- $5.3 billion in 2013 orders, a 10 percent increase over full-year 2012
- 2013 funded backlog increased to $3.4 billion, a 17 percent increase over full-year 2012
- Full-year 2013 earnings of $1.46 per share; adjusted earnings of $1.50 per share
- Funded status of pension improves by more than 35%
MCLEAN, Va. — (BUSINESS WIRE) — February 28, 2014 — Exelis (NYSE: XLS) reported 2013 financial results for the fourth quarter and full year of 2013. Fourth-quarter revenue was $1.2 billion, a 9 percent decrease from the fourth quarter of 2012. Fourth-quarter earnings were $0.41 per share, a 9 percent decrease from the fourth quarter of 2012. Adjusted earnings, which exclude costs related to the pending spin-off of Exelis Mission Systems and a tax-related item related to the 2011 spin-off from ITT Corporation, were $0.44 per share for the fourth quarter, a 6 percent decrease from the same period in 2012. The company generated $173 million in free cash flow in the fourth quarter of 2013.
For the full-year 2013, Exelis reported revenue of $4.8 billion, a 13 percent decline from 2012, and earnings of $1.46 per share, a 17 percent decrease compared to 2012. Adjusted earnings were $1.50 per share, down 19 percent from 2012. Earnings and adjusted earnings for the full year were driven by lower sales volumes and increased restructuring expenses of $83 million, partially offset by increased profitability in the Information & Technical Services segment. Free cash flow for the year was $234 million, which reflects approximately $200 million in payments made by the company to its pension plans.
The company secured $5.3 billion in orders in 2013, earning significant new business within our four Strategic Growth Platforms, extending key existing contracts, and continuing steady orders in our more mature business areas. International orders for the full-year increased 50 percent over 2012. Key contract awards included:
- A contract with South Korea for an advanced geostationary weather imager to support the country’s forecasting capabilities
- An award to supply electronic support measure (ESM) suites to several classes of Royal Australian Navy ships
- An order from the U.S. Navy for a second production lot of Exelis AN/AQ-214 jammers, a key electronic warfare subsystem on U.S. and Australian F/A-18 aircraft
- Long-term commercial agreements from Boeing to produce the composite airframe substructure for the 787 Dreamliner, and to continue producing composite tanks for several of its aircraft series
- A contract extension from the Jet Propulsion Laboratory for maintenance, operations and engineering services for NASA’s Deep Space Network
- Nearly $300 million in orders for night vision and communications equipment from a variety of international customers.
“In 2013, we proactively and significantly restructured our business to improve operational efficiency and focus on the emerging needs of customers in the global C4ISR, aerospace and information solutions markets,” said Exelis CEO and President David F. Melcher. “We believe that these steps, our solid backlog and the execution of the planned spin-off of our Mission Systems business have put in place the foundation for Exelis to better serve our customers and provide greater value for shareholders in 2014.”
Segment Results
C4ISR Electronics and Systems
C4ISR Electronics and Systems fourth-quarter 2013 revenue was $621million, up 3 percent from the same period in 2012. Full-year revenue for the segment was $2.1 billion, down 14 percent compared to 2012 as declines in sales of legacy domestic night vision goggles, commercial imagery payloads and IED jammers were offset partially by strong international electronic warfare equipment sales. Fourth-quarter 2013 adjusted operating income was $94 million, up 1 percent from the fourth quarter of 2012. Full-year 2013 adjusted operating income was $222 million, a decline of 39 percent from 2012, driven by lower sales volumes, as well as restructuring expenses, which the company expects should positively impact profitability in 2014.
Information and Technical Services
Information and Technical Services fourth-quarter 2013 revenue was $618 million, a decrease of 18 percent from the same period in 2012. Full-year revenue for the segment was $2.7 billion, a 12 percent decline from 2012, driven by slowing in Middle East and Afghanistan programs associated with reduced U.S. military presence in those regions. Fourth-quarter adjusted operating income was $56 million, up 14 percent from the fourth quarter of 2012. Full-year 2013 adjusted operating income was $262 million, 17 percent higher than 2012 due to improved contract performance and operational efficiencies.
