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Exelis Announces Third-quarter 2013 Financial Results

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.

Transition of the Exelis Brand

Effective today, the company also formally removed the “ITT” from its name and will be branded as “Exelis” going forward. Exelis has used the “ITT” name alongside “Exelis” as part of its branding strategy since October 31, 2011, under a licensing agreement with ITT Corporation.

Investor Call Today

Exelis senior management will host a conference call for investors today at 10 a.m. Eastern Daylight Time to review third-quarter 2013 financial results and 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 timing and navigation, sensors, air traffic solutions, image processing and distribution, communications and information systems, logistics and technical services; and we are 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 19,000 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;
  • 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, 2012, 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

September 30,

   

Nine Months Ended

September 30,

      2013     2012     2013     2012
Product revenue $ 498     $ 611     $ 1,515     $ 1,884
Service revenue       643       750         2,062       2,277
Total revenue       1,141       1,361         3,577       4,161
Cost of product revenue 354 434 1,091 1,328
Cost of service revenue 537 649 1,708 1,977
Selling, general and administrative expenses 100 114 337 377
Research and development expenses 11 18 39 48
Restructuring and asset impairment charges, net       6       3         68       5
Operating income 133 143 334 426

Interest expense, net

10 9 28 29
Other expense (income), net       3       (4 )       2       3
Income from continuing operations before income tax expense 120 138 304 394
Income tax expense       40       50         102       150
Net income     $ 80     $ 88       $ 202     $ 244
Earnings Per Share
Basic
Net income $ 0.42 $ 0.47 $ 1.07 $ 1.30
Diluted
Net income $ 0.41 $ 0.47 $ 1.06 $ 1.30
Weighted average common shares outstanding – basic 188.5 187.6 188.3 187.3
Weighted average common shares outstanding – diluted 192.8 188.7 191.0 188.3
Cash dividends declared per common share     $ 0.10     $ 0.10       $ 0.31     $ 0.31
 
 
Exelis Inc.
Condensed Consolidated Balance Sheets
(unaudited)
 
 
(IN MILLIONS)     September 30,     December 31,
      2013     2012
Assets
Current assets
Cash and cash equivalents $ 309 $ 292
Receivables, net 1,012 995
Inventories, net 288 283
Deferred tax asset 29 85
Other current assets       56         58  
Total current assets       1,694         1,713  
Plant, property and equipment, net 500 512
Goodwill 2,184 2,180
Other intangible assets, net 173 184
Deferred tax asset 471 556
Other non-current assets       71         67  
Total non-current assets       3,399         3,499  
Total assets     $ 5,093       $ 5,212  
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable $ 351 $ 444
Advance payments and billings in excess of costs 335 322
Compensation and other employee benefits 192 246
Other accrued liabilities       229         203  
Total current liabilities       1,107         1,215  
Defined benefit plans 1,858 2,203
Long-term debt 649 649
Deferred tax liability 3 1
Other non-current liabilities       129         128  
Total non-current liabilities       2,639         2,981  
Total liabilities       3,746         4,196  
Commitments and contingencies (Note 15)
Shareholders' equity
Common stock 2 2
Additional paid-in capital 2,602 2,575
Treasury stock (5 )
Retained earnings 416 274
Accumulated other comprehensive loss       (1,668 )       (1,835 )
Total shareholders' equity       1,347         1,016  
Total liabilities and shareholders' equity     $ 5,093       $ 5,212  
 
 
Exelis Inc.
Condensed Consolidated Statements of Cash Flows
(unaudited)
 
 
(IN MILLIONS)     Nine Months Ended September 30,
      2013     2012
Operating activities    
Net income $ 202 $ 244
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization 85 97
Stock-based compensation 25 18
Restructuring and asset impairment charges, net 68 5
Payments for restructuring (42 ) (14 )
Defined benefit plans expense 69 36
Defined benefit plans payments (136 ) (293 )
Change in assets and liabilities
Change in receivables (22 ) (40 )
Change in inventories (4 ) 29
Change in other assets (5 ) 1
Change in accounts payable (93 ) (53 )
Change in advance payments and billings in excess of costs 13 (14 )
Change in deferred taxes 31 147
Change in other liabilities       (73 )       (66 )
Net cash provided by operating activities       118         97  
Investing activities
Capital expenditures (57 ) (86 )
Proceeds from the sale of assets 9 2
Acquisitions, net of cash acquired (16 ) (42 )
Other, net               (1 )
Net cash used in investing activities       (64 )       (127 )
Financing activities
Proceeds from commercial paper, net 134
Dividends paid (39 ) (39 )
Common stock repurchased (5 )
Proceeds from exercise of stock options 11 14
Other, net       (2 )       (7 )
Net cash (used in) provided by financing activities       (35 )       102  
Exchange rate effects on cash and cash equivalents       (2 )       6  
Net change in cash and cash equivalents 17 78
Cash and cash equivalents – beginning of year       292         116  
Cash and cash equivalents – end of period     $ 309       $ 194  
 




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