Rockwell Collins Second Quarter 2013 Earnings Per Share Increase 7%

  Rockwell Collins Second Quarter 2013 Earnings Per Share Increase 7%

  *Generated $134 million of higher operating cash flow through second

Business Wire

CEDAR RAPIDS, Iowa -- April 19, 2013

Rockwell Collins, Inc. (NYSE: COL) today reported second quarter fiscal year
2013 earnings per share of $1.17, $0.08 higher than earnings per share of
$1.09 in the prior year. The 7% increase in earnings per share was due to the
favorable effect of the company's share repurchase program. Net income for the
second quarter of 2013 was $161 million, the same as the second quarter last

For the second quarter of 2013, the company reported a 3% reduction in total
sales to $1.13 billion with total segment operating earnings of $229 million,
or 20.2 percent of sales. Total segment operating earnings and margin in the
second quarter increased $5 million, or 100 basis points, to 21.7 percent of
sales, when excluding the impact of $16 million in incremental compensation
costs resulting from the favorable impact of the Federal R&D tax credit
extension. Specifics are detailed in the Non-GAAP table at the end of this

Cash provided by operating activities for the first six months of 2013 totaled
$179 million, an increase of $134 million compared to the $45 million reported
last year. The improvement in cash from operations was primarily driven by
improved inventory performance, lower tax payments and lower compensation

"Second quarter results were consistent with our expectations and I continue
to feel very good about the company's operating performance given the overall
economic conditions and a dynamic defense market environment," said Rockwell
Collins Chairman and Chief Executive Officer, Clay Jones. "Highlighting this
performance was a 300% improvement in operating cash flow compared to last
year and a second straight quarterly increase in core operating margins,
despite declining sales."

Jones went on to state, "Fortunately, we included the impacts of sequestration
in our original fiscal year guidance and, while the full impact is not yet
known, our performance to date has allowed us to increase the revenue outlook
for Government Systems. With the expected commercial revenue growth in the
second half of the year, I have growing confidence in our ability to meet or
exceed guidance projections."

Following is a discussion of fiscal year 2013 second 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 second quarter results as summarized below.

(dollars in millions)              Q2 FY13  Q2 FY12  Inc/(Dec)
Commercial Systems sales
Original equipment                  $ 312     $ 289     8        %
Aftermarket                         223       220       1        %
Wide-body in-flight entertainment   18       24       (25    ) %
Total Commercial Systems sales      $ 553    $ 533    4       %
Operating earnings                  $ 117     $ 112     4        %
Operating margin rate               21.2  %   21.0  %   20 BPS

  *Sales to aircraft original equipment manufacturers increased from higher
    deliveries for the Boeing 787 and 737, and the Bombardier Global and
    Challenger aircraft.
  *Aftermarket sales increased from higher business jet retrofits, partially
    offset by lower air transport service and support and higher spares sales
    last year.
  *Operating earnings and margin increased primarily due to higher sales
    volume. Increased compensation costs were offset by lower company-funded
    research and development expense. Although company-funded research and
    development investment declined, total research and development
    investment, which includes pre-production engineering programs, increased
    $12 million driven by the Boeing 737 Max, Bombardier CSeries and Airbus
    A350 programs.

Government Systems

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

(dollars in millions)           Q2 FY13  Q2 FY12  Inc/(Dec)
Government Systems sales
Avionics                         $ 324     $ 365     (11       ) %
Communication products           152       154       (1        ) %
Surface solutions                57        58        (2        ) %
Navigation products              45       51       (12       ) %
Total Government Systems sales   $ 578    $ 628    (8        ) %
Operating earnings               $ 112     $ 128     (13       ) %
Operating margin rate            19.4  %   20.4  %   (100) BPS

  *Avionics sales decreased from lower sales for development programs, which
    are completing or transitioning to production, and reduced sales for
    Eurofighter and helmet mounted displays for various fixed wing aircraft.
  *Communication product sales declined due to lower satellite communication
    product sales, mostly offset by increased deliveries of JTRS Manpack
  *Surface solutions sales declined primarily from development programs
    either completing or transitioning to production, offset by increased
    international sales of Firestorm targeting systems.
  *Navigation product sales declined due to fewer deliveries of Defense
    Advanced GPS Receiver products.
  *Operating earnings and margin decreased primarily due to lower sales, the
    absence of a favorable warranty adjustment recorded in the prior year and
    higher compensation costs, partially offset by the benefit from cost
    reduction actions and the completion of certain company-funded development

Corporate and Financial Highlights

General corporate expenses not allocated to the company's business segments
increased $4 million to $17 million primarily driven by increased compensation
and pension expenses.

