Nov. 3 (Bloomberg) -- Rockwell Collins Inc., the maker of cockpit instruments and radios, is looking for “bolt-on, tuck- in acquisitions” after generating a record level of operating cash flow, Chief Executive Officer Clay Jones said.

“There’s a good pipeline of opportunities out there, and we’re definitely looking for those opportunities,” Jones said in an interview today, declining to specify which areas the company would target. “We have plenty of capacity.”

Higher military sales and savings from job cuts helped offset the recession-induced drop in air travel that’s hurt planemakers and damped Rockwell Collins’ commercial revenue. The balance helped boost operating cash flow for the fiscal year through September to $633 million, a 2.1 percent gain from 2008, and enabled the company to make two purchases rather than the typical one, Jones said.

The Cedar Rapids, Iowa-based company bought DataPath Inc., a satellite-based communication networks company, and SEOS Group Ltd., which builds visual-display systems for commercial and military simulators. Those added to the 15 to 20 acquisitions in Rockwell Collins’ history that have ranged from $15 million to $300 million, said Jones, who has been CEO since the company’s initial public offering in 2001.

“We do bolt-on, tuck-in acquisitions that bring us product capability or technology that can be useful to get us into new markets,” he said. “Our history is a pretty good harbinger of what we’ll do.”

Net Income

Net income dropped 26 percent in the fiscal fourth quarter to $134 million, or 84 cents a share, from $182 million, or $1.13, a year earlier. Sales fell 6.8 percent to $1.19 billion, trailing the $1.23 billion average estimate of analysts in a Bloomberg survey, as business-jet builders slashed production and airlines put off maintenance and upgrades. Profit of 93 cents, excluding some items, topped the 87-cent average estimate of analysts surveyed by Bloomberg.

“We’re still one to two quarters away from fleet stabilization” as airlines continue to park older planes to save money, Jones said on a conference call with analysts. The spring and summer of 2010 should bring economic recovery and higher aircraft-utilization rates, releasing pent-up demand, he said.

On the business-jet side, where sales dropped more than 50 percent in the fourth quarter, “there’s general churn now coming back into the market for pure economic supply-and-demand reasons that are beginning to make that look more stable,” Jones said.

2010 Outlook

Looking at the Sept. 17 forecast for 2010 sales of between $4.6 billion and $4.8 billion, “we’d be closer to the lower end than the higher end,” Chief Financial Officer Patrick Allen said on the call. The company has forecast profit of $3.35 to $3.55 a share, with cash flow from operations of $600 million to $700 million.

Rockwell Collins fell $1.54, or 3 percent, to $49.24 at 4:15 p.m. in New York Stock Exchange trading. The shares have gained 30 percent in the past 12 months.

The company’s projection for 2010 anticipates a “modest” cut in production of single-aisle aircraft by both Airbus SAS and Boeing Co., Rockwell Collins’ biggest commercial customers, Jones said. Boeing has insisted it doesn’t see a need to scale back output of its 737, the world’s most widely flown plane, and Airbus has said at this point, it doesn’t plan to extend production cuts that began last month on its A320 model.

Rockwell Collins has cut enough costs, including reducing its workforce by 1,600 jobs, or about 8 percent, and closing a factory in San Jose, California, Jones said. He said he doesn’t anticipate a need for further such measures.

To contact the reporter on this story: Susanna Ray in Seattle at sray7@bloomberg.net

Last Updated: November 3, 2009 16:34 EST