Welcome!

Microsoft Cloud Authors: Pat Romanski, Janakiram MSV, Steven Mandel, John Basso, Liz McMillan

News Feed Item

Exelis reports first-quarter 2014 financial results, confirms 2014 guidance and provides update on Vectrus spin-off

Exelis (NYSE: XLS) reported financial results for the first quarter of 2014. First-quarter revenue was $1 billion, a 12 percent decrease from the first quarter of 2013. First-quarter earnings were $52 million, or $0.27 per share, a 17 percent increase from the first quarter of 2013. Adjusted earnings, which exclude costs related to the pending spin-off of the current Exelis Mission Systems business into an independent company that will be known as Vectrus, were $0.29 per share, a 26 percent increase from the same period in 2013. Free cash flow for the quarter was negative $160 million, which includes $44 million in cash returned to shareholders via dividends and share buybacks. The company reaffirms its full-year free cash flow expectations of approximately $250 million.

The company secured $1 billion in orders during the first quarter of 2014, including significant new business in three of its four Strategic Growth Platforms, along with orders from a variety of international customers. Key contracts and agreements in the quarter included:

  • Nearly $200 million in awards for airborne electronic warfare equipment from the U.S. Navy, Turkey, Pakistan and other international customers.
  • A multimillion-dollar order from a Japanese customer for the primary climate monitoring payload on the Greenhouse Gas Observing Satellite-2 (GOSAT)
  • A $34 million order from Sikorsky for composite assemblies for the Marine Corps CH-53K next-generation heavy lift helicopter
  • $135 million in orders for night vision and communications equipment from a variety of customers, including international orders for $50 million in i-Aware TMNVG night vision goggles

“We continued to earn new business from domestic and international customers in the first quarter of 2014 and profitability improved significantly in our C4ISR segment,” said Exelis CEO and President David F. Melcher. “We are also reaffirming our 2014 guidance and are looking forward to the successful spin-off of Vectrus this summer.”

Segment Results

C4ISR Electronics and Systems

C4ISR Electronics and Systems first-quarter 2014 revenue was $480 million, down 4 percent from the same period in 2013 due to volume declines in domestic night vision and counter-IED jammer products, partially offset by a surge in sales of both international tactical radios and electronic warfare equipment to U.S. customers. Segment adjusted operating income for the quarter was $47 million, an increase of 147 percent from the first quarter of 2013, due to lower restructuring charges compared to the same period in 2013.

Information and Technical Services

Information and Technical Services first-quarter 2014 revenue was $565 million, a decrease of 18 percent from the same period in 2013, driven by lower customer activity on U.S. government contracts in the Middle East and Afghanistan, slightly offset by increased revenue in Federal Aviation Administration programs. First-quarter adjusted operating income for the segment was $49 million, down 11 percent from the same period in 2013.

Vectrus Spin-off

The company continues to progress on the separation of its current Mission Systems business into an independent, publicly traded company that will be known as Vectrus, Inc. The most current public information on the Vectrus spin-off can be found at www.exelisinc.com/transformation.

2014 Guidance

       
Sales     $4.6 billion
Adjusted Operating Margin     ≈11%
Adjusted Earnings Per Share     $1.52 - $1.59
Free Cash Flow     ≈$250 million
   

Exelis reaffirms previously issued 2014 financial guidance, which includes approximately $20 million of projected restructuring expense and approximately $25 million of expenses related to the planned spin-off of Vectrus. 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 Time to review first-quarter 2014 results and guidance, and answer questions. The briefing can be monitored live via webcast at the following address on the company's website: http://investors.exelisinc.com.

About Exelis

Exelis is a diversified, top-tier global aerospace, defense, information and 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 positioning and navigation, sensors, air traffic management solutions, image processing and distribution, communications and information systems; and focused on strategic growth in the areas of critical networks, ISR and analytics, electronic warfare and composite aerostructures. Headquartered in McLean, Va., Exelis employs about 17,000 people and generated 2013 sales of $4.8 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 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:

  • The timing and completion of the tax-free spin-off described in this document;
  • 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;
  • Our ability to execute our internal performance plans including restructuring, productivity improvements and cost reduction initiatives;
  • Unanticipated changes in our tax provisions or exposure to additional income tax liabilities; and
  • Ability to execute our internal performance plans, including restructuring, productivity and cost-reduction initiatives.

