiscal year 2012 decreased $80 million, or 2%, to $4.73 billion. The lower sales was driven by an 8% decrease in Government Systems, partially offset by a 7% increase in Commercial Systems sales. Cash provided by operating activities for fiscal year 2012 totaled $534 million compared to $657 million last year. The lower cash flow was a result of higher payments this year for prior year employee incentive compensation costs and higher income tax payments.
Fourth quarter 2012 earnings per share increased to $1.06, or 4%, compared to earnings per share from continuing operations of $1.02 in the fourth quarter of 2011. Included in the fourth quarter 2012 earnings per share are restructuring and asset impairment charges of $0.26 per share. The previous year included an $0.11 per share restructuring charge. Excluding the fourth quarter restructuring and asset impairment charge in each year, earnings per share from continuing operations would have increased 17% to $1.32 per share from $1.13. The company reported sales of $1.27 billion for the fourth quarter of 2012, a decrease of 2%, compared to sales of $1.30 billion for the same period a year ago. Net income decreased 4% to $152 million from $158 million in the same period last year. Total segment operating earnings increased 10% to $297 million, or 23.5% of sales, for the fourth quarter of 2012 versus $271 million, or 20.9% of sales, for the fourth quarter of 2011.
“Market conditions in fiscal year 2012 were very challenging as customer bankruptcies, slower global economic recovery, and multiple defense order delays and cutbacks impacted our revenue growth,” said Rockwell Collins Chairman and Chief Executive Officer Clay Jones. “However, I am extremely pleased with the way our people managed all our businesses through these unpredictable events. With a slight decline in sales, we were still able to achieve improved profitability through operating margin expansion of 260 basis points.”
Jones went on to state, “Looking forward, we will continue to take the necessary actions to manage our business efficiently in these dynamic market conditions. While we expect continued growth in 2013 from our strong Commercial Systems positions, the challenges in our defense business will remain, including the dramatic cuts to U.S. defense spending anticipated to go into effect in January. I believe our focus on effectively managing our business for the long-term will have us well positioned to drive future years' results in line with or above our growth targets.”
Following is a discussion of fiscal year 2012 fourth quarter sales and earnings for each business segment.
Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved 2012 fourth quarter sales of $565 million, an increase of $48 million, or 9%, compared to sales of $517 million reported for the same period last year.
Sales related to aircraft original equipment manufacturers increased $39 million, or 15%, from the fourth quarter of 2011 to $307 million. The increased sales were driven by higher Boeing 787 revenue, higher OEM production rates at Boeing and Airbus, and higher product deliveries for the Bombardier Global and Cessna platforms. These increases were partially offset by lower sales to Hawker Beechcraft. Aftermarket revenue increased $25 million, or 12%, to $239 million primarily resulting from increased aircraft retrofits across the air transport and business jet markets as well as higher service and support sales. Sales of Wide-body in-flight entertainment declined 46%, or $16 million.
Commercial Systems fourth quarter operating earnings increased $21 million, or 21%, to $122 million, resulting in an operating margin of 21.6%, compared to operating earnings of $101 million, and an operating margin of 19.5%, for the same period a year ago. The increase in operating earnings and margin was primarily attributable to higher sales volume and reduced employee-related costs.
Government Systems provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, state and local governments, other government agencies, civil agencies, defense contractors and foreign ministries of defense around the world. Sales in the fourth quarter of 2012 were $701 million, a decrease of $78 million, or 10%, compared to the $779 million reported for the same period last year.
Avionics sales decreased $20 million, or 5%, from the fourth quarter of 2011 due to the completion of certain rotary wing and unmanned aerial system programs, and from lower development sales as the E-6 program transitions to production. These decreases were partially offset by increased KC-135 and KC-46A tanker revenues. Communication product sales declined by $12 million, or 6%, primarily due to the wind-down of the JTRS GMR development program. Surface solutions sales decreased $39 million, or 40%, resulting from the decision to discontinue investment in public safety vehicle systems and the completion of certain surface based programs. Navigation product sales decreased by $7 million, or 9%, primarily driven by fewer deliveries of Defense Advanced GPS Receiver products.
Government Systems fourth quarter operating earnings increased $5 million to $175 million, resulting in an operating margin of 25.0%, compared to operating earnings of $170 million, and an operating margin of 21.8%, for the same period last year. The increase in operating earnings and margin was primarily the result of lower employee-related costs and reduced spending on company-funded research and development partially offset by lower sales.
