- Full year sales increase 5%
- Cash provided by operating
activities for the full year increase 13%
- Fiscal year 2016 guidance
reiterated
Rockwell Collins, Inc. (NYSE:COL) today reported fiscal year
2015 sales were $5.24 billion, a 5% increase from fiscal year 2014.
Fiscal year 2015 earnings per share from continuing operations was
$5.19 compared to $4.52 in the prior year. Cash provided by
operating activities from continuing operations totaled $749
million in 2015, an increase of $89 million, or 13%, compared to
the $660 million in fiscal year 2014.
Fourth quarter fiscal year 2015 earnings per share from
continuing operations increased 9% to $1.38, compared to $1.27 in
the prior year. Total sales for the fourth quarter of fiscal year
2015 were $1.38 billion, a 1% decrease from the same period in
fiscal year 2014. Total segment operating margin for the fourth
quarter was 22.0% compared to 21.3% in the prior year and total
segment operating earnings increased 2% to $304 million, compared
to the same period in fiscal year 2014.
"I'm pleased with our overall performance for the year,
highlighted by double-digit earnings per share and cash flow
growth. We were able to perform to our expectations for the year in
spite of a weaker than expected commercial aftermarket and the
negative impact of foreign currency rates," said Rockwell Collins
Chief Executive Officer and President, Kelly Ortberg. “Our team did
a great job of delivering strong operating performance, allowing us
to continue investing in long-term growth. During the year we
invested almost $1 billion in R&D and made two acquisitions
that strengthen our portfolio of connectivity-related
offerings."
Ortberg continued, "As we enter fiscal year 2016, we are sharply
focused on meeting our commitments to our customers, including
executing on a number of important development programs that are
expected to drive growth over the balance of the decade. While
growth in 2016 will be muted particularly in the first half of the
fiscal year, I remain confident our strategies will drive long-term
double-digit growth in earnings and cash flow."
Following is a discussion of fiscal year 2015 fourth 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 2015 fourth
quarter results as summarized below.
(dollars in millions)
Q4 FY15
Q4 FY14
Inc/(Dec)
Commercial Systems sales Original equipment $ 372 $ 380 (2 )%
Aftermarket 251 243 3 % Wide-body in-flight entertainment 13
16 (19 )% Total Commercial Systems sales $ 636
$ 639 — % Operating earnings $ 146 $ 141 4 %
Operating margin rate 23.0 % 22.1 % 90 bps
- Original equipment sales decreased due
to lower sales for Chinese regional aircraft OEM programs partially
offset by higher deliveries in support of the A350 and Legacy 500
entries into service.
- Aftermarket sales increased due to
higher regulatory mandate sales, partially offset by lower spares
provisioning for the Boeing 787 program.
- Operating earnings and operating margin
increased primarily due to lower company-funded research and
development expense and cost savings initiatives, partially offset
by higher employee incentive compensation expense.
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 fourth quarter of 2015 are summarized below.
(dollars in millions)
Q4 FY15
Q4 FY14
Inc/(Dec)
Government Systems sales Avionics $ 381 $ 375 2 % Communication
products 92 128 (28 )% Surface solutions 53 52 2 % Navigation
products 55 50 10 % Total Government
Systems sales $ 581 $ 605 (4 )% Operating
earnings $ 129 $ 137 (6 )% Operating margin rate 22.2 % 22.6 % (40)
bps
- Avionics sales increased due to higher
tanker/transport hardware deliveries partially offset by lower
rotary wing hardware sales.
- Communication products sales decreased
due to lower Joint Tactical Radio System Manpack sales.
- Navigation products sales increased
primarily due to development effort on modernized GPS
products.
- Changes in foreign currency rates,
primarily the strengthening of the U.S. dollar, resulted in a $12
million reduction to Government Systems sales for the fourth
quarter of fiscal year 2015 when compared to the same quarter in
the prior year. The $12 million reduction is included within the
Government Systems sales categories above.
- Operating earnings and operating margin
decreased due to lower sales, higher investment in company-funded
research and development expense, and higher employee incentive
compensation expense, partially offset by favorable hardware
product mix and cost savings initiatives.
Information Management Services
Information Management Services (IMS) provides communication
services, systems integration and security solutions across the
aviation, airport, rail, transit and nuclear security markets.
Results from the fourth quarter of 2015 are summarized below.
