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.
Rockwell Collins has some 20 plants in the US, as well as plants in France, Germany, Mexico, and the UK. The company operates engineering facilities, sales offices, warehouses, and service outlets in about 20 countries.
The government systems segment provides products for a variety of uses but they all have the common theme of design for use under rugged conditions constrained by challenges in relation to size, weight, and power. These products include satellite communications systems, handheld navigation devices, flight controls, helmet-mounted displays, and training systems.
The company's commercial systems segment provides systems and products for the original manufacturing, retrofitting, and upgrading of aircraft. Products include the Pro Line Fusion integrated avionics system, cabin management systems, head-up guidance systems, primary actuation systems, and simulators for crew training. The segment serves a range of customers, from the biggest aircraft makers in the world to owners of individual aircraft. Aftermarket products are sold through distributors and to regional airline operators.
Both segments use an internal sales force to market products worldwide. The US government accounts for 43% of sales. Though these segments serve a diverse base of customers with a varied portfolio of products, the company uses a shared services operating platform that consolidates resources to develop products in both of its segments.
Year-over-year 2011 sales increased 4% thanks mainly to a surge in sales for commercial systems, which was enough to compensate for a decline in sales for government systems. Net income was up 13%. The company as a whole enjoyed an operating cash flow of $657 million from sales of more than $4.8 billion.
Government systems' year-over-year sales decreased 2%. Sales for the segment's avionics business went up 3% thanks to healthy sales of the E-6 special mission aircraft program, the KC-46A Tanker program, and rotary wing avionics. Communications products sales fell 7% due to less demand for satellite communication products as the US government delayed funding and an upgrade program was completed. Struggling with lower demand for iForce public safety vehicle systems and soldier system optronics products, surface solutions went down 8%. Navigation products slipped 3% amid lower demand for GPS-based products. The segment accounts for 59% of sales.
Year-over-year 2011 sales rose 13% for commercial systems. Air transport aviation electronics sales soared 9% thanks in part to strong demand from Boeing for the 787 and 747-8 aircraft. Business and regional aviation electronics surged 17%, supported by sales to Bombardier and Cessna.
The company is leveraging its research, development, engineering, and product design expertise. Its investment in R&D was more than 18% of sales in 2011. R&D is expected again to be about 18% of sales in 2012.
Joint ventures are an important element of the company's strategy for growth. It maintains 50-50 JVs with BAE Systems for Data Link Solutions (serving the worldwide data link market); Elbit Systems for Vision Systems International (helmet-mounted cueing systems for the military fixed-wing market); Honeywell International for Integrated Guidance Systems (weapons guidance and navigation products); Quadrant Group for Quest Flight Training (aircrew training for the UK Ministry of Defense).
The company anticipates a slight decline for its government systems segment but is more optimistic about commercial systems in 2012, when a year-over-year increase of 2% to 4% is expected. Compensating for the decline in sales for government systems that is attributable to cuts in the US defense budget, Rockwell Collins has initiated cost-savings measures and a restructuring plan that matches resources more optimally for the new defense landscape.
One advantage and risk of the company's standard operating procedure is the fixed-price contract, which accounts for about 90% of sales. This practice creates costs savings, but it can also bring cost overruns if initial cost estimates prove to be wrong.