L-3 Communications Announces First Quarter 2003 Results.Business Editors/High-Tech Writers NEW YORK--(BUSINESS WIRE)--April 22, 2003 Sales, Operating Income Operating Income The profit realized from a business' own operations. Notes: This would not include income from things such as investments in other firms. Also referred to as operating profit or recurring profit. , Diluted Earnings Per Share diluted earnings per share An earnings measure calculated by dividing net income less preferred stock dividends for a period by the average number of shares of common stock that would be outstanding if all convertible securities were converted into shares of Before Cumulative Effect of a Change in Accounting Principle and Free Cash Flow Increase 56.3%, 52.6%, 38.9% and 189.7%, respectively L-3 Communications
L-3 Communications Holdings, Inc. (NYSE: LLL) is a company that supplies command, control, communications, intelligence, surveillance and reconnaissance (C3ISR) systems and (NYSE NYSE See: New York Stock Exchange : LLL LLL abbr. left lower lobe (of the lung) ) today announced results for the 2003 first quarter, reflecting strong growth in sales, operating income, diluted earnings per share and free cash flow(1) compared to the 2002 first quarter. For the 2003 first quarter, sales increased $392.2 million to $1,089.0 million from sales of $696.8 million for the 2002 first quarter. Excluding the increase in sales from acquisitions of $322.8 million, sales grew $69.4 million, or 10.0%, primarily because of continued strong demand for the company's secure communications systems In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. , security products and aircraft modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, , as well as increasing shipments of naval power equipment. Operating income for the 2003 first quarter increased 52.6% to $108.8 million from $71.3 million for the 2002 first quarter. Operating income as a percentage of sales ("operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: ") declined slightly to 10.0% from 10.2% primarily because of continued weakness for commercial aviation products and commercial communication products. Net cash from operating activities for the 2003 first quarter increased to $106.1 million compared to $41.4 million for the 2002 first quarter. Free cash flow for the 2003 first quarter was approximately $90.1 million, an increase of $59.0 million, or 189.7%, compared to free cash flow of $31.1 million for the 2002 first quarter. The increase in free cash flow for the 2003 first quarter was primarily related to the company's growth in earnings and better working capital management, including collections of billed receivables from customers and, to a lesser extent, the timing of interest payments on debt. Earnings before interest, taxes, depreciation and amortization Earnings before interest, taxes, depreciation and amortization (EBITDA) is a non-GAAP metric that can be used to evaluate a company's profitability.
Net income for the 2003 first quarter increased to $49.7 million compared to income before cumulative effect of a change in accounting principle of $29.3 million for the 2002 first quarter. Diluted earnings per share (EPS (Encapsulated PostScript) A PostScript file format used to transfer a graphic image between applications and platforms. EPS files contain PostScript code as well as an optional preview image in TIFF, WMF, PICT or EPSI, the latter being an ASCII-only format. ) increased 38.9% to $0.50, compared to diluted EPS before cumulative effect of a change in accounting principle of $0.36 for the 2002 first quarter. Net income for the 2002 first quarter includes a charge, net of income taxes, of $24.4 million, or $0.30 per diluted share, for the cumulative effect of a Note (1) Free cash flow is defined as net cash from operating activities less capital expenditures net of disposition of property, plant and equipment. EBITDA is defined as operating income plus depreciation and amortization. See discussions and calculations of free cash flow and EBITDA on the financial tables attached to this press release. Change in accounting principle for goodwill impairment Impairment 1. A reduction in a company's stated capital. 2. The total capital that is less than the par value of the company's capital stock. Notes: 1. This is usually reduced because of poorly estimated losses or gains. 2. in connection with the adoption of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System 142. Including the cumulative effect of a change in accounting principle, diluted EPS for the 2002 first quarter was $0.06. For the 2003 first quarter, diluted shares outstanding increased 27.4% to 105.0 million from 82.4 million for the 2002 first quarter, principally because of the company's public offering of 14.0 million shares of common stock on June 28, 2002, and the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of the company's convertible notes. Shares outstanding for all periods have been restated to reflect the company's two-for-one stock split that occurred on May 20, 2002. At March 31, 2003, the company had $34.4 million in cash, a decline of $100.5 million from $134.9 million at December 31, 2002. The decline in cash was principally related to the payment for the acquisition of Avionics Systems (discussed below), net of the company's free cash flow for the 2003 first quarter. Total debt was $1,843.7 million at March 31, 2003 compared to $1,847.8 million at December 31, 2002. Total debt as a percentage of total debt plus minority interest plus shareholders' equity Shareholders' Equity A firms' total assets minus its total liabilities. Equivalently, it is share capital plus retained earnings minus treasury shares. Shareholders' equity is the amount by which a company is financed through common and preferred shares. (book