- Revenue and earnings results in line with company expectations
- Corporate restructuring initiative on-plan
- Program performance driving improved operating income in Information and Technical Services segment
MCLEAN, Va. — (BUSINESS WIRE) — May 3, 2013 — ITT Exelis (NYSE: XLS) reported first-quarter 2013 financial results today. First-quarter revenue was $1.2 billion, compared to $1.4 billion in the first quarter of 2012. Operating income was $74 million and net earnings were $0.23 per diluted share, compared to $138 million and $0.37 per diluted share during the same period in 2012. As expected, results for the first quarter of 2013 were impacted by $49 million in restructuring charges incurred by the company as it aligns its headcount, footprint and cost structure more closely with customer and market conditions.
Significant new orders announced during the first quarter of 2013 included a $102 million contract to provide electronic support measures suites for two classes of Australian warships; a multimillion dollar contract to provide South Korea with an advanced geostationary weather imager; the company’s first base operations contract for the U.S. Navy in Deveselu, Romania; and multiple international orders, totaling more than $40 million, for communications equipment and sustainment. Exelis also completed the acquisition of C4i Pty. Ltd., an Australian company that provides advanced communications software that is integral to air traffic management systems and mobile communications solutions around the globe.
“Our first quarter results were in line with expectations. We secured several significant orders from international customers and our restructuring efforts are proceeding on schedule,” said Exelis CEO and President David F. Melcher. “While challenges and uncertainties remain within the U.S. defense and aerospace market, we continue to focus on cost improvement, operational efficiency and delivering value to our customers and shareholders.”
Segment Results
C4ISR Electronics and Systems
C4ISR Electronics and Systems first-quarter 2013 revenue was $499 million, compared to $653 million during the same period in 2012, mainly due to decreased sales of SINCGARS, night vision and counter-IED products, partially offset by increased international demand for airborne electronic warfare equipment. Segment operating income for the quarter was $19 million, versus $91 million for the first quarter of 2012, primarily driven by volume declines and restructuring charges taken in the segment during the first three months of 2013.
Information and Technical Services
Information and Technical Services first-quarter 2013 revenue was $686 million, compared to $768 million in the first quarter of 2012, primarily due to decreased activity on several Information Systems and Middle East facility operations programs. Segment operating income for the quarter was $55 million, compared to $47 million for the same period in 2012, positively impacted by contract productivity improvements, but partially offset by higher restructuring charges.
2013 Guidance
Exelis also reaffirms its previously published guidance for 2013 sales, operating margin, earnings per share and free cash flow.
| Sales | $5.0 billion - $5.1 billion | |||
| Operating Margin | 9.4% - 9.8% | |||
| Earnings Per Share | $1.45 - $1.55 | |||
| Free Cash Flow | > $225 million | |||
The company’s 2013 financial guidance includes $60 million to $70 million of projected restructuring expense. FAS pension expense for the year is projected in the range of $90 million to $100 million, at the midpoint, an increase of approximately $63 million from the prior year. The company anticipates generating free cash flow in excess of $225 million after making pension contributions in the range of $145 million to $160 million.
The company notes that forward-looking statements of future performance made in this release are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below.
Investor Call Today
Exelis senior management will host a conference call for investors today at 10 a.m. Eastern Daylight Time to review first-quarter 2013 financial results, as well as to answer questions. The briefing can be monitored live via webcast at the following address on the company's website: www.exelisinc.com/investors.
About ITT Exelis
Exelis is a diversified, top-tier global aerospace, defense, information and technical services company that leverages a 50-year legacy of deep customer knowledge and technical expertise to deliver affordable, mission-critical solutions for global customers. We are a leader in communications, sensing and surveillance, critical networks, electronic warfare, navigation, air traffic solutions and information systems with growing positions in C4ISR, composite aerostructures, logistics and technical services. Headquartered in McLean, Va., the company employs about 19,900 people and generated 2012 sales of $5.5 billion. For more information, visit our website at www.exelisinc.com or connect with us on Facebook, Twitter and YouTube.
