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Strategies & Market Trends : Value Investing -- Ignore unavailable to you. Want to Upgrade?

To: Spekulatius who wrote (45985)	12/16/2011 10:41:14 PM
From: Rex Torro	2 Recommendations Read Replies (1) \| Respond to of 78744

Subject: ITT Exelis (XLS) Below I've added the link to the amended form 10 I was referencing. The 6/30/11 pro forma balance sheet is on page 52 and shows $1.26B for postretirement benefits. Adding the 9/30 $661M re-measurement gets to $1.92B which seems to tie to the $2B you site from the Moody's report. I think they were allowed to just report the segment balance sheet in the 9/30 10Q which is why they just show $188M for postretirement benefits. You'll notice that the parent company investment is still reported and not eliminated. I figured this out when I tried to roll forward equity from 6/30. From the form 10 balance sheet elimination entry (f) deducted the transfer of the pension liability from equity through accumulated other comprehensive loss. Therefore I'll assume the $661M re-measurement will receive the same accounting treatment and also be offset to equity. So it sounds like book value is around a half what one may have initially calculated from the 6/30/11 pro forma numbers reported in the last form 10. I can't believe they just realized a quarter later, they were short $661M on the liability. Maybe I'm being overly cynical but it sounds like they took advantage of some reporting loopholes between keeping $661M out of the final form 10 and then reporting the segment balance sheet at 9/30, which also allowed them to not report the pension liability. I agree with you that the 9% estimated return on plan assets seems overly aggressive and leaves them exposed if the markets underperform, which they have been doing for onwards of a decade now. sec.gov