Rockwell Collins Reports First Quarter 2013 Earnings Per Share Increase 9% to $0.94

  Rockwell Collins Reports First Quarter 2013 Earnings Per Share Increase 9%
  to $0.94

Full year earnings per share guidance raised to between $4.45 and $4.65

Business Wire

CEDAR RAPIDS, Iowa -- January 18, 2013

Rockwell Collins, Inc. (NYSE: COL) today reported first quarter fiscal year
2013 net income of $132 million, an increase of 2%, compared to the same
period last year. Earnings per share for the quarter were $0.94, $0.08 higher
than earnings per share of $0.86 in the prior year. Earnings per share growth
was higher than the rate of net income growth due to the favorable effect of
the company's share repurchase program.

The company reported total sales of $1.06 billion for the first quarter of
2013, a 3% reduction from $1.09 billion for the same period in 2012.
Meanwhile, total segment operating margins increased in the first quarter of
2013 to 20.1 percent of sales compared to 19.9 percent of sales in 2012.

Cash provided by operating activities for the first quarter of 2013 totaled
$63 million, an increase of $127 million, compared to a $64 million use of
cash in the first quarter of last year. The improvement in cash from
operations was primarily driven by increased collections from customers,
improved inventory performance and lower employee incentive compensation

"I am very pleased with our results this quarter, which generated 9% EPS
growth and strong cash flow on declining sales," said Rockwell Collins
Chairman and Chief Executive Officer, Clay Jones. "Despite continued
government and economic uncertainty, our focus on the things we can control
such as costs, capital deployment, and investments are paying off. For
example, in the first quarter, we expanded operating margins, reduced our
share count by 4%, and won a number of programs to enhance future growth."

Jones went on to state, "We are off to a solid start in this year of
transition for our company and should see improving performance throughout the
year. Fortunately, we had already incorporated the impact of sequestration in
our annual guidance and expect a greater benefit from our FY12 restructuring
actions in subsequent quarters as well. Therefore, we are increasingly
confident that we can meet or exceed our financial expectations."

Following is a discussion of fiscal year 2013 first 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 first quarter sales of $516 million, an
increase of $5 million, or 1%, compared to sales of $511 million reported for
the same period last year.

Sales related to aircraft original equipment manufacturers increased $17
million, or 6%, to $282 million driven by increased sales resulting from
higher production rates for the Bombardier Globals, Boeing 787 and Airbus A330
aircraft, partially offset by lower deliveries at the light end of the
business jet market. Aftermarket sales decreased $14 million to $207 million
driven by higher sales of spares in the prior fiscal year.

Commercial Systems first quarter operating earnings increased $5 million, or
5%, to $106 million, resulting in an operating margin of 20.5%, compared to
operating earnings of $101 million, and an operating margin of 19.8%, for the
same period a year ago. The increase in operating earnings and margin was
primarily due to lower company-funded research and development expense.
However, total research and development investment increased $7 million as
resources were redirected to pre-production engineering programs, including
the Boeing 737 Max, Bombardier CSeries and Global 7000/8000.

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. Sales in the first quarter of 2013 were $546
million, a decrease of 6%, compared to $583 million reported for the same
period last year.

Avionics sales decreased $9 million, or 3%, from the first quarter of 2012
driven by lower sales from development programs, which are completing or
transitioning to production, partially offset by higher tanker aircraft
program sales. Communication product sales declined $11 million, or 8%, driven
by lower airborne and satellite communication product sales, partially offset
by increased deliveries of ground network radios. Surface solutions sales were
$10 million, or 17%, lower than last year, resulting primarily from
development programs either completing or transitioning to production,
partially offset by increased international sales of Firestorm targeting
systems. Fewer deliveries of Defense Advanced GPS Receiver products drove a $7
million, or 13%, decline in Navigation product sales.

Government Systems first quarter operating earnings of $107 million resulted
in an operating margin of 19.6%, compared to operating earnings of $117
million, and an operating margin of 20.1%, for the same period last year. The
decrease in operating earnings and margin was primarily due to lower sales,
partially offset by the completion of certain company-funded development
programs related to GPS and communication products.

Corporate and Financial Highlights

General corporate expenses not allocated to the company's business segments
increased $1 million to $13 million. The company's effective income tax rate
was 29.8% for the first quarter of 2013 compared to a rate of 33.0% for the
same period last year. The lower tax rate was primarily due to the favorable
impact of certain international tax strategies.

During the first quarter of 2013, the company repurchased 6 million shares of
common stock at a total cost of $333 million. The company also paid a dividend
on its common stock of $42 million, or 30 cents per share in the first quarter
of 2013.

