Welcome!

Microsoft Cloud Authors: Andreas Grabner, Stackify Blog, Liz McMillan, David H Deans, Automic Blog

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 that Cloud Academy named "Bronze Sponsor" of 21st International Cloud Expo which will take place October 31 - November 2, 2017 at the Santa Clara Convention Center in Santa Clara, CA. Cloud Academy is the industry’s most innovative, vendor-neutral cloud technology training platform. Cloud Academy provides continuous learning solutions for individuals and enterprise teams for Amazon Web Services, Microsoft Azure, Google Cloud Platform, and the most popular cloud com...
We build IoT infrastructure products - when you have to integrate different devices, different systems and cloud you have to build an application to do that but we eliminate the need to build an application. Our products can integrate any device, any system, any cloud regardless of protocol," explained Peter Jung, Chief Product Officer at Pulzze Systems, in this SYS-CON.tv interview at @ThingsExpo, held November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA
SYS-CON Events announced today that IBM has been named “Diamond Sponsor” of SYS-CON's 21st Cloud Expo, which will take place on October 31 through November 2nd 2017 at the Santa Clara Convention Center in Santa Clara, California.
In his session at Cloud Expo, Alan Winters, an entertainment executive/TV producer turned serial entrepreneur, presented a success story of an entrepreneur who has both suffered through and benefited from offshore development across multiple businesses: The smart choice, or how to select the right offshore development partner Warning signs, or how to minimize chances of making the wrong choice Collaboration, or how to establish the most effective work processes Budget control, or how to ma...
With major technology companies and startups seriously embracing Cloud strategies, now is the perfect time to attend 21st Cloud Expo October 31 - November 2, 2017, at the Santa Clara Convention Center, CA, and June 12-14, 2018, at the Javits Center in New York City, NY, and learn what is going on, contribute to the discussions, and ensure that your enterprise is on the right path to Digital Transformation.
SYS-CON Events announced today that CA Technologies has been named "Platinum Sponsor" of SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. CA Technologies helps customers succeed in a future where every business - from apparel to energy - is being rewritten by software. From planning to development to management to security, CA creates software that fuels transformation for companies in the applic...
Multiple data types are pouring into IoT deployments. Data is coming in small packages as well as enormous files and data streams of many sizes. Widespread use of mobile devices adds to the total. In this power panel at @ThingsExpo, moderated by Conference Chair Roger Strukhoff, panelists looked at the tools and environments that are being put to use in IoT deployments, as well as the team skills a modern enterprise IT shop needs to keep things running, get a handle on all this data, and deliver...
In his session at @ThingsExpo, Eric Lachapelle, CEO of the Professional Evaluation and Certification Board (PECB), provided an overview of various initiatives to certify the security of connected devices and future trends in ensuring public trust of IoT. Eric Lachapelle is the Chief Executive Officer of the Professional Evaluation and Certification Board (PECB), an international certification body. His role is to help companies and individuals to achieve professional, accredited and worldwide re...
Amazon started as an online bookseller 20 years ago. Since then, it has evolved into a technology juggernaut that has disrupted multiple markets and industries and touches many aspects of our lives. It is a relentless technology and business model innovator driving disruption throughout numerous ecosystems. Amazon’s AWS revenues alone are approaching $16B a year making it one of the largest IT companies in the world. With dominant offerings in Cloud, IoT, eCommerce, Big Data, AI, Digital Assista...
New competitors, disruptive technologies, and growing expectations are pushing every business to both adopt and deliver new digital services. This ‘Digital Transformation’ demands rapid delivery and continuous iteration of new competitive services via multiple channels, which in turn demands new service delivery techniques – including DevOps. In this power panel at @DevOpsSummit 20th Cloud Expo, moderated by DevOps Conference Co-Chair Andi Mann, panelists examined how DevOps helps to meet the de...
No hype cycles or predictions of zillions of things here. IoT is big. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, Associate Partner at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He discussed the evaluation of communication standards and IoT messaging protocols, data analytics considerations, edge-to-cloud tec...
"When we talk about cloud without compromise what we're talking about is that when people think about 'I need the flexibility of the cloud' - it's the ability to create applications and run them in a cloud environment that's far more flexible,” explained Matthew Finnie, CTO of Interoute, in this SYS-CON.tv interview at 20th Cloud Expo, held June 6-8, 2017, at the Javits Center in New York City, NY.
IoT solutions exploit operational data generated by Internet-connected smart “things” for the purpose of gaining operational insight and producing “better outcomes” (for example, create new business models, eliminate unscheduled maintenance, etc.). The explosive proliferation of IoT solutions will result in an exponential growth in the volume of IoT data, precipitating significant Information Governance issues: who owns the IoT data, what are the rights/duties of IoT solutions adopters towards t...
With the introduction of IoT and Smart Living in every aspect of our lives, one question has become relevant: What are the security implications? To answer this, first we have to look and explore the security models of the technologies that IoT is founded upon. In his session at @ThingsExpo, Nevi Kaja, a Research Engineer at Ford Motor Company, discussed some of the security challenges of the IoT infrastructure and related how these aspects impact Smart Living. The material was delivered interac...
The Internet giants are fully embracing AI. All the services they offer to their customers are aimed at drawing a map of the world with the data they get. The AIs from these companies are used to build disruptive approaches that cannot be used by established enterprises, which are threatened by these disruptions. However, most leaders underestimate the effect this will have on their businesses. In his session at 21st Cloud Expo, Rene Buest, Director Market Research & Technology Evangelism at Ara...
When growing capacity and power in the data center, the architectural trade-offs between server scale-up vs. scale-out continue to be debated. Both approaches are valid: scale-out adds multiple, smaller servers running in a distributed computing model, while scale-up adds fewer, more powerful servers that are capable of running larger workloads. It’s worth noting that there are additional, unique advantages that scale-up architectures offer. One big advantage is large memory and compute capacity...
Artificial intelligence, machine learning, neural networks. We’re in the midst of a wave of excitement around AI such as hasn’t been seen for a few decades. But those previous periods of inflated expectations led to troughs of disappointment. Will this time be different? Most likely. Applications of AI such as predictive analytics are already decreasing costs and improving reliability of industrial machinery. Furthermore, the funding and research going into AI now comes from a wide range of com...
Internet of @ThingsExpo, taking place October 31 - November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA, is co-located with 21st 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 devic...
SYS-CON Events announced today that Enzu will exhibit at SYS-CON's 21st Int\ernational Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Enzu’s mission is to be the leading provider of enterprise cloud solutions worldwide. Enzu enables online businesses to use its IT infrastructure to their competitive advantage. By offering a suite of proven hosting and management services, Enzu wants companies to focus on the core of their ...
SYS-CON Events announced today that GrapeUp, the leading provider of rapid product development at the speed of business, will exhibit at SYS-CON's 21st International Cloud Expo®, which will take place October 31-November 2, 2017, at the Santa Clara Convention Center in Santa Clara, CA. Grape Up is a software company, specialized in cloud native application development and professional services related to Cloud Foundry PaaS. With five expert teams that operate in various sectors of the market acr...