Rockwell Collins Third Quarter 2013 Earnings Per Share Increased 5% to $1.20

  Rockwell Collins Third Quarter 2013 Earnings Per Share Increased 5% to $1.20

  *Increased full year earnings per share guidance to between $4.55 and $4.60
    per share
  *Increased full year cash flow guidance to about $600 million

Business Wire

CEDAR RAPIDS, Iowa -- July 19, 2013

Rockwell Collins, Inc. (NYSE: COL) today reported third quarter fiscal year
2013 earnings per share of $1.20, $0.06 higher than earnings per share of
$1.14 in the same quarter last year. The 5% increase in earnings per share was
due to improved operating performance and the benefit of share repurchases.
Net income for the third quarter of 2013 was $164 million, compared with $166
million in the same quarter last year.

For the third quarter of 2013, the company reported a 3% reduction in total
sales, to $1.17 billion compared with $1.21 billion last year with Commercial
Systems sales increasing 7%, while Government Systems revenue declined 11%.
Total segment operating earnings increased $8 million to $261 million, or 22.4
percent of sales this quarter, compared to $253 million, or 21.0 percent in
the third quarter of the prior year.

Cash provided by operating activities for the first nine months of 2013
totaled $309 million, an increase of $117 million compared to $192 million
last year. The improvement in cash from operations was primarily driven by
improved inventory performance, lower tax payments and lower compensation

"Despite the lingering impact of defense budget reductions, I believe the
operating performance of our company was outstanding in the third quarter,"
said Rockwell Collins Chairman and Chief Executive Officer, Clay Jones.
"Segment operating margins were up 140 basis points driven by a Commercial
Systems increase of 340 basis points while Government Systems held roughly
flat on declining sales. Additionally, operating cash flow generation is 61%
greater than this point last year. This earnings and cash performance was
driven by double-digit growth in commercial aftermarket revenue and our
continued focus on cost containment, program performance and asset

Jones went on to state, "Although near-term visibility remains difficult as
the U.S. Department of Defense incorporates the impacts of sequestration, we
see continued strength in our commercial business. Based on our performance
to-date, we are increasing our guidance for earnings per share and operating
cash flow toward the high end of our previous range."

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

(dollars in millions)              Q3 FY13  Q3 FY12  Inc/(Dec)
Commercial Systems sales
Original equipment                  $ 309     $ 295     5     %
Aftermarket                         235       208       13    %
Wide-body in-flight entertainment   19       23       (17   )%
Total Commercial Systems sales      $ 563    $ 526    7     %
Operating earnings                  $ 132     $ 105     26    %
Operating margin rate               23.4  %   20.0  %   340 bps

  *Sales to aircraft original equipment manufacturers increased from higher
    deliveries for the Bombardier Global and Challenger aircraft, and a full
    quarter of production for Beechcraft King Air aircraft, which was
    partially offset by fewer deliveries for Cessna business jets.
  *Aftermarket sales increased from higher spares sales and increased
    retrofits related to airspace mandates.
  *Operating earnings and margin increased primarily due to higher sales
    volume and lower company-funded research and development expense. Although
    company-funded research and development expense declined $10 million,
    total research and development investment, which includes pre-production
    engineering programs, increased $3 million primarily driven by the Boeing
    737 MAX program.

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 third quarter of 2013 are
summarized below.

(dollars in millions)           Q3 FY13  Q3 FY12  Inc/(Dec)
Government Systems sales
Avionics                         $ 341     $ 393     (13   )%
Communication products           153       178       (14   )%
Surface solutions                62        50        24    %
Navigation products              46       58       (21   )%
Total Government Systems sales   $ 602    $ 679    (11   )%
Operating earnings               $ 129     $ 148     (13   )%
Operating margin rate            21.4  %   21.8  %   (40) bps

  *Avionics revenue decreased from lower sales for development programs which
    are completing or transitioning to production, simulator award delays, and
    reduced sales for Eurofighter and helmet mounted displays for various
    fixed wing aircraft.
  *Communication product sales declined due to lower satellite communication
    and datalink product sales, partially offset by increased deliveries of
    JTRS Manpack radios.
  *Surface solutions sales increased from higher international Firestorm
    targeting systems sales.
  *Navigation product sales declined due to fewer deliveries of Defense
    Advanced GPS Receivers.
  *Operating earnings and margin decreased primarily due to lower sales,
    which was partially offset by the benefit from cost reduction actions.

Corporate and Financial Highlights

General corporate expenses not allocated to the company's business segments
increased $4 million to $14 million primarily driven by increased compensation
and pension expenses.

The company's effective income tax rate was 29.9% for the third quarter of
2013 compared to a rate of 27.8% for the same period last year. The higher tax
rate was due to the absence of a favorable adjustment to tax reserves made in
the prior year.

During the third quarter of 2013, the company repurchased 1.4 million shares
of common stock at a total cost of $90 million. The company also paid a
dividend on its common stock of 30 cents per share, or $41 million, in the
third quarter of 2013.

