In likely its final earnings release ahead of its pending acquisition by Harris Corp. [HRS] next month, Exelis [XLS] on Wednesday reported solid first quarter financial results largely driven by strength in its electronic warfare business segment.
Net income increased 13 percent to $59 million, 31 cents earnings per share (EPS), from $52 million (27 cents EPS) a year ago, beating analysts’ estimates by four cents per share. Excluding discontinued operations that contributed $13 million (7 cents EPS) to the bottom line a year ago, earnings soared 51 percent.
Sales increased 5 percent to $785 million from $748 million primarily on growth in product revenue.
Operating earnings at the company’s C4ISR Electronics and Systems segment soared 85 percent to $74 million on a shift toward higher margin sales, and lower restructuring, sales, and general administrative expenses. Segment sales increased 6 percent to $508 million mainly on environmental sensing satellite payloads and international electronic warfare products.
At the Information and Technical Services segment, sales and operating earnings edged up 3 percent to $277 million and $30 million, respectively, on higher activity on civil and aerospace program areas contracts.
“First quarter revenue and profitability growth reflect the strength of our current backlog and improvements in our operational efficiency,” David Melcher, Exelis president and CEO, said in a statement. With the acquisition by Harris near, Exelis did not host an analyst call.
On Tuesday Harris posted lower sales and earnings in its third quarter and said the deal for Exelis is still expected to close in June despite a second request from the Justice Department for more information about the merger.
“While we received a second request from the Department of Justice, we don’t expect anti-trust clearance to require the divestiture of any business or asset,” Bill Brown, chairman, president and CEO of Harris, said on the company’s analyst call. “The request for additional information is related to intellectual property needed to update the encryption in SINGCARS radios to meet an NSA 2024 requirement for secret communications.”
The intellectual property request surrounds a potential Army plan to upgrade the encryption of “these older radios and much of the information requested is intended to help determine if the Army has all the intellectual property it would need to enable other companies to compete for that encryption modification work,” Brown said. “We anticipate resolving these concerns promptly.”
Exelis’ orders in the quarter totaled $700 million.