Fiscal Year 2013 Outlook

Earnings per share and tax rate guidance for fiscal year 2013 is being revised
as a result of the net impact from the Federal Research and Development tax
credit extension for calendar year 2012 and 2013.

The following table is a complete summary of the company's updated fiscal year
2013 financial guidance:

 --  Total sales                             $4.6 billion to $4.7
  --   Total segment operating margins             21% to 22%
  --   Earnings per share                          $4.45 to $4.65 (from $4.30
                                                   to $4.50)
  --   Cash flow from operations                   $500 million to $600
  --   Total research & development                About $1.0 billion
  --   Capital expenditures                        About $140 million
  --   Full year income tax rate                   About 27% (from about 32%)

Business Highlights

Rockwell Collins won the Boeing 737 MAX contract for large-format flight
Rockwell Collins was selected by Boeing to provide its large-format flight
displays as standard equipment on the 737 MAX flight deck. The multi-year
agreement leverages Rockwell Collins’ flight display technology from the
Boeing 787 Dreamliner. The new flight deck includes four configurable
15.1-inch landscape LCD displays that will increase situational awareness and
efficiency. The displays are also featured on the Boeing KC-46 Tanker and as a
retrofit offering for existing Boeing 757 and 767 aircraft.

Rockwell Collins’ Pro Line Fusion® in service on Gulfstream G280™
Rockwell Collins announced that its Pro Line Fusion integrated avionics system
is now in service on the Gulfstream G280, marking the system’s debut in the
super mid-size business jet market segment.

Rockwell Collins awarded a $295 million production contract for Block I
Modernization of U.S. Navy E-6B aircraft
Rockwell Collins was awarded a contract by the U.S. Navy to upgrade eleven
aircraft as part of the E-6B Block I Modification program. The Navy E-6B
aircraft is used to conduct the “Take Charge and Move Out” (TACAMO) and the
United States Strategic Command Airborne Command Post missions. The open
system solution provided by the Block I modification addresses immediate
modernization requirements and enables system expansion in the future.

Rockwell Collins received production order for U.S. Army two-channel PRC-155
Manpack radios
Rockwell Collins, one of two qualified manufacturers, received a contract from
General Dynamics C4 Systems to produce approximately half of 3,700 PRC-155
Manpack radios ordered for the U.S. Army. The two-channel PRC-155 Manpack
radio has also been certified by the National Security Agency to communicate
classified voice and data at the Top Secret level and below. The radio is the
only secure, two-channel networking radio certified for communication of data
across the entire force structure from battalion headquarters to soldiers on
foot and in vehicles.

Rockwell Collins Pro Line Fusion entered a new market segment with the
AgustaWestland AW609 win
The selection of Pro Line Fusion integrated avionics for AgustaWestland’s
AW609 TiltRotor marked new territory for Rockwell Collins. AgustaWestland, a
Finmeccanica company, is the first European customer for Pro Line Fusion and
the first announced forward-fit application of Rockwell Collins’ touch-control
primary flight displays. With Pro Line Fusion, the AW609 will be capable of
single-pilot operations under instrument flight rule conditions. The TiltRotor
is expected to be certified in 2016.

Rockwell Collins avionics equipment selected by NAVAIR for Navy C-130T upgrade
Rockwell Collins was selected by the Naval Air Systems Command (NAVAIR) to
provide a suite of avionics equipment for the U.S. Navy C-130T Avionics
Obsolescence Upgrade program. The equipment will be installed on 20 aircraft
with work scheduled to begin in 2013. The Rockwell Collins equipment will
enable these aircraft to meet current and future Communication, Navigation,
and Surveillance/Air Traffic Management airspace requirements.

Rockwell Collins received award for completion of the TTNT waveform
The Air Force Research Laboratory awarded Rockwell Collins an $18 million
contract to complete the development and qualification of the Tactical
Targeting Network Technology (TTNT) waveform, paving the way for the
high-speed, networking waveform to be implemented across a broad range of
aircraft. TTNT provides high data rate, long-range communication links for
airborne platforms.

Rockwell Collins avionics selected by the following airlines:
- Brazil’s GOL Airlines selected the full suite of Rockwell Collins’ advanced
avionics for 20 new Boeing 737NG aircraft. Deliveries of GOL’s new Boeing
aircraft are expected to begin in early 2014.

