Rockwell Collins' Fiscal Year 2007 Earnings Per Share Increase 26% to $3.45 on 14% Revenue Growth to $4.42 Billion

Business Wire,  Oct 31, 2007  

Tags: earnings per share, net income, Rockwell

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CEDAR RAPIDS, Iowa -- Rockwell Collins, Inc. (NYSE:COL) today reported net income for the fiscal year ended September 30, 2007 of $585 million, an increase of $108 million, or 23% over fiscal year 2006 net income of $477 million. Earnings per share improved 26% to $3.45 compared to earnings per share of $2.73 a year ago. Earnings per share growth exceeded the growth rate in net income due to the favorable effect of the company's share repurchase program.

Fiscal year 2007 revenues increased $552 million, or 14%, to $4.42 billion compared to revenues of $3.86 billion last year. Organic revenue growth was 13%, while $60 million of incremental sales from business acquisitions, principally the Evans & Sutherland simulator visualization systems business (the E&S business) acquired in May 2006, contributed to the total revenue growth. Cash provided by operating activities for fiscal year 2007 totaled $607 million, or 104% of net income, compared to $595 million of cash provided by operating activities last year.

For the fiscal year 2007 fourth quarter, net income increased $18 million, or 13% to $156 million from $138 million last year. Earnings per share improved 14 cents, or 18% to 93 cents compared to earnings per share of 79 cents a year ago. Revenues increased $165 million, or 16%, to $1.23 billion from revenues of $1.06 billion last year.

"An excellent fourth quarter capped off another terrific year of financial performance for Rockwell Collins," said Chairman, President and Chief Executive Officer Clay Jones. "These financial results mark our fourth consecutive year of generating double-digit revenue and earnings per share growth as well as higher year-over-year levels of operating cash flow. Robust market conditions and our strengthening positions in faster growing market areas were the principal drivers for strong Government and Commercial Systems revenue growth in 2007. In addition, our efficient operating structure enabled both businesses to expand segment operating margins, with Commercial Systems' segment operating margin expanding by nearly 200 basis points. This was achieved while also significantly increasing our rate of investment on research and development initiatives aimed at fueling future revenue growth," added Jones noting that 2007 research and development expenditures increased by 15% over 2006 levels.

Following is a discussion of fiscal year 2007 fourth quarter sales and earnings for each business segment.

Government Systems

Government Systems, which provides defense communications and defense electronics systems, products and services, including subsystems, displays, navigation equipment and simulation systems, to the U.S. Department of Defense, other government agencies, civil agencies, defense contractors and foreign ministries of defense, achieved fourth quarter sales of $621 million, an increase of $63 million, or 11%, compared to the $558 million reported for the same period last year. Government Systems' organic revenues increased $58 million, or 10%.

Sales of defense electronics systems and products increased $43 million, or 11%, to $421 million primarily driven by higher rotary and fixed wing electronic systems program and simulation and training systems program revenues. Defense communications sales increased $20 million, or 11%, to $200 million principally due to higher Joint Tactical Radio System (JTRS) program revenues as well as higher ARC-210 radio hardware and development program revenues.

Government Systems' fourth quarter operating earnings totaled $121 million, resulting in an operating margin of 19.5%, compared to operating earnings of $110 million, or an operating margin of 19.7%, for the same period last year. Operating earnings were higher as the positive impact of the higher sales, productivity improvements, and lower retirement benefit costs were partially offset by higher employee incentive compensation costs.

Commercial Systems

Commercial Systems, which provides aviation electronics systems, products and services to original equipment manufacturers (OEMs) of commercial air transport, regional and business aircraft, commercial airlines, fractional and other business aircraft operators worldwide, achieved fourth quarter sales of $605 million, an increase of $102 million, or 20%, compared to sales of $503 million reported for the same period last year.

Sales to airlines and aircraft OEMs related to new aircraft production increased $61 million, or 24%, to $314 million. Higher air transport and business aircraft avionics sales as well as higher air transport aircraft in-flight entertainment (IFE) systems sales more than offset slightly lower business aircraft cabin systems revenues. Commercial Systems' aftermarket revenues increased $41 million, or 16%, to $291 million driven by higher avionics service and support and IFE system retrofit revenues as well as revenues related to avionics equipment for Boeing 787 simulators.

Commercial Systems' fourth quarter operating earnings increased $24 million to $130 million, generating an operating margin of 21.5%, compared to operating earnings of $106 million, or an operating margin of 21.1%, for the same period a year ago. The increase in operating earnings and operating margin was primarily due to the positive impact of the higher sales, lower retirement benefit costs and productivity improvements. The positive impact of these items was partially offset by higher company funded research and development expenditures, due in part to the timing of certain subcontract engineering activities, as well as higher employee incentive compensation costs and a higher proportion of lower margin IFE systems revenues.