(dollars in millions)
Q4 FY15
Q4 FY14
Inc/(Dec)
Information Management Services sales $ 167 $ 158 6 %
Operating earnings $ 29 $ 21 38 % Operating margin rate 17.4 % 13.3
% 410 bps
- IMS sales increased primarily due to
low double-digit growth in aviation related businesses including
GLOBALinkSM and ARINCDirectSM, partially offset by lower sales from
the non-aviation related businesses due to the timing of certain
airport programs and the exit of a government program.
- IMS operating earnings and operating
margin increased primarily due to the higher sales volume, a more
favorable mix of higher margin aviation related sales, and the
absence of certain licensing costs incurred in the prior year.
Cash Flow
Cash provided by operating activities from continuing operations
was $749 million in fiscal year 2015, compared to $660 million in
fiscal year 2014. The $89 million increase was primarily due to
converting the higher earnings in 2015 to cash flow within the
year.
The company paid a dividend on its common stock of 33 cents per
share, or $44 million, in the fourth quarter of 2015.
Fiscal Year 2016 Outlook
The following table is a summary of the company's financial
guidance for fiscal year 2016, which is unchanged from the original
issuance on September 18, 2015:
Total sales $5.3 billion to $5.4 billion
Total segment operating margins About 21.0% Earnings per share
$5.20 to $5.40 Cash flow from operations $700 million to $800
million Total research & development investment About $1
billion (1) Capital expenditures About $200 million Full year
income tax rate About 28%
(1) - Total research and development investment consists of
company and customer funded research & development expenditures
as well as the net increase in pre-production engineering costs
capitalized within inventory.
Conference Call and Webcast DetailsRockwell Collins CEO
and President, Kelly Ortberg, and Senior Vice President and CFO,
Patrick Allen, will conduct an earnings conference call at 9:00
a.m. Eastern Time on October 30, 2015. Individuals may listen to
the call and view management's supporting slide presentation on the
Internet at www.rockwellcollins.com. 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
www.rockwellcollins.com.
Business Highlights
Rockwell Collins acquired International Communications
GroupRockwell Collins acquired Newport News, Virginia-based
International Communications Group, Inc. (ICG), a leading provider
of satellite-based global voice and data communication products and
services for the aviation industry. The initial purchase price was
$50 million and additional post-closing consideration of up to $14
million may be paid.
New Rockwell Collins technology to provide safe transfer of
data on Boeing 777XRockwell Collins was selected by Boeing to
provide the Avionics Gateway secure server on new 777X airplanes.
The Avionics Gateway will feature the newest generation of Rockwell
Collins’ proven Secure Server Router that enables the safe transfer
of data between the flight deck, cabin crew and airline operations
on the ground.
Rockwell Collins to provide avionics for U.S. Air Force
Combat Rescue HelicoptersRockwell Collins was selected by
Sikorsky for the U.S. Air Force Combat Rescue Helicopter program.
Rockwell Collins will provide state-of-the art avionics and mission
equipment to the next generation of combat rescue helicopters,
including the cockpit flight and mission display system, navigation
radios and the advanced ARC-210 V/UHF communication system.
Rockwell Collins’ FANS 1/A upgrade for Bombardier Challenger
604 aircraft now certifiedRockwell Collins received a Federal
Aviation Administration supplemental type certificate for its
Future Airspace Navigation Systems (FANS) 1/A upgrade for
Bombardier Challenger 604 aircraft equipped with Pro Line 4™
avionics. The solution is available now through Rockwell Collins
authorized dealers.
Rockwell Collins’ PAVES™ Wireless solution certified for A320
and A321 aircraftRockwell Collins received an European Aviation
Safety Agency supplemental type certificate with Federal Aviation
Administration validation for its PAVES™ Wireless media
distribution system for Airbus A320 and A321 aircraft.
Rockwell Collins airport-related information management
services were selected by the following:
- Lufthansa Airlines’ passengers will be
able to check-in faster at the airport due to the implementation of
Rockwell Collins’ new ARINC vMUSE™ mobile passenger processing
solution. Lufthansa is the first airline to implement this new
technology, which gives it the ability to check-in travelers
wherever and whenever needed.
- Airport Authority Hong Kong will deploy
120 common use self-service bag drop systems at Hong Kong
International Airport, making it one of the largest self-service
bag drop projects in the world. This new system will allow
travelers at one of the world’s busiest airports to self-tag their
bags, speeding up the departure process for passengers and reducing
handling costs for the airport.