- China Southern selected Rockwell Collins avionics for 16 new Airbus A330

Rockwell Collins agreed to form a joint venture with China Electronics
Technology Avionics Co. Ltd.
Rockwell Collins and China Electronics Technology Avionics Co. signed an
agreement to establish a joint venture to develop and manufacture the
communication and navigation systems for the Commercial Aircraft Corporation
of China Ltd. (COMAC) C919 aircraft.

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 January 18, 2013. Individuals may listen to the call and view
management's supporting slide presentation on the Internet at 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 through March 18, 2013.

Rockwell Collins is a pioneer in the development and deployment of innovative
communication and aviation electronics solutions for both commercial and
government applications. Our expertise in flight deck avionics, cabin
electronics, mission communications, information management and simulation and
training is delivered by 19,000 employees through a global service and support
network that crosses 27 countries. To find out more, please visit

This press release contains statements, including certain projections and
business trends, that are forward-looking statements as defined in the Private
Securities Litigation Reform Act of 1995. Actual results may differ materially
from those projected as a result of certain risks and uncertainties, including
but not limited to the financial condition of our customers, including
bankruptcies; the health of the global economy, including potential
deterioration in economic and financial market conditions; the rate of
recovery of the commercial OEM production rates and the aftermarket; the
impacts of natural disasters, including operational disruption, potential
supply shortages and other economic impacts; cybersecurity threats, including
the potential misappropriation of assets or sensitive information, corruption
of data or operational disruption; delays related to the award of domestic and
international contracts; unanticipated impacts of sequestration and other
provisions of the Budget Control Act of 2011 that are set to be implemented in
March 2013; the discontinuance of support for military transformation and
modernization programs; potential adverse impact of oil prices on the
commercial aerospace industry; the impact of terrorist events on the
commercial aerospace industry; declining defense budgets resulting from budget
deficits in the U.S. and abroad; changes in domestic and foreign government
spending, budgetary, procurement and trade policies adverse to our businesses;
market acceptance of our new and existing technologies, products and services;
reliability of and customer satisfaction with our products and services;
favorable outcomes on or potential cancellation or restructuring of contracts,
orders or program priorities by our customers; timing of international
contract awards; recruitment and retention of qualified personnel; regulatory
restrictions on air travel due to environmental concerns; effective
negotiation of collective bargaining agreements by us and our customers,
including our collective bargaining agreements set to expire in May 2013;
performance of our customers and subcontractors; risks inherent in development
and fixed-price contracts, particularly the risk of cost overruns; risk of
significant reduction to air travel or aircraft capacity beyond our forecasts;
our ability to execute to our internal performance plans such as our
productivity and quality improvements and cost reduction initiatives;
achievement of our acquisition and related integration plans; continuing to
maintain our planned effective tax rates; our ability to develop contract
compliant systems and products on schedule and within anticipated cost
estimates; risk of fines and penalties related to noncompliance with laws and
regulations including export control and environmental regulations; risk of
asset impairments; our ability to win new business and convert those orders to
sales within the fiscal year in accordance with our annual operating plan; and
the uncertainties of the outcome of lawsuits, claims and legal proceedings, 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 assumes no obligation to update any
forward-looking statement.

(in millions, except per share amounts)
                                              Three Months Ended
                                              December 31
                                              2012       2011
Government Systems                            $ 546       $ 583
Commercial Systems                            516        511     
Total sales                                   $ 1,062    $ 1,094 
Segment operating earnings
Government Systems                            $ 107       $ 117
Commercial Systems                            106        101     
Total segment operating earnings              213         218
Interest expense                              (6      )   (6      )
Stock-based compensation                      (6      )   (6      )
General corporate, net                        (13     )   (12     )
Income before income taxes                    188         194
Income tax expense                            (56     )   (64     )
Net income                                    $ 132      $ 130   
Diluted earnings per share                    $ 0.94      $ 0.86
Weighted average diluted shares outstanding   140.7       151.1

The following tables summarize sales by product category for the three months
ended December 31, 2012 and 2011 (unaudited, in millions):

                                                  Three Months Ended
                                                   December 31
                                                   2012        2011
Government Systems sales:
Avionics                                           $  315       $ 324
Communication products                             133          144
Surface solutions                                  50           60
Navigation products                                48          55
Total Government Systems sales                     $  546      $ 583
Commercial Systems sales:
Air transport aviation electronics:
Original equipment                                 $  140       $ 124
Aftermarket                                        112          120
Wide-body in-flight entertainment                  27          25
Total air transport aviation electronics           279         269
Business and regional aviation electronics:
Original equipment                                 142          141
Aftermarket                                        95          101
Total business and regional aviation electronics   237         242
Total Commercial Systems sales                     $  516      $ 511
Commercial Systems sales:
Total original equipment                           $  282       $ 265
Total aftermarket                                  207          221
Wide-body in-flight entertainment                  27          25
Total Commercial Systems sales                     $  516      $ 511

