Rockwell Collins (COL)

Rockwell Collins (NYSE:COL) | Products & Business Units

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Rockwell Collins is a leader in the design, production and support of communications and aviation electronics for commercial and military customers worldwide. While the company's products and systems are primarily focused on aviation applications, Rockwell Collins' Government Systems business also offers products and systems for ground and shipboard applications. The integrated system solutions and products the company provides are oriented around a set of core competencies, including communications, navigation, automated flight control, displays/surveillance, simulation and training, integrated electronics and information management systems. Rockwell Collins also provides a wide range of services and support to its customers through a worldwide network of service centers, including equipment repair and overhaul, service parts, field service engineering, training, technical information services and aftermarket used equipment sales.

Rockwell Collins operates in multiple countries and is headquartered in Cedar Rapids, Iowa. The company's heritage is rooted in the Collins Radio Company, established in 1933. Rockwell Collins, Inc., the parent company, is incorporated in Delaware. Rockwell Collins' corporate offices are located in Cedar Rapids, Iowa.

On August 11, 2013, Rockwell Collins announced it had reached a definitive agreement to acquire ARINC Incorporated, a leading global provider of air-to-ground data and voice communication services. ARINC develops and operates communications and information processing systems and provides systems engineering and integration solutions to five key industries: commercial aviation, business aviation, airports, rail and nuclear security. Combining ARINC's communication networks and services with Rockwell Collins's onboard aircraft information systems strengthens the company's ability to deliver enhanced connectivity to aircraft operators worldwide. On December 23, 2013, the $1,405 million deal (net of cash acquired) closed when Rockwell Collins acquired 100% of the outstanding common stock and voting interests of Radio Holdings, Inc., the holding company of ARINC.

Rockwell Collins serves a worldwide customer base through its two principal business segments:


Government Systems
Commercial Systems
Information Management Services



The following table highlights Rockwell Collins' sales from 2012 to 2014 by segment:
Rockwell Collins' Segment Sales

Rockwell Collins' two segments are described in detail below.


Government Systems

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Rockwell Collins' Government Systems business provides a broad range of electronic products, systems and services to customers including the U.S. Department of Defense, other ministries of defense, other government agencies and defense contractors around the world. The company's defense electronic solutions are designed to meet a wide range of customer requirements, but tend to share certain characteristics including design for rugged environments for use in size, weight and power constrained applications. These applications also typically have stringent product integrity and certification requirements with a high degree of customer oversight. These products, systems and services support airborne, precision weapon, ground and maritime applications on new equipment as well as in retrofit and upgrade applications designed to extend the service life and enhance the capability of existing aircraft, vehicle and weapon platforms.

The company's defense-related systems, products and services include:



• communications systems and products designed to enable the transmission of information across the communications spectrum, including satellite communications;

• navigation products and systems, including radio navigation products, global positioning system (GPS) equipment, handheld navigation devices and multi-mode receivers;

• avionics sub-systems for aircraft flight decks that combine flight operations with navigation and guidance functions that can include flight controls and displays, information/data processing and communications, navigation, safety and surveillance systems;

• precision targeting and range and training systems;

• cockpit display products, including multipurpose flat panel head-down displays, wide field of view head-up and helmet-mounted displays;

• simulation and training systems, including visual system products, training systems and services;

• maintenance, repair, parts, after-sales support services and aftermarket used equipment.



Government Systems sales are categorized into avionics, communication products, surface solutions and navigation products. Product category sales are delineated based upon the difference in the underlying product technologies.

Avionics consists of electronic solutions for a broad range of airborne platforms including fixed and rotary wing aircraft, unmanned aerial systems (UASs) and the associated aircrew and maintenance training devices and services. Rockwell Collins provides complete avionics solutions, including cockpit avionics, mission system applications and system integration, and also provides individual avionics products to platform integrators. The company serves various roles within these markets including system and sub-systems integrator as well as provider of various electronic products. For the UAS market, Rockwell Collins provides cost effective, high performance integrated flight control, navigation, communication and sensor capabilities. Simulation and training solutions are provided for both fixed and rotary wing aircraft.

Communication products include full spectrum voice and data connectivity for government and military use in the air, on the ground and at sea. The products support military user requirements for high availability, highly secure, jam resistant wireless communication capability. Products include radio communication, data links and networking devices.

Surface solutions include electronic systems applied to a variety of market segments. This includes products and solutions for ground forces, maritime applications, precision targeting systems, range and training systems, and surface-based communication network integration programs.

Navigation products are primarily comprised of GPS-based products delivered for precision navigation applications including handheld navigation devices (e.g. DAGR), precision-guided weapons (e.g. JDAM) and other embedded GPS applications.

     Financial results for Rockwell Collins' Government Systems segment were as follows:
Performance of Rockwell Collins' principal lines of business

Avionics sales decreased $42 million (-3%) primarily due to a $69 million decrease from lower development revenues on the KC-46, KC-10, and E-2 programs. This was partially offset by $27 million in other net increases to revenue, including higher deliveries for the Joint Helmet Mounted Cueing System program and F-15 aircraft.

