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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 December 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) 295-1000

(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  ¨

178,385,167 shares of registrant’s Common Stock, par value $.01 per share, were outstanding on January 21, 2005.

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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, 2004, 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 months ended December 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.

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

In December 2004, the Financial Accounting Standards Board (FASB) issued Statement of Financial Accounting Standards (SFAS) No. 123 (revised 2004), Share-Based Payment (SFAS 123R). SFAS 123R requires the Company to measure the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award. The cost of the employee services is recognized as compensation cost over the period that an employee provides service in exchange for the award. SFAS 123R is effective July 1, 2005 for the Company and may be adopted using a modified prospective method or a modified retrospective method. The Company is currently evaluating the adoption alternatives and expects to complete its evaluation during the fourth quarter of 2005. If the Company adopts SFAS 123R under the modified prospective method, the full year 2005 impact would be to decrease net income by approximately $2 million, or 1 cent per diluted share. If the Company adopts SFAS 123R under the modified retrospective method, the full year 2005 impact would be to decrease net income by approximately $13 million, or 7 cents per diluted share.

In December 2004, the FASB issued FASB Staff Position No. FAS 109-2, Accounting and Disclosure Guidance for the Foreign Earnings Repatriation Provision within the American Jobs Creation Act of 2004 (FSP 109-2). The American Jobs Creation Act of 2004 (the “Act”) provides for a special one-time deduction of 85 percent of certain foreign earnings repatriated into the U.S. from non-U.S. subsidiaries through September 30, 2006. The Company is currently evaluating the merits of repatriating funds under the Act. The range of reasonably possible amounts of unremitted earnings that are being considered for repatriation is between zero and $15 million, which would require the Company to pay income taxes in the range of zero to $2 million. To date, the Company has not provided for income taxes on unremitted earnings generated by non-U.S. subsidiaries given the Company’s intent to permanently invest these earnings abroad. As a result, additional taxes may be required to be recorded for any funds repatriated under the Act. The Company expects to complete its evaluation of the repatriation provision of the Act by June 30, 2006.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

In December 2003, the Company acquired NLX Holding Corporation (NLX), a provider of integrated training and simulation systems. Effective December 2004, NLX is recognized as Rockwell Collins Simulation and Training Solutions (RCSTS). RCSTS 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. The acquisition of RCSTS extends the Company’s capabilities in the areas of training and simulation and enables the Company to provide a more complete service offering to its customers. In 2004, the purchase price and purchase price allocation were finalized. The purchase price, net of cash acquired, was $126 million, of which $102 million was allocated to goodwill and $17 million was allocated to intangible assets with finite lives. The weighted average useful life of the intangible assets with finite lives is approximately 5 years. Goodwill is included within the assets of the Government Systems segment. Approximately 20 percent of the goodwill resulting from this acquisition is tax deductible.

Receivables are summarized as follows (in millions):

As of December 31, 2004 and September 30, 2004, the portion of receivables outstanding that are not expected to be collected within the next twelve months is not significant.

Unbilled receivables principally represent sales recorded under the percentage-of-completion method of accounting that have not been billed to customers in accordance with applicable contract terms.

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 $102 million and $98 million at December 31, 2004 and September 30, 2004, respectively.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Property is summarized as follows (in millions):

Depreciable lives are reviewed by the Company periodically with any changes recorded on a prospective basis. Effective the first quarter of 2005, the Company changed its useful lives for certain classes of depreciable property. The range of estimated useful lives for machinery and equipment was changed from 8 to 10 years to 6 to 12 years. As a result of the change, depreciation expense decreased $2 million for the three months ended December 31, 2004 compared to the three months ended December 31, 2003.

There were no changes in the carrying amount of goodwill during the period ended December 31, 2004.

Intangible assets are summarized as follows (in millions):

Amortization expense for intangible assets for each of the three months ended December 31, 2004 and 2003 was $4 million. Annual amortization expense for intangible assets for 2005, 2006, 2007, 2008, and 2009 is expected to be $18 million, $16 million, $17 million, $21 million, and $14 million, respectively.

Other assets are summarized as follows (in millions):

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 (RSC), Vision Systems International, LLC, and Data Link Solutions, LLC.

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 $29 million and $28 million for the three months ended December 31, 2004 and 2003, respectively. The deferred portion of profit generated from sales to equity affiliates was not significant as of December 31, 2004 and 2003.

The Company shares equally with Rockwell Automation, Inc. (Rockwell Automation) in providing a $6 million line-of-credit to RSC, which bears interest at the greater of the Company’s or Rockwell Automation’s commercial paper borrowing rate. At December 31, 2004, no borrowings were due from RSC under this line-of-credit.