capitalization) decreased to 44.0% at March 31, 2003 from 44.8% at December 31, 2002. Additionally, shareholders' equity increased to $2,270.0 million at March 31, 2003, an increase of $67.8 million from $2,202.2 million at December 31, 2002. Available borrowings under the company's revolving credit Revolving Credit A line of credit where the customer pays a commitment fee and is then allowed to use the funds when they are needed. It is usually used for operating purposes, fluctuating each month depending on the customers current cash flow needs. facilities were $676.4 million at March 31, 2003. For the 2003 first quarter, the company received funded orders of $1,215.5 million, an increase of 53.4% over funded orders of $792.5 million for the 2002 first quarter. At March 31, 2003, funded backlog was $3,395.3 million, an increase of 5.2% over funded backlog of $3,228.6 million at December 31, 2002. "We had a very good start in the first quarter of 2003," said Frank C. Lanza, chairman and chief executive officer. "The company had good results across its government businesses, especially in intelligence, surveillance and reconnaissance Intelligence, Surveillance and Reconnaissance may refer to:
For the 2003 first quarter, sales from the company's government businesses increased $346.2 million to $964.8 million from $618.6 million for the 2002 first quarter. Excluding the increase in sales from acquisitions of $270.5 million, sales from the company's government businesses grew $75.7 million, or 12.2%, primarily because of higher sales of secure communications systems and security products, as well as increased shipments of naval power equipment. Operating income from the company's government businesses for the 2003 first quarter increased $34.2 million to $106.2 million from $72.0 million for the 2002 first quarter. For the 2003 first quarter, sales from the company's commercial businesses increased $46.0 million to $124.2 million from $78.2 million for the 2002 first quarter. Excluding the increase in sales from acquisitions of $52.3 million, sales from the company's commercial businesses declined $6.3 million, or 8.1%, primarily because of lower volumes for commercial aviation products and commercial communication products. Operating income from the company's commercial businesses for the 2003 first quarter increased $3.3 million to $2.6 million from a loss of $0.7 million for the 2002 first quarter. SEGMENT RESULTS Secure Communications & ISR Secure Communications & ISR (SC&ISR) first quarter 2003 sales increased $163.9 million to $321.3 million from $157.4 million for the 2002 first quarter. Excluding the increase in sales from the Integrated Systems (IS) and ComCept acquired businesses of $105.2 million, sales grew $58.7 million, or 37.3%, primarily due to continued strong demand from the DoD and other U.S. Government agencies for the company's secure communications systems, including Secure Terminal Equipment (STE STE Saint (French) STE Suite (US Postal Service) STE Societe (French: Society) STE Spanning Tree Explorer STE Software Test Engineer ) and data links. SC&ISR generated operating income of $33.3 million for the 2003 first quarter compared with $16.4 million for the 2002 first quarter. Operating margin was unchanged at 10.4%, primarily because of changes in sales mix sales mix See product mix. between fixed-price and cost-reimbursable contracts. Orders for the SC&ISR segment were $374.3 million during the 2003 first quarter and included: -- A milestone booking of the 100,000th unit for Secure Terminal Equipment (STE) since the initial procurement began in 1998. -- Continued strong orders for L-3's products for the Predator and GlobalHawk Unmanned Aerial Vehicle A powered, aerial vehicle that does not carry a human operator, uses aerodynamic forces to provide vehicle lift, can fly autonomously or be piloted remotely, can be expendable or recoverable, and can carry a lethal or nonlethal payload. (UAV UAV Unmanned Aerial Vehicle UAV Unmanned Air Vehicle UAV Unmanned Aerospace Vehicle UAV Unmanned Airborne Vehicle UAV Uninhabited Air Vehicle UAV Urban Assault Vehicle UAV Unpiloted Aerial Vehicle (less common) ) platforms, and support for the U2 reconnaissance aircraft. -- Continued funding for the U.S. military's secure global communications system under the Advanced Extremely High Frequency Communications Security See COMSEC. (COMSEC (COMmunications SECurity) A term used primarily by the military to denote measures for ensuring secure communications, including integrity and confidentiality during transmissions. ) and Transmission Security (TRANSEC TRANSEC Transmission Security ) System, known as ACTS. L-3 teamed with Boeing Space Systems to design and develop the architecture for the new CRYPTO-MODERN security components in December 1999. The system will provide secure global communication to support joint U.S. military services and allied or joint coalition actions well into the 21st century. -- Selection by the U.S. Air Force to design and develop the Multi-Platform Common Data Link (MP-CDL MP-CDL Multi-Platform - Common Data Link (US DoD) ) that supports the transmission and receipt of data between ground facilities and multiple simultaneous air vehicle platforms. This important program serves as a cornerstone for future network centric communications by providing a wideband communication architecture that connects the critical information flow within the ISR community. In addition, in April 2003, the U.S. Army awarded L-3 a contract for the build, test certification and delivery of a Tri-Band Satellite Communication System to support its Phoenix program. This award, valued at approximately $300 million over the life of the contract, also includes spares and additional technology development services. Training, Simulation and Support Services Training, