Year-to-Date: NSS net sales for the 2012 year-to-date period decreased by $213 million, or 17%, compared to the 2011 year-to-date period. The decrease was primarily due to trends similar to the 2012 third quarter. Specifically, lower volumes for IT support services reduced sales by $84 million, less U.S. Special Operations Command IT support services lowered sales by $81 million, and the drawdown of U.S. military forces in Iraq lowered sales by $48 million.
NSS operating income for the 2012 year-to-date period decreased by $20 million, or 26%, compared to the 2011 year-to-date period. Operating margin decreased by 70 basis points to 5.4%. Lower sales volume and lower contract profit rates on re-competitions of existing business decreased operating margins by 40 basis points, a $4 million inventory write-down for security and safety equipment reduced operating margin by 40 basis points, and legal fees of $3 million related to a supplier dispute reduced operating margins by 30 basis points. These decreases were partially offset by the timing of award fees for acquisition management and IT support services, which increased operating margin by 40 basis points.
All financial guidance amounts are estimates subject to change in the future, including as a result of matters discussed under the “Forward-Looking Statements” cautionary language beginning on page 8, and the company undertakes no duty to update its guidance.
|Consolidated L-3 (Excluding Engility) 2012 Financial Guidance|
|($ in millions, except per share data)|
|Current||Prior (July 26, 2012)|
|Net Sales||$13,000 to $13,100||$12,950 to $13,150|
|Net interest expense and other income||$||176||$||177|
|Debt retirement charge||$||13||$||8|
|Effective tax rate||33.2||%||34.4||%|
|Diluted EPS from continuing operations||$7.80 to $ 7.90||$7.70 to $ 7.85|
|Net cash from operating activities from continuing operations||$||1,230||$||1,240|
|Less: Capital expenditures, net of dispositions of property, plant and equipment||185||195|
|Free cash flow||$||1,045||$||1,045|
|Segment 2012 Financial Guidance|
|($ in millions)|
|Current||Prior (July 26, 2012)|
|Electronic Systems||$5,650 to $5,700||$5,650 to $5,750|
|C 3ISR||$3,500 to $3,550||$3,500 to $3,600|
|AM&M||$2,450 to $2,500||$2,400 to $2,500|
|National Security Solutions||$1,350 to $1,400||$1,300 to $1,400|
|Electronic Systems||11.8% to 11.9||%||12.1% to 12.3||%|
|C 3ISR||10.3% to 10.4||%||10.2% to 10.4||%|
|AM&M||9.1% to 9.2||%||8.5% to 8.7||%|
|National Security Solutions||5.9% to 6.0||%||6.6% to 6.8||%|
- Updated the consolidated and segment guidance ranges for net sales and operating margin for: (a) year-to-date nine month actual results, (b) the addition of the Link U.K. business acquisition completed on August 6, 2012, to the Electronic Systems segment, which is expected to add between $60 million and $70 million to 2012 sales, and (c) reduced estimated sales in the Electronic Systems segment of approximately $90 million, primarily due to fewer book-and-ship orders and a lower Euro-U.S. dollar foreign exchange rate.
- Increased diluted EPS range primarily attributable to: (a) the 2012 third quarter income tax gain of $0.11, (b) the Link U.K. business acquisition, which adds approximately $0.01, (c) a 2012 fourth quarter debt retirement charge of $0.03, and (d) the 2012 third quarter $0.02 charge included in net interest expense and other income for the dissolution of an unconsolidated joint venture.
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