Safe Harbor Statement
Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Some of the information included herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Private Securities Litigation Reform Act of 1995 (the “Act”). Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “may,” “could,” “outlook” and other terms of similar meaning are intended to identify such forward-looking statements. Forward-looking statements are uncertain and to some extent unpredictable, and involve known and unknown risks, uncertainties and other important factors that could cause actual results to differ materially from those expressed in, or implied from, such forward-looking statements. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to:
- Our dependence on the defense industry and the business risks peculiar to that industry, including changing priorities or reductions in the U.S. government or international defense budgets;
- Government regulations and compliance therewith, including changes to the Department of Defense procurement process;
- Our international operations, including sales to foreign customers;
- Competition, industry capacity and production rates;
- Misconduct of our employees, subcontractors, agents and business partners;
- The level of returns on postretirement benefit plan assets and potential employee benefit plan contributions and other employment and pension matters;
- Changes in interest rates and other factors that affect earnings and cash flows;
- The mix of our contracts and programs, our performance, and our ability to control costs;
- Governmental investigations;
- Our level of indebtedness and our ability to make payments on or service our indebtedness;
- Subcontractor performance;
- Economic and capital markets conditions;
- The availability and pricing of raw materials and components;
- Ability to retain and recruit qualified personnel;
- Protection of intellectual property rights;
- Changes in technology;
- Contingencies related to actual or alleged environmental contamination, claims and concerns;
- Security breaches and other disruptions to our information technology and operations; and
- Unanticipated changes in our tax provisions or exposure to additional income tax liabilities.
The forward-looking statements in this release are made as of the date hereof and the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from the company’s historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in the Exelis Inc. Form 10-K for the fiscal year ended December 31, 2012, and those described from time to time in our future reports filed with the Securities and Exchange Commission.
| Exelis Inc. | ||||||||
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Consolidated Consolidated Statements of Operations |
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| (unaudited) | ||||||||
| (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) | Three Months Ended March 31, | |||||||
| 2013 | 2012 | |||||||
| Product revenue | $ | 499 | $ | 653 | ||||
| Service revenue | 686 | 768 | ||||||
| Total revenue | 1,185 | 1,421 | ||||||
| Costs of product revenue | 357 | 461 | ||||||
| Costs of service revenue | 577 | 674 | ||||||
| Selling, general and administrative expenses | 115 | 133 | ||||||
| Research and development expenses | 13 | 14 | ||||||
| Restructuring charges, net | 49 | 1 | ||||||
| Operating income | 74 | 138 | ||||||
| Interest expense, net | 8 | 9 | ||||||
| Other expense (income), net | 2 | 8 | ||||||
| Income from continuing operations before income tax expense | 64 | 121 | ||||||
| Income tax expense | 20 | 51 | ||||||
| Net income | $ | 44 | $ | 70 | ||||
| Earnings Per Share | ||||||||
| Basic | ||||||||
| Net income | $ | 0.23 | $ | 0.38 | ||||
| Diluted | ||||||||
| Net income | $ | 0.23 | $ | 0.37 | ||||
|
Weighted average common shares outstanding – basic |
188.3 | 186.6 | ||||||
|
Weighted average common shares outstanding – diluted |
189.8 | 187.5 | ||||||
| Cash dividends declared per common share | $ | 0.10 | $ | 0.10 | ||||
| Exelis Inc. | ||||||||||
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Consolidated Consolidated Balance Sheets |
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| (unaudited) | ||||||||||
