Exelis Inc. 2012 Credit Suisse Aerospace & Defense Investor Conference David F. Melcher, Chief Executive Officer & President Peter Milligan, Chief Financial Officer and Senior Vice President November 28, 2012 Exhibit 99.1 |
SAFE HARBOR STATEMENT Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Certain material presented herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. These forward-looking statements include, but are not limited to, statements about the separation of the Company from ITT Corporation, the terms and the effect of the separation, the nature and impact of such a separation, capitalization of the Company, future strategic plans and other statements that describe the Company’s business strategy, outlook, objectives, plans, intentions or goals, and any discussion of future operating or financial performance. Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target” 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 or implied in, or reasonably inferred from, such forward-looking statements. Factors that could cause results to differ materially from those anticipated include, but are not limited to: In addition, there are risks and uncertainties relating to our separation from ITT Corporation including whether those transactions will result in any tax liability, the operational and financial profile of the Company or any of its businesses after giving effect to the separation, and the ability of the Company to operate as an independent entity. 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, those described in Exelis Inc.’s Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and those described from time to time in our future reports filed with the Securities and Exchange Commission. 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. 2 |
EXELIS – INVESTMENT HIGHLIGHTS Diversified portfolio with attractive positions in enduring market segments Mission-critical and affordable ready-now solutions Proven record of solid program performance and operational excellence Large fielded base and platform- agnostic solutions drive sustainable revenue 3 (1) See Appendix for non-GAAP reconciliations. Diversified portfolio, strong cost controls, Diversified portfolio, strong cost controls, and solid FCF and solid FCF 2012 Guidance Revenue $5.4B - $5.5B Adj. Operating Margin (1) 10.6% - 10.8% Adj. Earnings per Share (1) $1.80 - $1.86 |
2011 REVENUE BY CUSTOMER AND CONTRACT TYPE 4 Cost Plus 55% Fixed Price 45% Army 39% Intel, Special Ops, Other DOD 2% Navy 12% Air Force 15% International, Other Non-DoD, NASA, Commercial, FAA 32% CUSTOMERS CONTRACT TYPE CONTRACT POSITION Customer and contract diversity provides Customer and contract diversity provides sustainability and mitigates against downside risk sustainability and mitigates against downside risk Sub 20% Prime 80% 2011 Revenue $5.8B 2011 Revenue $5.8B |
5 We are among the most agile C4ISR, aerospace, and information & technical services provider with deep customer knowledge and technology expertise to deliver affordable, mission-critical products and services. Information & Technical Services (I&TS) C4ISR Electronics & Systems > Electronic warfare > Unmanned ISR > Force protection > Networked communications > Radar > Composite structures > Reconnaissance & surveillance > Acoustic systems Information Systems Mission Systems Geospatial Systems Electronic Systems >Airborne situational awareness >Information exploitation >Space -based satellite imaging >Weather & climate monitoring > GPS > Night vision > Power solutions >Information -enabled mission solutions >High -end engineering services >Air traffic management systems >Commercial aviation solutions > Satellite ground systems > Spectrum management > Space, ground & range operations, sustainment, upgrade & modernization AGILITY AND INGENUITY FOR THE 21 CENTURY ST > Global-base operations and infrastructure support >Battlefield network communications & information support >Worldwide logistics & deployment support > Ground vehicle & equipment maintenance |
STRATEGIC GROWTH PLATFORMS GUIDE INVESTMENTS 6 Leverage deep technical expertise in the electro-magnetic spectrum to provide specialized systems and components for critical missions Provide key solutions in image analysis, processing, exploitation and dissemination Design, build, operate and sustain large, specialized and secure communications networks for customers for whom outages are high-risk Electronic Warfare Critical Networks Sensors to Decisions Invest and grow integrated aerostructures assemblies capabilities Aerostructures |
