Attached files
| file | filename |
|---|---|
| 8-K - 8-K - Exelis Inc. | d795431d8k.htm |
| EX-2.1 - EX-2.1 - Exelis Inc. | d795431dex21.htm |
| EX-10.1 - EX-10.1 - Exelis Inc. | d795431dex101.htm |
| EX-10.3 - EX-10.3 - Exelis Inc. | d795431dex103.htm |
| EX-10.2 - EX-10.2 - Exelis Inc. | d795431dex102.htm |
| EX-10.4 - EX-10.4 - Exelis Inc. | d795431dex104.htm |
| EX-99.1 - EX-99.1 - Exelis Inc. | d795431dex991.htm |
| EX-10.5 - EX-10.5 - Exelis Inc. | d795431dex105.htm |
Exhibit 99.2
UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION
On September 27, 2014, Exelis Inc. (“Exelis” or the “Company”) completed the previously announced spin-off of Vectrus, Inc. (“Vectrus”), its former Mission Systems business, through a pro rata distribution to the Company’s shareholders of one share of Vectrus common stock for every 18 shares of the Company’s common stock held by such shareholders as of September 18, 2014 (the “Record Date”), resulting in a total distribution of approximately 10.5 million shares of Vectrus common stock. In connection with the spin-off, Vectrus made a net cash distribution of $136 million to a subsidiary of Exelis on September 26, 2014. This cash distribution is subject to a working capital adjustment. Vectrus filed a registration statement on Form 10 with the Securities and Exchange Commission (SEC) describing the spin-off and other information about Vectrus that was declared effective by the SEC on September 8, 2014.
Vectrus was part of the Company’s Information and Technical Services segment and included the following major program areas: Infrastructure Asset Management; Logistics and Supply Chain Management; and Information Technology and Network Communication Services. Immediately after the spin-off, the Company does not beneficially own any shares of Vectrus common stock and will not consolidate the financial results of Vectrus for its future financial reporting. Vectrus’ financial results prior to the spin-off will be reported as discontinued operations beginning in the Company’s Annual Report on Form 10-K for the year ended December 31, 2014.
Prior to the completion of the spin-off, the Company and Vectrus entered into a Distribution Agreement and related separation agreements that will govern the post-separation relationship between the Company and Vectrus. These agreements generally provide that each party is responsible for its respective assets, liabilities and obligations following the spin-off, including employee benefits, intellectual property, information technology, insurance and tax-related assets and liabilities. The agreements also describe the Company’s future commitments to provide Vectrus with certain temporary transition services.
The following unaudited pro forma condensed consolidated financial information consists of unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011, and an unaudited pro forma condensed consolidated balance sheet as of June 30, 2014, which were derived from the Company’s historical consolidated and combined financial statements and give effect to the spin-off. The unaudited pro forma condensed consolidated financial information should be read together with the Company’s historical consolidated and combined financial statements and accompanying notes included in its Annual Report on From 10-K for the year ended December 31, 2013 and its Quarterly Report on Form 10-Q for the quarter ended June 30, 2014.
The unaudited pro forma condensed consolidated statements of operations for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011 reflect the Company’s results as if the spin-off and related transactions described below had occurred as of January 1, 2011. The unaudited pro forma condensed consolidated balance sheet as of June 30, 2014 reflects the Company’s financial position as if the spin-off and related transactions described below had occurred as of that date.
The unaudited pro forma condensed consolidated financial information gives effect to the spin-off and related transactions, including:
| • | the transfer to Vectrus of Company assets and liabilities that are specifically identifiable or otherwise allocable to Vectrus; |
| • | the elimination of the Company’s equity interest in Vectrus; |
| • | the removal of certain non-recurring separation costs directly related to the spin-off transaction; and |
| • | the net cash distribution from Vectrus to a subsidiary of the Company. |
The unaudited pro forma condensed consolidated financial information is not intended to be a complete presentation of the Company’s financial position or results of operations had the spin-off and related transactions occurred as of and for the periods indicated. In addition, the unaudited pro forma condensed consolidated financial information is provided for illustrative and informational purposes only and is not necessarily indicative of the Company’s future results of operations or financial condition had the spin-off been completed on the dates assumed. The pro forma adjustments are based on available information and assumptions that Exelis management believes are reasonable, that reflect the impacts of events directly attributable to the spin-off, that are factually supportable, and for purposes of the statements of operations, are expected to have a continuing impact on Exelis. The pro forma adjustments may differ from those that will be calculated to report Vectrus as a discontinued operation in the Company’s future filings.
