Rockwell Collins Reports First Quarter Fiscal Year 2010 Earnings

CEDAR RAPIDS, Iowa--(BUSINESS WIRE)-- Rockwell Collins, Inc. (NYSE: COL) today reported net income of $121 million for its fiscal year 2010 first quarter ended December 31, 2009, a decrease of $30 million, or 20%, from fiscal year 2009 first quarter net income of $151 million. Earnings per share was $0.76, a decrease of $0.19, or 20%, from earnings per share of $0.95 for the same period in 2009.

First quarter 2010 sales decreased $31 million, or 3%, to $1.027 billion compared to sales of $1.058 billion for the same period a year ago. Incremental sales from the acquisitions of DataPath, Inc. and SEOS Group Ltd. contributed $69 million of revenue growth. The organic revenue decline of $100 million resulted primarily from continued weakness in business jet OEM revenues, lower commercial aerospace aftermarket revenues and a decline in sales of Defense Advance GPS Receivers within Government Systems. Total segment operating margins were 19.7% for the first quarter of 2010 compared to 22.4% for the first quarter of 2009.

Cash provided by operating activities for the first three months of 2010 totaled $84 million compared to the $21 million reported for the same period last year. The increase resulted from working capital improvements as well as lower employee incentive compensation payments, partially offset by higher pension plan contributions and lower net income.

"After effects of the global recession and delays in passing the fiscal year 2010 Defense Appropriations bill impacted our first quarter revenues largely as we expected," said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. "Although revenues declined on a year-over-year basis we realized an increase in operating cash flow through working capital performance and minimized the impact to operating margins through effective cost containment."

Mr. Jones went on to state, "Improvements in commercial aerospace conditions and general developments in the formulation of defense budgets world-wide reinforce my confidence that we should see sequential growth in sales and profitability throughout the year which will allow us to achieve our full year forecast."

Following is a discussion of fiscal year 2010 first quarter sales and earnings for each business segment.

Government Systems

Government Systems, which provides communication and electronic systems, products and services for airborne and surface applications to the U.S. Department of Defense, other government agencies, civil agencies, defense contractors and foreign ministries of defense, achieved first quarter sales of $616 million, an increase of $42 million, or 7%, compared to the $574 million reported for the same period last year. Incremental sales from the acquisitions of DataPath Inc. and SEOS Group Ltd. contributed a total of $65 million, or 11 percentage points of revenue growth.

Airborne solutions sales increased $7 million, or 2%, to $410 million. Incremental sales from the acquisition of SEOS Group Ltd. contributed $5 million to Airborne solutions revenue growth. Organic sales were relatively flat as lower revenues related to the F-22 program were offset by higher tanker and transport program revenues. Surface solutions sales increased $35 million, or 20%, to $206 million. Incremental sales from the acquisition of DataPath, Inc. contributed $60 million to Surface solutions revenue growth. Organic sales declined $25 million primarily due to lower sales for the Defense Advanced GPS Receiver (DAGR) program.

Government Systems first quarter operating earnings decreased 4% to $134 million, resulting in an operating margin of 21.8%, compared to operating earnings of $140 million, or an operating margin of 24.4%, for the same period last year. The decrease in operating earnings was primarily due to increased pension expense and higher company funded research and development costs, which were partially offset by the increased sales volume. Operating margins were also impacted by lower margin revenues from the DataPath and SEOS acquisitions.

Commercial Systems

Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved first quarter sales of $411 million, a decrease of $73 million, or 15%, compared to sales of $484 million reported for the same period last year.

Sales related to aircraft OEMs decreased $43 million, or 18%, to $201 million, as a result of reduced production rates at business jet OEMs, partially offset by an increase in air transport OEM sales related to the adverse impact of the Boeing strike in the prior year. Aftermarket sales decreased $27 million, or 12%, to $192 million due primarily to lower aftermarket hardware sales and lower service and support revenue. Wide-body in-flight entertainment products and systems sales decreased $3 million, or 14%, to $18 million.

Commercial Systems first quarter operating earnings decreased 30% to $68 million, resulting in an operating margin of 16.5%, compared to operating earnings of $97 million, or an operating margin of 20.0%, for the same period a year ago. The decrease in operating earnings and margin was due primarily to lower sales volume and higher pension expense, partially offset by lower research and development costs, a reduction in selling, general and administrative expenses and a favorable contract settlement.

Source: Rockwell Collins, Inc.