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Exelis Reports Fourth-quarter And Full-year 2012 Financial Results; Provides 2013 Outlook

Stocks in this article: XLS

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 2012 results and 2013 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 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.
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(preliminary and unaudited)
 
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS) Year ended December 31,
    2012   2011   2010
Product revenue $ 2,487 $ 2,817 $ 3,596
Service revenue   3,035     3,022     2,295
Total revenue   5,522     5,839     5,891
Costs of product revenue 1,726 1,933 2,491
Costs of service revenue 2,633 2,683 2,032
Selling, general and administrative expenses 516 566 525
Research and development expenses 67 99 119
Restructuring and asset impairment charges, net   19     23     35
Operating income 561 535 689
Interest expense, net   37     10    
Other expense (income), net   3     (12)     (7)
Income from continuing operations before income tax expense 521 537 696
Income tax expense   191     211     248
Income from continuing operations 330 326 448
Income from discontinued operations, net of tax           139
Net income $ 330   $ 326   $ 587
Earnings Per Share
Basic
Continuing operations $ 1.76 $ 1.75 $ 2.41
Discontinued operations 0.75
Net income $ 1.76 $ 1.75 $ 3.15
Diluted
Continuing operations $ 1.75 $ 1.75 $ 2.39
Discontinued operations 0.74
Net income $ 1.75 $ 1.75 $ 3.14
Weighted average common shares – basic 187.4 186.2 186.2
Weighted average common shares – diluted 188.6 186.7 187.1
Cash dividends declared per common share $ 0.41   $ 0.10   $
 
   
EXELIS INC.
CONSOLIDATED BALANCE SHEETS
(preliminary and unaudited)
 
 
(IN MILLIONS) December 31,
      2012   2011
Assets
Current assets
Cash and cash equivalents $ 292 $ 116
Receivables, net 995 1,061
Inventories, net 283 337
Deferred tax asset 85 106
Other current assets     58     49
Total current assets     1,713     1,669
Plant, property and equipment, net 512 494
Goodwill 2,180 2,154
Other intangible assets, net 184 211
Deferred tax asset 556 507
Other non-current assets     67     64
Total non-current assets     3,499     3,430
Total assets   $ 5,212   $ 5,099
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 444 $ 447
Advance payments and billings in excess of costs 322 378
Compensation and other employee benefits 246 250
Other accrued liabilities     203     199
Total current liabilities     1,215     1,274
Defined benefit plans 2,203 2,149
Long-term debt 649 649
Deferred tax liability 1 1
Other non-current liabilities     128     133
Total non-current liabilities     2,981     2,932
Total liabilities     4,196     4,206
Commitments and contingencies
Shareholders' equity
Common stock 2 2
Additional paid-in capital 2,575 2,523
Retained earnings 274 23
Accumulated other comprehensive loss     (1,835)     (1,655)
Total shareholders' equity     1,016     893
Total liabilities and shareholders' equity   $ 5,212   $ 5,099
 
     
EXELIS INC.
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(preliminary and unaudited)
 
 
(IN MILLIONS) Year Ended December 31,
    2012   2011   2010
Operating activities
Net income $ 330 $ 326 $ 587
Less income from discontinued operations             (139)
Income from continuing operations 330 326 448
Adjustments to reconcile income from continuing operations to cash provided by operating activities:
Depreciation and amortization 130 133 139
Stock-based compensation 24 18 15
Restructuring and asset impairment charges, net 19 23 35
Payments for restructuring (20) (19) (21)
Defined benefit plans expense 43 46 7
Defined benefit plans payments (290) (87) (6)
Change in assets and liabilities
Change in receivables 41 (106) (100)
Change in inventories 56 (99) 131
Change in other assets (11) (27) 6
Change in accounts payable (2) 122 (37)
Change in advance payments and billings in excess of costs (58) (49) 36
Change in deferred taxes 112 64 (1)
Change in other liabilities 9 (13) (12)
Other, net     2     2     1
Net cash provided by operating activities     385     334     641
Investing activities
Capital expenditures (119) (95) (108)
Proceeds from the sale of assets 2 14 251
Acquisitions, net of cash acquired (43) (29)
Other, net     1     (4)    
Net cash (used in) provided by investing activities     (159)     (85)     114
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 (77) (19)
Proceeds from the exercise of stock options 19
Transfers to parent, net (775) (747)
Other, net     1     4     (28)
Net cash used in financing activities     (57)     (147)     (775)
Exchange rate effects on cash and cash equivalents 7 (4)
Net cash from discontinued operations             4
Net change in cash and cash equivalents 176 98 (16)
Cash and cash equivalents – beginning of year 116 18 34
Cash and cash equivalents – end of year   $ 292   $ 116   $ 18
Supplemental disclosures of cash flow information
Cash paid during the year for
Income taxes (net of refunds received) $ 28 $ 86 $ 206
Interest   $ 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 sales, operating income, income from continuing operations, or net cash from continuing operations as determined in accordance with GAAP. We consider the following non-GAAP measures, which may not be comparable to similarly titled measures reported by other companies, to be key performance indicators:

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