8-K

UNITED STATESSECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM 8-K

CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported):May 2, 2014

EXELIS INC.
(Exact name of registrant as specified in its charter)

Indiana	001-35228	45-2083813
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1650 Tysons Boulevard, Suite 1700 McLean, Virginia	22102
(Address of principal executive offices)	(Zip Code)

(703) 790-6300
(Registrant’s telephone number, including area code)

NOT APPLICABLE
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):

⃞ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

⃞ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

⃞ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

⃞ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

TABLE OF CONTENTS

ITEM 2.02 Results of Operations and Financial Condition	3
ITEM 7.01 Regulation FD Disclosure	3
ITEM 9.01 Financial Statements and Exhibits	4
SIGNATURE	5

ITEM 2.02  Results of Operations and Financial Condition.

Attached hereto as Exhibit 99.1 and incorporated by reference herein is a press release issued by Exelis Inc. (the “Company”) on May 2, 2014 that includes financial information for the Company for the first quarter of 2014, and fiscal 2014 guidance.  This information shall not be deemed filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) or incorporated by reference into any filing under the Securities Act of 1933, as amended (the “Securities Act”), or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.

ITEM 7.01  Regulation FD Disclosure.

Mr. David Melcher, Chief Executive Officer and President, and Mr. Peter Milligan, Senior Vice President and Chief Financial Officer, will present financial information for the Company for the first quarter of 2014, and fiscal 2014 guidance on May 2, 2014.  A copy of the presentation is attached hereto and incorporated by reference herein as Exhibit 99.2.  This information is furnished pursuant to Item 7.01 Regulation FD Disclosure and shall not be deemed filed for purposes of Section 18 of the Exchange Act or incorporated by reference into any filing under the Securities Act or the Exchange Act, except as shall be expressly set forth by specific reference in such filing.   

ITEM 9.01     Financial Statements and Exhibits

(d) Exhibits.

Exhibit
No.	Description
99.1	Press Release of Exelis Inc. dated May 2, 2014
99.2	Presentation slides issued by Exelis Inc. on May 2, 2014

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

		EXELIS INC.
Date:	May 2, 2014	By:	/s/ Kathleen S. Stolar
			Kathleen S. Stolar
		Its:	Assistant Secretary
			(Authorized Officer of Registrant)

EX-99.1

Exhibit 99.1

Exelis reports first-quarter 2014 financial results, confirms 2014 guidance and provides update on Vectrus spin-off

• Earnings increase 17 percent and adjusted earnings, excluding Vectrus spin-off costs, increase 26 percent over same period in 2013
• $1 billion in orders in the quarter and funded backlog increase of 21 percent over the first quarter of 2013
• C4ISR segment orders increase 18 percent over first quarter of 2013; adjusted segment profitability up 600 basis points

MCLEAN, Va.--(BUSINESS WIRE)--May 2, 2014--Exelis (NYSE: XLS) reported financial results for the first quarter of 2014. First-quarter revenue was $1 billion, a 12 percent decrease from the first quarter of 2013. First-quarter earnings were $52 million, or $0.27 per share, a 17 percent increase from the first quarter of 2013. Adjusted earnings, which exclude costs related to the pending spin-off of the current Exelis Mission Systems business into an independent company that will be known as Vectrus, were $0.29 per share, a 26 percent increase from the same period in 2013. Free cash flow for the quarter was negative $160 million, which includes $44 million in cash returned to shareholders via dividends and share buybacks. The company reaffirms its full-year free cash flow expectations of approximately $250 million.

The company secured $1 billion in orders during the first quarter of 2014, including significant new business in three of its four Strategic Growth Platforms, along with orders from a variety of international customers. Key contracts and agreements in the quarter included:

• Nearly $200 million in awards for airborne electronic warfare equipment from the U.S. Navy, Turkey, Pakistan and other international customers.
• A multimillion-dollar order from a Japanese customer for the primary climate monitoring payload on the Greenhouse Gas Observing Satellite-2 (GOSAT)
• A $34 million order from Sikorsky for composite assemblies for the Marine Corps CH-53K next-generation heavy lift helicopter
• $135 million in orders for night vision and communications equipment from a variety of customers, including international orders for $50 million in i-Aware TMNVG night vision goggles

“We continued to earn new business from domestic and international customers in the first quarter of 2014 and profitability improved significantly in our C4ISR segment,” said Exelis CEO and President David F. Melcher. “We are also reaffirming our 2014 guidance and are looking forward to the successful spin-off of Vectrus this summer.”

Segment Results

C4ISR Electronics and Systems

C4ISR Electronics and Systems first-quarter 2014 revenue was $480 million, down 4 percent from the same period in 2013 due to volume declines in domestic night vision and counter-IED jammer products, partially offset by a surge in sales of both international tactical radios and electronic warfare equipment to U.S. customers. Segment adjusted operating income for the quarter was $47 million, an increase of 147 percent from the first quarter of 2013, due to lower restructuring charges compared to the same period in 2013.

Information and Technical Services

Information and Technical Services first-quarter 2014 revenue was $565 million, a decrease of 18 percent from the same period in 2013, driven by lower customer activity on U.S. government contracts in the Middle East and Afghanistan, slightly offset by increased revenue in Federal Aviation Administration programs. First-quarter adjusted operating income for the segment was $49 million, down 11 percent from the same period in 2013.

Vectrus Spin-off

The company continues to progress on the separation of its current Mission Systems business into an independent, publicly traded company that will be known as Vectrus, Inc. The most current public information on the Vectrus spin-off can be found at www.exelisinc.com/transformation.

2014 Guidance

Sales	≈$4.6 billion
Adjusted Operating Margin	≈11%
Adjusted Earnings Per Share	$1.52 - $1.59
Free Cash Flow	≈$250 million

Exelis reaffirms previously issued 2014 financial guidance, which includes approximately $20 million of projected restructuring expense and approximately $25 million of expenses related to the planned spin-off of Vectrus. The company notes that forward-looking statements of future performance made in this release are based upon current expectations and are subject to factors that could cause actual results to differ materially from those suggested here, including those factors set forth in the Safe Harbor Statement below.

Investor Call Today

Exelis senior management will host a conference call for investors today at 10 a.m. Eastern Time to review first-quarter 2014 results and guidance, and answer questions. The briefing can be monitored live via webcast at the following address on the company's website: http://investors.exelisinc.com.

About Exelis

Exelis is a diversified, top-tier global aerospace, defense, information and services company that leverages a 50-year legacy of deep customer knowledge and technical expertise to deliver affordable, mission-critical solutions for global customers. We are a leader in positioning and navigation, sensors, air traffic management solutions, image processing and distribution, communications and information systems; and focused on strategic growth in the areas of critical networks, ISR and analytics, electronic warfare and composite aerostructures. Headquartered in McLean, Va., Exelis employs about 17,000 people and generated 2013 sales of $4.8 billion. For more information, visit our website at www.exelisinc.com or connect with us on Facebook, Twitter and YouTube.

Safe Harbor Statement

Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Some of the information included herein includes forward-looking statements intended to qualify for the safe harbor from liability established by the Act. Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “may,” “could,” “outlook” 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 in, or implied from, such forward-looking statements. 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:

• The timing and completion of the tax-free spin-off described in this document;
• 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;
• Our ability to execute our internal performance plans including restructuring, productivity improvements and cost reduction initiatives;
• Unanticipated changes in our tax provisions or exposure to additional income tax liabilities; and
• Ability to execute our internal performance plans, including restructuring, productivity and cost-reduction initiatives.

The forward-looking statements in this release are made as of the date hereof and the company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise. 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 the Exelis Inc. Form 10-K for the fiscal year ended December 31, 2013, and those described from time to time in our future reports filed with the Securities and Exchange Commission.

Exelis Inc.
Condensed Consolidated Statements of Operations (unaudited)
(IN MILLIONS, EXCEPT PER SHARE AMOUNTS)
	Three Months Ended March 31,
	2014		2013
Product revenue	$	480	$	499
Service revenue		565		686
Total revenue		1,045		1,185
Cost of product revenue		354		357
Cost of service revenue		474		577
Selling, general and administrative expenses		113		115
Research and development expenses		10		13
Restructuring and asset impairment charges		5		49
Operating income		89		74
Interest expense, net		9		8
Other (income) expense, net		(2)		2
Income from continuing operations before income tax expense		82		64
Income tax expense		30		20
Net income	$	52	$	44
Earnings Per Share
Basic
Net income	$	0.27	$	0.23
Diluted
Net income	$	0.27	$	0.23
Weighted average common shares outstanding – basic		189.6		188.3
Weighted average common shares outstanding – diluted		194.9		189.8
Cash dividends declared per common share	$	0.10	$	0.10

