L-3 Announces Third Quarter 2012 Results

Year-to-Date: Electronic Systems net sales for the 2012 year-to-date period decreased by $13 million, or 0.3%, compared to the 2011 year-to-date period. Sales declined for: (1) Marine & Power Systems by $105 million primarily due to reduced shipments of tactical quiet generators for the U.S. Army, which reduced sales by $72 million, and $33 million of negative foreign currency translation, (2) Warrior Systems by $68 million for night vision and illumination products due to reduced U.S. Army requirements, (3) Precision Engagement by $65 million due to contracts nearing completion and lower demand. These declines were partially offset by sales increases of: (1) $135 million for Sensor Systems, comprised of $100 million from the KEO acquisition and $35 million primarily for higher sales of airborne EO/IR turrets for the U.S. Department of Defense (DoD), (2) $66 million primarily for Microwave Products due to reasons similar to the 2012 third quarter, and (3) $24 million for the Link U.K. acquisition.

Electronic Systems operating income for the 2012 year-to-date period decreased by $23 million, or 5%, compared to the 2011 year-to-date period. Operating margin decreased by 60 basis points to 11.8%. Sales mix changes reduced operating margin by 80 basis points and higher pension expense of $4 million reduced operating margin by 10 basis points. This decrease was partially offset by improved contract performance, primarily for Displays, Warrior Systems and Precision Engagement, which increased operating margin by 30 basis points.

C ³ ISR

					Third Quarter Ended													Year-to-Date Ended
($ in millions)					Sept. 28, 2012				Sept. 30,2011				Increase/(decrease)					Sept. 28, 2012				Sept. 30,2011				Increase/(decrease)
Net sales					$	885.9			$	874.9			1	%				$	2,634.1			$	2,466.7			7	%
Operating income					$	92.9			$	100.1			(7	)%				$	271.8			$	284.7			(5	)%
Operating margin						10.5	%			11.4	%		(90) bpts						10.3	%			11.5	%		(120) bpts

Third Quarter: C ³ISR net sales for the 2012 third quarter increased by $11 million, or 1%, compared to the 2011 third quarter. Sales for ISR Systems increased by $49 million primarily due to higher volume for airborne ISR systems. These increases were partially offset by lower sales of $38 million for networked communication systems primarily from fewer deliveries of remote video terminals and lower volume on the Hawklink contract due to development and low rate initial production work nearing completion.

C ³ISR operating income for the 2012 third quarter decreased by $7 million, or 7%, compared to the 2011 third quarter. Operating margin decreased by 90 basis points to 10.5%. Higher pension expense of $10 million reduced operating margin by 110 basis points and sales mix changes reduced operating margin by 40 basis points. This decrease was partially offset by improved contract performance, which increased operating margin by 60 basis points.

Year-to-Date: C ³ISR net sales for the 2012 year-to-date period increased by $167 million, or 7%, compared to the 2011 year-to-date period. Sales for ISR Systems increased by $144 million primarily due to higher volume on airborne ISR systems and increased demand for logistic support and fleet management services. Sales also increased by $23 million primarily for networked communication systems due to higher volume for manned and unmanned platforms for DoD customers.

C ³ISR operating income for the 2012 year-to-date period decreased by $13 million, or 5%, compared to the 2011 year-to-date period. Operating margin decreased by 120 basis points to 10.3%. Higher pension expense of $19 million reduced operating margin by 70 basis points and sales mix changes reduced operating margin by 80 basis points. These decreases were partially offset by improved contract performance, which increased operating margin by 30 basis points.

AM&M

					Third Quarter Ended												Year-to-Date Ended
($ in millions)					Sept. 28, 2012				Sept. 30,2011				Increase				Sept. 28, 2012				Sept. 30,2011				Increase/(decrease)
Net sales					$	648.9			$	622.7			4	%			$	1,854.5			$	1,825.4			2	%
Operating income					$	65.0			$	60.4			8	%			$	178.8			$	180.5			(0.9	)%
Operating margin						10.0	%			9.7	%		30 bpts					9.6	%			9.9	%		(30) bpts

Third Quarter: AM&M net sales for the 2012 third quarter increased by $26 million, or 4%, compared to the 2011 third quarter. Platform systems sales increased by $99 million, partially offset by a decline of $73 million for logistics support services. The platform systems increase was due primarily to volume on new contracts, including the Australia C-27J and international head-of-state aircraft modification contracts, and increased scope on the EC-130 aircraft for the U.S. Air Force (USAF). Logistics support services decreased due primarily to the competitive loss of a task order for U.S. Army contract field team support services in Southwest Asia.

AM&M operating income for the 2012 third quarter increased by $5 million, or 8%, compared to the 2011 third quarter. Operating margin increased 30 basis points to 10.0%. Operating margin increased by 100 basis points due to lower costs related to the Joint Cargo Aircraft (JCA). This increase was partially offset by 50 basis points primarily due to sales mix changes and 20 basis points due to higher pension expense of $1 million.

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