Rockwell Collins’ second quarter sales increase 7%

CEDAR RAPIDS, Iowa (April 21, 2011) – Rockwell Collins, Inc. (NYSE: COL) today reported a sales increase of $81 million, or 7%, to $1.223 billion for its second quarter ended March 31, 2011 compared to sales of $1.142 billion for the same period a year ago. Total segment operating earnings increased 11% to $242 million, or 19.8% of sales, for the second quarter of 2011 compared to $219 million, or 19.2% of sales, for the second quarter of 2010.

The company reported second quarter 2011 net income of $150 million, an increase of $2 million, or 1%, from fiscal year 2010 second quarter net income of $148 million. Earnings per share for the quarter was $0.96, an increase of $0.03, or 3%, from earnings per share of $0.93 for the same period in 2010. Excluding a $15 million, or 9 cents per share, net benefit of certain prior year tax-related matters discussed in greater detail below, net income increased by 13% and earnings per share increased by 14%.

”As expected, we were able to deliver solid growth across both our businesses with Commercial Systems leading the way,” said Rockwell Collins Chairman, President and Chief Executive Officer Clay Jones. “Indicative of our operating leverage, Commercial Systems delivered operating earnings growth at almost three times the rate of sales while Government Systems demonstrated it could maintain an exceptionally high rate of profitability despite slower, albeit positive, growth.”

Jones went on to state, “Once again our balanced business model proved its resilience and ability to achieve strong performance in transitional markets. Halfway through our fiscal year, we see continued improving market conditions and sufficient reductions in areas of risk that we are again raising earnings guidance expectations.”

Following is a discussion of fiscal year 2011 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 2011 second quarter sales of $507 million, an increase of $58 million, or 13%, compared to sales of $449 million reported for the same period last year.

Sales related to aircraft original equipment manufacturers increased $37 million, or 16%, to $270 million driven by higher product deliveries for the Boeing 737 and 787, Bombardier Global and Cessna CJ-4 platforms as well as increased deliveries of single-aisle in-flight entertainment products. Aftermarket sales increased $27 million, or 15%, to $208 million primarily driven by a 25% increase in retrofit and spares and a 9% increase in service and support sales. Sales related to wide-body in-flight entertainment products and services decreased $6 million to $29 million.

Commercial Systems second quarter operating earnings increased 33% to $92 million, resulting in an operating margin of 18.1%, compared to operating earnings of $69 million, or an operating margin of 15.4%, for the same period a year ago. The increase in operating earnings and margin was primarily attributable to higher sales volume partially offset by an increase in selling, general and administrative expense, employee incentive compensation and company funded research and development costs.

Corporate and Financial Highlights

General corporate expenses that are not allocated to the company’s business segments were $12 million, $1 million lower than last year. The company’s effective income tax rate of 31.5% for the second quarter of 2011 was higher than the rate of 24.5% for the prior year. The lower rate for the second quarter of 2010 was primarily due to favorable adjustments resulting from the completion of an IRS examination partially offset by the difference in availability of the Federal R&D Tax Credit. The net benefit of these tax-related matters to net income and earnings per share for the second quarter of 2010 was $15 million and 9 cents, respectively.

Cash provided by operating activities for the first six months of 2011 totaled $127 million compared to $280 million reported in the same period last year. The decrease in operating cash flow resulted primarily from higher payments for pre-production engineering effort, employee incentive compensation and inventory purchases for anticipated production volume.

During the second quarter of 2011 the company repurchased 1.0 million shares of its common stock at a total cost of $65 million, leaving $117 million available for authorized share repurchases. The company also paid dividends totaling $38 million, or 24 cents per share, on its common stock.

Fiscal Year 2011 Outlook

The company is making the following adjustment to its full fiscal year 2011 guidance:

Earnings per share are projected to be in the range of $3.90 to $4.10 (previously in the range of $3.85 to $4.05).

The following table is a complete summary of the company’s fiscal year 2011 financial guidance:

Total sales $4.8 Bil. to $5.0 Bil.
Total segment operating margins 19.5% to 20.5%
Earnings per share $3.90 to $4.10
Cash flow from operations $650 Mil. to $750 Mil.
Research & development costs $900 Mil. to $950 Mil.
Capital expenditures about $150 Mil.