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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended March 31, 2004.

Commission file number 1-16445.

Rockwell Collins, Inc.

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code: (319) 295-6835

(Office of the Corporate Secretary)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes   x    No  ¨

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes  x    No  ¨

177,325,584 shares of registrant’s Common Stock, par value $.01 per share, were outstanding on April 15, 2004.

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ROCKWELL COLLINS, INC.

INDEX

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PART I. FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

ROCKWELL COLLINS, INC.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

(Unaudited)

(in millions, except per share amounts)

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL COLLINS, INC.

CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

(in millions, except per share amounts)

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL COLLINS, INC.

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(Unaudited)

(in millions)

See Notes to Condensed Consolidated Financial Statements.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The accompanying unaudited condensed consolidated financial statements of Rockwell Collins, Inc. (the Company or Rockwell Collins) have been prepared in accordance with accounting principles generally accepted in the United States of America and with the instructions to Form 10-Q of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements have been condensed or omitted. These statements should be read in conjunction with the Company’s Annual Report on Form 10-K for the year ended September 30, 2003, including the financial statements in Exhibit 13 incorporated by reference in the Form 10-K.

In the opinion of management, the unaudited financial statements contain all adjustments, consisting of adjustments of a normal recurring nature, necessary to present fairly the financial position, results of operations, and cash flows for the periods presented. The results of operations for the three and six months ended March 31, 2004 are not necessarily indicative of the results that may be expected for the full year.

The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements. Actual results could differ from those estimates and assumptions.

The Company operates on a fiscal year basis with the fiscal year ending on September 30. All date references contained herein relate to the Company’s fiscal year unless otherwise stated.

Certain prior year amounts have been reclassified to conform to the current year presentation.

On February 10, 2004, the Board of Directors of the Company declared a quarterly dividend of nine cents per share on its common stock, paid on March 15, 2004 to shareowners of record on February 23, 2004.

In December 2003, the Company acquired NLX Holding Corporation (NLX), a provider of integrated training and simulation systems. NLX provides simulators ranging from full motion full flight simulators to desktop simulators, training, upgrades, modifications, and engineering and technical services primarily to branches of the United States military.

In March 2004, the Company finalized the purchase price for NLX, which resulted in a $1 million reduction in the purchase price. The adjusted purchase price was $126 million, of which $99 million was allocated to goodwill; $21 million was allocated to intangibles with finite lives, including customer relationships, developed technology, and trademarks; and $6 million was allocated to other acquired assets and liabilities. The weighted average useful life of intangible assets with finite lives is approximately 5 years. The purchase price allocations are expected to be finalized during 2004. Goodwill resulting from the acquisition is included in the Government Systems segment. Approximately 25 percent of the goodwill resulting from the acquisition is tax deductible.

Receivables are summarized as follows (in millions):

Unbilled receivables principally represent sales recorded under the percentage-of-completion method of accounting that are to be billed to customers in accordance with applicable contract terms.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Inventories are summarized as follows (in millions):

In accordance with industry practice, inventories include amounts which are not expected to be realized within one year. These amounts primarily relate to life-time buy inventory, which is inventory that is typically no longer being produced by the Company’s vendors but for which multiple years of supply are purchased in order to meet production and service requirements over the life span of a product. Life-time buy inventory was $116 million and $106 million at March 31, 2004 and September 30, 2003, respectively.

Property is summarized as follows (in millions):

Changes in the carrying amount of goodwill for the six months ended March 31, 2004 are summarized as follows (in millions):

The Company performs an annual impairment test of goodwill and indefinite-lived intangible assets during the second quarter of each fiscal year, or at any time there is an indication of potential impairment. The Company’s 2004 impairment tests yielded no impairments.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Intangible assets are summarized as follows (in millions):

During the six months ended March 31, 2004, the Commercial Systems segment acquired license agreements for $18 million, of which $11 million was paid during the six months ended March 31, 2004. These license agreements relate primarily to a strategic agreement with Boeing to provide a global broadband connectivity solution for business aircraft through the Company’s Collins eXchange product.

Annual estimated amortization expense for 2004, 2005, 2006, 2007, and 2008 is $19 million, $18 million, $22 million, $20 million, and $13 million, respectively.

