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--Fiscal year 2013 earnings per share between $4.30 and $4.50
--Guidance incorporates the impact of sequestration
Rockwell Collins, Inc. (COL) today announced its fiscal year 2013
guidance of revenue between $4.6 billion and $4.7 billion, earnings per
share in the range of $4.30 to $4.50, and cash flow from operations of
$500 million to $600 million. Total segment operating margins are
expected to be in the range of 21.0% to 22.0%. The Budget Control Act of
2011 requires reductions (sequestration) to U.S. defense spending
beginning on January 2, 2013, the impact of which has been incorporated
in the guidance ranges provided above.
"The potential sequestration impacts on the U.S. defense budgets have
created unprecedented uncertainty for all businesses that support the
Department of Defense. Given the legal requirements set forth in the
Budget Control Act of 2011 and the challenges facing the U.S. Congress
for the balance of this year, it is more than reasonable to assume
sequestration impacts will occur and we have incorporated what we
believe them to be in our fiscal year 2013 guidance," said Rockwell
Collins Chairman, President and Chief Executive Officer, Clay Jones. "As
we have done in the past, our company will take swift and appropriate
actions to size our infrastructure to reduce costs and enhance our
ability to deliver long-term growth and shareowner value. These actions
include a restructuring charge in the fourth quarter of fiscal year 2012
to position us for improved performance in 2013 and beyond."
Jones went on to state, "Despite this extraordinary headwind, Rockwell
Collins should once again demonstrate its ability to maintain strong
segment operating margins and, with the benefits of share repurchases,
maintain earnings per share in the same range as fiscal year 2012. As I
look beyond 2013, I expect government programs transitioning from
development into production along with the strong air transport OEM
backlog, the launch of new air transport and business aircraft, and our
continued focus on shareowner value creation to drive results more in
line with our long-term growth targets."
Details related to the projected performance of the company’s Commercial
and Government Systems businesses for fiscal year 2013 are as follows:
Commercial Systems
Commercial Systems provides aviation electronics systems, products and
services to air transport, business and regional aircraft manufacturers
and airlines worldwide. Commercial Systems fiscal year 2013 revenue is
expected to increase by about 7 percent when compared with 2012.
Original Equipment Sales to aircraft Original Equipment
Manufacturers (OEMs) are expected to increase by high single digits
across both the air transport, and business and regional markets. Sales
to air transport aircraft OEMs should benefit from both the Boeing 787
production rate increase as well as the planned production rate
increases of Boeing and Airbus legacy aircraft. Business and regional
jets OEM sales should improve due to modest production rate increases
across most OEM customers.
Aftermarket Aftermarket sales for 2013 are expected to
increase by low double-digits. The sales increase is expected to be
driven by initial revenue from airspace mandates, including TCAS 7.1 and
Link 2000+, as both airlines and business jet owners incorporate these
retrofits onto their aircraft. Additionally, we expect growth from
business jet cockpit upgrades, air transport spares for 787 and higher
service and support revenue across both markets.
Sales of wide-body in-flight entertainment products and services are
expected to decrease by about 15%, or approximately $15 million, due to
the company’s decision in 2005 to cease investing in this product area.
Government Systems
Government Systems provides avionics, communication and navigation
products, and surface solutions to 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.
Government Systems fiscal year 2013 revenue is expected to decrease by
approximately 10 percent, with about half of the year over year decline
resulting from the impact of sequestration. The remaining decline is
primarily driven by a $100 million reduction to revenue from certain
programs completing the development phase and expected to begin full
scale production beyond 2013. In addition to the program transitions, we
expect increased deliveries of the Joint Tactical Radio System Manpack
radios, Firestorm targeting systems and higher tanker sales to be mostly
offset by lower product deliveries of our Defense Advanced GPS Receiver
and satellite communication terminals, the delay in the Eurofighter
Tranche III and the lingering impact of programs and product lines
terminated in 2012.
Expense and Cash Flow Assumptions
Other assumptions integral to the company’s projected financial guidance
for fiscal year 2013 are as follows:
--
Combined segment operating margins are expected to be in the range of
21.0% to 22.0%. Government Systems operating margins should sustain at
about 21 percent, while Commercial Systems operating margins are
anticipated to expand approximately 200 basis points.
--
2013 operating margins will benefit from a planned restructuring and
asset impairment charge, which could be up to $0.30 cents per share,
expected to be recorded in the fourth quarter of 2012. Approximately
2/3 of the anticipated charge relates to headcount reductions and
facility optimization actions to reduce costs in 2013 and beyond,
while the balance of the charge relates to the write-off of impaired
accounts receivable, including certain balances associated with the
Hawker Beechcraft bankruptcy.
--
Total research and development (R&D) investment is expected to
increase about 5% to approximately $1.0 billion, or 22% of sales, when
compared with 2012. Company-funded R&D expenditures are expected to
remain relatively flat to 2012.
--
The company’s effective income tax rate is expected to be about 32%
and excludes any benefit from the Federal Research & Development Tax
Credit.
--
Employee incentive compensation costs will increase by $25 million
compared with 2012.
--
Cash flow from operations is projected to be in the range of $500
million to $600 million and includes:
--
A $110 million contribution to the company’s qualified defined
benefit pension plan.
--
A $210 million net increase in pre-production engineering costs as
the company continues to fund development projects on which
customers have provided contractual guarantees for reimbursement.
The increased funding, when compared with 2012, is primarily
driven by certain large Commercial Systems programs for which we
have yet to be selected.
--
Capital expenditures are projected to total about $140 million for
fiscal year 2013.
The following table is a complete summary of the company’s financial
guidance for fiscal year 2013:
--Total sales $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.
*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 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 20,000 employees
through a global service and support network that crosses 27 countries.
To find out more, please visit www.rockwellcollins.com.
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
January of 2013; the continued 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 of
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.
SOURCE: Rockwell Collins, Inc.
Rockwell Collins, Inc.
Media Contact:
Pam Tvrdy, 319-295-0591
pjtvrdy@rockwellcollins.com
or
Investor Contact:
Steve Buesing, 319-295-7575
investorrelations@rockwellcollins.com
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