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, 2013, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

   
Exelis Inc.
Condensed Consolidated Statements of Operations (unaudited)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
 
Three Months Ended March 31,
    2014   2013
Product revenue $ 480 $ 499
Service revenue     565     686
Total revenue     1,045     1,185
Cost of product revenue 354 357
Cost of service revenue 474 577
Selling, general and administrative expenses 113 115
Research and development expenses 10 13
Restructuring and asset impairment charges     5     49
Operating income 89 74
Interest expense, net 9 8
Other (income) expense, net     (2)     2
Income from continuing operations before income tax expense 82 64
Income tax expense     30     20
Net income   $ 52   $ 44
Earnings Per Share
Basic
Net income $ 0.27 $ 0.23
Diluted
Net income $ 0.27 $ 0.23
Weighted average common shares outstanding – basic 189.6 188.3
Weighted average common shares outstanding – diluted 194.9 189.8
Cash dividends declared per common share   $ 0.10   $ 0.10
 

   
Exelis Inc.
Condensed Consolidated Balance Sheets (unaudited)
(IN MILLIONS)
 
March 31, December 31,
    2014   2013
Assets
Current assets
Cash and cash equivalents $ 280 $ 469
Receivables, net 1,023 939
Inventories, net 267 246
Deferred tax asset 17 16
Other current assets     70     70
Total current assets     1,657     1,740
Plant, property and equipment, net 478 498
Goodwill 2,185 2,184
Other intangible assets, net 160 167
Deferred tax asset 192 216
Other non-current assets     86     79
Total non-current assets     3,101     3,144
Total assets   $ 4,758   $ 4,884
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 325 $ 367
Advance payments and billings in excess of costs 272 301
Compensation and other employee benefits 170 216
Other accrued liabilities     174     160
Total current liabilities     941     1,044
Defined benefit plans 1,359 1,407
Long-term debt 649 649
Deferred tax liability 3 2
Other non-current liabilities     117     130
Total non-current liabilities     2,128     2,188
Total liabilities     3,069     3,232
Commitments and contingencies
Shareholders' equity
Common stock 2 2
Additional paid-in capital 2,642 2,623
Treasury stock

(45)

 

(16)
Retained earnings 507 475
Accumulated other comprehensive loss     (1,417)     (1,432)
Total shareholders' equity     1,689     1,652
Total liabilities and shareholders' equity   $ 4,758   $ 4,884
 

   

Exelis Inc.

Condensed Consolidated Statements of Cash Flows (unaudited)

(IN MILLIONS)

 
Three Months Ended March 31,
    2014   2013
Operating activities
Net income $ 52 $ 44
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization 27 27
Stock-based compensation 8 5
Restructuring and asset impairment charges 5 49
Payments for restructuring (11) (6)
Defined benefit plans expense 17 26
Defined benefit plans payments (42) (39)
Change in assets and liabilities
Change in receivables (84) (27)
Change in inventories (21) (17)
Change in other assets (3)
Change in accounts payable (42) (77)
Change in advance payments and billings in excess of costs (29) 6
Change in deferred taxes 14 18
Change in other liabilities (49) (72)
Other, net     (3)     1
Net cash used in operating activities     (158)     (65)
Investing activities
Capital expenditures (7) (17)
Proceeds from the sale of assets 3
Acquisitions, net of cash acquired         (15)
Net cash used in investing activities     (4)     (32)
Financing activities
Dividends paid (20)
Common stock repurchased (24)
Proceeds from the exercise of stock options 12 1
Other, net     5     (2)
Net cash used in financing activities     (27)     (1)
Exchange rate effects on cash and cash equivalents         (9)
Net change in cash and cash equivalents (189) (107)
Cash and cash equivalents – beginning of year     469     292
Cash and cash equivalents – end of period   $ 280   $ 185
 

Key Performance Indicators and Non-GAAP Financial Measures

Management reviews key performance indicators including revenue, segment operating income and margins, orders growth, and backlog, among other metrics on a regular basis. In addition, we consider certain additional measures to be useful to management and investors evaluating our operating performance for the periods presented, and provide a tool for evaluating our ongoing operations, liquidity and management of assets. This information can assist investors in assessing our financial performance and measures our ability to generate capital for deployment among competing strategic alternatives and initiatives, including, but not limited to, acquisitions and debt repayment. These metrics, however, are not measures of financial performance under accounting principles generally accepted in the United States of America (GAAP) and should not be considered a substitute for revenue, operating income, income from continuing operations, or net cash from continuing operations as determined in accordance with GAAP. We consider the following non-GAAP measure, which may not be comparable to similarly titled measures reported by other companies, to be a key performance indicator:

“Adjusted net income” defined as net income, adjusted to exclude items that include, but are not limited to, significant charges or credits that impact current results, but are not related to our ongoing operations, unusual and infrequent non-operating items and non-operating tax settlements or adjustments. A reconciliation of adjusted net income is provided below.