The company's effective income tax rate was 18.3% for the second quarter of
2013 compared to a rate of 24.4% for the same period last year. The lower tax
rate was due to the retroactive extension of the Federal R&D tax credit,
partially offset by the absence of a favorable adjustment in the prior year
related to the completion of certain IRS tax audits. This net tax benefit was
offset by incremental compensation costs included in profit before tax. For a
reconciliation of the net income and earnings per share impacts of these
items, see the Non-GAAP table at the end of this press release.

During the second quarter of 2013, the company repurchased 1.4 million shares
of common stock at a total cost of $84 million. In February of 2013, the
company's Board of Directors authorized an additional $500 million in share
repurchases. The company also paid a dividend on its common stock of 30 cents
per share, or $41 million, in the second quarter of 2013.

Rockwell Collins today announced that Chairman and CEO Clay Jones, 64, has
informed the company’s board of directors of his plans to retire as CEO
effective July 31, after almost 34 years of service. Rockwell Collins
President Kelly Ortberg, 52, is expected to succeed Jones as CEO at that time.
Jones will remain on the company’s board of directors as non-executive

Fiscal Year 2013 Outlook

Total research & development investment guidance was lowered to align our
spend profile for certain customer-funded and pre-production engineering
programs. We now anticipate pre-production engineering investment to increase
by about $170 million in fiscal year 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 billion
--   Total segment operating margins        21% to 22%
--   Earnings per share                     $4.45 to $4.65
--   Cash flow from operations              $500 million to $600 million
--   Total research & development           About $950 million (from about
     investment                             $1.0 billion)
--   Capital expenditures                   About $140 million
--   Full year income tax rate              About 27%

Business Highlights

Rockwell Collins’ rudder/brake pedal assembly selected by Airbus for the A350
XWB aircraft
Rockwell Collins announced it has been selected by Airbus to provide the
rudder/brake pedal assembly for the A350 XWB family of aircraft. Rockwell
Collins-supplied products and solutions for the A350 XWB, including the
aircraft’s communications, information management, landing and navigation
systems, are valued at $2.5 billion over the life of the program.

Rockwell Collins’ Head-up Guidance System selected by China Eastern and Okay
Airways for their 737 aircraft
Rockwell Collins was selected to provide their Head-up Guidance System (HGS)
by China Eastern Airlines for 58 new Boeing Next-Generation 737 aircraft.
Deliveries are expected to begin in 2013. Additionally, Rockwell Collins was
selected to provide HGS for Okay Airways for 10 new Boeing Next-Generation 737
aircraft. Deliveries are expected to begin in 2014.

Rockwell Collins selected by Piaggio Aero to develop integrated avionics
system for its Multirole Patrol Aircraft
Rockwell Collins announced that it has been selected by Piaggio Aero to
develop an integrated avionics system with touch-control flight displays for
the Piaggio Aero Multirole Patrol Aircraft.

Rockwell Collins was awarded a contract to continue GPS cost savings program
Rockwell Collins was awarded a $3.2 million Technology Investment Agreement to
continue the next phase of a joint investment agreement for the Low Cost
Military GPS program.

South African Airways selected Rockwell Collins’ full avionics suite and
South African Airways will be featuring a full suite of Rockwell Collins’
communications, surveillance and navigation avionics on 20 new Airbus A320
aircraft. The selection includes Rockwell Collins’ MultiScan™ Threat Detection
System, GLU-925 Multi-Mode Receiver (MMR), and Iridium SATCOM system.
Deliveries are scheduled to begin later this year.

The airline also plans to retrofit MultiScan on its current fleet of eleven
A319 aircraft.

Rockwell Collins conducted a successful Critical Design Review for CRIIS
Rockwell Collins conducted a successful Critical Design Review with the U.S.
Air Force, and has been approved to begin the integration, test, and
pre-production phase of the Common Range Integrated Instrumentation System
(CRIIS) program. Rockwell Collins is the prime contractor and systems
integrator for the next-generation military test range system that will
replace the Advanced Range Data System currently in use at major U.S. military
test ranges. CRIIS will support weapon system testing for a variety of
platforms, including advanced aircraft, and could also support testing of
ships, helicopters, unmanned aerial vehicles and ground vehicles. The program
fulfills critical Department of Defense requirements to provide Time, Space,
Position Information, additional platform test data, and employs a more
robust, spectrally efficient data link capable of multiple levels of

Rockwell Collins successfully completed the Critical Design Review for KC-390
Rockwell Collins achieved its most significant milestone yet for the KC-390
program with the completion of a successful Critical Design Review at the
Embraer facility in São José dos Campos, Brazil in February.