Exelis Inc.
Condensed Consolidated Balance Sheets (unaudited)
(IN MILLIONS)
	March 31,		December 31,
	2014		2013
Assets
Current assets
Cash and cash equivalents	$	280	$	469
Receivables, net		1,023		939
Inventories, net		267		246
Deferred tax asset		17		16
Other current assets		70		70
Total current assets		1,657		1,740
Plant, property and equipment, net		478		498
Goodwill		2,185		2,184
Other intangible assets, net		160		167
Deferred tax asset		192		216
Other non-current assets		86		79
Total non-current assets		3,101		3,144
Total assets	$	4,758	$	4,884
Liabilities and Shareholders' Equity
Current liabilities
Accounts payable	$	325	$	367
Advance payments and billings in excess of costs		272		301
Compensation and other employee benefits		170		216
Other accrued liabilities		174		160
Total current liabilities		941		1,044
Defined benefit plans		1,359		1,407
Long-term debt		649		649
Deferred tax liability		3		2
Other non-current liabilities		117		130
Total non-current liabilities		2,128		2,188
Total liabilities		3,069		3,232
Commitments and contingencies
Shareholders' equity
Common stock		2		2
Additional paid-in capital		2,642		2,623
Treasury stock		(45)		(16)
Retained earnings		507		475
Accumulated other comprehensive loss		(1,417)		(1,432)
Total shareholders' equity		1,689		1,652
Total liabilities and shareholders' equity	$	4,758	$	4,884

Exelis Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(IN MILLIONS)
	Three Months Ended March 31,
	2014		2013
Operating activities
Net income	$	52	$	44
Adjustments to reconcile net income to net cash used in operating activities:
Depreciation and amortization		27		27
Stock-based compensation		8		5
Restructuring and asset impairment charges		5		49
Payments for restructuring		(11)		(6)
Defined benefit plans expense		17		26
Defined benefit plans payments		(42)		(39)
Change in assets and liabilities
Change in receivables		(84)		(27)
Change in inventories		(21)		(17)
Change in other assets		—		(3)
Change in accounts payable		(42)		(77)
Change in advance payments and billings in excess of costs		(29)		6
Change in deferred taxes		14		18
Change in other liabilities		(49)		(72)
Other, net		(3)		1
Net cash used in operating activities		(158)		(65)
Investing activities
Capital expenditures		(7)		(17)
Proceeds from the sale of assets		3		—
Acquisitions, net of cash acquired		—		(15)
Net cash used in investing activities		(4)		(32)
Financing activities
Dividends paid		(20)		—
Common stock repurchased		(24)		—
Proceeds from the exercise of stock options		12		1
Other, net		5		(2)
Net cash used in financing activities		(27)		(1)
Exchange rate effects on cash and cash equivalents		—		(9)
Net change in cash and cash equivalents		(189)		(107)
Cash and cash equivalents – beginning of year		469		292
Cash and cash equivalents – end of period	$	280	$	185

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 revenue, operating income, income from continuing operations, or net cash from continuing operations as determined in accordance with GAAP. We consider the following non-GAAP measure, which may not be comparable to similarly titled measures reported by other companies, to be a key performance indicator:

“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.

“Free cash flow” defined as GAAP cash provided by operating activities, less capital expenditures plus separation costs. This metric does not include dividend payments.

Exelis Inc.
Non-GAAP Financial Measures - Adjusted Net Income & Adjusted EPS
	Three Months Ended
	March 31,
($ million, except per share)	2014	2013
Net Income	52	44
Separation Costs for the Vectrus Spin-off, net of tax	5	-
Adjusted Net Income	57	44
Net Income per fully diluted share	$0.27	$0.23
Adjusted Net Income per fully diluted share	$0.29	$0.23
Weighted Average Shares Outstanding, Diluted	194.9	189.8