- Mactan Cebu International Airport
selected Rockwell Collins' ARINC airport solutions to improve its
passengers' travel experiences.
Rockwell Collins wins DARPA award to develop GPS backup
technologies for contested environmentsRockwell Collins was
selected by the Defense Advanced Research Projects Agency (DARPA)
to develop technologies that could serve as a backup to GPS. The
research, being conducted as part of DARPA’s Spatial, Temporal and
Orientation Information in Contested Environments program aims to
reduce warfighter dependence on GPS for modern military
operations.
Rockwell Collins selected for AC312E/C platformsHarbin
Aircraft Industry Group has selected Rockwell Collins to provide
avionics for Avicopter’s new AC312E/C helicopters, which will
perform search and rescue, emergency medical service and general
purpose transport missions.
Rockwell Collins introduces ARINC UrgentLink, the first
nationwide network exclusively for disaster
communicationsRockwell Collins unveiled ARINC UrgentLink, the
first national disaster communications network for public safety
that enables first responders, public health, public safety and
critical industry officials to communicate with each other when
traditional networks are damaged or destroyed.
Data Link Solutions Selected to Provide U.S. and Allied
Militaries with Advanced Networked CommunicationsData Link
Solutions (DLS), a joint venture between Rockwell Collins and BAE
Systems, received a $18.3 million award from the U.S. Navy Space
and Naval Warfare Systems Command to provide real-time situational
awareness data and voice communications technology to U.S. and
international militaries. DLS will deliver Multifunctional
Information Distribution System Low Volume Terminals - a key
component of Link 16 data exchange networks - to the U.S. Air
Force, the U.S. Navy, and the U.S. Air National Guard, as well as
to several foreign governments through the U.S. Department of
Defense’s Foreign Military Sales program.
Rockwell Collins selected to provide communications for E-4B
programThe Boeing Company selected Rockwell Collins to upgrade
a low-frequency transmission system for the E-4B program, which
connects U.S. command authorities to strategic launch control
centers and strike assets during a national emergency.
Rockwell Collins’ electronic Engine Control Unit to be
featured on new Rotax® 915 iS turbocharged aircraft engine for
light aircraftRockwell Collins’ electronic dual-channel Engine
Control Unit (ECU) will be featured on the new Rotax® 915 iS
turbocharged piston engine for the light aircraft market. The ECU
includes fully integrated turbocharging control and protection for
the Rotax 915 iS.
Royal Netherlands Air Force selected Rockwell Collins
Intertrade to manage avionics repairsIntertrade, a Rockwell
Collins company that provides competitively priced, recertified
used aircraft and engine parts, was selected by the Royal
Netherlands Air Force to provide avionics repair chain management
services for its Pilatus PC-7 trainer fleet.
About Rockwell CollinsRockwell Collins is a pioneer in
the development and deployment of innovative communication and
aviation electronic solutions for both commercial and government
applications. Our expertise in flight deck avionics, cabin
electronics, mission communications, simulation and training and
information management services is delivered by a global workforce,
and a service and support network that crosses more than 150
countries. To find out more, please visit
www.rockwellcollins.com.
Forward-Looking StatementThis 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 and suppliers, including bankruptcies; the health
of the global economy, including potential deterioration in
economic and financial market conditions; adjustments to the
commercial OEM production rates and the aftermarket; the impacts of
natural disasters and pandemics, 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; delays in customer programs, including new
aircraft programs entering service later than anticipated; the
continued support for military transformation and modernization
programs; potential impact of volatility in oil prices, currency
exchange rates or interest rates on the commercial aerospace
industry or our business; 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; potential
unavailability of our mission-critical data and voice communication
networks; unfavorable outcomes on or potential cancellation or
restructuring of contracts, orders or program priorities by our
customers; recruitment and retention of qualified personnel;
regulatory restrictions on air travel due to environmental
concerns; effective negotiation of collective bargaining agreements
by us, our customers, and our suppliers; 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 internal performance plans
such as restructuring activities, productivity and quality
improvements and cost reduction initiatives; achievement of ARINC
integration and synergy plans as well as our other 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 compliance requirements
associated with U.S. Government work, 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.
