Rockwell Collins Reports Second Quarter Fiscal Year 2008 Earnings Per Share of $1.03 on Sales of $1.186 Billion; Fiscal Year 2008 Earnings Per Share Guidance Range Increased to $3.95 to $4.05

Business Wire, April 24, 2008

CEDAR RAPIDS, Iowa -- Rockwell Collins, Inc. (NYSE: COL) today reported net income of $168 million for the second quarter of fiscal year 2008 ended March 31, 2008, an increase of $28 million, or 20% over fiscal year 2007 second quarter net income of $140 million. Earnings per share improved 21 cents, or 26%, to $1.03 compared to earnings per share of 82 cents last year. Earnings per share growth exceeded the growth rate in net income by 6 percentage points, principally due to the favorable effect of the company's share repurchase program.

Second quarter fiscal year 2008 sales increased $103 million, or 10%, to $1.186 billion compared to year ago second quarter sales of $1.083 billion. Cash provided by operating activities of $130 million for the first six months of fiscal year 2008 was lower than the $186 million reported for the same period last year as the impact of higher net income was more than offset by an increase in working capital utilization.

"These results clearly demonstrate the level of performance we can achieve through the unique combination of our balanced exposure to government and commercial markets, the diversity of our customer base within each market, and the successful operation of our efficient shared service business model," said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. "Despite higher research and development investments and a decline in Commercial Systems' aftermarket revenues, we achieved double-digit growth in total company revenues as well as higher year-over-year segment operating margins in both our Commercial and Government Systems businesses."

"This excellent operational performance was further enhanced by taking advantage of our strong balance sheet capacity and repurchasing an additional 3 million shares of common stock during the quarter," said Jones, noting that over the past 12 months, the company has repurchased 9 million shares and reduced its total outstanding share count by 4%.

Commenting on the company's assessment of current Aerospace and Defense market conditions and the company's updated financial projections for the 2008 fiscal year, Jones concluded, "Although we expect a weaker U.S. economic environment in 2008, market conditions for our Commercial and Government Systems businesses continue to be solid. Accordingly, we remain on track toward meeting our full year revenue projections. In addition, and due in part to higher profitability expectations in Government Systems, we raised our full year earnings per share forecast for a second consecutive quarter."

As anticipated, the company's second quarter fiscal year 2008 net income and earnings per share include the impact of a net 7 cent earnings per share benefit resulting from the favorable settlement of certain tax matters, partially offset by lower research and development tax credits due to the expiration of federal research and development tax credit legislation on December 31, 2007.

Following is a discussion of fiscal year 2008 second 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 second quarter sales of $610 million, an increase of $68 million, or 13%, compared to sales of $542 million reported for the same period last year.

Sales to airlines and aircraft original equipment manufacturers (OEMs) increased $79 million, or 29%, to $351 million. Market share gains and increased demand for new air transport, business and regional aircraft led to higher avionics sales across all three market areas, with particularly strong growth in sales to business and regional aircraft OEMs. In-flight entertainment system sales were also higher. Commercial Systems aftermarket revenues declined $11 million, or 4%, to $259 million. Higher revenues from service and support activities and sales of equipment for Boeing 787 simulators were more than offset by the anticipated impact of lower in-flight entertainment and business aircraft retrofit and spares revenues as well as lower regulatory mandate program revenues.

Commercial Systems' second quarter operating earnings increased $18 million, or 15%, to $140 million, delivering an operating margin of 23.0%, compared to operating earnings of $122 million and an operating margin of 22.5% for the same period a year ago. The increase in operating earnings and operating margins was primarily due to the combination of higher revenues, productivity improvements, and higher royalty income, partially offset by higher research and development costs and the absence of a favorable contract option exercise adjustment recognized in last year's second quarter.

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 second quarter sales of $576 million, an increase of $35 million, or 6%, compared to sales of $541 million reported for the same period last year. Incremental sales from the August 2007 acquisition of Information Technology & Applications Corporation (ITAC) contributed $4 million, or 1 percentage point of the Government Systems revenue growth.