| (IN MILLIONS) | March 31, | December 31, | ||||||||
| 2013 | 2012 | |||||||||
| Assets | ||||||||||
| Current assets | ||||||||||
| Cash and cash equivalents | $ | 185 | $ | 292 | ||||||
| Receivables, net | 1,022 | 995 | ||||||||
| Inventories, net | 301 | 283 | ||||||||
| Deferred tax asset | 68 | 85 | ||||||||
| Other current assets | 62 | 58 | ||||||||
| Total current assets | 1,638 | 1,713 | ||||||||
| Plant, property and equipment, net | 509 | 512 | ||||||||
| Goodwill | 2,188 | 2,180 | ||||||||
| Other intangible assets, net | 184 | 184 | ||||||||
| Deferred tax asset | 543 | 556 | ||||||||
| Other non-current assets | 66 | 67 | ||||||||
| Total non-current assets | 3,490 | 3,499 | ||||||||
| Total assets |
$ |
5,128 | $ | 5,212 | ||||||
| Liabilities and Shareholders' Equity | ||||||||||
| Current liabilities | ||||||||||
| Accounts payable |
$ |
368 |
$ |
444 | ||||||
| Advance payments and billings in excess of costs | 327 | 322 | ||||||||
| Compensation and other employee benefits | 177 | 246 | ||||||||
| Other accrued liabilities | 265 | 203 | ||||||||
| Total current liabilities | 1,137 | 1,215 | ||||||||
| Defined benefit plans | 2,160 | 2,203 | ||||||||
| Long-term debt | 649 | 649 | ||||||||
| Deferred tax liability | 3 | 1 | ||||||||
| Other non-current liabilities | 127 | 128 | ||||||||
| Total non-current liabilities | 2,939 | 2,981 | ||||||||
| Total liabilities | 4,076 | 4,196 | ||||||||
|
Commitments and contingencies |
||||||||||
| Shareholders' equity | ||||||||||
| Common stock | 2 | 2 | ||||||||
| Additional paid-in capital | 2,578 | 2,575 | ||||||||
| Retained earnings | 298 | 274 | ||||||||
|
Accumulated other comprehensive loss |
(1,826 | ) | (1,835 | ) | ||||||
| Total shareholders' equity | 1,052 | 1,016 | ||||||||
| Total liabilities and shareholders' equity | $ | 5,128 | $ | 5,212 | ||||||
| Exelis Inc. | ||||||||||
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Consolidated Consolidated Statements of Cash Flows |
||||||||||
| (unaudited) | ||||||||||
| (IN MILLIONS) | Three Months Ended March 31, | |||||||||
| 2013 | 2012 | |||||||||
| Operating activities | ||||||||||
| Net income | $ | 44 | $ | 70 | ||||||
|
Adjustments to reconcile net income to cash provided by operating activities: |
||||||||||
| Depreciation and amortization | 27 | 30 | ||||||||
| Stock-based compensation | 5 | 5 | ||||||||
| Restructuring charges, net | 49 | 1 | ||||||||
| Payments for restructuring | (6 | ) | (8 | ) | ||||||
| Defined benefit plans expense | 26 | 12 | ||||||||
| Defined benefit plans payments | (39 | ) | (197 | ) | ||||||
| Change in assets and liabilities | ||||||||||
| Change in receivables | (27 | ) | (225 | ) | ||||||
| Change in inventories | (17 | ) | 1 | |||||||
| Change in other assets | (3 | ) | (11 | ) | ||||||
| Change in accounts payable | (77 | ) | 15 | |||||||
| Change in advance payments and billings in excess of costs | 6 | 10 | ||||||||
| Change in deferred taxes | 18 | 69 | ||||||||
| Change in other liabilities | (72 | ) | (66 | ) | ||||||
| Other, net | 1 | (4 | ) | |||||||
|
Net cash used in operating activities |
(65 | ) | (298 | ) | ||||||
| Investing activities | ||||||||||
| Capital expenditures | (17 | ) | (24 | ) | ||||||
| Proceeds from the sale of assets | — | 1 | ||||||||
| Acquisitions, net of cash acquired | (15 | ) | — | |||||||
| Other, net | — | 2 | ||||||||
| Net cash used in investing activities | (32 | ) | (21 | ) | ||||||
| Financing activities | ||||||||||
| Short-term borrowing under credit facility, net | — | 145 | ||||||||
| Proceeds from commercial paper, net | — | 265 | ||||||||
| Dividend paid | — | (19 | ) | |||||||
| Proceeds from the exercise of options | 1 | 13 | ||||||||
| Other, net | (2 | ) | 2 | |||||||
| Net cash (used in) provided by financing activities | (1 | ) | 406 | |||||||
| Exchange rate effects on cash and cash equivalents | (9 | ) | 5 | |||||||
| Net change in cash and cash equivalents | (107 | ) | 92 | |||||||
| Cash and cash equivalents – beginning of year | 292 | 116 | ||||||||
| Cash and cash equivalents – end of period | $ | 185 | $ | 208 | ||||||
Contact:
ITT Exelis
Investors
Katy Herr, 703-790-6376
Email Contact
or
Media
B.J.
Talley, 703-790-6349
Email Contact