Communication products sales increased $5 million (+1%) as a $32 million benefit from higher deliveries of Joint Tactical Radio System Manpack radios was largely offset by the combined impact of a reduction in international Talon and software defined radios.

Surface solutions sales increased $2 million (+1%) as higher targeting system revenues were mostly offset by a reduction in development effort on the Common Range Integrated Instrumentation Systems program.

Navigation products sales decreased $15 million (-8%), primarily due to fewer deliveries of GPS-related products and a reduction in development revenues from a GPS modernization program.

2014 Outlook: Rockwell Collins expects Government Systems revenues to be about flat from 2014 to 2015, as mid-single digit growth in the international defense business is expected to be offset by a slight decline in U.S. defense sales. Increases in tanker/transport retrofit programs, rotary wing programs and data link program sales are expected to be offset by lower deliveries of Joint Tactical Radio System Manpack radios.

Rockwell Collins projects Government Systems 2015 segment operating margins to be about 21%.


Commercial Systems

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Rockwell Collins' Commercial Systems business supplies aviation electronics systems, products and services to customers located throughout the world. The customer base is comprised of original equipment manufacturers (OEMs) of commercial air transport, business and regional aircraft, commercial airlines and business aircraft operators. The company's systems and products are used in both OEM applications as well as in retrofit and upgrade applications designed to increase the efficiency and enhance the value of existing aircraft.

The company's commercial aviation electronics systems, products and services include:



• integrated avionics systems, such as Pro Line Fusion® that provide advanced avionics capabilities to meet the challenges of operating in the next generation global airspace. Capabilities include synthetic and enhanced vision enabled flight displays, advanced flight and performance management systems, fly-by-wire integrated flight controls and information management solutions to improve operational efficiency;

• integrated cabin electronics systems, including cabin management systems, passenger connectivity and entertainment solutions, business support systems to improve passenger productivity and passenger flight information systems;

• communications systems and products, such as data link, high frequency (HF), very high frequency (VHF) and satellite communications systems;

• navigation systems and products, including landing sensors to enable fully automatic landings, radio navigation and geophysical sensors, as well as flight management systems;

• situational awareness and surveillance systems and products, such as synthetic and enhanced vision systems, surface surveillance and guidance solutions, head-up guidance systems, weather radar and collision avoidance systems;

• electro-mechanical systems, including integrated pilot control solutions and primary and secondary actuation systems;

• simulation and training systems, including full-flight simulators for crew training, visual system products, training systems and engineering services;

• maintenance, repair, parts, after-sales support services and aftermarket used equipment.



Commercial Systems sales are categorized into air transport aviation electronics and business and regional aviation electronics. Product category sales are delineated based upon the difference in the underlying customer base, size of aircraft and markets served.

Air transport aviation electronics include avionics, cabin systems and flight control systems for large commercial transport aircraft platforms. Rockwell Collins designs these items as sub-systems and works with OEMs to integrate with other suppliers' products into the flight deck and broader aircraft systems. The company's products offered for OEM applications in the air transport category are marketed directly to aircraft OEMs and airline operators, while Rockwell Collins' products offered for aftermarket applications are primarily marketed to the airline operators.

Business and regional aviation electronics include integrated avionics, cabin management and flight control systems for application on regional and business aircraft platforms. Rockwell Collins develops integrated avionics, cabin and flight control solutions for business and regional aircraft OEMs and support them with the integration into other aircraft systems. Products offered for OEM applications in the business and regional aircraft category are marketed directly to the aircraft OEMs. Products offered for aftermarket applications are primarily marketed through distributors for business aviation and directly to regional airline operators.

     Financial results for Rockwell Collins' Commercial Systems segment were as follows:
Performance of Rockwell Collins' principal lines of business

Total air transport aviation electronics sales increased $104 million (+9%) primarily due to: 1) a $102 million increase in OEM sales (due to increased product deliveries from higher aircraft production rates for the Boeing 787 and 737 aircraft, as well as higher customer funded development program sales); 2) a $15 million increase in Aftermarket sales primarily driven by higher revenues from increased service and support activities and regulatory airspace mandates, partially offset by the absence of certain major retrofit programs that were completed in 2013; and 3) a $13 million decrease in wide-body in-flight entertainment (IFE) sales as airlines continued to decommission their legacy IFE systems and no longer require Rockwell Collins' services, given the company's strategic decision announced in 2005 to cease investment in this product area.

Total business and regional aviation electronics sales increased $25 million (+3%) primarily due to the following: 1) OEM sales increased $6 million as higher customer funded development program revenues were mostly offset by a reduction in sales at the light-end of the business jet market; and 2) aftermarket sales increased $19 million driven by higher service and support activities.