Rockwell Collins completed first HH-60G Avionics Communication Suite Upgrade
Rockwell Collins installed next generation ARC-210 Gen5 radios on an initial
HH-60G Combat Search and Rescue helicopter for the U.S. Air Force Air National
Guard, a key milestone in the HH-60G Avionics Communications Suite Upgrade
Program. The modification included installing four ARC-210 Gen5
receiver-transmitters on the aircraft, which provide a form and fit
replacement for existing ARC-210 radios currently installed on more than 180
different platform types in 45 countries worldwide.

Rockwell Collins signed comprehensive service agreement with Emirates
Rockwell Collins signed a five-year service agreement with Dubai-based
Emirates Airline for maintenance, repair and overhaul of Rockwell Collins
avionics on Emirates’ fleet.

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 April 19, 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 June 19, 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; 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      Six Months Ended
                                 March 31                March 31
                                 2013       2012        2013       2012
Government Systems               $ 578       $ 628       $ 1,124     $ 1,211
Commercial Systems               553        533        1,069      1,044   
Total sales                      $ 1,131    $ 1,161    $ 2,193    $ 2,255 
Segment operating earnings
Government Systems               $ 112       $ 128       $ 219       $ 245
Commercial Systems               117        112        223        213     
Total segment operating          229         240         442         458
Interest expense                 (8      )   (7      )   (14     )   (13     )
Stock-based compensation         (7      )   (7      )   (13     )   (13     )
General corporate, net           (17     )   (13     )   (30     )   (25     )
Income before income taxes       197         213         385         407
Income tax expense               (36     )   (52     )   (92     )   (116    )
Net income                       $ 161      $ 161      $ 293      $ 291   
Diluted earnings per share       $ 1.17      $ 1.09      $ 2.10      $ 1.95
Weighted average diluted         137.8       147.6       139.3       149.4
shares outstanding

The following tables summarize sales by product category for the three and six
months ended March 31, 2013 and 2012 (unaudited, in millions):

                                     Three Months Ended  Six Months Ended
                                      March 31             March 31
                                      2013      2012      2013       2012
Government Systems sales:
Avionics                              $  324     $ 365     $ 639       $ 689
Communication products                152        154       285         298
Surface solutions                     57         58        107         118
Navigation products                   45        51       93         106
Total Government Systems sales        $  578    $ 628    $ 1,124    $ 1,211
Commercial Systems sales:
Air transport aviation electronics:
Original equipment                    $  154     $ 141     $ 294       $ 265
Aftermarket                           117        122       229         242
Wide-body in-flight entertainment     18        24       45         49
Total air transport aviation          289       287      568        556
Business and regional aviation
Original equipment                    158        148       300         289
Aftermarket                           106       98       201        199
Total business and regional           264       246      501        488
aviation electronics
Total Commercial Systems sales        $  553    $ 533    $ 1,069    $ 1,044
Commercial Systems sales:
Total original equipment              $  312     $ 289     $ 594       $ 554
Total aftermarket                     223        220       430         441
Wide-body in-flight entertainment     18        24       45         49
Total Commercial Systems sales        $  553    $ 533    $ 1,069    $ 1,044

The following table summarizes total Research & Development Investment by
segment and funding type for the three and six months ended March 31, 2013 and
2012 (unaudited, dollars in millions):

                                       Three Months Ended  Six Months Ended
                                        March 31             March 31
                                        2013      2012      2013     2012
Research and Development Investment:
Government Systems                      $  101     $ 112     $ 199     $ 220
Commercial Systems                      25        20       47       41    
Total Customer-funded                   126       132      246      261   
Government Systems                      19         22        36        43
Commercial Systems                      52        60       106      119   
Total Company-funded                    71        82       142      162   
Total Research and Development          197        214       388       423
Increase in Pre-production              40        31       76       56    
Engineering Costs, Net
Total Research and Development          $  237    $ 245    $ 464    $ 479 
Percent of Total Sales                  21.0   %   21.1  %   21.2  %   21.2  %

(in millions)
                                                     March 31,   September 30,
                                                     2013        2012
Cash and cash equivalents                            $ 337       $    335
Receivables, net                                     954         971
Inventories, net ^(1)                                1,444       1,332
Current deferred income taxes                        32          58
Other current assets                                 107        91
Total current assets                                 2,874       2,787
Property                                             758         773
Goodwill                                             778         780
Intangible assets                                    289         291
Long-term deferred income taxes                      429         455
Other assets                                         225        228
Total assets                                         $ 5,353    $    5,314
Liabilities and equity
Short-term debt                                      $ 588       $    —
Accounts payable                                     394         475
Compensation and benefits                            275         269
Advance payments from customers                      323         288
Accrued customer incentives                          169         174
Product warranty costs                               121         126
Other current liabilities                            90         108
Total current liabilities                            1,960       1,440
Long-term debt, net                                  570         779
Retirement benefits                                  1,547       1,693
Other liabilities                                    151         138
Equity                                               1,125      1,264
Total liabilities and equity                         $ 5,353    $    5,314
^(1) Inventories, net is comprised of the
                                                     March 31,   September 30,
                                                     2013        2012
Inventories, net:
Production inventory                                 $ 799       $    763
Pre-production engineering costs                     645        569
Total inventories, net                               $ 1,444    $    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 customer-funded research and development expense within
cost of sales over their estimated useful lives using a units-of-delivery
method, up to 15 years.