Fiscal Year 2013 Outlook

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

--  Total sales                        About $4.65 billion (From $4.6
                                          billion to $4.7 billion)
--   Total segment operating margins      21% to 22%
--   Earnings per share                   $4.55 to $4.60 (From $4.45 to $4.65)
--   Cash flow from operations            About $600 million (From $500 mil.
                                          to $600 mil.)
--   Total research & development         About $950 million
--   Capital expenditures                 About $125 million (From about $140
--   Full year income tax rate            About 27%

Business Highlights

Rockwell Collins will expand avionics capability for Bombardier Challenger 300
and Challenger 350 business jets
Rockwell Collins was selected by Bombardier to provide enhancements to its Pro
Line 21^TM avionics. The avionics system, which Bombardier will market as Pro
Line 21 Advanced, significantly enhances mission performance, increases
airport access and enables future airspace operations. Pro Line 21 Advanced is
available on both the recently launched Challenger 350 and Challenger 300

Rockwell Collins and China Leihua Electronic Technology Research Institute
established a joint venture
Rockwell Collins and China Leihua Electronic Technology Research Institute, a
subsidiary of Aviation Industry Corporation of China (AVIC), announced the
formal incorporation and grand opening of their joint venture - AVIC Leihua
Rockwell Collins Avionics Company. The new joint venture will initially
develop, manufacture and deliver integrated surveillance systems products for
the C919 program in China.

Rockwell Collins and Bluesky Aviation Technology to create a commercial
simulation joint venture in China
Rockwell Collins and Beijing Bluesky Aviation Technology, an AVIC subsidiary,
signed a Memorandum of Agreement towards establishing a joint venture that
will design, manufacture and market commercial aviation flight simulators. The
venture will initially focus on airlines and aircraft manufactures in China,
with future plans to address the global commercial simulation and training
market segment.

Brazilian Army Aviation Command selected Rockwell Collins airborne tactical
Rockwell Collins was selected by the Brazilian Army Aviation Command to
provide its Talon radio for a variety of rotary aircraft. The Rockwell Collins
Talon radio is designed to provide the best value in features, technology and
growth capabilities, including a digital radio architecture that allows easy
reprogramming with different waveforms and operating modes.

Bristow Group to equip helicopters with Rockwell Collins TCAS II
Bristow Group, which provides helicopter transport services for offshore oil
and gas and government operations, is retrofitting a fleet of 44 helicopters
with Rockwell Collins' Traffic Collision Avoidance System.

L-3 selected Rockwell Collins for U.S. Air Force EC-130H avionics upgrade
Rockwell Collins was selected by L-3 Platform Integration for the
communication, navigation and surveillance/air traffic management upgrade for
the U.S Air Force EC-130H aircraft program.

Rockwell Collins selected for Oman C-130 upgrade
Rockwell Collins' Flight2^TM avionics system was selected for the Royal Air
Force of Oman's C-130 upgrade program.

Rockwell Collins avionics selected by the following airlines:
- China Southern Airlines for 66 aircraft including Airbus A320, Boeing 777
and Boeing 737 NG aircraft
- EVA Air for 7 firm, with an option for 4 additional, Boeing 777 aircraft
- Xiamen Airlines for 12 Boeing 737NG aircraft

Rockwell Collins Venue^TM HD cabin system selected for a Boeing Business Jet
Rockwell Collins announced that its Venue cabin management and high-definition
entertainment system was recently selected for installation aboard a Boeing
Business Jet. This represents the fifth selection on a narrow-body VIP
aircraft in the last nine months.

Rockwell Collins selected to upgrade avionics in preparation for Link 2000+
European mandate
- Iberia Airlines will upgrade entire single-aisle fleet.
- SunExpress will retrofit entire Boeing 737 NG 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 July 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 September 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; 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      Nine Months Ended
                                 June 30                 June 30
                                 2013       2012        2013       2012
Government Systems               $ 602       $ 679       $ 1,726     $ 1,890
Commercial Systems               563        526        1,632      1,570   
Total sales                      $ 1,165    $ 1,205    $ 3,358    $ 3,460 
Segment operating earnings
Government Systems               $ 129       $ 148       $ 348       $ 393
Commercial Systems               132        105        355        318     
Total segment operating          261         253         703         711
Interest expense                 (7      )   (7      )   (21     )   (20     )
Stock-based compensation         (6      )   (6      )   (19     )   (19     )
General corporate, net           (14     )   (10     )   (44     )   (35     )
Income before income taxes       234         230         619         637
Income tax expense               (70     )   (64     )   (162    )   (180    )
Net income                       $ 164      $ 166      $ 457      $ 457   
Diluted earnings per share       $ 1.20      $ 1.14      $ 3.30      $ 3.09
Weighted average diluted         137.2       145.0       138.5       147.9
shares outstanding

The following tables summarize sales by product category for the three and
nine months ended June 30, 2013 and 2012 (unaudited, in millions):

