Rockwell’s Net Increases 27% for Fiscal 1988 : Gain Comes Despite End to B-1 Bomber Program
Rockwell International reported Wednesday that it earned $811.9 million in its fiscal year ended Sept. 30, a 27% surge, even though the lucrative B-1 bomber production program came to an end during the period.
The El Segundo-based company posted sales of $11.9 billion, down slightly from the $12.1 billion the year before, when B-1 sales were $1.8 billion higher.
“We are very pleased with the results,” said Sam Iacobellis, Rockwell executive vice president. “This year was higher than last year, even when you take out the tax adjustment.”
The tax adjustment cited by Iacobellis amounted to $197 million that the company added to profit because of tax reform, which changed accounting procedures on government contracts. The company accumulated more tax reserves than it now needs to pay its taxes.
Rockwell was able to successfully offset the decline of B-1 revenue and earnings with increased sales in all of its non-aircraft segments. Automotive operations sales were up 24% for the year; electronics, 5%, and graphics, 30%. Aerospace sales were off 22%.
Reserve Cited
Even in aircraft, however, the company said it made some small progress in filling the gap left by the B-1. Aircraft sales other than from the B-1 were $311 million, up from $63 million in fiscal 1987.
But the company posted sharply lower operating earnings in the aerospace segment, in part because of a reserve that it set aside for “potential cost problems on a weapons systems modernization program.”
Rockwell did not identify the program or the amount involved, but analysts suggested that the program was to modify C-130 cargo planes and to install guns in them to create the so-called AC-130U. They estimated that the reserve amounted to about $30 million.
Iacobellis also noted that the company closed the fiscal year with a corporate backlog of orders amounting to $13.2 billion, up 10% from the year earlier. That was despite a $500-million decline in the size of the B-1 backlog.
Rockwell Chairman Donald Beall said in a statement that the 1988 results “demonstrate the effectiveness of the strategic diversification of the company’s business and the significant progress the company has made in replacing the major contribution of the B-1B program.”
Nonetheless, analysts said the results were in line with their expectations. And Prudential-Bache Securities analyst Paul Nisbet said the firm “faces a hard fight next year to go beyond where they are now.”