“Segment adjusted operating income” defined as operating income of our two segments, adjusted to exclude items that include, but are not limited to, significant charges or credits that impact current results, but are not related to our ongoing operations, unusual and infrequent non-operating items and non-operating tax settlements or adjustments. A reconciliation of segment operating income is provided below.

“Free cash flow” defined as GAAP cash provided by operating activities, less capital expenditures plus separation costs. This metric does not include dividend payments.

   
Exelis Inc.
Non-GAAP Financial Measures - Adjusted Net Income & Adjusted EPS
 
Three Months Ended
March 31,
($ million, except per share)   2014   2013
Net Income 52 44
         
Separation Costs for the Vectrus Spin-off, net of tax   5   -
Adjusted Net Income   57   44
         
Net Income per fully diluted share $0.27 $0.23
Adjusted Net Income per fully diluted share   $0.29   $0.23
 
Weighted Average Shares Outstanding, Diluted 194.9 189.8
 

   
Exelis Inc.

Non-GAAP Financial Measures - Adjusted Segment Operating Income &

Operating Margin

 
Three Months Ended
March 31,
($ million)   2014   2013
Sales 1,045 1,185
C4ISR 480 499
I&TS 565 686
         
Segment Operating Income, As Reported 89 74
C4ISR 43 19
I&TS   46     55  
         
Separation Costs 7 -
C4ISR 4 -
I&TS   3     -  
         
Segment Operating Income, Adjusted 96 74
C4ISR 47 19
I&TS   49     55  
         
Segment Operating Margin, As Reported
C4ISR 8.9 % 3.8 %
I&TS   8.1 %   8.0 %
         
Segment Operating Margin, Adjusted
C4ISR 9.8 % 3.8 %
I&TS   8.7 %   8.0 %
         
Operating Margin, As Reported 8.5 % 6.2 %
Operating Margin, Adjusted   9.2 %   6.2 %
 

   
Exelis Inc.
Free Cash Flow Year-to-Date
 
Three Months Ending Three Months Ending
March 31,   March 31,
($ million)   2014   2013
Cash Flow From Operating Activities   (158 )   (65 )
         
Subtract:        
Capital Expenditures   (7 )   (17 )
         
Free Cash Flow   (165 )   (82 )
 
Add:        
Separation Costs for the Vectrus Spin-off, net of tax   5     -  
Free Cash Flow, as Adjusted   (160 )   (82 )
 