The following table summarizes total Research & Development Investment by
segment and funding type for the three months ended December 31, 2012 and 2011
(unaudited, dollars in millions):

                                                   Three Months Ended
                                                    December 31
                                                    2012      2011
Research and Development Investment:
Government Systems                                  $  98      $ 108
Commercial Systems                                  22        21    
Total Customer-funded                               120       129   
Government Systems                                  17         21
Commercial Systems                                  54        59    
Total Company-funded                                71        80    
Total Research and Development Expense              $  191     $ 209
Increase in Pre-production Engineering Costs, Net   36        25    
Total Research and Development Investment           227       234   
Percent of Total Sales                              21.4   %   21.4  %

(in millions)
                                  December 31,   September 30,
                                  2012           2012
Cash and cash equivalents         $  337         $    335
Receivables, net                  906            971
Inventories, net ^(1)             1,403          1,332
Current deferred income taxes     47             58
Other current assets              100           91
Total current assets              2,793          2,787
Property                          767            773
Goodwill                          781            780
Intangible assets                 293            291
Long-term deferred income taxes   453            455
Other assets                      226           228
Total assets                      $  5,313      $    5,314
Liabilities and equity
Short-term debt                   $  549         $    —
Accounts payable                  393            475
Compensation and benefits         220            269
Advance payments from customers   324            288
Accrued customer incentives       172            174
Product warranty costs            121            126
Other current liabilities         136           108
Total current liabilities         1,915          1,440
Long-term debt, net               573            779
Retirement benefits               1,624          1,693
Other liabilities                 144            138
Equity                            1,057         1,264
Total liabilities and equity      $  5,313      $    5,314

^(1) Inventories, net is comprised of the following:

                                     December 31,  September 30,
                                         2012           2012
      Inventories, net:
      Production inventory               $  798         $    763
      Pre-production engineering costs   605           569
      Total inventories, net             $  1,403      $    1,332

Pre-production engineering costs include costs incurred during the development
phase of a program in connection with long-term supply arrangements that
contain contractual guarantees for reimbursement from customers. These costs
are deferred in Inventories, net to the extent of the contractual guarantees
and are amortized to cost of sales over their estimated useful lives using a
units-of-delivery method, up to 15 years.

(in millions)
                                                            Three Months Ended
                                                            December 31
                                                            2012      2011
Operating Activities:
Net income                                                  $  132     $ 130
Adjustments to arrive at cash provided by operating
Depreciation                                                30         27
Amortization of intangible assets and pre-production        13         13
engineering costs
Stock-based compensation expense                            6          6
Compensation and benefits paid in common stock              18         18
Excess tax benefit from stock-based compensation            (1     )   (4    )
Deferred income taxes                                       7          16
Pension plan contributions                                  (57    )   (50   )
Changes in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments:
Receivables                                                 67         73
Production inventory                                        (45    )   (94   )
Pre-production engineering costs                            (41    )   (28   )
Accounts payable                                            (64    )   (67   )
Compensation and benefits                                   (50    )   (124  )
Advance payments from customers                             34         2
Accrued customer incentives                                 (2     )   5
Product warranty costs                                      (5     )   (6    )
Income taxes                                                36         21
Other assets and liabilities                                (15    )   (2    )
Cash Provided by Operating Activities                       63        (64   )
Investing Activities:
Property additions                                          (40    )   (44   )
Other investing activities                                  —         (3    )
Cash Used for Investing Activities                          (40    )   (47   )
Purchases of treasury stock                                 (336   )   (393  )
Cash dividends                                              (42    )   (36   )
Increase in short-term commercial paper borrowings, net     345        48
Increase in long-term borrowings                            —          247
Proceeds from the exercise of stock options                 7          2
Excess tax benefit from stock-based compensation            1         4     
Cash Used for Financing Activities                          (25    )   (128  )
Effect of exchange rate changes on cash and cash            4         (5    )
Net Change in Cash and Cash Equivalents                     2          (244  )
Cash and Cash Equivalents at Beginning of Period            335       530   
Cash and Cash Equivalents at End of Period                  $  337    $ 286 


Rockwell Collins, Inc.
Media Contact:
Pam Tvrdy, 319-295-0591
Investor Contact:
Steve Buesing, 319-295-7575
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