The $1.5 billion mission systems business that Exelis [XLS] plans to spin-off later this year is heavily dependent on work for the Army, although the new company plans to broaden its customer base as part of a four-prong business strategy, according to a filing Exelis made today with government regulators.
MSCO, as the new company will be called, generated about 92 percent of its sales last year through the Army, according to Exelis’ Form 10 filing with the Securities and Exchange Commission. It also added its first Marine Corps contract in 2013.
Exelis last December announced its plans to spin-off the Missions Systems business into a new publicly traded company. Exelis said the spin-off would allow it to focus on higher margin strategic growth business.
The key components of MSCO’s business strategy include expanding its geographic footprint, broadening its customer base, a continued focus on providing the United States government with infrastructure asset management and sustainment services, and internal investment to extend, deepen and enhance its technical capabilities. In addition to internal investments, MSCO plans to pursue acquisitions “with a view to adding capabilities that allow us to deliver an even higher value added differentiated service,” according to the SEC filing.
With the drawdown of the U.S. military forces from Afghanistan, MSCO expects some of its programs will contract. Last year, 34 percent of its business was related to U.S. government contracts for work in Afghanistan.
To counter those impacts, the company has “realigned our resources to invest in new business opportunities in the United States, Middle East and North Africa and the Pacific,” according to the SEC filing. The company also hopes to leverage its work with the Army in the Middle East to provide its services to other U.S. military and civil agencies domestically and globally.
Currently, four contracts make up $1 billion of sales with each of those accounting for more than 10 percent of business last year.
The government filing shows that MSCO sales in 2013 were just over $1.5 billion and that net income was $84 million versus $1.8 billion in sales and net income of $75 million in 2012. Operating margin was 8.7 percent in 2013 versus 6 percent in 2012. MSCO has 6,800 employees.
In December Exelis said it hoped the spin-off would be completed this summer.