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L-3 Announces Third Quarter 2012 Results

Stocks in this article: LLL

Net interest expense and other income increased by $1 million for the 2012 third quarter compared to the same period last year. The 2012 third quarter includes a $3 million ($2 million after income tax, or $0.02 per diluted share) non-cash asset impairment charge related to the planned dissolution of an unconsolidated joint venture. Interest expense declined by $2 million due to lower interest rates on outstanding fixed rate debt.

During the 2012 third quarter, the company recorded a debt retirement charge of $8 million ($5 million after income tax, or $0.05 per diluted share) related to the redemption of $250 million of the 2015 Notes.

The effective tax rate for the 2012 third quarter decreased by 230 basis points compared to the same period last year. The effective tax rate decreased by 390 basis points due to a tax benefit of $11 million, primarily related to the reversal of amounts previously accrued for tax years in which the statute of limitations had expired, partially offset by the expiration of the U.S. Federal research and experimentation tax credit on December 31, 2011.

Net income from continuing operations attributable to L-3 in the 2012 third quarter decreased 9% to $193 million compared to the 2011 third quarter, and diluted EPS from continuing operations decreased 2% to $1.98 from $2.02. Diluted weighted average common shares outstanding for the 2012 third quarter declined by 7% compared to the 2011 third quarter due to repurchases of L-3 common stock.

Year-to-Date Results of Operations: For the year-to-date period ended September 28, 2012 (2012 year-to-date period) consolidated net sales decreased by $29 million compared to the year-to-date period ended September 30, 2011 (2011 year-to-date period). Higher sales from the C 3ISR and AM&M segments were offset by lower sales from the NSS and Electronic Systems segments. Acquired businesses, which are all included in the Electronic Systems segment, added $130 million to net sales in the 2012 year-to-date period. Net sales to commercial and foreign government end customers grew 12% to $2,223 million for the 2012 year-to-date period compared to $1,992 million for the 2011 year-to-date period.

Operating income for the 2012 year-to-date period decreased by $58 million compared to the 2011 year-to-date period. Operating margin decreased by 60 basis points to 10.3% for the 2012 year-to-date period compared to 10.9% for the 2011 year-to-date period. Higher pension expense of $28 million ($17 million after income tax, or $0.17 per diluted share) reduced operating margin by 30 basis points. See segment results below for additional discussion of sales and operating margin.

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