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L-3 Announces Third Quarter 2012 Results

For a discussion of these and other risks and uncertainties that could impair our results of operations or financial condition, see ‘‘Part I — Item 1A — Risk Factors’’ and Note 19 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2011, “Part I – Item 2 – Management’s Discussion and Analysis of Financial Condition and Results of Operations – Overview and Outlook – Industry Considerations,” included in our Quarterly Reports on Form 10-Q for the quarters ended June 29, 2012 and March 30, 2012, and any material updates to these factors contained in any of our future filings.

Our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this release to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

– Financial Tables Follow –

       

Table A

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

 

Third Quarter Ended (a)

 

Year-to-Date Ended
Sept. 28,

2012

    Sept. 30,

2011

Sept. 28,

2012

  Sept. 30,

2011

Net sales $ 3,283 $ 3,301 $ 9,586 $ 9,615
Cost of sales   2,952     2,942 8,599   8,570
Operating income 331 359 987 1,045
 
Interest and other income, net

3 6 10
Interest expense 48 50 138 152
Debt retirement charge   8     8   18
Income from continuing operations before income taxes 275 312 847 885
Provision for income taxes   80     98 274   275
Income from continuing operations $ 195 $ 214 $ 573 $ 610
Income (loss) from discontinued operations, net of income tax   (1 )   24 32   81
Net income 194 238 605 691
Less: Net income from continuing operations attributable to noncontrolling interests 2 2 3 6
Less: Net income from discontinued operations attributable to noncontrolling interests       1 4   3
Net income attributable to L-3 $ 192 $ 235 $ 598 $ 682
Less: Net income allocable to participating securities       2
Net income allocable to L-3 Holdings’ common shareholders $ 192   $ 235 $ 598 $ 680
 
Basic earnings (loss) per share allocable to L-3 Holdings’ common shareholders:
Continuing operations $ 2.01 $ 2.05 $ 5.85 $ 5.68
Discontinued operations $ (0.01 ) $ 0.22 $ 0.29 $ 0.74
Basic earnings per share $ 2.00   $ 2.27 $ 6.14 $ 6.42
 
Diluted earnings (loss) per share allocable to L-3 Holdings’ common shareholders:
Continuing operations $ 1.98 $ 2.02 $ 5.78 $ 5.62
Discontinued operations $ (0.01 ) $ 0.22 $ 0.28 $ 0.72
Diluted earnings per share $ 1.97   $ 2.24 $ 6.06 $ 6.34
 
L-3 Holdings’ weighted average common shares outstanding:
Basic   96.1     103.5 97.4   106.0
Diluted   97.4     104.8 98.7   107.2
   
(a) It is the company’s established practice to close its books for the quarters ending March, June and September on the Friday nearest to the end of the calendar quarter. The interim financial statements and tables of financial information included herein have been prepared and are labeled based on that convention. The company closes its annual books on December 31 regardless of what day it falls on.
 
     

Table B

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED SELECT FINANCIAL DATA
(in millions)
 
Third Quarter Ended Year-to-Date Ended
Sept. 28,

2012

  Sept. 30,

2011

Sept. 28,

2012

  Sept. 30,

2011

 

Segment Operating Data

Net Sales:
Electronic Systems $ 1,395.1 $ 1,385.8 $ 4,060.1 $ 4,072.8
C 3 ISR 885.9 874.9 2,634.1 2,466.7
AM&M 648.9 622.7 1,854.5 1,825.4
NSS   352.6     417.4     1,037.5     1,250.1  
Total $ 3,282.5   $ 3,300.8   $ 9,586.2   $ 9,615.0  
Operating income:
Electronic Systems $ 158.3 $ 165.8 $ 480.4 $ 503.8
C 3 ISR 92.9 100.1 271.8 284.7
AM&M 65.0 60.4 178.8 180.5
NSS   14.5     32.5     56.1     75.9  
Total $ 330.7   $ 358.8   $ 987.1   $ 1,044.9  
Operating margin:
Electronic Systems 11.3 % 12.0 % 11.8 % 12.4 %
C 3 ISR 10.5 % 11.4 % 10.3 % 11.5 %
AM&M 10.0 % 9.7 % 9.6 % 9.9 %
NSS 4.1 % 7.8 % 5.4 % 6.1 %
Total 10.1 % 10.9 % 10.3 % 10.9 %
Depreciation and amortization:
Electronic Systems $ 34.2 $ 34.9 $ 105.4 $ 109.5
C 3 ISR 11.4 11.0 34.4 32.6
AM&M 4.2 4.4 14.9 13.4
NSS   4.7     4.1     10.5     12.6  
Total $ 54.5   $ 54.4   $ 165.2   $ 168.1  

