Rockwell Collins, a spinoff of Rockwell Automation, makes aviation electronics and communication equipment for commercial and military aircraft. The company boasts that nearly every commercial cockpit contains something made by Rockwell Collins. It also provides flight simulation and training, MRO services, navigation, and surveillance systems. The company has two primary segments: Commercial Systems (avionics and in-flight entertainment systems for commercial aircraft) and Government Systems (airborne/ground/shipboard communication systems with military applications and overhaul services). Serving more than two dozen countries, Rockwell Collins makes about 70% of its sales in the US.
Although concentrated geographically, the company manages to exploit a dual presence in the commercial and government markets coupled with a diversified product portfolio which appeals to both the defense and aviation industries. Earnings slid for a second year in 2010, hampered by pension and employee incentive costs coupled with a slump in Commercial Systems' business. Nonetheless, revenues increased modestly over the previous year, driven by a more than 10% improvement in Government Systems' sales and incremental sales from prior acquisitions. Rockwell Collins achieved a whopping $711 million in operating cash flow (a new record for the company), positioning it to consider several business opportunities.
The company purchased Computing Technologies for Aviation (CTA) in early 2011. CTA, which provides flight operations management for corporate and other aviation customers, bolsters the Commercial Systems' flight information offerings. Hard on its heels, Rockwell Collins acquired Blue Ridge Simulation. Blue Ridge Simulation specializes in advanced sensor simulation for US defense agencies, and commercial and international training exercises. The lineup, which runs from weather radar simulators to complex simulators for surveillance and fire control, adds a sensor simulation capability to Rockwell Collins' slate of training services.
During 2010, 2009, and 2008, Rockwell Collins made four acquisitions that helped preserve its technological leadership. In 2010, the company purchased Houston-based AR (Air Routing) Group and its related companies. A business aircraft trip support-company, Air Routing offers Rockwell Collins' customers a single hub for weather information, flight planning services, and fuel preparations; it also enhances the company's aftermarket services. Mid-2009, Rockwell Collins ramped up its networked communications offerings by acquiring DataPath. The $130 million deal garnered experience in developing satellite-based communications systems for military and commercial customers. SEOS, a display system designer for commercial/military simulators, was picked up late 2008 to augment the flight training segment. Earlier in the year, Rockwell Collins expanded its unmanned aerial vehicles (UAVs) lineup by purchasing Athena Technologies, a provider of flight control and navigation systems for UAVs, for $107 million.
In the meantime, the recession's impact on US defense spending and, more so, the commercial aviation market has forced Rockwell Collins to streamline operations. Its hard choices have included freezing salaries, canceling bonuses, trimming its workforce, and closing a San Jose, California facility. However, beyond the US the company is pursuing alliances that further its reach into regions enjoying a faster economic recovery. International demand accounted for about 30% of sales in 2010.
The company is simultaneously leveraging its research, development, engineering, and product design expertise. Its investment in R&D was more than 18% of sales in 2010. Rockwell Collins is well-established in four high-growth sectors: transformational defense communications (real-time interoperable communications systems and components), information management (airline business and entertainment systems), open system architecture, and service and support (Rockwell products and logistics support). As such, Government Systems, which represents approximately 60% of sales, has managed to capitalize on a number of military projects: the Joint Strike Fighter (Lightning II), the Joint Tactical Radio System, the UK Bowman communications program, and others. Commercially, the company supplies equipment and systems primarily for the Boeing 787 Dreamliner and the Airbus A350XWB.