CEDAR RAPIDS, Iowa (April 21, 2017)
Acquisition of B/E Aerospace closes; new Interior Systems segment created
Sales and free cash flow guidance raised
- Rockwell Collins, Inc. (NYSE: COL) today reported sales for the second quarter of fiscal year 2017 of $1.34 billion, a 2% increase from the same period in fiscal year 2016. Second quarter fiscal year 2017 earnings per share from continuing operations was $1.27 compared to $1.30 in the prior year. Earnings per share for the second quarter of fiscal year 2017 includes 7 cents of B/E Aerospace acquisition-related expenses. Total segment operating margins were 21.0% for the second quarter of fiscal year 2017, a 30 basis point improvement over the same period in fiscal year 2016.
On April 13, 2017 the company completed the acquisition of B/E Aerospace, a leading manufacturer of aircraft cabin interior products and services, for $8.6 billion in total consideration. B/E Aerospace will operate as a new Interior Systems segment within Rockwell Collins. The company's updated full year fiscal 2017 financial guidance adjusted to include the acquisition of B/E Aerospace is as follows:
Sales are now expected to be in the range of $6.7 billion to $6.8 billion (from $5.3 billion to $5.4 billion). Interior Systems (formerly B/E Aerospace) sales are estimated to be about $1.4 billion.
GAAP earnings per share are expected to be in the range of $4.50 to $4.70. Earnings per share adjusted for B/E Aerospace acquisition-related expenses and total combined company acquisition-related intangible asset amortization is expected to be in the range of $5.95 to $6.15 (see the supplemental schedule included in this press release for a reconciliation of adjusted earnings per share).
Free cash flow is now expected to be in the range of $650 million to $750 million (from $600 million to $700 million).
'The operating performance of our business through the first half of 2017 has been very good,' said Rockwell Collins Chairman, President, and Chief Executive Officer, Kelly Ortberg. 'In the quarter, growth in our Government Systems, Information Management Services, and Air Transport businesses were partially offset by sales headwinds from lower business jet OEM deliveries. Operating margins grew 30 basis points over last year as we continued to realize the benefit of cost saving initiatives across all of our businesses.'
Ortberg continued, 'It's an exciting time as we welcome B/E Aerospace's talented employees to Rockwell Collins and bring these two industry leaders together. We have updated our fiscal year 2017 financial guidance to include our new Interior Systems segment, which will be accretive to adjusted earnings per share right out of the gate in fiscal year 2017. We are now focused on integrating the business and achieving our synergy plans.'
Following is a discussion of fiscal year 2017 second quarter sales and earnings for each business segment.
Commercial Systems, which provides aviation electronics systems, products and services to air transport, business and regional aircraft manufacturers and airlines worldwide, achieved 2017 second quarter results as summarized below.
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 second quarter of 2017 are summarized below.
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 second quarter of 2017 are summarized below.
Corporate and Financial Highlights
The company's effective income tax rate from continuing operations was 27.9% for the second quarter of fiscal year 2017 compared to a rate of 26.8% for the same period last year. The higher current year effective income tax rate from continuing operations was primarily due to the adoption of new share-based compensation accounting guidance, which resulted in a retroactive benefit to income tax expense in the prior year.
Cash provided by operating activities from continuing operations was $1 million for the first six months of fiscal year 2017, compared to $45 million in the first six months of fiscal year 2016. The decrease in cash provided by operating activities was due primarily to higher income tax payments and B/E Aerospace acquisition-related expenses, partially offset by higher cash collections from customers.
The Company paid a dividend on its common stock of 33 cents per share, or $86 million, in the second quarter of 2017.
Fiscal Year 2017 Outlook
The following table is a summary of the company's financial guidance for continuing operations for fiscal year 2017, which has been updated to include the impact of the B/E Aerospace acquisition completed on April 13, 2017. This guidance is based on a preliminary purchase accounting allocation and is subject to potential adjustments that could be material to the guidance presented below. In addition, this guidance is based on the weighted average common shares for fiscal year 2017, which includes the issuance of 31.2 million shares of Rockwell Collins' common stock on April 13, 2017 in connection with the acquisition of B/E Aerospace. Due to the timing of the share issuance, the earnings per share impact of the acquisition of B/E Aerospace will be different in our annual results compared to our quarterly results.