ROCKWELL COLLINS, INC. SEGMENT SALES AND EARNINGS
INFORMATION (Unaudited) (in millions, except per
share amounts) Three Months Ended
Year Ended September 30 September 30 2015 2014
2015 2014
Sales Commercial Systems $ 636 $ 639
$ 2,434 $ 2,299 Government Systems 581 605 2,187 2,209 Information
Management Services 167 158 623
471 Total sales $ 1,384 $ 1,402
$ 5,244 $ 4,979
Segment operating
earnings Commercial Systems $ 146 $ 141 $ 554 $ 509 Government
Systems 129 137 457 465 Information Management Services 29
21 95 62 Total
segment operating earnings 304 299 1,106 1,036 Interest
expense (16 ) (16 ) (61 ) (59 ) Stock-based compensation (7 ) (7 )
(24 ) (24 ) General corporate, net (15 ) (14 ) (59 ) (59 ) Gain on
divestiture of business — — — 10 ARINC transaction costs — — — (13
) Restructuring, pension settlement and asset impairment charges,
net — (9 ) — (9 )
Income from continuing operations before income taxes 266
253 962 882 Income tax expense (82 ) (80 )
(268 ) (264 )
Income from continuing
operations 184 173 694 618 (Loss) from discontinued operations,
net of taxes (1) — (6 ) (8 ) (14
)
Net income $ 184 $ 167 $ 686 $ 604
Diluted earnings per share: Continuing
operations $ 1.38 $ 1.27 $ 5.19 $ 4.52 Discontinued operations
— (0.04 ) (0.06 ) (0.10 )
Diluted earnings per share $ 1.38 $ 1.23 $
5.13 $ 4.42
Weighted average diluted shares
outstanding 133.2 136.2 133.7 136.7
(1) On July 25, 2014, the Company sold its satellite
communications systems business formerly known as DataPath, Inc.
(DataPath), which designs, manufactures and services ground-based
satellite communication systems primarily for military customers.
In addition, on March 10, 2015, the Company sold ARINC’s Aerospace
Systems Engineering and Support business (ASES), which provides
military aircraft integration and modification services. The
results of DataPath and ASES have been classified as discontinued
operations.
The following tables summarize sales by category for the three
and twelve months ended September 30, 2015 and 2014
(unaudited, in millions):
Three Months Ended Year Ended September
30 September 30 2015 2014 2015 2014
Commercial Systems sales: Air transport aviation electronics:
Original equipment $ 209 $ 194 $ 806 $ 703 Aftermarket 133 133 522
512 Wide-body in-flight entertainment 13 16 57
70 Total air transport aviation electronics 355
343 1,385 1,285 Business and regional
aviation electronics: Original equipment 163 186 640 618
Aftermarket 118 110 409 396 Total
business and regional aviation electronics 281 296
1,049 1,014 Total Commercial Systems sales $ 636 $
639 $ 2,434 $ 2,299 Commercial Systems sales: Total original
equipment $ 372 $ 380 $ 1,446 $ 1,321 Total aftermarket 251 243 931
908 Wide-body in-flight entertainment 13 16 57
70 Total Commercial Systems sales $ 636 $ 639 $ 2,434 $
2,299 Government Systems Sales: Avionics $ 381 $ 375 $ 1,390
$ 1,342 Communication products 92 128 401 455 Surface Solutions 53
52 200 234 Navigation products 55 50 196
178 Total Government Systems Sales $ 581 $ 605 $ 2,187 $
2,209 Information Management Services sales $ 167 $ 158 $
623 $ 471 Total sales $ 1,384 $ 1,402 $ 5,244 $ 4,979
The following table summarizes total Research and Development
Investment by segment and funding type for the three and twelve
months ended September 30, 2015 and 2014 (unaudited, dollars
in millions):
Three Months Ended Year Ended September
30 September 30 2015 2014 2015 2014
Research and Development Investment Customer-funded:
Commercial Systems $ 56 $ 57 $ 187 $ 143 Government Systems 89 87
382 353 Information Management Services 2 3
9 8 Total Customer-funded
147 147 578 504
Company-funded: Commercial Systems 44 53 182 193 Government
Systems 26 21 88 74 Information Management Services (1) 1
— 2 1 Total
Company-funded 71 74 272
268
Total Research and Development Expense 218
221 850 772 Increase in Pre-production Engineering Costs,
Net 37 30 136 162
Total Research and Development Investment $ 255
$ 251 $ 986 $ 934 Percent of
Total Sales 18.4 % 17.9 % 18.8 % 18.8 %
(1) Research and development expenses for the Information
Management Services segment, including the ARINC acquisition, do
not include costs of internally developed software and other costs
associated with the expansion and construction of network-related
assets. These costs are capitalized as Property on the Summary
Balance Sheet.
