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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