Corporate and Financial Highlights
General corporate expenses not allocated to the company's business segments were $8 million for the fourth quarter of 2012 compared to $14 million in the same period last year. The reduction was primarily driven by lower employee incentive compensation expenses. During the fourth quarter of 2012, the company recorded restructuring and asset impairment charges of $57 million ($37 million after income taxes), or $0.26 per share. The charges were comprised of $29 million for employee severance costs and $28 million in asset impairment charges, primarily related to the write-off of accounts receivable resulting from the Hawker Beechcraft bankruptcy.
The company's effective income tax rate was 30.9% for the fourth quarter of 2012 compared to a rate of 27.9% for the same period last year. The higher tax rate was primarily driven by the expiration of the Federal Research and Development Tax Credit on December 31, 2011.
The company repurchased 0.4 million shares of its common stock in the fourth quarter of 2012 at a total cost of $21 million. The remaining share repurchase authorization as of the end of fiscal year 2012 is $481 million. The company also paid dividends on its common stock in the fourth quarter totaling $43 million, or 30 cents per share.
During the fourth quarter of 2011, the company sold the Rollmet product line. The divestiture has been accounted for as a discontinued operation for all periods presented.
Fiscal Year 2013 Outlook
The following table is a complete summary of the company's fiscal year 2013 financial guidance, which is unchanged from the original issuance on September 21, 2012:
$4.6 Bil. to $4.7 Bil.
•Total segment operating margins
21.0% to 22.0%
•Earnings per share from continuing operations
$4.30 to $4.50
•Cash flow from operations
$500 Mil. to $600 Mil.
•Total research & development investment*
About $1.0 Bil.
About $140 Mil.
*Total research and development investments consist of company and customer funded research and development expenditures as well as the
net increase in pre-production engineering costs capitalized within inventory.
Rockwell Collins and Boeing to bring new flight deck to 757/767
Rockwell Collins and Boeing announced a program to bring a 787-style flight deck to Boeing 757/767 airplanes. The advanced flight deck technology will be available for retrofit on existing Boeing 757 and 767 airplanes.
Rockwell Collins avionics selected for installation on aircraft by the following airlines:
•Thomas Cook for their A320 and A321 fleet
•Aviation Capital Services for 50 Boeing 737 aircraft to be operated by Aeroflot airlines
•Lufthansa for combination of 49 A320, A330 and A380 aircraft
•COPA Airlines for 37 Boeing 737 aircraft
•Iberia Airlines for 33 A330 and A340 aircraft
•Avianca Airlines for 4 A330 cargo aircraft
•Aeromexico for 10 Boeing 737 aircraft
•Air Astana for 6 A320/A321 aircraft
Rockwell Collins selected for 787 Dispatch service at the Farnborough Airshow
Rockwell Collins was selected by three airlines; Hainan, China Southern and Air India, to provide service and support for their Boeing 787 fleet through the Dispatch Program. The Dispatch program provides guaranteed spares availability, systems configuration updates, technical repairs, and performance monitoring on Rockwell Collins’ comprehensive suite of communications, surveillance, displays and pilot controls systems.
DARPA selected Rockwell Collins to lead cyber security program for unmanned air vehicles
Rockwell Collins has been selected as the prime contractor for the unmanned air vehicle portion of the High-Assurance Cyber Military Systems (HACMS) program sponsored by the Defense Advanced Research Projects Agency. The four-and-a-half-year contract calls for Rockwell Collins to develop cyber security solutions for unmanned air vehicles, with applicability to other network-enabled military vehicles.
Data Link Solutions awarded $31 million contract to provide MIDS-LVT for KC-46A tanker program
Data Link Solutions, a joint venture between Rockwell Collins and BAE Systems, was awarded a contract to provide Multifunctional Information Distribution System - Low Volume Terminals for the U.S. Air Force's KC-46A tanker program.
Rockwell Collins awarded $21 million contract from Boeing to provide advanced displays for U.S. Air Force B-1 cockpit
Rockwell Collins was selected for an initial production contract from Boeing to provide high resolution 6-by-8-inch color displays for the fleet of U.S. Air Force B-1 aircraft. The contract is part of the Air Force's Integrated Battle Station Program.
Rockwell Collins selected by AeroVironment to provide secure GPS capability for WaspTM AE Unmanned Aircraft
Rockwell Collins was selected by AeroVironment to bring secure, jam-resistant MicroGRAM GPS capability for the first time to a micro unmanned aerial vehicle.
Rockwell Collins Pro Line Fusion® certified on Gulfstream G280TM
Rockwell Collins announced that its Pro Line Fusion integrated avionics system has achieved Federal Aviation Administration certification on the Gulfstream PlaneView280TM flight deck.
Conference Call and Webcast Details
Rockwell Collins Chairman 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 October 26