2014 Guidance
|
|
||
| Sales | ≈$4.6 billion | |
| Adjusted Operating Margin | ≈11% | |
| Adjusted Earnings Per Share | $1.52 - $1.59 | |
| Free Cash Flow | ≈$250 million | |
The company's 2014 financial guidance is based on the spending levels provided for in the Bipartisan Budget Act of 2013 and the Consolidated Appropriations Act of 2014. The guidance assumes no disruption or cancellation of any of our significant programs and no disruption or shutdown of government operations resulting from a federal government debt ceiling breach.
The company’s 2014 financial guidance includes approximately $20 million of projected restructuring expense. The company also expects approximately $25 million of expenses related to the planned spin-off of its Mission Systems business into a separate publicly traded company. FAS post-retirement expense for the year is projected in the range of $60 million - $70 million, at the midpoint a decrease of $22 million from the prior year. The company anticipates generating free cash flow of approximately $250 million after making pension contributions in the range of $185 million to $200 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 Standard Time to review fourth-quarter and full-year 2013 results and 2014 guidance, 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 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 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;
- 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. | |||||||||
| CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS | |||||||||
| (preliminary and unaudited) | |||||||||
| (IN MILLIONS, EXCEPT PER SHARE AMOUNTS) | Year ended December 31, | ||||||||
| 2013 | 2012 | 2011 | |||||||
| Product revenue | $ | 2,136 | $ | 2,487 | $ | 2,817 | |||
| Service revenue | 2,680 | 3,035 | 3,022 | ||||||
| Total revenue | 4,816 | 5,522 | 5,839 | ||||||
| Costs of product revenue | 1,517 | 1,726 | 1,933 | ||||||
| Costs of service revenue | 2,231 | 2,633 | 2,683 | ||||||
| Selling, general and administrative expenses | 455 | 516 | 566 | ||||||
| Research and development expenses | 54 | 67 | 99 | ||||||
| Restructuring and asset impairment charges | 83 | 19 | 23 | ||||||
| Operating income | 476 | 561 | 535 | ||||||
| Interest expense, net | 37 | 37 | 10 | ||||||
| Other expense (income), net | 2 | 3 | (12) | ||||||
| Income from continuing operations before income tax expense | 437 | 521 | 537 | ||||||
| Income tax expense | 156 | 191 | 211 | ||||||
| Net income | $ | 281 | $ | 330 | $ | 326 | |||
| Earnings Per Share | |||||||||
| Basic | |||||||||
| Net income | $ | 1.49 | $ | 1.76 | $ | 1.75 | |||
| Diluted | |||||||||
| Net income | $ | 1.46 | $ | 1.75 | $ | 1.75 | |||
| Weighted average common shares – basic | 188.5 | 187.4 | 186.2 | ||||||
| Weighted average common shares – diluted | 192.0 | 188.6 | 186.7 | ||||||
| Cash dividends declared per common share | $ | 0.41 | $ | 0.41 | $ | 0.10 | |||
| EXELIS INC. | ||||||
| CONSOLIDATED BALANCE SHEETS | ||||||
| (preliminary and unaudited) | ||||||
| (IN MILLIONS) | December 31, | |||||
| 2013 | 2012 | |||||
| Assets | ||||||
| Current assets | ||||||
| Cash and cash equivalents | $ | 469 | $ | 292 | ||
| Receivables, net | 939 | 995 | ||||
| Inventories, net | 246 | 283 | ||||
| Deferred tax asset | 16 | 85 | ||||
| Other current assets | 70 | 58 | ||||
| Total current assets | 1,740 | 1,713 | ||||
| Plant, property and equipment, net | 498 | 512 | ||||
| Goodwill | 2,184 | 2,180 | ||||
| Other intangible assets, net | 167 | 184 | ||||
| Deferred tax asset | 216 | 556 | ||||
| Other non-current assets | 79 | 67 | ||||
