Rockwell Collins earnings guidance suggests more cuts ahead

Earnings guidance for 2013 released by Rockwell Collins Friday suggests more cutbacks are in store at the aerospace electronics company to bring expenses in line with lower revenue anticipations.

The Cedar Rapids-based avionics company  said it expects revenues to decline into the $4.6 billion to $4.7 billion range for the fiscal year beginning Oct. 1, down from recent earnings guidance of $4.85 billion for the current fiscal year.

Revenues from the company's Commercial Systems division are expected to rise 7 percent in fiscal 2013, while revenues from its Government Systems Division are expected to fall 10 percent.

Rockwell Collins Chief Executive Officer Clay Jones said the company will take "swift and appropriate action" to adjust the company's infrastructure to respond to conditions.

The company's sixth round of employment reductions in the last fiscal year, announced in late August, affected about 80 employees in Cedar Rapids.

A restructuring charge will be taken in the quarter just ended to reflect related expenses. The impairment charge could be up to 30 cents per share, Jones said, with about two-thirds of the charge relating to employment reductions and facility changes to reduce costs.

The balance will come mainly from the write-off of impaired accounts receivable, Jones said, including revenues lost to the Hawker Beechcraft bankruptcy.

Rockwell Collins forecast earnings per share will fall in a range of $4.30 to $4.50 per share. That compares to recent estimates of $4.40 to $4.60 for the current fiscal year.

Jones said about half the decline in Government Systems revenue will result from Congress' use of sequestration cuts to balance the budget in its Budget Control Act. The sequestration approach, reflecting Congressional indecision about cutting priorities beginning in January 2013, spreads cuts evenly across federal programs.

The remainder of the revenue decline is projected to result as the development phase of defense programs Rockwell Collins was engaged in concludes, and the programs will not be ready to begin full-scale production until after fiscal 2013.

Rockwell Collins expects higher deliveries of Joint Tactical Radio System Manpack Radios, Firestorm targeting system and flying tankers to be mostly offset by lower deliveries of Defense Advanced GPS Receivers and satellite communication terminals. Revenue also will be negatively affected by the delay in the next phase of the Eurofighter program and the lingering impact of programs and product lines terminated in 2012, Jones said.

Rockwell Collins shares were up 1.6 percent at 11 a.m. Friday, at $56.25, possibly indicating that lowered earnings were already priced into the stock.

Beyond 2013, Jones said Rockwell Collins sees improved revenues from defense programs going from development into product and a strong backlog of air transport jetliners, in addition to the launch of new jetliners and business aircraft.