Exelis Inc.
Non-GAAP Financial Measures - Adjusted Segment Operating Income &
Operating Margin
	Three Months Ended
	March 31,
($ million)	2014		2013
Sales	1,045		1,185
C4ISR	480		499
I&TS	565		686
Segment Operating Income, As Reported	89		74
C4ISR	43		19
I&TS	46		55
Separation Costs	7		-
C4ISR	4		-
I&TS	3		-
Segment Operating Income, Adjusted	96		74
C4ISR	47		19
I&TS	49		55
Segment Operating Margin, As Reported
C4ISR	8.9	%	3.8	%
I&TS	8.1	%	8.0	%
Segment Operating Margin, Adjusted
C4ISR	9.8	%	3.8	%
I&TS	8.7	%	8.0	%
Operating Margin, As Reported	8.5	%	6.2	%
Operating Margin, Adjusted	9.2	%	6.2	%

Exelis Inc.
Free Cash Flow Year-to-Date
	Three Months Ending		Three Months Ending
	March 31,		March 31,
($ million)	2014		2013
Cash Flow From Operating Activities	(158	)	(65	)
Subtract:
Capital Expenditures	(7	)	(17	)
Free Cash Flow	(165	)	(82	)
Add:
Separation Costs for the Vectrus Spin-off, net of tax	5		-
Free Cash Flow, as Adjusted	(160	)	(82	)

CONTACT:
Exelis
Investors
Katy Herr, 703-790-6376
Katy.Herr@exelisinc.com
or
Media
B.J. Talley, 703-790-6349
William.Talley@exelisinc.com

EX-99.2

Exhibit 99.2

First Quarter 2014 Earnings Presentation David Melcher Chief Executive Officer and President Peter Milligan Senior Vice President and Chief Financial Officer May 2, 2014

Safe Harbor Statement Safe Harbor Statement under the Private Securities Litigation Reform Act of 1995 (the “Act”): Some of the information included herein includes forward‐looking statements intended to qualify for the safe harbor from liability established by the Act. Whenever used, words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” “target,” “may,” “could,” “outlook” 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 in, or implied from, such forward‐looking statements. 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, forwardlooking 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: The timing and completion of the tax‐free spin‐off described in this presentation; 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; Unanticipated changes in our tax provisions or exposure to additional income tax liabilities; and Ability to execute our internal performance plans including restructuring, productivity improvements and cost reduction initiatives. The forward‐looking statements in this presentation are made as of the date hereof and the company undertakes no obligation to update any forward‐looking statements, whether as a result of new information, future events or otherwise. 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 the Exelis Inc. Form 10‐K for the fiscal year ended December 31, 2013, and those described from time to time in our future reports filed with the Securities and Exchange Commission. 2

Q1 2014 Exelis Results Q1 2014 Results $ millions, except per share amounts 2014 vs. 2013(1) Orders $ 1,023 ‐7% Revenue $ 1,045 ‐12% Adj. Operating Income (2) $ 96 +30% Adj. Operating Margin (2) 9.2% +300 bps Adj. EPS (2) $ 0.29 +26% Year‐to‐Date Free Cash Flow (FCF) (3) $ (160) ‐95% Q1 funded backlog +21% year‐over‐year Revenue ‐4% excluding the Mission Systems(4) division Free cash flow trend expected to improve over the course of the year Solid orders support full year expectations (1) First quarter 2013 results are as reported, including $49M of restructuring expense. (2) 2014 adjusted operating income, operating margin and EPS excludes separation charges related to the pending spin‐off of Mission Systems/Vectrus. (3) Free cash flow = cash flow from operations less capital expenditures plus separation charges. Does not include dividend payments. (4) Based on carve out of the Mission Systems division sales in Q1 2013 and Q1 2014. For Non‐GAAP reconciliations, refer to appendix and www.exelisinc.com/investors 3

Backlog & Business Environment $3.4 $3.4 $1.3 $1.1 $2.1 $2.3 Q4 2013 Q1 2014 Funded Backlog ($B) $9.4 $9.4 $6.5 $6.3 $2.9 $3.1 Q4 2013 Q1 2014 Total Backlog ($B) Stable funded backlog Q1 strategic awards IDECM FRP for the U.S. Navy CH‐53K production award from Sikorsky Climate monitoring satellite payload to Japan Electronic warfare equipment to Turkey Over $50M in TM‐NVG awards from international customers Decelerating operational tempo on Middle East and Afghanistan Programs Resource emphasis on Strategic Growth Platforms 4