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
SYS-CON Events announced today Telecom Reseller has been named “Media Sponsor” of SYS-CON's 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Telecom Reseller reports on Unified Communications, UCaaS, BPaaS for enterprise and SMBs. They report extensively on both customer premises based solutions such as IP-PBX as well as cloud based and hosted platforms.
Smart Cities are here to stay, but for their promise to be delivered, the data they produce must not be put in new siloes. In his session at @ThingsExpo, Mathias Herberts, Co-founder and CTO of Cityzen Data, will deep dive into best practices that will ensure a successful smart city journey.
DevOps at Cloud Expo, taking place Nov 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The widespread success of cloud computing is driving the DevOps revolution in enterprise IT. Now as never before, development teams must communicate and collaborate in a dynamic, 24/7/365 environment. There is no time to wait for long dev...
The 19th International Cloud Expo has announced that its Call for Papers is open. Cloud Expo, to be held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, brings together Cloud Computing, Big Data, Internet of Things, DevOps, Digital Transformation, Microservices and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding business opportuni...
There is growing need for data-driven applications and the need for digital platforms to build these apps. In his session at 19th Cloud Expo, Muddu Sudhakar, VP and GM of Security & IoT at Splunk, will cover different PaaS solutions and Big Data platforms that are available to build applications. In addition, AI and machine learning are creating new requirements that developers need in the building of next-gen apps. The next-generation digital platforms have some of the past platform needs a...
Pulzze Systems was happy to participate in such a premier event and thankful to be receiving the winning investment and global network support from G-Startup Worldwide. It is an exciting time for Pulzze to showcase the effectiveness of innovative technologies and enable them to make the world smarter and better. The reputable contest is held to identify promising startups around the globe that are assured to change the world through their innovative products and disruptive technologies. There w...
Internet of @ThingsExpo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 19th Cloud Expo and will feature technical sessions from a rock star conference faculty and the leading industry players in the world. The Internet of Things (IoT) is the most profound change in personal and enterprise IT since the creation of the Worldwide Web more than 20 years ago. All major researchers estimate there will be tens of billions devices - comp...
Data is the fuel that drives the machine learning algorithmic engines and ultimately provides the business value. In his session at Cloud Expo, Ed Featherston, a director and senior enterprise architect at Collaborative Consulting, will discuss the key considerations around quality, volume, timeliness, and pedigree that must be dealt with in order to properly fuel that engine.
19th Cloud Expo, taking place November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA, will feature technical sessions from a rock star conference faculty and the leading industry players in the world. Cloud computing is now being embraced by a majority of enterprises of all sizes. Yesterday's debate about public vs. private has transformed into the reality of hybrid cloud: a recent survey shows that 74% of enterprises have a hybrid cloud strategy. Meanwhile, 94% of enterpri...
Personalization has long been the holy grail of marketing. Simply stated, communicate the most relevant offer to the right person and you will increase sales. To achieve this, you must understand the individual. Consequently, digital marketers developed many ways to gather and leverage customer information to deliver targeted experiences. In his session at @ThingsExpo, Lou Casal, Founder and Principal Consultant at Practicala, discussed how the Internet of Things (IoT) has accelerated our abil...
With so much going on in this space you could be forgiven for thinking you were always working with yesterday’s technologies. So much change, so quickly. What do you do if you have to build a solution from the ground up that is expected to live in the field for at least 5-10 years? This is the challenge we faced when we looked to refresh our existing 10-year-old custom hardware stack to measure the fullness of trash cans and compactors.
The emerging Internet of Everything creates tremendous new opportunities for customer engagement and business model innovation. However, enterprises must overcome a number of critical challenges to bring these new solutions to market. In his session at @ThingsExpo, Michael Martin, CTO/CIO at nfrastructure, outlined these key challenges and recommended approaches for overcoming them to achieve speed and agility in the design, development and implementation of Internet of Everything solutions wi...
Cloud computing is being adopted in one form or another by 94% of enterprises today. Tens of billions of new devices are being connected to The Internet of Things. And Big Data is driving this bus. An exponential increase is expected in the amount of information being processed, managed, analyzed, and acted upon by enterprise IT. This amazing is not part of some distant future - it is happening today. One report shows a 650% increase in enterprise data by 2020. Other estimates are even higher....
I wanted to gather all of my Internet of Things (IOT) blogs into a single blog (that I could later use with my University of San Francisco (USF) Big Data “MBA” course). However as I started to pull these blogs together, I realized that my IOT discussion lacked a vision; it lacked an end point towards which an organization could drive their IOT envisioning, proof of value, app dev, data engineering and data science efforts. And I think that the IOT end point is really quite simple…
Today we can collect lots and lots of performance data. We build beautiful dashboards and even have fancy query languages to access and transform the data. Still performance data is a secret language only a couple of people understand. The more business becomes digital the more stakeholders are interested in this data including how it relates to business. Some of these people have never used a monitoring tool before. They have a question on their mind like “How is my application doing” but no id...
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.
Is the ongoing quest for agility in the data center forcing you to evaluate how to be a part of infrastructure automation efforts? As organizations evolve toward bimodal IT operations, they are embracing new service delivery models and leveraging virtualization to increase infrastructure agility. Therefore, the network must evolve in parallel to become equally agile. Read this essential piece of Gartner research for recommendations on achieving greater agility.
SYS-CON Events announced today that Venafi, the Immune System for the Internet™ and the leading provider of Next Generation Trust Protection, will exhibit at @DevOpsSummit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Venafi is the Immune System for the Internet™ that protects the foundation of all cybersecurity – cryptographic keys and digital certificates – so they can’t be misused by bad guys in attacks...
For basic one-to-one voice or video calling solutions, WebRTC has proven to be a very powerful technology. Although WebRTC’s core functionality is to provide secure, real-time p2p media streaming, leveraging native platform features and server-side components brings up new communication capabilities for web and native mobile applications, allowing for advanced multi-user use cases such as video broadcasting, conferencing, and media recording.
Akana has announced the availability of version 8 of its API Management solution. The Akana Platform provides an end-to-end API Management solution for designing, implementing, securing, managing, monitoring, and publishing APIs. It is available as a SaaS platform, on-premises, and as a hybrid deployment. Version 8 introduces a lot of new functionality, all aimed at offering customers the richest API Management capabilities in a way that is easier than ever for API and app developers to use.