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

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. 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 and a reconciliation to the carrying amount is summarized as follows (in millions):

Interest paid on debt for the three months ended December 31, 2004 and 2003 was $4 million and $2 million, respectively.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Pension Benefits

The components of expense for pension benefits for the three months ended December 31, 2004 and 2003 are as follows (in millions):

During the three months ended December 31, 2004, the Company made $2 million of contributions to its non-qualified pension plans. During the three months ended December 31, 2003, the Company made $125 million of voluntary contributions to its qualified plans and $2 million of contributions to its non-qualified plans. The Company is not required to make any contributions to its qualified plans in 2005 pursuant to governmental regulations and the Company currently has no plans to make discretionary contributions to its qualified pension plans. Contributions to the Company’s unfunded, non-qualified plans are expected to approximate $7 million in 2005.

Other Retirement Benefits

The components of expense for other retirement benefits for the three months ended December 31, 2004 and 2003 are as follows (in millions):

SFAS 123 Pro Forma Disclosures

The Company accounts for employee 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.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The fair value method is an alternative method of accounting for stock-based compensation that is permitted by 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):

The Company issued 1,290,950 options during the first quarter of 2005 with a weighted average exercise price of $36.55. The Company issued 1,857,850 options during the first quarter of 2004 with a weighted average exercise price of $27.95. The weighted average fair value of the options granted in the first quarter of 2005 and 2004 was $9.96 and $9.43 per option, respectively. The fair value of each option granted by the Company was estimated using the following weighted average assumptions:

Employee Benefits Paid in Company Stock

During the three months ended December 31, 2004 and 2003, 0.7 million and 0.9 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 $22 million and $19 million for the respective periods. These transactions are non-cash transactions and therefore are 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 income, net consists of the following (in millions):

The insurance settlements gain consists of favorable settlements related to insurance matters.

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 months ended December 31, 2004 and 2003, the effective income tax rate was 30 percent. During the three months ended December 31, 2004, the Company paid income taxes of $16 million. During the three months ended December 31, 2003, the Company received $2 million in income tax refunds.

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

The fair value of cash approximates its carrying value due to its 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. 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 December 31, 2004 and September 30, 2004, the Company had outstanding foreign currency forward exchange contracts with notional amounts of $77 million and $96 million, respectively. These notional values consist primarily of contracts for the Euro, Pound Sterling and Yen, and are stated in U.S. dollar equivalents at spot exchange rates at the respective dates. As of December 31, 2004 and September 30, 2004, 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 amounts of $5 million and $2 million, respectively, and Other Current Liabilities in the amounts of $6 million and $5 million, respectively.

Product warranty costs

Accrued liabilities are recorded to reflect the Company’s contractual obligations 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 the length of the warranty and historical warranty return rates and repair costs.

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

Lease guarantee

The Company guarantees fifty percent of a lease obligation for a RSC facility. The Company’s portion of the guarantee totals $3 million and expires ratably through December 2011. Should RSC 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 December 31, 2004 were $102 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 of varying amounts 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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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The Company also provides indemnifications of varying scope and amounts to certain customers against claims of intellectual property infringement made by third parties arising from the use of Company products. These indemnifications generally require the Company to compensate the other party for certain damages and costs incurred as a result of third party intellectual property claims arising from these transactions.

The amount the Company could be required to pay under its indemnification agreements is generally limited based on amounts specified in the underlying agreements, or in the case of some agreements, the maximum potential amount of future payments that could be required is not limited. When a potential claim is asserted under these agreements, the Company considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. A liability is recorded when a potential claim is both probable and estimable. The nature of these agreements prevents the Company from making a reasonable estimate of the maximum potential amount it could be required to pay should counterparties to these agreements assert a claim; however, the Company currently has no material claims pending related to such agreements.

The Company is subject to federal, state and local regulations relating to the discharge of substances into the environment, the disposal of hazardous wastes, and other activities affecting the environment that have had and will continue to have an impact on the Company’s manufacturing operations. These environmental protection regulations may require the investigation and remediation of environmental impairments at current and previously owned or leased properties. In addition, lawsuits, claims and proceedings have been asserted on occasion against the Company alleging violations of environmental protection regulations, or seeking remediation of alleged environmental impairments, principally at previously owned or leased properties. The Company is currently involved in the investigation or remediation of ten sites under these regulations or pursuant to lawsuits asserted by third parties. Certain of these sites relate to properties purchased in connection with the Company’s acquisition of Kaiser Aerospace & Electronics Corporation (Kaiser). Rockwell Collins has certain rights to indemnification from escrow funds set aside at the time of acquisition that management believes are sufficient to address the Company’s potential liability related to the Kaiser related environmental matters. As of December 31, 2004, management estimates that the total reasonably possible future costs the Company could incur from these matters to be approximately $14 million. The Company has recorded environmental reserves for these matters of $5 million as of December 31, 2004, which represents management’s best estimate of the probable future cost for these matters.