Other assets are summarized as follows (in millions):

Investments in equity affiliates consist of investments in three joint ventures, each of which is 50 percent owned by the Company and accounted for under the equity method. The Company’s joint ventures consist of Rockwell Scientific, LLC (Rockwell Scientific), Vision Systems International, LLC, and BAE Systems/Rockwell Collins Data Link Solutions. In addition to these 50% owned joint ventures, the Company also has a 16% ownership investment in Tenzing Communications (Tenzing). Tenzing is a developer of passenger connectivity solutions for commercial aircraft and is considered by Rockwell Collins to be a development-stage entity subject to higher risk relative to the Company’s other equity investments. Principal risk factors include Tenzing’s ability to meet cash flow requirements and competition that may have greater financial, technical, operational, and marketing resources than Tenzing. The Company reviews its investment in Tenzing for recoverability on a quarterly basis by considering factors that include, but are not limited to, current cash position, projected short and long-term cash flows, and management’s plans to dispose of assets, borrow money or restructure debt, reduce or delay expenditures, and increase ownership equity. The Company accounts for its investment in Tenzing under the equity method and the maximum exposure to loss is $8 million. The Company’s ability to recover its investment in Tenzing is dependent on Tenzing’s ability to secure additional financing from current or new investors and successfully execute its business plan.

In the normal course of business or pursuant to the underlying joint venture agreements, the Company may sell products or services to equity affiliates. The Company defers a portion of the profit generated from these sales equal to its ownership interest in the equity affiliates until the underlying product is ultimately sold to an unrelated third party. Sales to equity affiliates were $27 million and $55 million for the three and six months ended March 31, 2004, respectively, compared to $24 million and $42 million for the three and six months ended March 31, 2003, respectively.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company shares equally with Rockwell Automation, Inc. (Rockwell Automation) in providing a $6 million line-of-credit to Rockwell Scientific, which bears interest at the greater of the Company’s or Rockwell Automation’s commercial paper borrowing rate. At March 31, 2004, $2 million was due to the Company from Rockwell Scientific under this line-of-credit.

Other current liabilities are summarized as follows (in millions):

Short-term debt

Short-term commercial paper borrowings outstanding were $66 million at March 31, 2004 and $42 million at September 30, 2003. The weighted average interest rate and maturity period of the commercial paper outstanding at March 31, 2004 was 1.03 percent and 9 days, respectively, and 1.08 percent and 66 days, respectively, at September 30, 2003.

Interest paid for the six months ended March 31, 2004 and 2003 was $3 million and $1 million, respectively.

Long-term debt

On November 20, 2003, the Company issued $200 million of 4.75 percent fixed rate unsecured debt due December 1, 2013 (the Notes). Interest payments on the Notes are due on June 1 and December 1 of each year, commencing June 1, 2004. The Notes contain certain covenants and events of default, including requirements that the Company satisfy certain conditions in order to incur debt secured by liens, engage in sale/leaseback transactions, or merge or consolidate with another entity. In addition, on November 20, 2003, the Company entered into interest rate swap contracts which effectively converted $100 million aggregate principal amount of the Notes to floating rate debt based on six-month LIBOR less 7.5 basis points.

Long-term debt is summarized as follows (in millions):

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension Benefits

The components of net periodic pension expense (income) are as follows for the three and six months ended March 31, 2004 and 2003 (in millions):

During the six months ended March 31, 2004, the Company made $128 million of contributions to its pension plans, of which $125 million related to voluntary contributions to its qualified plans and $3 million related to contributions to its non-qualified plans. The Company expects total pension plan contributions for the year ended September 30, 2004 to approximate $131 million, comprised of $125 million in voluntary contributions to its qualified plans and $6 million of contributions to its non-qualified plans.

Other Retirement Benefits

Other retirement benefits consist primarily of retiree health care benefits that are provided to substantially all of the Company’s domestic employees and covered dependents. Employees generally become eligible to receive these benefits if they retire after age 55 with at least 10 years of service. Most plans are contributory with retiree contributions generally based upon years of service and adjusted annually by the Company. These plans pay a stated percentage of expenses reduced by deductibles and other coverage, principally Medicare.

The components of net periodic other retirement benefit expense (income) are as follows for the three and six months ended March 31, 2004 and 2003 (in millions):

On December 8, 2003, the Medicare Prescription Drug, Improvement and Modernization Act of 2003 (the Act) was signed into law. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care benefit plans that provide a benefit that is at least actuarially equivalent to Medicare Part D. The Company is currently evaluating the impact of this Act on its Other Retirement Benefits expense. Until final guidance is issued, the Company has elected to defer the accounting for the effects of the Act as permitted by Financial Accounting Standards Board (FASB) Staff Position 106-1, Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of 2003.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company accounts for stock-based compensation using the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees. Under the intrinsic value method, compensation expense is recorded for the excess of the stock’s quoted market price at the time of grant over the amount an employee must pay to acquire the stock. As the Company’s various incentive plans require stock options to be granted at prices equal to or above the fair market value of the Company’s common stock on the grant dates, no compensation expense is recorded in connection with stock options granted to employees.

