Rockwell Collins reports increase in commercial sales, decrease in government system sales

Fiscal year's effect not as severe as the company budgeted, CEO Clay Jones says

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Rockwell Collins on Friday reported an increase in commercial sales and a decrease in government system sales during its fiscal third quarter - pretty much as expected, said CEO and Chairman Clay Jones.

The Cedar Rapids-based avionics and communications supplier posted a net income of $164 million, or $1.20 a share, for the three months that ended June 30, compared with $166 million, or $1.14 a share, in the third quarter of fiscal year 2012.

Sales overall fell 3 percent, to $1.17 billion. Commercial sales increased 7 percent, while government system sales fell 11 percent.

The commercial sales figured included $14 million in original-equipment-manufacturer market due to increased deliveries for Bombardier Global and Challenger as well as Beechcraft King Air. The increase was partially offset by fewer deliveries for Cessna business jets.

Rockwell also reported $27 million in aftermarket increase because of higher spare sales and increased retrofits for airspace mandates.

"That's been the trend that we've seen over the last two years," Jones said in a phone interview. "Certainly the direction was anticipated. A little variance in the magnitude, but I think generally aligns with where we've seen those businesses going for some time now."

Asked whether sequestration the federal government's forced spending cuts has played out the way Jones thought it would go, he answered "yes and no."

"Back in September of last year, we were the first and only defense company that suggested that it was going to happen when the rest of world thought it was certainly never going to go into play," Jones said. "But because we had to plan our budgets for our fiscal year which lines up with the government fiscal year and ends here in September, we included an effect of sequestration and so the fact that it happened, that we were prepared for it and that it had a fairly significant impact on our government business, happened pretty much as we thought it would."

Jones said the effect this fiscal year was not quite as severe as the company budgeted. Rockwell Collins budgeted for $120 million of negative effect, Jones said, and the current estimate is about $70 million of reductions as a result of sequestration.

The company had planned for sequestration to go into effect in January, but it was delayed by Congress until March, Jones noted. While the magnitude changed, the direction is something the company expected, he said.

Jones will retire as CEO at the end of the month but will stay on as non-executive chairman. He will be succeeded by Kelly Ortberg, Rockwell Collins president.

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