Dear Shareowners:

I’m proud to report that in fiscal year 2014, after several years of challenging market dynamics, Rockwell Collins returned to growth and positioned our company, shareowners and employees for what I believe will be an exciting and promising future.

In fiscal year 2014, total revenue grew by 11 percent to $4.98 billion. We saw an increase of 6 percent in Commercial Systems sales to $2.3 billion, driven by more deliveries of air transport aircraft and higher customer-funded development in business and regional aviation. Government Systems sales experienced a 2 percent decline to $2.2 billion — better than our initial fiscal year 2014 guidance — as we continued to adjust to changes in defense spending.

Our acquisition of ARINC — the largest in our company’s history — positioned us as a leader in the fast-growing aviation information management segment. In the three quarters that ARINC was part of Rockwell Collins, our Information Management Services business met our high expectations, contributing $421 million in additional revenue to our top line, led by double-digit growth in the core aviation portion of the business. And with revenue from the ARINC acquisition included, our international sales increased 18 percent year over year, growing to 43 percent of our total revenue as we successfully expanded our global footprint across all segments.

Earnings per share from continuing operations for fiscal year 2014 totaled $4.52, while profitability remained strong with total segment operating margins of 21 percent. In addition, cash flow from operations increased 11 percent to $660 million. Overall, Rockwell Collins’ performance in fiscal year 2014 met or exceeded our guidance ranges for revenue, earnings and cash flow.

While I’m certainly pleased with these results, I’m even more excited by what’s ahead. I believe we are in an opportunity-rich environment, and we have aligned our portfolio, our investments and our talent to maximize our potential, focusing on four key areas: capitalizing on new platform positions, accelerating international growth, repositioning our government portfolio and leveraging opportunities for information management.

Capitalize on our new platform positions

We enter fiscal year 2015 with air transport in the midst of a prolonged up cycle, driven by consistent growth in passenger traffic, particularly in emerging markets, as well as the need for more fuel-efficient aircraft. The business jet sector appears to have stabilized and is even showing the first hints of resurgence, with the upper end of that sector — where we have focused our investments in recent years — leading the way.

Rockwell Collins is well positioned to benefit from these trends. Historically, our strong relationships with customers have been a crucial element in our growth strategy, and today, our significant positions with aircraft manufacturers are paying off.

In 2015, we’ll benefit from a full year of increased delivery rates for the Boeing 737, as well as the first full year of Airbus A350 deliveries. Similarly, in business and regional aviation, we expect to see the Embraer Legacy 450 delivered with our Pro Line Fusion^® integrated avionics system on board in fiscal year 2015, joining 2014’s entry into service of the Embraer Legacy 500. Several more platforms remain on the horizon, including AVIC’s recently announced MA-700 regional aircraft in China.

With the majority of our investments in these platforms completed, a substantial amount of revenue is still to be realized in the years to come.

With the majority of our investments in these platforms completed, a substantial amount of revenue is still to be realized in the years to come. And even as we leverage these existing investments for growth, we will continue to seek new positions, like our recent fly-by-wire control system win on Boeing’s new 777X. We’ll also bring our leading-edge technologies to existing platforms via retrofits and upgrades, like the flight deck display system for the Boeing 767/757 and our newly announced Pro Line II^™-to-Pro Line Fusion retrofit for the King Air 350 aircraft.

Top left: Our Pro Line Fusion^® integrated avionics system is now available as an upgrade for Pro Line II^™-equipped King Air 350 aircraft.

Top right: Our remote vision system on the KC-46 will facilitate aerial refueling at any time, under any lighting conditions.

Bottom: Rockwell Collins will provide the fly-by-wire control system for Boeing’s new 777X.

Accelerate international growth

Our growing presence in the international marketplace creates opportunities across all of our addressed sectors, and we are on track to increase international sales to roughly 50 percent of our total revenue by the end of the decade. In addition to a larger share of global defense markets, this growth will be driven by enhanced positions with international aircraft manufacturers and airlines, a focus on business aviation aftermarket opportunities and a strong global presence in information management services.

In fiscal year 2015, we will continue to enhance our global capabilities and insights, particularly by leveraging our commercial off-the-shelf technologies to best meet our international customers’ defense requirements. And our business development teams will refine additional international strategies to bring us commercial wins like this year’s order of avionics packages for 234 Airbus A320 aircraft from Indonesia’s Lion Air, one of the largest airline contracts in Rockwell Collins’ history.

To maximize our reach in growing markets, we will also seek to increase our more than 15 cooperative relationships — including joint ventures, strategic alliances and teaming agreements — around the world, such as 2014’s grand opening of a joint venture to develop communications and navigation solutions for Chinese aircraft programs.

Reposition our Government Systems portfolio to align with a changing market

Government market dynamics have shifted in recent years, and we’ve adjusted by streamlining our portfolio to focus on growing areas of the market while divesting some businesses and reducing exposure to shrinking U.S. Army programs. This year, with the impact of sequestration and the fiscal 2015 U.S. defense budget now better known, we anticipate more stability domestically, along with growth outside the United States.

As in the commercial sector, we have captured significant positions with aircraft manufacturers throughout the world including AgustaWestland and Embraer. A number of those positions will transition to production in the next few years, enhancing revenue while broadening our global footprint.

We are able to leverage Commercial Systems developments across many of our Government Systems avionics programs, giving our customers access to a remarkably broad range of cutting-edge technologies. This flexibility also allows us to focus our Government Systems resources on promising new areas of growth, like the remote vision system with 3D imaging for the KC-46 and the F-35 Helmet Mounted Display System that we’re creating in partnership with Elbit Systems of America, as well as product developments that better position us for a number of key international pursuits.

Leverage information management growth opportunities

Rockwell Collins has long been a leader in information-enabled avionics and communications systems that share and prioritize data to help users safely and efficiently complete their missions. The December 2013 acquisition of ARINC provided us with a new growth platform by combining that information-enabled hardware with a powerful global air-to-ground network and infrastructure, along with information management services for air transport and business aviation, airports, rail and critical infrastructure.

As we look toward 2015, we’re expecting increased demand for information management solutions across all of our served markets. For example, we should see growth in our GLOBALink^SM air-to-ground network as airlines build their fleets to meet rising demand. In business aviation, we expect continued increased demand for our new ARINCDirect^SM suite of services — the combination of our Ascend and ARINC Direct portfolios — which now offers customers a comprehensive suite of flight support services.

We are also pursuing synergies across our business to drive growth, such as bringing new broadband-speed connectivity — gained through our recently announced agreement with Inmarsat — to in-flight entertainment and cabin management systems for commercial and business aircraft.

Full speed ahead

Thanks in part to years of hard work and smart planning, I believe we turned a corner on our company’s future in fiscal year 2014. Today we are poised to accelerate our growth through reliable delivery of innovative aviation electronic and communication solutions in an environment full of opportunity. Cash flow is expected to continue to expand as we realize revenue gains from earlier program development investments. And we remain focused on a deployment of capital that balances growth with shareowner returns.

I’m confident that Rockwell Collins has the vision and innovative spirit to move forward, full speed ahead — all while continuing to build trust every day. Thank you for your support and confidence in our company.

Kelly Ortberg
CEO and President