Actionable news
0
All posts from Actionable news
Actionable news in COL: ROCKWELL COLLINS Inc,

Rockwell Collins Reports Third Quarter Fiscal 2016 Earnings

CEDAR RAPIDS, Iowa--(BUSINESS WIRE)--Rockwell Collins, Inc. (NYSE: COL) today reported third quarter fiscal year 2016 earnings per share from continuing operations increased 23% to $1.63 compared to $1.33 in the prior year. Total sales in the third quarter of fiscal year 2016 were $1.33 billion, a 3% increase from the same period in fiscal year 2015. Total segment operating margins increased 10 basis points to 21.1%.

“Lower-than-anticipated business aircraft OEM production rates and air transport aftermarket service and support sales have impacted our Commercial Systems revenue outlook”

Tweet this

"All of our business segments posted solid operating performance during the quarter, highlighted by a return to growth in Government Systems and 10% revenue growth in Information Management Services,” said Rockwell Collins Chairman, President, and Chief Executive Officer, Kelly Ortberg. “Directionally, fiscal 2016 continues to progress as we expected, and our restructuring actions announced in the first quarter are delivering the savings we anticipated. As a result, we are narrowing our financial guidance for the year."

The Company narrowed the ranges for its financial outlook for fiscal year 2016 as follows:

  • Total sales are now expected to be about $5.3 billion (from $5.3 billion to $5.4 billion).
  • Earnings per share is now expected to be in the range of $5.50 to $5.55 (from $5.45 to $5.65).
  • Cash flow from operations is now expected to be about $750 million (from $750 million to $850 million).
  • The full year income tax rate is now expected to be about 22.5% (from 22% to 23%).

"Lower-than-anticipated business aircraft OEM production rates and air transport aftermarket service and support sales have impacted our Commercial Systems revenue outlook," added Ortberg. "We now expect Commercial Systems sales to be down about 1% for the year. In addition, we now forecast our cash flow from operations at the lower end of the previously guided range due to the timing of receivable collections and higher spending for pre-production engineering costs. In spite of these market challenges, our strong operational performance has allowed us to narrow our earnings per share estimate for fiscal year 2016 within the previously guided range."

Following is a discussion of fiscal year 2016 third 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 2016 third quarter results as summarized below.

(dollars in millions) Q3 FY16 Q3 FY15 Inc/(Dec)
Commercial Systems sales
Original equipment $ 367 $ 373 (2 )%
Aftermarket 236 225 5 %
Wide-body in-flight entertainment 9 13 (31 )%
Total Commercial Systems sales $ 612 $ 611 %
Operating earnings $ 141 $ 141 %
Operating margin rate 23.0 % 23.1 % (10) bps
  • Original equipment sales decreased due to lower business aircraft OEM production rates, lower product deliveries to a Chinese regional aircraft manufacturer, and lower Airbus A330 production rates. These decreases were mostly offset by higher product deliveries in support of the Airbus A350 and Boeing 787 production ramps, favorable customer timing for airline selectable equipment, higher product deliveries for the Bombardier CSeries program, and higher customer-funded development program revenues.
  • Aftermarket sales increased due to higher simulation hardware deliveries, higher inorganic sales from the acquisition of International Communications Group, and higher flight deck retrofits, partially offset by lower spares provisioning and lower cabin retrofits.
  • Operating earnings and operating margin were about flat with the prior year as benefits from cost savings initiatives from previously announced restructuring plans were offset by unfavorable sales mix as lower margin customer-funded development sales increased and higher margin business jet OEM sales decreased.

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.

Beginning with the first quarter of fiscal year 2016, Government Systems sales categories have been consolidated as a result of an internal reorganization and are delineated based on the underlying product technologies. The previously reported sales categories of Communication products, Surface solutions and Navigation products are now primarily consolidated into Communication and Navigation. Government Systems sales for the third quarter of fiscal year 2015 has been reclassified to the current year presentation.

Results from the third quarter of 2016 are summarized below.

(dollars in millions) Q3 FY16 Q3 FY15 Inc/(Dec)
Government Systems sales
Avionics $ 376 $ 338 11 %
Communication and Navigation 179 192 (7 )%
Total Government Systems sales $ 555 $ 530 5 %
Operating earnings $ 115 $ 108 6 %
Operating margin rate 20.7 % 20.4 % 30 bps
  • Avionics sales increased due to higher fixed-wing platform revenues and higher simulation and training sales, partially offset by lower deliveries on various rotary wing platforms.
  • Communication and Navigation sales decreased due to the wind-down of an international electronic warfare program and lower international deliveries of targeting systems.
  • Operating earnings and operating margin increased due to higher sales volume and cost savings initiatives from previously announced restructuring plans, partially offset by unfavorable development program adjustments.

Information Management Services

Information Management Services (IMS) provides communication services, systems integration and security solutions across the aviation, airport, rail and nuclear security markets. Results from the third quarter of 2016 are summarized below.

  • IMS sales increased due to 9% growth in aviation related sales, including GLOBALinkSM and ARINCDirectSM. In addition, non-aviation related sales increased 11% due primarily to higher airport and rail program sales.
  • IMS operating earnings and operating margin increased due to incremental earnings on higher sales volume.

Corporate and Financial Highlights

Income Taxes
The company's effective income tax rate from continuing operations was 13.4% for the third quarter of fiscal year 2016 compared to a rate of 24.9% for the same period last year. The lower current year effective income tax rate from continuing operations was primarily due to the release of a $41 million valuation allowance related to a U.S. capital loss carryforward. This tax benefit was partially offset by favorable adjustments recorded in the prior year related to the remeasurement of certain tax positions.

Cash Flow
Cash provided by operating activities from continuing operations was $223 million for the first nine months of fiscal year 2016, compared to $341 million in the first nine months of fiscal year 2015. The decrease in cash provided by operating activities was due primarily to unfavorable net working capital changes, partially offset by lower tax payments.

During the third quarter of 2016, the company repurchased 0.7 million shares of common stock at a total cost of $67 million. The company also paid a dividend on its common stock of 33 cents per share, or $43 million, in the third quarter of 2016.

Fiscal Year 2016 Outlook

The following table is a summary of the company's updated financial guidance for continuing operations for fiscal year 2016:

--

Total sales About $5.3 billion (From $5.3 billion to $5.4 billion)

--

Total segment operating margins About 21.0%

--

Earnings per share $5.50 to $5.55 (From $5.45 to $5.65)

--

Cash flow from operations About $750 million (From $750 million to $850 million)

--

Total research & development investment About $1 billion (1)

--

Capital expenditures About $200 million

--

Full year income tax rate About 22.5% (From 22% to 23%)

(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.

Non-GAAP Financial Information
Total segment operating margin is a non-GAAP measure and is reconciled to the related GAAP measure, Income from continuing operations before income taxes, in the Segment Sales and Earnings Information schedule in this press release. Total segment operating margin is calculated as total segment operating earnings divided by total sales. The non-GAAP total segment operating margin information...


More