| Total non-current assets | 3,144 | 3,499 | ||||
| Total assets | $ | 4,884 | $ | 5,212 | ||
| Liabilities and Shareholders' Equity | ||||||
| Current liabilities | ||||||
| Accounts payable | $ | 367 | $ | 444 | ||
| Advance payments and billings in excess of costs | 301 | 322 | ||||
| Compensation and other employee benefits | 216 | 246 | ||||
| Other accrued liabilities | 160 | 203 | ||||
| Total current liabilities | 1,044 | 1,215 | ||||
| Defined benefit plans | 1,407 | 2,203 | ||||
| Long-term debt | 649 | 649 | ||||
| Deferred tax liability | 2 | 1 | ||||
| Other non-current liabilities | 130 | 128 | ||||
| Total non-current liabilities | 2,188 | 2,981 | ||||
| Total liabilities | 3,232 | 4,196 | ||||
| Commitments and contingencies | ||||||
| Shareholders' equity | ||||||
| Common stock | 2 | 2 | ||||
| Additional paid-in capital | 2,623 | 2,575 | ||||
| Treasury stock | (16) | — | ||||
| Retained earnings | 475 | 274 | ||||
| Accumulated other comprehensive loss | (1,432) | (1,835) | ||||
| Total shareholders' equity | 1,652 | 1,016 | ||||
| Total liabilities and shareholders' equity | $ | 4,884 | $ | 5,212 | ||
| EXELIS INC. | |||||||||
| CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS | |||||||||
| (preliminary and unaudited) | |||||||||
| (IN MILLIONS) | Year Ended December 31, | ||||||||
| 2013 | 2012 | 2011 | |||||||
| Operating activities | |||||||||
| Net income | $ | 281 | $ | 330 | $ | 326 | |||
| Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||
| Depreciation and amortization | 110 | 130 | 133 | ||||||
| Stock-based compensation | 32 | 24 | 18 | ||||||
| Restructuring and asset impairment charges | 83 | 19 | 23 | ||||||
| Payments for restructuring | (58) | (20) | (19) | ||||||
| Defined benefit plans expense | 87 | 43 | 46 | ||||||
| Defined benefit plans payments | (206) | (290) | (87) | ||||||
| Change in assets and liabilities | |||||||||
| Change in receivables | 52 | 41 | (106) | ||||||
| Change in inventories | 39 | 56 | (99) | ||||||
| Change in other assets | (20) | (11) | (27) | ||||||
| Change in accounts payable | (77) | (2) | 122 | ||||||
| Change in advance payments and billings in excess of costs | (21) | (58) | (49) | ||||||
| Change in deferred taxes | 130 | 112 | 64 | ||||||
| Change in other liabilities | (123) | 9 | (13) | ||||||
| Other, net | 1 | 2 | 2 | ||||||
| Net cash provided by operating activities | 310 | 385 | 334 | ||||||
| Investing activities | |||||||||
| Capital expenditures | (78) | (119) | (95) | ||||||
| Proceeds from the sale of assets | 9 | 2 | 14 | ||||||
| Acquisitions, net of cash acquired | (16) | (43) | — | ||||||
| Other, net | 2 | 1 | (4) | ||||||
| Net cash used in investing activities | (83) | (159) | (85) | ||||||
| Financing activities | |||||||||
| Short-term borrowing under credit facility | — | — | 240 | ||||||
| Repayments under credit facility | — | — | (240) | ||||||
| Proceeds from the issuance of debt, net | — | — | 649 | ||||||
| Payment of debt issuance costs | — | — | (6) | ||||||
| Dividend paid | (58) | (77) | (19) | ||||||
| Common stock repurchased | (16) | — | — | ||||||
| Proceeds from the exercise of stock options | 23 | 19 | — | ||||||
| Transfers to parent, net | — | — | (775) | ||||||
| Other, net | — | 1 | 4 | ||||||
| Net cash used in financing activities | (51) | (57) | (147) | ||||||
| Exchange rate effects on cash and cash equivalents | 1 | 7 | (4) | ||||||
| Net change in cash and cash equivalents | 177 | 176 | 98 | ||||||
| Cash and cash equivalents – beginning of year | 292 | 116 | 18 | ||||||
| Cash and cash equivalents – end of year | $ | 469 | $ | 292 | $ | 116 | |||
