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L-3 Announces Third Quarter 2012 Results

Key contract wins for the quarter included: (1) continued operations and sustainment for the U.S. Army Constant Hawk aircraft, (2) an indefinite-delivery/indefinite-quantity (ID/IQ) contract to supply VideoScout® products and related upgrades to the Marine Corps, (3) communications systems for NASA’s Common Communications for Visiting Vehicles (C2V2) program, and (4) an ID/IQ contract to supply medium-speed explosives detection and ProVision® ATD (Automatic Target Detection) advanced imaging technology systems to the Transportation Security Administration (TSA).

Mr. Strianese continued, “We remain committed to shareholder value, deploying capital and free cash flow to enhance our operations and return cash to our shareholders. During the quarter, we repurchased $189 million of our common stock and paid dividends of $51 million, resulting in $653 million of cash returned to our shareholders year-to-date.”

L-3 Consolidated Results
  Third Quarter Ended     Year-to-Date Ended  
Sept. 28,   Sept. 30, Increase/ Sept. 28,   Sept. 30, Increase/
($ in millions, except per share data) 2012 2011 (decrease) 2012 2011 (decrease)
 
Net sales

$

3,283
$ 3,301 (0.5 )%

$

9,586
$ 9,615 (0.3 )%
 
Operating income $ 331 $ 359 (8 )% $ 987 $ 1,045 (6 )%
 
Operating margin 10.1 % 10.9 % (80) bpts 10.3 % 10.9 % (60) bpts
 
Net interest expense and other income $ 48 $ 47 2 % $ 132 $ 142 (7 )%
 

Debt retirement charge
$ 8

$

nm $ 8 $ 18 (56 )%
 
Effective income tax rate 29.1 % 31.4 % (230) bpts 32.3 % 31.1 % 120 bpts
 
Net income from continuing operationsattributable to L-3 $ 193 $ 212 (9 )% $ 570 $ 604 (6 )%
 
Diluted EPS from continuing operations $ 1.98 $ 2.02 (2 )% $ 5.78 $ 5.62 3 %
 
Diluted weighted average common shares outstanding 97.4 104.8 (7 )% 98.7 107.2 (8 )%

____________________________
nm – not meaningful                        
 

Third Quarter Results of Operations: For the 2012 third quarter, consolidated net sales of $3.3 billion were 0.5% lower than the 2011 third quarter. Sales growth from the Aircraft Modernization and Maintenance (AM&M), Command, Control, Communications, Intelligence, Surveillance and Reconnaissance (C 3ISR) and Electronic Systems segments was offset by lower sales from the National Security Solutions (NSS) (1) segment. Acquired businesses (2), which are all included in the Electronic Systems segment, added $63 million to net sales in the 2012 third quarter. Net sales to commercial and foreign government end customers grew 19% to $808 million for the 2012 third quarter compared to $679 million for the 2011 third quarter.

____________________________

(1)
 

L-3’s Government Services segment has been renamed National Security Solutions and comprises L-3’s cyber security, intelligence, enterprise information technology and security solutions businesses.

(2)

Net sales from acquired businesses are comprised of (i) net sales from business acquisitions that are included in L-3’s actual results for less than 12 months, less (ii) net sales from business divestitures that are included in L-3’s actual results for the 12 months prior to the divestitures.
 

Operating income for the 2012 third quarter decreased by $28 million compared to the 2011 third quarter. Operating income as a percentage of sales (operating margin) decreased by 80 basis points to 10.1% for the 2012 third quarter compared to 10.9% for the 2011 third quarter. Higher pension expense of $15 million ($9 million after income tax, or $0.09 per diluted share) reduced operating margin by 40 basis points. See segment results below for additional discussion of sales and operating margin.

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