2012 PERFORMANCE (1) Free Cash Flow = Cash Flow from Operations less Capital Expenditures plus Separation Costs. Does not include dividend payments. For Non-GAAP reconciliations, refer to appendix and www.exelisinc.com/investors 7 Performance in line with expectations Performance in line with expectations On track to achieve 2012 guidance On track to achieve 2012 guidance Revenue trending to high end of guidance range Generated $167 of Free Cash Flow (1) in Q3 Positioning to perform in tighter U.S. DoD budget outlook Key contract vehicles in place Global Tactical Advanced Communications Systems (GTAC) Enhanced Army Global Logistics Enterprise (EAGLE) Program Adaptive Persistent Awareness System (APAS) |
LOOKING AHEAD TO 2013 Positioning for greater flexibility in uncertain budget environment Anticipating pension headwind in 2013 Focused on cash generation - managing cash obligations 8 Continue to deliver innovative, differentiated Continue to deliver innovative, differentiated and ready-now solutions and ready-now solutions |
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APPENDIX |
RECONCILIATION OF NON-GAAP 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. 11 ($ million, except per share) Q3 2012 Q3 2011 YTD Q3 2012 YTD Q3 2011 Net Income 88 101 244 262 Separation Costs, net of tax 4 6 19 15 Reversal of Separation Related Tax Receivable Write-down (4) - (4) - Separation Related Tax Items (4) - - - Adjusted Net Income 84 107 259 277 Net Income per fully diluted share $0.47 $0.54 $1.30 $1.40 Adjusted Net Income per fully diluted share $0.45 $0.57 $1.38 $1.48 Weighted Average Shares Outstanding, Diluted 188.7 187.1 188.3 187.1 |
RECONCILIATION OF NON-GAAP MEASURES “segment adjusted operating income” defined as operating income of our two segments, adjusted to exclude items that include, but are not limited to significant charges or credits that impact current results, but are not related to our ongoing operations, unusual and infrequent non-operating items and non-operating tax settlements or adjustments. A reconciliation of segment operating income is provided below. “segment adjusted operating margin” defined as segment adjusted operating income as defined above, divided by revenue. A reconciliation of segment operating margin is provided below. 12 ($ million) Q3 2012 Q3 2011 YTD Q3 2012 YTD Q3 2011 Sales 1,361 1,529 4,161 4,359 C4ISR 611 746 1,884 2,114 I&TS 750 786 2,277 2,250 Eliminations - (3) - (5) Segment Operating Income, As Reported 143 156 426 392 C4ISR 84 107 261 278 I&TS 59 49 165 114 Separation Costs 6 9 22 23 C4ISR 3 6 13 15 I&TS 3 3 9 8 Segment Operating Income, Adjusted 149 165 448 415 C4ISR 87 113 274 293 I&TS 62 52 174 122 Segment Operating Margin, As Reported C4ISR 13.7% 14.3% 13.9% 13.2% I&TS 7.9% 6.2% 7.2% 5.1% Segment Operating Margin, Adjusted C4ISR 14.2% 15.1% 14.5% 13.9% I&TS 8.3% 6.6% 7.6% 5.4% Operating Margin, As Reported 10.5% 10.2% 10.2% 9.0% Operating Margin, Adjusted 10.9% 10.8% 10.8% 9.5% |
“Free cash flow” defined as GAAP cash flow from operating activities, less capital expenditures plus separation costs. This metric does not include dividend payments. 13 Free Cash Flow - Quarterly Q3 QTD 2012 Q3 YTD 2012 Q2 YTD 2012 ($ million) Cash Flow From Operating Activities 207 97 (110) Subtract Capital Expenditures (36) (86) (50) Free Cash Flow 171 11 (160) Add: Separation Costs, net of tax 4 19 15 Reversal of Separation Related Tax Receivable (4) (4) - Reversal of Separation Related Tax Items (4) - 4 Free Cash Flow, as Adjusted 167 26 (141) RECONCILIATION OF NON-GAAP MEASURES |
RECONCILIATION OF NON-GAAP MEASURES “Free cash flow” defined as GAAP cash flow from operating activities, less capital expenditures plus separation costs. This metric does not include dividend payments. 14 Free Cash Flow Year-to-Date Q3 YTD 2012 Q3 YTD2011 ($ million) Cash Flow From Operating Activities 97 343 Subtract Capital Expenditures (86) (55) Free Cash Flow 11 288 Add: Separation Costs, net of tax 19 15 Reversal Separation Tax Receivable (4) - Separation Related Tax Items - - Free Cash Flow, as Adjusted 26 303 |
15 RECONCILIATION OF NON-GAAP MEASURES Operating Income, Operating Margin, & EPS Guidance Mid Point ($ million, except per share) FY 2012 Sales, Guidance Mid Point Estimate 5,450 Operating Income, Guidance Mid Point Estimate 567 Separation Costs 27 Adjusted Operating Income, Guidance Mid Point Estimate 594 Operating Margin, Guidance Mid Point Estimate 10.4% Adjusted Operating Margin, Guidance Mid Point Estimate 10.9% Net Income, Guidance Mid Point Estimate 327 Separation Costs, net of tax 17 Adjusted Net Income, Guidance Mid Point Estimate 344 Net Income per fully diluted share, Guidance Mid Point Estimate $1.74 Adjusted Net Income per fully diluted share, Guidance Mid Point Estimate $1.83 Weighted Average number shares outstanding diluted 188.5 |