| Supplemental disclosures of cash flow information | |||||||||
| Cash paid during the year for | |||||||||
| Income taxes (net of refunds received) | $ | 97 | $ | 28 | $ | 86 | |||
| Interest | $ | 34 | $ | 37 | $ | — | |||
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 | Twelve Months Ended | |||||||
| December 31, | December 31, | |||||||
| ($ million, except per share) | 2013 | 2012 | 2013 | 2012 | ||||
| Net Income | 79 | 86 | 281 | 330 | ||||
| Separation Costs for the Exelis Mission Systems Spin-off, net of tax | 2 | - | 2 | - | ||||
| Separation Costs for the ITT Spin-off, net of tax | - | 4 | - | 19 | ||||
| Tax-related special items for the ITT Spin-off | 5 | - | 5 | - | ||||
| Adjusted Net Income | 86 | 90 | 288 | 349 | ||||
| Net Income per fully diluted share | $0.41 | $0.45 | $1.46 | $1.75 | ||||
| Adjusted Net Income per fully diluted share | $0.44 | $0.47 | $1.50 | $1.85 | ||||
| Weighted Average Shares Outstanding, Diluted | 194.2 | 189.5 | 192.0 | 188.6 | ||||
| Exelis Inc. | ||||||||||||
| Non-GAAP Financial Measures - Adjusted Segment Operating Income & Operating Margin | ||||||||||||
| Three Months Ended | Twelve Months Ended | |||||||||||
| December 31, | December 31, | |||||||||||
| ($ million) | 2013 | 2012 | 2013 | 2012 | ||||||||
| Sales | 1,239 | 1,361 | 4,816 | 5,522 | ||||||||
| C4ISR | 621 | 603 | 2,136 | 2,487 | ||||||||
| I&TS | 618 | 758 | 2,680 | 3,035 | ||||||||
| Segment Operating Income, As Reported | 142 | 135 | 476 | 561 | ||||||||
| C4ISR | 90 | 89 | 218 | 350 | ||||||||
| I&TS | 52 | 46 | 258 | 211 | ||||||||
| Separation Costs & Other Special Items | 8 | 7 | 8 | 29 | ||||||||
| C4ISR | 4 | 4 | 4 | 16 | ||||||||
| I&TS | 4 | 3 | 4 | 13 | ||||||||
| Segment Operating Income, Adjusted | 150 | 142 | 484 | 590 | ||||||||
| C4ISR | 94 | 93 | 222 | 366 | ||||||||
| I&TS | 56 | 49 | 262 | 224 | ||||||||
| Segment Operating Margin, As Reported | ||||||||||||
| C4ISR | 14.5 | % | 14.8 | % | 10.2 | % | 14.1 | % | ||||
| I&TS | 8.4 | % | 6.1 | % | 9.6 | % | 7.0 | % | ||||
| Segment Operating Margin, Adjusted | ||||||||||||
| C4ISR | 15.1 | % | 15.4 | % | 10.4 | % | 14.7 | % | ||||
| I&TS | 9.1 | % | 6.5 | % | 9.8 | % | 7.4 | % | ||||
| Operating Margin, As Reported | 11.5 | % | 9.9 | % | 9.9 | % | 10.2 | % | ||||
| Operating Margin, Adjusted | 12.1 | % | 10.4 | % | 10.0 | % | 10.7 | % | ||||
| Exelis Inc. | ||||||
| Free Cash Flow Year-to-Date | ||||||
| Twelve Months Ending | ||||||
| December 31, | ||||||
| ($ million) | 2013 | 2012 | ||||
| Cash Flow From Operating Activities | 310 | 385 | ||||
| Subtract: | ||||||
| Capital Expenditures | (78 | ) | (119 | ) | ||
| Free Cash Flow | 232 | 266 | ||||
| Add: | ||||||
| Separation Costs for the Exelis Mission Systems Spin-off, net of tax | 2 | - | ||||
| Separation Costs for the ITT Spin-off, net of tax | - | 19 | ||||
| Free Cash Flow, as Adjusted | 234 | 285 | ||||
| Exelis Inc. | |||||||||
| Free Cash Flow Quarter-to-Date | |||||||||
| Three Months Ending | Twelve Months Ending | Twelve Months Ending | |||||||
| December 31, | December 31, | December 31, | |||||||
| ($ million) | 2013 | 2013 | 2013 | ||||||
| Cash Flow From Operating Activities | 192 | 310 | 118 | ||||||
| Subtract: | |||||||||
| Capital Expenditures | (21 | ) | (78 | ) | (57 | ) | |||
| Free Cash Flow | 171 | 232 | 61 | ||||||
| Add: | |||||||||
| Separation Costs for the Exelis Mission Systems Spin-off, net of tax | 2 | 2 | - | ||||||
| Free Cash Flow, as Adjusted | 173 | 234 | 61 | ||||||
Contact:
Exelis
Investors
Katy Herr, 703-790-6376
Email Contact
or
Media
B.J.
Talley, 703-790-6349
Email Contact