ROCKWELL COLLINS, INC. SUMMARY BALANCE SHEET
(Unaudited) (in millions)
September 30
2015 2014
Assets Cash and cash equivalents $
252 $ 323 Receivables, net 1,038 1,033 Inventories, net (1) 1,824
1,709 Current deferred income tax asset 9 9 Business held for sale
— 15 Other current assets 110 115 Total current
assets 3,233 3,204 Property 964 919 Goodwill
1,904 1,863 Intangible assets 703 688 Long-term deferred income
taxes 241 101 Other assets 344 288
Total
assets $ 7,389 $ 7,063
Liabilities and equity
Short-term debt $ 448 $ 504 Accounts payable 487 535 Compensation
and benefits 273 256 Advance payments from customers 365 359
Accrued customer incentives 232 202 Product warranty costs 89 104
Current deferred income tax liability 84 57 Liabilities associated
with business held for sale — 16 Other current liabilities
166 165 Total current liabilities 2,144 2,198
Long-term debt, net 1,680 1,663 Retirement benefits 1,466 1,096
Other liabilities 219 217 Equity 1,880 1,889
Total
liabilities and equity $ 7,389 $ 7,063 (1) Inventories,
net is comprised of the following: September September 30, 2015 30,
2014
Inventories, net: Production inventory $ 812 $ 833
Pre-production engineering costs 1,012 876 Total
Inventories, net $ 1,824 $ 1,709
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.
ROCKWELL COLLINS, INC. CASH FLOW INFORMATION
(Unaudited, in millions) Year Ended
September
30
2015 2014
Operating Activities: Net income $
686 $ 604 Loss from discontinued operations, net of tax (8 )
(14 ) Income from continuing operations 694 618 Adjustments
to arrive at cash provided by operating activities: Restructuring,
asset impairment and other charges — 9 Gain on sale of business —
(10 ) Depreciation 152 141 Amortization of intangible assets and
pre-production engineering costs 100 84 Stock-based compensation
expense 24 24 Compensation and benefits paid in common stock 50 50
Excess tax benefit from stock-based compensation (13 ) (6 )
Deferred income taxes 50 113 Pension plan contributions (69 ) (75 )
Changes in assets and liabilities, excluding effects of
acquisitions and foreign currency adjustments: Receivables (46 ) 67
Production inventory (23 ) (84 ) Pre-production engineering costs
(183 ) (198 ) Accounts payable (29 ) 23 Compensation and benefits
24 (60 ) Advance payments from customers 16 (11 ) Accrued customer
incentives 30 18 Product warranty costs (14 ) (14 ) Income taxes 50
(21 ) Other assets and liabilities (64 ) (8 )
Cash
Provided by Operating Activities from Continuing Operations
749 660
Investing Activities:
Property additions (210 ) (163 ) Acquisition of businesses, net of
cash acquired (74 ) (1,405 ) Acquisition of intangible assets — (1
) Proceeds from business divestitures — 24 Other investing
activities (10 ) 8
Cash (Used for)
Investing Activities from Continuing Operations (294 )
(1,537 )
Financing Activities: Purchases of treasury
stock (330 ) (211 ) Cash dividends (167 ) (162 ) Repayment of debt
— (200 ) Increase (decrease) in short-term commercial paper
borrowings, net (56 ) 269 Increase in long-term borrowings — 1,089
Proceeds from the exercise of stock options 49 37 Excess tax
benefit from stock-based compensation 13 6 Other financing
activities (1 ) (1 )
Cash (Used for) Provided by Financing
Activities from Continuing Operations
(492 ) 827 Effect of exchange rate changes on
cash and cash equivalents (23 ) (12 )
Discontinued
Operations: Operating activities (14 ) (16 ) Investing
activities 3 10 Cash (used for)
discontinued operations (11 ) (6 )
Net Change in
Cash and Cash Equivalents (71 ) (68 )
Cash and Cash
Equivalents at Beginning of Period 323 391
Cash and Cash Equivalents at End of Period $ 252
$ 323
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version on businesswire.com: http://www.businesswire.com/news/home/20151030005079/en/
Rockwell Collins, Inc.Media Contact:Pam Tvrdy,
319-295-0591pam.tvrdy@rockwellcollins.comorInvestor Contact:Ryan
Miller, 319-295-7575investorrelations@rockwellcollins.com
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