Exelis reports fourth-quarter and full-year 2012 financial results; provides 2013 outlook

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:

“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.

“segment adjusted operating margin” defined as segment adjusted operating income as defined above, divided by revenue. A reconciliation of segment operating margin is provided below.

“Free cash flow” defined as GAAP cash flow from operating activities, less capital expenditures. This metric does not include dividend payments.

       
EXELIS INC.
Non-GAAP Financial Measures - Adjusted Net Income & Adjusted EPS
 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

($ million, except per share)   2012   2011 2012   2011
Net Income 86 64 330 326
               
Separation Costs, net of tax 4 14 19 29
Separation Related Tax Items   -   16 -   16
Adjusted Net Income   90   94 349   371
               
Net Income per fully diluted share $0.45 $0.34 $1.75 $1.75
Adjusted Net Income per fully diluted share   $0.47   $0.50 $1.85   $1.99
 
Weighted Average Shares Outstanding, Diluted 189.5 186.7 188.6 186.7
 
       
EXELIS INC.
Non-GAAP Financial Measures - Adjusted Segment Operating Income & Operating Margin
 

Three Months Ended
December 31,

Twelve Months Ended
December 31,

($ million)   2012   2011 2012   2011
Sales 1,361 1,480 5,522 5,839
C4ISR 603 709 2,487 2,817
I&TS 758 771 3,035 3,022
               
Segment Operating Income, As Reported 135 143 561 535
C4ISR 89 106 350 385
I&TS   46   37 211   150
               
Separation Costs 7 25 29 48
C4ISR 4 16 16 30
I&TS   3   9 13   18
               
Segment Operating Income, Adjusted 142 168 590 583
C4ISR 93 122 366 415
I&TS   49   46 224   168
               
Segment Operating Margin, As Reported
C4ISR 14.8% 15.0% 14.1% 13.7%
I&TS   6.1%   4.8% 7.0%   5.0%
               
Segment Operating Margin, Adjusted
C4ISR 15.4% 17.2% 14.7% 14.7%
I&TS   6.5%   6.0% 7.4%   5.6%
               
Operating Margin, As Reported 9.9% 9.7% 10.2% 9.2%
Operating Margin, Adjusted   10.4%   11.4% 10.7%   10.0%
 
     
EXELIS INC.
Non-GAAP Financial Measures - Quarterly Free Cash Flow
 
Three Months Ended Twelve Months Ending Nine Months Ended
December 31, December 31, September 30,
($ million)   2012 2012   2012
Cash Flow From Operating Activities   288 385   97
Subtract          
Capital Expenditures (33) (119) (86)
           
           
Free Cash Flow   255 266   11
 
Add:          
Separation Costs, net of tax   4 19   15
           
Free Cash Flow, as Adjusted   259 285   26
 
   
EXELIS INC.
Free Cash Flow Year-to-Date
 
Twelve Months Ending Twelve Months Ending
December 31, December 31,
($ million)   2012   2011
Cash Flow From Operating Activities   385   334
Subtract        
Capital Expenditures   (119)   (95)
         
Free Cash Flow   266   239
 
Add:        
Separation Costs, net of tax 19 29
Cash Taxes Paid Adjustment - 161
Non-Cash Allocated Postretirement Costs   -   79
Free Cash Flow, as Adjusted   285   508
 

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