- Revenue from continuing operations
increases 5 percent over the first quarter of 2014
- Operating margin from continuing
operations increases 400bps to 13.2 percent; C4ISR segment
operating income increases 85% over the first quarter of 2014
- Earnings per share from continuing
operations up 55 percent over the first quarter of 2014
Exelis (NYSE: XLS) reported financial results for the first
quarter of 2015. First-quarter revenue from continuing operations
was $785 million, a five percent increase from the first quarter of
2014. First-quarter operating income from continuing operations was
$104 million, a 51 percent improvement from the first quarter of
2014. First-quarter diluted earnings per share from continuing
operations were $0.31 per share, a 55 percent increase from the
first quarter of 2014. The company reported $(17) million in first
quarter cash from continuing operations an improvement of $91
million from the prior period.
The company secured $700 million in orders in the first quarter
of 2015, including new business in its strategic growth platforms.
Key announcements during the quarter included:
- Over $30 million in electronic warfare
awards for both U.S. and international customers;
- Over $25 million in Carriage and
Release programs for the F-35 and MQ-9 Reaper programs;
- A multi-million dollar contract from
Airbus to provide center wing box struts for the A350 XWB
aircraft;
- The launch of the Global Aviation
Solutions business area within the Information Services segment and
new contracts with the Port of Seattle, Los Angeles Airport and
Singapore Changi Airport; and
- Over $17 million in communications and
night vision awards.
“First-quarter revenue and profitability growth reflect the
strength of our current backlog and improvements in our operational
efficiency,” said Exelis CEO and President David F. Melcher. “As we
move toward closing the merger with Harris Corporation, I am proud
of our employees’ continued commitment to the Exelis growth
strategy and delivering our customers and shareholders outstanding
capabilities and value.”
Segment Results
C4ISR Electronics and Systems
C4ISR Electronics and Systems first-quarter 2015 revenue was
$508 million, up 6 percent from the same period in 2014 primarily
due to higher revenue on environmental sensing satellite payloads
and international electronic warfare products. First-quarter 2015
operating income from continuing operations was $74 million, up 85
percent from the first quarter of 2014, driven by favorable sales
mix and lower restructuring costs and SG&A.
Information and Technical Services
Information and Technical Services first-quarter 2015 revenue
from continuing operations was $277 million, an increase of 3
percent from the same period in 2014, driven by higher activity on
Civil and Aerospace program area contracts. First-quarter operating
income from continuing operations was $30 million, up 3 percent
from the first quarter of 2014.
About Exelis
Exelis is a diversified, top-tier global aerospace, defense,
information and services company that leverages a greater than
50-year legacy of deep customer knowledge and technical expertise
to deliver affordable, mission-critical solutions for global
customers. Exelis is 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, Virginia, Exelis employs approximately
10,000 people and generated 2014 sales of approximately $3.3
billion. For more information, visit our website at
www.exelisinc.com or connect with us on Facebook, Twitter and
YouTube.