                                     Three Months Ended  Nine Months Ended
                                      June 30              June 30
                                      2013      2012      2013       2012
Government Systems sales:
Avionics                              $  341     $ 393     $ 980       $ 1,082
Communication products                153        178       438         476
Surface solutions                     62         50        169         168
Navigation products                   46        58       139        164
Total Government Systems sales        $  602    $ 679    $ 1,726    $ 1,890
Commercial Systems sales:
Air transport aviation electronics:
Original equipment                    $  151     $ 150     $ 445       $ 415
Aftermarket                           128        109       357         351
Wide-body in-flight entertainment     19        23       64         72
Total air transport aviation          298       282      866        838
Business and regional aviation
Original equipment                    158        145       458         434
Aftermarket                           107       99       308        298
Total business and regional           265       244      766        732
aviation electronics
Total Commercial Systems sales        $  563    $ 526    $ 1,632    $ 1,570
Commercial Systems sales:
Total original equipment              $  309     $ 295     $ 903       $ 849
Total aftermarket                     235        208       665         649
Wide-body in-flight entertainment     19        23       64         72
Total Commercial Systems sales        $  563    $ 526    $ 1,632    $ 1,570

The following table summarizes total Research & Development Investment by
segment and funding type for the three and nine months ended June 30, 2013 and
2012 (unaudited, dollars in millions):

                                       Three Months Ended  Nine Months Ended
                                        June 30              June 30
                                        2013      2012      2013     2012
Research and Development Investment:
Government Systems                      $  97      $ 102     $ 296     $ 322
Commercial Systems                      25        20       72       61    
Total Customer-funded                   122       122      368      383   
Government Systems                      18         20        54        63
Commercial Systems                      49        59       155      178   
Total Company-funded                    67        79       209      241   
Total Research and Development          189        201       577       624
Increase in Pre-production              37        32       113      88    
Engineering Costs, Net
Total Research and Development          $  226    $ 233    $ 690    $ 712 
Percent of Total Sales                  19.4   %   19.3  %   20.5  %   20.6  %

(in millions)
                                                       June 30,    September
                                                       2013        30, 2012
Cash and cash equivalents                              $ 354       $  335
Receivables, net                                       969         971
Inventories, net ^(1)                                  1,509       1,332
Current deferred income taxes                          14          58
Other current assets                                   99         91
Total current assets                                   2,945       2,787
Property                                               757         773
Goodwill                                               778         780
Intangible assets                                      287         291
Long-term deferred income taxes                        407         455
Other assets                                           223        228
Total assets                                           $ 5,397    $  5,314
Liabilities and equity
Short-term debt                                        $ 602       $  —
Accounts payable                                       379         475
Compensation and benefits                              271         269
Advance payments from customers                        298         288
Accrued customer incentives                            167         174
Product warranty costs                                 119         126
Other current liabilities                              99         108
Total current liabilities                              1,935       1,440
Long-term debt, net                                    563         779
Retirement benefits                                    1,534       1,693
Other liabilities                                      157         138
Equity                                                 1,208      1,264
Total liabilities and equity                           $ 5,397    $  5,314
^(1) Inventories, net is comprised of the following:
                                                       June 30,    September
                                                       2013        30, 2012
Inventories, net:
Production inventory                                   $ 827       $  763
Pre-production engineering costs                       682        569
Total inventories, net                                 $ 1,509    $  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)
                                                             Nine Months Ended
                                                             June 30
                                                             2013     2012
Operating Activities:
Net income                                                   $ 457     $ 457
Adjustments to arrive at cash provided by operating
Depreciation                                                 91        86
Amortization of intangible assets and pre-production         41        42
engineering costs
Stock-based compensation expense                             19        19
Compensation and benefits paid in common stock               42        53
Excess tax benefit from stock-based compensation             (7    )   (7    )
Deferred income taxes                                        75        119
Pension plan contributions                                   (120  )   (120  )
Changes in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments:
Receivables                                                  2         3
Production inventory                                         (99   )   (112  )
Pre-production engineering costs                             (131  )   (101  )
Accounts payable                                             (67   )   (71   )
Compensation and benefits                                    3         (92   )
Advance payments from customers                              11        12
Accrued customer incentives                                  (7    )   27
Product warranty costs                                       (7    )   (21   )
Income taxes                                                 14        (85   )
Other assets and liabilities                                 (8    )   (17   )
Cash Provided by Operating Activities                        309      192   
Investing Activities:
Property additions                                           (85   )   (102  )
Proceeds from disposition of property                        1         17
Acquisition of intangible assets                             (1    )   (2    )
Other investing activities                                   —        (4    )
Cash Used for Investing Activities                           (85   )   (91   )
Financing Activities:
Purchases of treasury stock                                  (524  )   (710  )
Cash dividends                                               (124  )   (114  )
Increase in short-term commercial paper borrowings, net      400       201
Increase in long-term borrowings                             —         247
Proceeds from the exercise of stock options                  38        17
Excess tax benefit from stock-based compensation             7        7     
Cash Used for Financing Activities                           (203  )   (352  )
Effect of exchange rate changes on cash and cash             (2    )   (14   )
Net Change in Cash and Cash Equivalents                      19        (265  )
Cash and Cash Equivalents at Beginning of Period             335      530   
Cash and Cash Equivalents at End of Period                   $ 354    $ 265 


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