Mission Systems Spin‐off Update Mission Systems division will do business as Vectrus, Inc. after its spin‐off Q1’14 Financial Performance Slowing pace of operations in Middle East and Afghanistan programs driving top‐line pressure Expecting 2014 revenue decline in the high‐teens from 2013 2014 pro forma operating margin between 5.5% ‐ 6.0% Dividend to Exelis to be based on 2015E Vectrus profitability Continue to progress through regulatory and legal requirements Spin‐off continues on track for completion Summer 2014 5

C4ISR Segment Q1 2014 Results $ millions, except per share amounts 2014 vs. 2013(1) Orders $ 664 +18% Revenue $ 480 ‐4% Adj. Operating Income(2) $ 47 +147% Adj. Operating Margin (2) 9.8% +600 bps +18% Orders Domestic airborne EW; International EW; International climate payloads International radars ‐4% Revenue Tactical Radios; Domestic airborne EW Night vision products; Domestic ground EW; commercial imagery payloads +600 bps Adjusted Operating Margin(2) Lower restructuring and pension expenses (1) First quarter 2013 results are as reported, including $40M of restructuring expense in the C4ISR segment. (2) 2014 adjusted operating income, operating margin and EPS excludes separation charges related to the pending spin‐off of Mission Systems/Vectrus. For Non‐GAAP reconciliations, refer to appendix and www.exelisinc.com/investors 6

I&TS Segment Q1 2014 Results $ millions, except per share amounts 2014 vs. 2013(1) Orders $ 359 ‐33% Revenue $ 565 ‐18% Adj. Operating Income(2) $ 49 ‐11% Adj. Operating Margin (2) 8.7% +70 bps ‐33% Orders Middle East programs ‐18% Revenue FAA programs Middle East and Afghanistan programs +70 bps Adjusted Operating Margin Lower restructuring; lower volume (1) First quarter 2013 results are as reported, including $9M of restructuring expense in the I&TS segment. (2) 2014 adjusted operating income, operating margin and EPS excludes separation charges related to the pending spin‐off of Mission Systems/Vectrus. For Non‐GAAP reconciliations, refer to appendix and www.exelisinc.com/investors 7

SUMMARY Core business benefits from stable backlog Continued progress in international – accounted for 25% of total Q1 orders Anticipate generating ≈60% of 2014 profitability in 2H’14 Reaffirming Full Year Outlook 8

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 revenue, operating income, income from continuing operations, or net cash from continuing operations as determined in accordance with GAAP. We consider the following non‐GAAP measure, which may not be comparable to similarly titled measures reported by other companies, to be a key performance indicator: “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. ($ million, except per share) Q1 2014 Q1 2013 Net Income 52 44 Separation Costs for the Vectrus Spin‐off, net of tax 5 ‐ Adjusted Net Income 57 44 Net Income per fully diluted share $0.27 $0.23 Adjusted Net Income per fully diluted share $0.29 $0.23 Weighted Average Shares Outstanding, Diluted 194.9 189.8 10

Reconciliation of Non‐GAAP Measures (cont.) “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. ($ million) Q1 2014 Q1 2013 Sales 1,045 1,185 C4ISR 480 499 I&TS 565 686 Segment Operating Income, As Reported 89 74 C4ISR 43 19 I&TS 46 55 Separation Costs, pre tax 7 - C4ISR 4 - I&TS 3 - Segment Operating Income, Adjusted 96 74 C4ISR 47 19 I&TS 49 55 Segment Operating Margin, As Reported C4ISR 8.9% 3.8% I&TS 8.1% 8.0% Segment Operating Margin, Adjusted C4ISR 9.8% 3.8% I&TS 8.7% 8.0% Operating Margin, As Reported 8.5% 6.2% Operating Margin, Adjusted 9.2% 6.2% 11

Reconciliation of Non‐GAAP Measures (cont.) “Free cash flow” defined as GAAP cash provided by operating activities, less capital expenditures plus separation costs. This metric does not include dividend payments. Q1 YTD 2014 Q1 YTD 2013 ($ million) Cash Flow From Operating Activities (158) (65) Subtract: Capital Expenditures (7) (17) Free Cash Flow (165) (82) Add: Separation Costs for the Vectrus Spin‐off, net of tax 5 - Free Cash Flow, as Adjusted (160) (82) 12