“Safe Harbor” Statement under the Private
Securities Litigation Reform Act of 1995
This communication contains “forward-looking” statements within
the meaning of Section 21E of the Securities Exchange Act of 1934,
as amended, and the Private Securities Litigation Reform Act of
1995, known as the PSLRA. These statements, as they relate to
Exelis and Harris, the management of either such company or the
proposed transaction between Exelis and Harris, involve risks and
uncertainties that may cause results to differ materially from
those set forth in the statements. These statements are based on
current plans, estimates and projections, and therefore, you are
cautioned not to place undue reliance on them. No forward-looking
statement can be guaranteed, and actual results may differ
materially from those projected. Exelis and Harris undertake no
obligation to publicly update any forward-looking statement,
whether as a result of new information, future events or otherwise,
except to the extent required by law. Forward-looking statements
are not historical facts, but rather are based on current
expectations, estimates, assumptions and projections about the
business and future financial results, and other legal, regulatory
and economic developments. We use words such as “anticipates,”
“believes,” “plans,” “expects,” “projects,” “future,” “intends,”
“may,” “will,” “should,” “could,” “estimates,” “predicts,”
“potential,” “continue,” “guidance,” and similar expressions to
identify these forward-looking statements that are intended to be
covered by the safe harbor provisions of the PSLRA. Actual results
could differ materially from the results contemplated by these
forward-looking statements due to a number of factors, including:
the risk that the businesses will not be integrated successfully;
the risk that the cost savings and any other synergies from the
transaction may not be fully realized or may take longer to realize
than expected; disruption from the transaction making it more
difficult to maintain relationships with customers, employees or
suppliers; the failure to obtain governmental approvals of the
transaction on the proposed terms and schedule, and any conditions
imposed on the combined company in connection with consummation of
the merger; the failure to obtain approval of the merger by the
shareholders of Exelis and the failure to satisfy various other
conditions to the closing of the merger contemplated by the merger
agreement; and the risks that are described from time to time in
Exelis’ and Harris’ respective reports filed with the SEC,
including Exelis’ Annual Report on Form 10-K for the year ended
December 31, 2014 (as amended by Annual Report on Form 10-K/A filed
on April 6, 2015), and Harris’ annual report on Form 10-K for the
year ended June 27, 2014 and quarterly reports on Form 10-Q for the
quarters ended September 26, 2014, and January 2, 2015, in each
case, as such reports may have been amended. This document speaks
only as of its date, and Exelis and Harris each disclaims any duty
to update the information herein.
Additional Information and Where to Find
It
In connection with the proposed transaction, Harris has filed
with the SEC, and the SEC has declared effective, a Registration
Statement on Form S-4 (Reg. No. 333-202539), containing a proxy
statement/prospectus regarding the proposed merger. SHAREHOLDERS OF
EXELIS ARE ENCOURAGED TO READ THE REGISTRATION STATEMENT AND ANY
OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, INCLUDING THE
DEFINITIVE PROXY STATEMENT/ PROSPECTUS THAT IS PART OF THE
REGISTRATION STATEMENT, BECAUSE THEY CONTAIN IMPORTANT INFORMATION
ABOUT THE PROPOSED MERGER. The definitive proxy
statement/prospectus has been mailed to shareholders of Exelis.
Investors and security holders may obtain the documents free of
charge at the SEC’s web site, www.sec.gov, from Harris at its web
site, www.Harris.com, or from Exelis at its web site,
www.Exelisinc.com, or 1650 Tysons Blvd. Suite 1700, McLean, VA
22102, attention: Corporate Secretary.
Participants In Solicitation
Exelis and Harris and their respective directors and executive
officers, other members of management and employees and the
proposed directors and executive officers of the combined company,
may be deemed to be participants in the solicitation of proxies in
respect of the proposed transaction. Information concerning the
proposed directors and executive officers of the combined company,
Exelis’ and Harris’ respective directors and executive officers and
other participants in the proxy solicitation, including a
description of their interests, is included in the definitive proxy
statement/prospectus contained in the above-referenced Registration
Statement on Form S-4 (Reg. No. 333-202539), as amended, and in
Exelis’ and Harris’ respective Form 10-Ks, as amended, for the year
ended December 31, 2014 in respect of Exelis and for the year ended
June 27, 2014 in respect of Harris.
This communication shall not constitute an offer to sell or the
solicitation of an offer to sell or the solicitation of an offer to
buy any securities, nor shall there be any sale of securities in
any jurisdiction in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the
securities laws of any such jurisdiction. No offer of securities
shall be made except by means of a prospectus meeting the
requirements of Section 10 of the Securities Act of 1933, as
amended.