Funded order data:

Electronic Systems $ 1,491 $ 1,771 $ 4,375 $ 4,215
C 3 ISR 925 1,029 2,612 2,785
AM&M 447 527 2,302 1,796
NSS   383     512     1,163     1,241  
Total $ 3,246   $ 3,839   $ 10,452   $ 10,037  
 
 
 
Sept. 28, Dec. 31,
2012 2011

Period end data:

Funded backlog $ 10,953 $ 9,899
 
 

Table C

L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED
BALANCE SHEETS
(in millions)
       
Sept. 28,

2012

Dec. 31,

2011

ASSETS
 
Cash and cash equivalents $ 514 $ 764
Billed receivables, net 962 1,103
Contracts in process 2,839 2,351
Inventories 401 317
Deferred income taxes 131 132
Other current assets 139 191
Assets of discontinued operations   1,729
Total current assets   4,986   6,587
Property, plant and equipment, net 980 921
Goodwill 7,705 7,472
Identifiable intangible assets 327 308
Deferred debt issue costs 32 33
Other assets   170   176
Total assets $ 14,200 $ 15,497
 
LIABILITIES AND EQUITY
 
 
Accounts payable, trade $ 476 $ 395
Accrued employment costs 613 563
Accrued expenses 437 543
Advance payments and billings in excess of costs incurred 682 537
Income taxes 23 40
Other current liabilities 348 388
Liabilities of discontinued operations   351
Total current liabilities   2,579   2,817
Pension and postretirement benefits 1,090 1,137
Deferred income taxes 420 335
Other liabilities 391 359
Long-term debt   3,878   4,125
Total liabilities   8,358   8,773
Shareholders’ equity 5,766 6,635
Noncontrolling interests of continuing operations 76 79
Noncontrolling interests of discontinued operations   10
Total equity   5,842   6,724
Total liabilities and equity $ 14,200 $ 15,497
 
 

Table D

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in millions)

     
Year-to-Date Ended
Sept. 28,

2012

    Sept. 30,

2011

Operating activities

Net income $ 605 $ 691
Less: Income from discontinued operations, net of tax   32     81  
Income from continuing operations 573 610
Depreciation of property, plant and equipment 124 125
Amortization of intangibles and other assets 41 44
Deferred income tax provision 50 80
Stock-based employee compensation expense 44 47
Contributions to employee savings plans in L-3 Holdings’ common stock 104 89
Amortization of pension and postretirement benefit plans net loss and prior service cost 51 36
Amortization of bond discounts and deferred debt issue costs (included in interest expense) 5 10
Other non-cash items 9 5
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures and discontinued operations:
Billed receivables 161 18
Contracts in process (385 ) (204 )
Inventories (83 ) (46 )
Accounts payable, trade 47 41
Accrued employment costs 35 7
Accrued expenses (120 ) 16
Advance payments and billings in excess of costs incurred 94 (74 )
Income taxes (6 ) 55
Excess income tax benefits related to share-based payment arrangements (2 ) (2 )
Other current liabilities (54 ) (1 )
Pension and postretirement benefits (53 ) (74 )
All other operating activities   57     (33 )
Net cash from operating activities from continuing operations   692     749  
 

Investing activities

Contribution received from the spin-off of Engility 335
Business acquisitions, net of cash acquired (349 ) (15 )
Capital expenditures (124 ) (124 )
Dispositions of property, plant and equipment 6 5
Other   (5 )   1  
Net cash used in investing activities from continuing operations   (137 )   (133 )

Financing activities

Proceeds from sale of senior notes 646
Redemption of senior subordinated notes (250 ) (650 )
Redemption of CODES (11 )
Borrowings under revolving credit facility 199 625
Repayment of borrowings under revolving credit facility (199 ) (625 )
Common stock repurchased (504 ) (800 )
Dividends paid on L-3 Holdings’ common stock (149 ) (143 )
Proceeds from exercises of stock options 12 21
Proceeds from employee stock purchase plan 30 34
Debt issue costs (6 ) (7 )
Excess income tax benefits related to share-based payment arrangements 2 2
Other financing activities   (18 )   (7 )
Net cash used in financing activities from continuing operations   (883 )   (915 )
 
Effect of foreign currency exchange rate changes on cash and cash equivalents 4
Cash from (used in) discontinued operations
Operating activities 75 235
Investing activities (4 )
Financing activities   (1 )   (1 )
Cash from discontinued operations   74     230  
Net decrease in cash and cash equivalents (250 ) (69 )
Cash and cash equivalents, beginning of the period   764     607  
Cash and cash equivalents, end of the period $ 514   $ 538  




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