To date, compliance with environmental regulations and resolution of environmental claims has been accomplished without material effect on the Company’s liquidity and capital resources, competitive position or financial condition. Management believes that expenditures for environmental capital investment and remediation necessary to comply with present regulations governing environmental protection and other expenditures for the resolution of environmental claims will not have a material adverse effect on the Company’s business or financial position, but could possibly be material to the results of operations or cash flows of any one period. Management cannot assess the possible effect of compliance with future environmental regulations.

The Company is subject to various lawsuits, claims and proceedings that have been or may be instituted or asserted against the Company relating to the conduct of the Company’s business, including those pertaining to product liability, intellectual property, environmental, safety and health, contract and employment matters. Although the outcome of litigation cannot be predicted with certainty and some lawsuits, claims or proceedings may be disposed of unfavorably to the Company, management believes the disposition of matters that are pending or asserted will not have a material adverse effect on the Company’s business, financial position, results of operations or cash flows.

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ROCKWELL COLLINS, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The sales and results of operations of the Company’s operating segments are summarized as follows (in millions):

The Company evaluates performance and allocates resources based upon, among other considerations, segment operating earnings. The Company’s definition of segment operating earnings excludes income taxes, unallocated general corporate expenses, interest expense, gains and losses from the disposition of businesses, non-recurring charges resulting from purchase accounting such as purchased research and development charges, earnings and losses from corporate-level equity affiliates, and other special items as identified by management from time to time. Intersegment sales are not material and have been eliminated.

The following table summarizes sales by product category for the three months ended December 31, 2004 and 2003 (in millions):

Product line disclosures for defense-related products are delineated based upon their underlying technologies while the air transport and business and regional aviation electronics product lines are delineated based upon the difference in underlying customer base, size of aircraft, and markets served.

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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

RESULTS OF OPERATIONS

The following management discussion and analysis is based on financial results for the three months ended December 31, 2004 and 2003 and should be read in conjunction with the unaudited condensed consolidated financial statements and notes thereto in Item 1 of Part I of this quarterly report.

Consolidated Financial Results

Sales

(dollars in millions)

Total sales for the three months ended December 31, 2004 increased 21 percent to $763 million compared to the three months ended December 31, 2003. NLX, now recognized as Rockwell Collins Simulation and Training Solutions (RCSTS), acquired on December 1, 2003, provided $21 million of incremental sales or 3 percentage points of the total sales growth. The remainder of the sales increase resulted from 18 percent organic revenue growth in both our Government and Commercial Systems businesses.

Net Income and Diluted Earnings Per Share

(dollars in millions, except per share amounts)

Net income for the three months ended December 31, 2004 increased 32 percent to $90 million, or 11.8 percent of sales, from net income of $68 million, or 10.8 percent of sales, for the three months ended December 31, 2003. Diluted earnings per share for the three months ended December 31, 2004 was 50 cents compared to 38 cents for the three months ended December 31, 2003. The increase in net income and diluted earnings per share for the three months ended December 31, 2004 compared to the same period last year was primarily the result of higher sales volumes, a more favorable mix of higher margin aftermarket sales, and the success of our ongoing cost containment initiatives. These items were partially offset by the absence of an after-tax gain of $3 million ($5 million before taxes), or 2 cents per share, related to favorable insurance matters included in the three months ended December 31, 2003.

Government Systems Financial Results

Government Systems’ Sales

(dollars in millions)

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Defense electronics sales increased $73 million, or 38 percent, for the three months ended December 31, 2004 compared to the three months ended December 31, 2003. Incremental sales of RCSTS, acquired on December 1, 2003, for the three months ended December 31, 2004, provided $21 million, or 11 percentage points of this sales growth. Excluding our RCSTS acquisition, Defense electronics sales increased $52 million, or 27 percent, in the three months ended December 31, 2004 compared to the same period a year ago. This sales growth is primarily attributable to sales related to programs won during 2004 including the Defense Advanced Global Positioning System Receiver production program and the development portion of the E-6B aircraft modification program. Higher sales from the KC-135 aircraft retrofit program also contributed to the sales growth.

Defense communications sales increased $6 million, or 5 percent, for the three months ended December 31, 2004 compared to the three months ended December 31, 2003. This sales growth is attributable to sales related to the Joint Tactical Radio System development programs.

Government Systems’ Segment Operating Earnings

(dollars in millions)

Government Systems’ operating earnings increased $7 million, or 11 percent, for the three months ended December 31, 2004, compared to the same period a year ago primarily due to increased sales volume. As expected, Government Systems’ operating earnings as a percent of sales for the three months ended December 31, 2004 decreased to 17.9 percent compared with 20.3 percent for the same period a year ago. The prior year first quarter operating margin benefited from favorable performance on various production programs as well as the absence of the incremental lower margin RCSTS revenues.

Commercial Systems Financial Results

Commercial Systems’ Sales

The following table represents Commercial Systems’ sales by product category:

(dollars in millions)