The fair value method is an alternative method for accounting for stock-based compensation that is permitted by Statement of Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensation. Under the fair value method, compensation expense is recorded over the vesting periods based on the estimated fair value of the stock-based compensation. The following table illustrates the effect on net income and earnings per share if the Company had accounted for its stock-based compensation plans using the fair value method (in millions, except per share amounts):

During the six months ended March 31, 2004 and 2003, 1.1 million and 0.6 million shares, respectively, of Company common stock were issued to employees under the Company’s employee stock purchase and defined contribution savings plans at a value of $27 million and $11 million for the respective periods. These transactions are non-cash transactions and, therefore, not reflected in the Condensed Consolidated Statement of Cash Flows.

Comprehensive income consists of the following (in millions):

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Other expense (income), net consists of the following (in millions):

Insurance settlements consist of favorable settlements related to insurance matters arising prior to the Company’s spin-off from Rockwell Automation in 2001.

At the end of each interim reporting period, the Company makes an estimate of the effective income tax rate expected to be applicable for the full year. This estimate is used in providing for income taxes on a year-to-date basis and may change in subsequent interim periods. During the three and six months ended March 31, 2004 and 2003, the effective income tax rate was 30 percent. During the three and six months ended March 31, 2004, the Company paid income taxes of $4 million and $2 million, respectively, compared with $21 million and $42 million for the three and six months ended March 31, 2003, respectively.

The carrying amounts and fair values of the Company’s financial instruments are as follows (in millions):

The fair value of cash and short-term commercial paper borrowings approximate their carrying value due to their short-term nature. The fair value of long-term debt is based on quoted market prices for debt with similar terms and maturities.

The Company uses derivative financial instruments in the form of interest rate swaps and foreign currency forward exchange contracts to manage interest rate risk and foreign currency risk, respectively. The Company’s policy is to execute such instruments with creditworthy financial institutions and not enter into derivative financial instruments for speculative purposes.

On November 20, 2003, the Company entered into interest rate swap contracts (the Swaps) which effectively converted $100 million aggregate principal amount of the Notes to floating rate debt based on six-month LIBOR less 7.5 basis points. As permitted by SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, the Company has designated the Swaps as fair value hedges. Accordingly, the fair values of the Swaps are recorded in Other Assets on the Condensed Consolidated Statement of Financial Position and the carrying value of the underlying debt is adjusted by an equal amount. The fair value of the interest rate swaps is based on quoted market prices for contracts with similar maturities.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Foreign currency forward exchange contracts provide for the purchase or sale of foreign currencies at specified future dates at specified exchange rates and are used to offset changes in the fair value of certain assets or liabilities or forecasted cash flows resulting from transactions denominated in foreign currencies. At March 31, 2004 and September 30, 2003, the Company had outstanding foreign currency forward exchange contracts with notional amounts of $105 million and $101 million, respectively. These notional values consist primarily of contracts for the euro and pound sterling, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates. As of March 31, 2004 and September 30, 2003, the foreign currency forward exchange contracts are recorded at their fair values based on quoted market prices for contracts with similar maturities in Other Current Assets in the amount of $2 million and Other Current Liabilities in the amounts of $8 million and $4 million, respectively. Management does not anticipate any material adverse effect on its financial position, results of operations, or cash flows relating to these foreign currency forward exchange contracts.

Product warranty costs

Reserves are recorded on the Statement of Financial Position to reflect the Company’s contractual liabilities relating to warranty commitments to customers. Warranty coverage of various lengths and terms is provided to customers depending on standard offerings and negotiated contractual agreements. An estimate for warranty expense is recorded at the time of sale based on historical warranty return rates and repair costs.

Changes in the carrying amount of accrued product warranty costs for the six months ended March 31, 2004 and 2003 are summarized as follows (in millions):

Lease guarantee

The Company guarantees fifty percent of a lease obligation of a Rockwell Scientific facility. The Company’s portion of the guarantee totals $3 million and expires ratably through December 2011. Should Rockwell Scientific fail to meet its lease obligations, this guarantee may become a liability of the Company. This guarantee is not reflected as a liability on the Company’s Statement of Financial Position.

Letters of credit

The Company has contingent commitments in the form of commercial letters of credit. Outstanding letters of credit are issued by banks on the Company’s behalf to support certain contractual obligations to its customers. If the Company fails to meet these contractual obligations, these letters of credit may become liabilities of the Company. Total outstanding letters of credit at March 31, 2004 were $127 million. These commitments are not reflected as liabilities on the Company’s Statement of Financial Position.

Indemnifications

The Company enters into indemnifications with lenders, counterparties in transactions such as administration of employee benefit plans, and other customary indemnifications with third parties in the normal course of business. The following are other than customary indemnifications based on the judgment of management.

In connection with agreements for the sale of portions of its business, the Company at times retains the liabilities of a business which relate to events occurring prior to its sale, such as tax, environmental, litigation and employment matters. The Company at times indemnifies the purchaser of a Rockwell Collins’ business in the event that a third party asserts a claim that relates to a liability retained by the Company.

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