2014 Outlook: Rockwell Collins expects Commercial Systems sales to increase by high-single digits in 2015 compared to 2014, primarily due to the following: 1) sales to aircraft OEMs are expected to increase by high-single digits when compared to 2014. Sales to air transport aircraft OEMs are projected to increase in the low double digits from higher Airbus A350 XWB production and increased production rates for other air transport aircraft as well as higher customer funded development program sales. Business and regional jet OEM sales are expected to increase low single digits due to deliveries of the Embraer Legacy aircraft as well as higher customer funded development program sales; 2) aftermarket sales for 2015 are expected to increase by high-single digits. The sales increase is expected to be driven by higher revenue from cockpit and cabin retrofits, airspace mandates, and service and support revenues; and 3) sales of wide-body IFE products and services are expected to decrease by about 30%, or $20 million, as airlines continue to decommission their legacy IFE systems and no longer require Rockwell Collins' services, given the company's decision in 2005 to cease investing in this product area.

Rockwell Collins projects Commercial Systems 2015 operating margins will expand by approximately 50 to 100 basis points above the 22.1% reported in 2014.


Information Management Services

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Rockwell Collins' Information Management Services business was formed with the December 2013 acquisition of ARINC and provides communications, systems integration and security solutions across the aviation, airport, rail, transit and nuclear security markets to customers located around the world. The customer base includes commercial airlines, business aircraft operators, the U.S. Federal Aviation Administration (FAA), airport and critical infrastructure operators and major passenger and freight railroads.

The company's information management services include:



• voice and data communication services, such as GLOBALinkSM voice and data services, which enable satellite, VHF and HF transmissions between the cockpit, the FAA and airline operation centers ensuring safety and efficiency for commercial airlines; these communications are enabled through ARINC's legacy ACARS® analog system and through the FAA's next generation VDLM2 digital technology;

• around the clock global flight support services for business aircraft operators, including ARINCDirectSM flight planning and datalink, international trip support, cabin connectivity solutions and flight operations management software;

• airport communications and information systems designed to ease congestion and improve airport efficiency via airline agent and passenger-facing check-in, baggage, boarding and access control solutions;

• train dispatching and information systems including solutions to support positive train control as mandated by the 2008 Railroad Safety Improvement Act;

• mission critical security systems including intrusion detection, access control, video and credential management and vehicle identification for nuclear power plants and defense-related facilities.



     

Financial results for Rockwell Collins' Information Management Services segment were as follows:
Performance of Rockwell Collins' principal lines of business

Total Information Management Services sales increased $426 million, primarily due to the acquisition of ARINC, which contributed $421 million of revenue in 2014.

2014 Outlook: Rockwell Collins expects Information Management Services sales to approach double digit growth in 2015, when compared to 2014 sales of $577 million on a full fiscal year pro-forma basis. The projected increase is primarily driven by double digit growth in airline and business aviation related sales.

Rockwell Collins projects Information Management Services operating margins for 2015 to expand by over 100 basis points over the 13.2% reported in 2014, driven primarily by the anticipated revenue increase.

Company Information

Revenues ('14): $4,979M +8.0%

R&D ('14): $268M -9.2%

Net Profit ('14): $604M -4.4%

CAPEX ('14): $163M +35.8%

Rockwell Collins - Tier I

Products News Subsidiaries Acquisitions Competitors Customers R&D Spending 5-Year Financials

Aerospace Sector:


   

Avionics; C4ISR Systems; Communication Systems/RF

Products:


Communications Systems and products including data link, high frequency (HF), very high frequency (VHF) and satellite communications; Navigation systems and products, including radio navigation products, global positioning system (GPS) equipment, handheld navigation devices, multi-mode receivers; landing sensors to enable fully automatic landings, radio navigation and geophysical sensors, as well as flight management systems; Situational awareness and surveillance systems and products, such as synthetic and enhanced vision systems, surface surveillance and guidance solutions, head-up guidance systems, weather radar and collision avoidance systems; Integrated avionics systems; Avionics sub-systems for aircraft flight decks that combine flight operations with navigation and guidance functions that can include flight controls and displays, information/data processing and communications, navigation, safety and surveillance systems; Electro-mechanical systems, including integrated pilot control solutions and primary and secondary actuation systems; Precision targeting and range and training systems; Cockpit display products, including multipurpose flat panel head-down displays, wide field of view head-up and helmet-mounted displays; Integrated cabin electronics systems, including cabin management systems, passenger connectivity and entertainment solutions, business support systems to improve passenger productivity and passenger flight information systems; Simulation and training systems, including full-flight simulators for crew training and visual system products; and Maintenance, repair, parts, after-sales support services and aftermarket used equipment.

Major DoD Defense Programs:


| C-17 | DAGR | E-2 | E-6B (upgrade) | FAB-T | F/A-18E/F | F-22 Raptor | F-35 Lightning II |
| JDAM | JPALS | DoD Prime ContractorJTRS | KC-10 | KC-46A | MQ-8B |

Rockwell Collins' Commercial Programs:


| Airbus: A320 Series, A330, A350 XWB, A380 |
| Boeing: 737NG, 747, 767, 777, 787 |
| Bombardier: CRJ, Challenger, Global | Embraer: ERJ | COMAC: C919 |

Sales 2010-2014 Net Income 2010-2014 R&D Spending 2010-2014 # Employees 2010-2014

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