(in millions)
                                                             Six Months Ended
                                                             March 31
                                                             2013     2012
Operating Activities:
Net income                                                   $ 293     $ 291
Adjustments to arrive at cash provided by operating
Depreciation                                                 61        58
Amortization of intangible assets and pre-production         27        26
engineering costs
Stock-based compensation expense                             13        13
Compensation and benefits paid in common stock               29        35
Excess tax benefit from stock-based compensation             (3    )   (7    )
Deferred income taxes                                        39        59
Pension plan contributions                                   (117  )   (118  )
Changes in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments:
Receivables                                                  2         80
Production inventory                                         (63   )   (139  )
Pre-production engineering costs                             (88   )   (63   )
Accounts payable                                             (46   )   (66   )
Compensation and benefits                                    7         (74   )
Advance payments from customers                              37        —
Accrued customer incentives                                  9         23
Product warranty costs                                       (5    )   (21   )
Income taxes                                                 6         (38   )
Other assets and liabilities                                 (22   )   (14   )
Cash Provided by Operating Activities                        179      45    
Investing Activities:
Property additions                                           (61   )   (69   )
Proceeds from disposition of property                        —         2
Acquisition of intangible assets                             (1    )   (1    )
Other investing activities                                   —        (4    )
Cash Used for Investing Activities                           (62   )   (72   )
Purchases of treasury stock                                  (437  )   (502  )
Cash dividends                                               (83   )   (71   )
Increase in short-term commercial paper borrowings, net      385       97
Increase in long-term borrowings                             —         247
Proceeds from the exercise of stock options                  19        16
Excess tax benefit from stock-based compensation             3        7     
Cash Used for Financing Activities                           (113  )   (206  )
Effect of exchange rate changes on cash and cash             (2    )   —     
Net Change in Cash and Cash Equivalents                      2         (233  )
Cash and Cash Equivalents at Beginning of Period             335      530   
Cash and Cash Equivalents at End of Period                   $ 337    $ 297 

                            ROCKWELL COLLINS, INC.
                        Non-GAAP Financial Information

The Non-GAAP information included in this press release is believed to be
useful to an investor's understanding and assessment of our on-going
operations. The Non-GAAP information is found in the second paragraph and in
the "Corporate and Financial highlights" section of this press release. The
company does not intend for the Non-GAAP information to be considered in
isolation or as a substitute for the related GAAP measures. The Non-GAAP
information is intended to clarify the impact that incremental compensation
costs and certain tax-related items had on our year-over-year comparative
results, as detailed in the table below (unaudited, in millions, except per
share amounts):

                               Three Months Ended
                                March 31, 2013          March 31, 2012
                                Net Income  EPS         Net Income  EPS
Net income and Earnings per     $  161       $ 1.17      $  161       $ 1.09
Share, as reported
Less: Benefit in income taxes   (31     )    (0.22  )    (1      )    (0.01  )
from Federal R&D Tax Credit
Less: Benefit in income taxes
from completion of certain      —            —           (19     )    (0.13  )
tax audits
Add: Incremental compensation   12          0.09       —           —      
costs, net of tax^1
Net income and Earnings Per     $  142      $ 1.04     $  141      $ 0.95 
Share, as adjusted
                                                         Three Months Ended
                                                         March 31
                                                         2013         2012
Government Systems segment operating earnings            $  112       $ 128
Commercial Systems segment operating earnings            117         112   
Total segment operating earnings, as reported            229          240
Total segment operating earnings, as a percentage of     20.2    %    20.7  %
Add: Pre-tax incremental compensation costs^1            16          —     
Adjusted total segment operating earnings                $  245      $ 240 
Adjusted total segment operating earnings, as a          21.7    %    20.7  %
percentage of sales

^1 During the three months ended March 31, 2013, net income included a $12
million adjustment ($19 million pre-tax) for incremental compensation costs.
$16 million of the pre-tax adjustment was recorded within segment operating
earnings and $3 million was recorded within general corporate, net expense.
The higher payouts we now expect to make to employees under incentive plans
are due to the forecasted increase to earnings per share as a result of the
Federal R&D tax credit extension.


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