Exelis Inc. Consolidated Statements of
Operations (unaudited) (IN MILLIONS, EXCEPT PER SHARE
AMOUNTS)
Three Months Ended March 31,
2015 2014 Product revenue
$ 508 $ 480 Service revenue
277
268 Total revenue
785 748 Cost of product revenue
354 354 Cost of service revenue
218 212 Selling,
general and administrative expenses
95 98 Research and
development expenses
13 10 Restructuring and asset
impairment charges
1 5
Operating income
104 69 Interest expense, net
9 9 Other (income) expense, net
−
(2 ) Income from continuing operations before
income tax expense
95 62 Income tax expense
36 23 Income from Continuing
operations
59 39 Income from discontinued operations, net of
tax
− 13
Net
income $ 59 $ 52
Earnings Per Share Basic Continuing operations
$ 0.32
$ 0.21 Discontinued operations
$ − $ 0.07 Net income
$ 0.32 $ 0.27 Diluted Continuing operations
$
0.31 $ 0.20 Discontinued operations
$ − $ 0.07
Net income
$ 0.31 $ 0.27 Weighted average common
shares outstanding – basic
186.4 189.6 Weighted average
common shares outstanding – diluted
191.5 194.9 Cash
dividends declared per common share
$ 0.10
$ 0.10
Exelis Inc.
Consolidated Balance Sheets (unaudited) (IN MILLIONS)
March 31, December 31,
2015 2014
Assets Current assets Cash
and cash equivalents
$ 479 $ 510 Receivables, net
853 824 Inventories, net
231 225 Deferred tax asset
55 56 Other current assets
47
47 Total current assets
1,665 1,662 Plant, property and
equipment, net
422 437 Goodwill
1,973 1,976 Other
intangible assets, net
143 150 Deferred tax asset
541
566 Other non-current assets
87
87 Total non-current assets
3,166 3,216
Total assets
$ 4,831 $ 4,878
Liabilities and Shareholders' Equity Current liabilities
Accounts payable
$ 229 $ 238 Advance payments and
billings in excess of costs
231 242 Compensation and other
employee benefits
120 170 Other accrued liabilities
134 124 Total current
liabilities
714 774
Defined benefit plans
2,021 2,072 Long-term debt
649 649 Deferred tax liability
2 2 Other non-current
liabilities
135 134
Total non-current liabilities
2,807
2,857 Total liabilities
3,521 3,631 Commitments and
contingencies Shareholders' equity Common stock
2 2
Additional paid-in capital
2,621 2,607 Treasury stock
(128 ) (128 ) Retained earnings
685 645
Accumulated other comprehensive loss
(1,870
) (1,879 ) Total shareholders' equity
1,310 1,247
Total
liabilities and shareholders' equity $
4,831 $ 4,878
Exelis
Inc. Consolidated Statements of Cash Flows (unaudited)
(IN MILLIONS) Three Months Ended March 31,
2015 2014
Operating activities Net
income
$ 59 $ 52 Less income from discontinued
operations
— 13
Income from continuing operations
59 39 Adjustments to
reconcile net income to net cash used in operating activities from
continuing operations: Depreciation and amortization
25 26
Stock-based compensation
8 8 Restructuring and asset
impairment charges
1 5 Payments for restructuring
(2
) (10 ) Defined benefit plans expense
20 17 Defined
benefit plans payments
(41 ) (42 ) Change in assets
and liabilities Change in receivables
(30 ) (42 )
Change in inventories
(8 ) (17 ) Change in other
assets
(1 ) (3 ) Change in accounts payable
(8
) (31 ) Change in advance payments and billings in excess of
costs
(10 ) (24 ) Change in deferred taxes
14
13 Change in other liabilities
(44 ) (44 ) Other, net
— (3 )
Net cash used
in operating activities from continuing operations
(17 ) (108 )
Investing
activities Capital expenditures
(8 ) (7 )
Proceeds from the sale of assets
6
3
Net cash used in investing activities
from continuing operations (2 )
(4 )
Financing activities Dividends paid
(20 ) (20 ) Common stock repurchased
— (24 )
Proceeds from the exercise of stock options
12 12 Transfer
from Vectrus, net
— 3 Other, net
1
5
Net cash used in financing
activities from continuing operations (7
) (24 ) Exchange rate effects on cash and cash
equivalents
(5 ) — Net cash used in
discontinued operations
—
(50 ) Net change in cash and cash equivalents
(31 )
(186 ) Cash and cash equivalents – beginning of year
510 459
Cash and cash
equivalents – end of period $ 479
$ 273
ExelisInvestorsKaty Herr,
703-790-6376Katy.Herr@exelisinc.comorMediaDavid Albritton,
703-790-6320David.Albritton@exelisinc.com
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