See the notes to the unaudited pro forma condensed consolidated financial information for a more detailed discussion of these transactions.
EXELIS INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| Six Months Ended June 30, 2014 | ||||||||||||||||
| Pro Forma Adjustments | ||||||||||||||||
| Historical | Vectrus (A) | Other | Pro Forma | |||||||||||||
| Product revenue |
$ | 1,003 | $ | — | $ | — | $ | 1,003 | ||||||||
| Service revenue |
1,159 | (598 | ) | — | 561 | |||||||||||
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| Total revenue |
2,162 | (598 | ) | — | 1,564 | |||||||||||
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|
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| Cost of product revenue |
732 | — | — | 732 | ||||||||||||
| Cost of service revenue |
979 | (535 | ) | — | 444 | |||||||||||
| Selling, general and administrative expenses |
227 | (35 | ) | — | 192 | |||||||||||
| Research and development expenses |
25 | — | — | 25 | ||||||||||||
| Restructuring and asset impairment charges |
7 | — | — | 7 | ||||||||||||
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| Operating income |
192 | (28 | ) | — | 164 | |||||||||||
| Interest expense, net |
18 | — | — | 18 | ||||||||||||
| Other expense (income), net |
(4 | ) | — | — | (4 | ) | ||||||||||
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| Income from continuing operations before income tax expense |
178 | (28 | ) | — | 150 | |||||||||||
| Income tax expense |
65 | (10 | ) | — | 55 | |||||||||||
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| Net income |
$ | 113 | $ | (18 | ) | $ | — | $ | 95 | |||||||
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| Earnings Per Share |
||||||||||||||||
| Basic |
||||||||||||||||
| Net income |
$ | 0.60 | $ | 0.50 | ||||||||||||
| Diluted |
||||||||||||||||
| Net income |
$ | 0.58 | $ | 0.49 | ||||||||||||
| Weighted average common shares outstanding – basic |
189.3 | 189.3 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
194.2 | 194.2 | ||||||||||||||
EXELIS INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| Year Ended December 31, 2013 | ||||||||||||||||
| Pro Forma Adjustments | ||||||||||||||||
| Historical | Vectrus (A) | Other | Pro Forma | |||||||||||||
| Product revenue |
$ | 2,136 | $ | — | $ | — | $ | 2,136 | ||||||||
| Service revenue |
2,680 | (1,475 | ) | — | 1,205 | |||||||||||
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| Total revenue |
4,816 | (1,475 | ) | — | 3,341 | |||||||||||
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| Cost of product revenue |
1,517 | — | — | 1,517 | ||||||||||||
| Cost of service revenue |
2,231 | (1,264 | ) | — | 967 | |||||||||||
| Selling, general and administrative expenses |
455 | (60 | ) | — | 395 | |||||||||||
| Research and development expenses |
54 | — | — | 54 | ||||||||||||
| Restructuring and asset impairment charges |
83 | (3 | ) | — | 80 | |||||||||||
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| Operating income |
476 | (148 | ) | — | 328 | |||||||||||
| Interest expense, net |
37 | — | — | 37 | ||||||||||||
| Other expense (income), net |
2 | 1 | — | 3 | ||||||||||||
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| Income from continuing operations before income tax expense |
437 | (149 | ) | — | 288 | |||||||||||
| Income tax expense |
156 | (46 | ) | — | 110 | |||||||||||
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| Net income |
$ | 281 | $ | (103 | ) | $ | — | $ | 178 | |||||||
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| Earnings Per Share |
||||||||||||||||
| Basic |
||||||||||||||||
| Net income |
$ | 1.49 | $ | 0.94 | ||||||||||||
| Diluted |
||||||||||||||||
| Net income |
$ | 1.46 | $ | 0.93 | ||||||||||||
| Weighted average common shares outstanding – basic |
188.5 | 188.5 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
192.0 | 192.0 | ||||||||||||||
EXELIS INC.