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 included in this disclosure is believed to be useful to investors' understanding by excluding certain expenses we believe are not relevant to investors' assessment of our operating results.
See also the supplemental schedule included in this press release for a reconciliation of other non-GAAP measures including free cash flow and adjusted earnings per share.
Conference Call and Webcast Details
Rockwell Collins Chairman, President and CEO, Kelly Ortberg, and Senior Vice President and CFO, Patrick Allen, will conduct an earnings conference call at 9:00 a.m. Eastern Time on April 21, 2017. 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
Rockwell Collins named as a 2017 World's Most Ethical Company by the Ethisphere Institute for eighth straight year
Rockwell Collins was recognized by the Ethisphere Institute, a global leader in defining and advancing the standards of ethical business practices, as a 2017 World's Most Ethical Company®.
U.S. Navy selected Rockwell Collins and Leonardo DRS to field its Tactical Combat Training System Increment II solution
The U.S. Navy selected Rockwell Collins and Leonardo DRS to supply their encrypted, next-generation tactical training system. Initial award of $142 million to benefit U.S. Navy and Marine Corps pilots for advanced fixed and deployable air combat training.
Rockwell Collins selected for Pakistan Air Force C-130 upgrade
Rockwell Collins' Flight2™ avionics system was selected by the Pakistan Air Force through the Foreign Military Sales Office, Warner Robins, Georgia, for the upgrade of up to 11 C-130E and 5 C-130B aircraft.
Rockwell Collins will provide the DOD a cross-platform datalink capability for mobile devices
Rockwell Collins was awarded a Digitally Aided Close Air Support agreement from Defense Innovation Unit Experimental (DIUx). DIUx increases the Department of Defense's access to the leading-edge technologies and talent that reside in the commercial sector, with the ultimate goal of accelerating innovation into the hands of men and women in uniform.
Rockwell Collins selected by Thales to upgrade Hawkei Protected Mobility Vehicle-Light system
Rockwell Collins will serve as a subcontractor to Thales Australia to integrate the Digital Terminal Control System into the Integral Computing System of the Hawkei Protected Mobility Vehicle-Light system.
Asiana Airlines and Air Busan selected Rockwell Collins flight tracking service
Korea-based Asiana Airlines and its subsidiary Air Busan selected Rockwell Collins' ARINC MultiLink aircraft tracking service for their respective fleets, joining a number of other airlines around the world.
Rockwell Collins expanded global aircraft observation weather program through new agreement with LATAM Airlines
Rockwell Collins expanded its successful operational aircraft weather observations program to include weather data from LATAM Airlines' fleet of aircraft. The agreement is the latest as part of a Rockwell Collins/National Oceanic and Atmospheric Administration program to improve the accuracy of forecasts for the aviation industry and the general public.
About Rockwell Collins
Rockwell Collins (NYSE: COL) is a leader in aviation and high-integrity solutions for commercial and military customers around the world. Every day we help pilots safely and reliably navigate to the far corners of the earth; keep warfighters aware and informed in battle; deliver millions of messages for airlines and airports; and help passengers stay connected and comfortable throughout their journey. As experts in flight deck avionics, cabin electronics, cabin interiors, information management, mission communications, and simulation and training, we offer a comprehensive portfolio of products and services that can transform our customers' futures. To find out more, please visit www.rockwellcollins.com
Safe Harbor Statement
This press release contains statements, including statements regarding certain projections, business trends, and the impact of the acquisition of B/E Aerospace 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; 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; 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; the uncertainties of the outcome of lawsuits, claims and legal proceedings; uncertainty of the expected financial performance of the combined company following completion of the acquisition of B/E Aerospace; failure to realize the anticipated benefits of the acquisition of B/E Aerospace, including as a result of delay in integrating the businesses of Rockwell Collins and B/E Aerospace; risk to the ability of the combined company to implement its business strategy; 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.