PRO FORMA CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| Year Ended December 31, 2012 | ||||||||||||||||
| Pro Forma Adjustments | ||||||||||||||||
| Historical | Vectrus (A) | Other | Pro Forma | |||||||||||||
| Product revenue |
$ | 2,487 | $ | — | $ | — | $ | 2,487 | ||||||||
| Service revenue |
3,035 | (1,792 | ) | — | 1,243 | |||||||||||
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| Total revenue |
5,522 | (1,792 | ) | — | 3,730 | |||||||||||
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| Cost of product revenue |
1,726 | — | — | 1,726 | ||||||||||||
| Cost of service revenue |
2,633 | (1,606 | ) | — | 1,027 | |||||||||||
| Selling, general and administrative expenses |
516 | (57 | ) | — | 459 | |||||||||||
| Research and development expenses |
67 | — | — | 67 | ||||||||||||
| Restructuring and asset impairment charges |
19 | — | — | 19 | ||||||||||||
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| Operating income |
561 | (129 | ) | — | 432 | |||||||||||
| Interest expense, net |
37 | — | — | 37 | ||||||||||||
| Other expense (income), net |
3 | — | — | 3 | ||||||||||||
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| Income from continuing operations before income tax expense |
521 | (129 | ) | — | 392 | |||||||||||
| Income tax expense |
191 | (45 | ) | — | 146 | |||||||||||
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| Net income |
$ | 330 | $ | (84 | ) | $ | — | $ | 246 | |||||||
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| Earnings Per Share |
||||||||||||||||
| Basic |
||||||||||||||||
| Net income |
$ | 1.76 | $ | 1.31 | ||||||||||||
| Diluted |
||||||||||||||||
| Net income |
$ | 1.75 | $ | 1.30 | ||||||||||||
| Weighted average common shares outstanding – basic |
187.4 | 187.4 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
188.6 | 188.6 | ||||||||||||||
EXELIS INC.
PRO FORMA CONDENSED CONSOLIDATED AND COMBINED STATEMENT OF OPERATIONS (UNAUDITED)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
| Year Ended December 31, 2011 | ||||||||||||||||
| Pro Forma Adjustments | ||||||||||||||||
| Historical | Vectrus (A) | Other | Pro Forma | |||||||||||||
| Product revenue |
$ | 2,817 | $ | — | $ | — | $ | 2,817 | ||||||||
| Service revenue |
3,022 | (1,785 | ) | — | 1,237 | |||||||||||
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| Total revenue |
5,839 | (1,785 | ) | — | 4,054 | |||||||||||
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| Cost of product revenue |
1,933 | — | — | 1,933 | ||||||||||||
| Cost of service revenue |
2,683 | (1,634 | ) | — | 1,049 | |||||||||||
| Selling, general and administrative expenses |
566 | (46 | ) | — | 520 | |||||||||||
| Research and development expenses |
99 | — | — | 99 | ||||||||||||
| Restructuring and asset impairment charges |
23 | — | — | 23 | ||||||||||||
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| Operating income |
535 | (105 | ) | — | 430 | |||||||||||
| Interest expense, net |
10 | — | — | 10 | ||||||||||||
| Other expense (income), net |
(12 | ) | — | — | (12 | ) | ||||||||||
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| Income from continuing operations before income tax expense |
537 | (105 | ) | — | 432 | |||||||||||
| Income tax expense |
211 | (43 | ) | — | 168 | |||||||||||
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| Net income |
$ | 326 | $ | (62 | ) | $ | — | $ | 264 | |||||||
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| Earnings Per Share |
||||||||||||||||
| Basic |
||||||||||||||||
| Net income |
$ | 1.75 | $ | 1.42 | ||||||||||||
| Diluted |
||||||||||||||||
| Net income |
$ | 1.75 | $ | 1.41 | ||||||||||||
| Weighted average common shares outstanding – basic |
186.2 | 186.2 | ||||||||||||||
| Weighted average common shares outstanding – diluted |
186.7 | 186.7 | ||||||||||||||
EXELIS INC.
PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (UNAUDITED)
(IN MILLIONS)
| June 30, 2014 | ||||||||||||||||
| Pro Forma Adjustments | ||||||||||||||||
| Historical | Vectrus (A) | Other | Pro Forma | |||||||||||||
| Assets |
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| Current assets |
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| Cash and cash equivalents |
$ | 394 | $ | (9 | ) | $ | 120 | (B) | $ | 505 | ||||||
| Receivables, net |
964 | (237 | ) | — | 727 | |||||||||||
| Inventories, net |
259 | (4 | ) | — | 255 | |||||||||||
| Deferred tax asset |
18 | 21 | — | 39 | ||||||||||||
| Other current assets |
50 | (10 | ) | — | 40 | |||||||||||
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| Total current assets |
1,685 | (239 | ) | 120 | 1,566 | |||||||||||
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| Plant, property and equipment, net |
460 | (9 | ) | — | 451 | |||||||||||
| Goodwill |
2,190 | (217 | ) | — | 1,973 | |||||||||||
| Other intangible assets, net |
157 | — | — | 157 | ||||||||||||
| Deferred tax asset |
183 | 86 | — | 269 | ||||||||||||
| Other non-current assets |
93 | (3 | ) | — | 90 | |||||||||||
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| Total non-current assets |
3,083 | (143 | ) | — | 2,940 | |||||||||||
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| Total assets |
$ | 4,768 | $ | (382 | ) | $ | 120 | $ | 4,506 | |||||||
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| Liabilities and Shareholders’ Equity |
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| Current liabilities |
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| Accounts payable |
$ | 348 | $ | (115 | ) | $ | — | $ | 233 | |||||||
| Advance payments and billings in excess of costs |
272 | (7 | ) | — | 265 | |||||||||||
| Compensation and other employee benefits |
196 | (56 | ) | — | 140 | |||||||||||
| Other accrued liabilities |
143 | (9 | ) | — | 134 | |||||||||||
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| Total current liabilities |
959 | (187 | ) | — | 772 | |||||||||||
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| Defined benefit plans |
1,312 | — | — | 1,312 | ||||||||||||
| Long-term debt |
649 | — | — | 649 | ||||||||||||
| Deferred tax liability |
3 | (1 | ) | — | 2 | |||||||||||
| Other non-current liabilities |
113 | (3 | ) | — | 110 | |||||||||||
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| Total non-current liabilities |
2,077 | (4 | ) | — | 2,073 | |||||||||||
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| Total liabilities |
3,036 | (191 | ) | — | 2,845 | |||||||||||
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| Shareholders’ equity |
||||||||||||||||
| Common stock |
2 | — | — | 2 | ||||||||||||
| Additional paid-in capital |
2,651 | (193 | ) | 120 | (B) | 2,578 | ||||||||||
| Treasury stock |
(69 | ) | — | — | (69 | ) | ||||||||||
| Retained earnings |
548 | — | — | 548 | ||||||||||||
| Accumulated other comprehensive loss |
(1,400 | ) | 2 | — | (1,398 | ) | ||||||||||
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| Total shareholders’ equity |
1,732 | (191 | ) | 120 | 1,661 | |||||||||||
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| Total liabilities and shareholders’ equity |
$ | 4,768 | $ | (382 | ) | $ | 120 | $ | 4,506 | |||||||
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EXELIS INC.
NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION (UNAUDITED)
(IN MILLIONS, UNLESS OTHERWISE STATED)
Statements of Operations and Balance Sheet
(A) The adjustments reflect the discontinued operations of Vectrus; including the removal of the assets, liabilities, equity and results of operations of Vectrus and non-recurring separation costs directly related to the spin-off transaction, and excluding certain general corporate overhead expenses that were not specifically related to Vectrus and that did not meet the discontinued operations criteria. The non-recurring separation costs removed were $6, $2, $0 and $0 for the six months ended June 30, 2014 and for the years ended December 31, 2013, 2012 and 2011, respectively.
(B) The adjustments reflect the net cash distribution from Vectrus to Exelis. The distribution was funded by the proceeds from a senior secured term loan issued by Vectrus in connection with the spin-off.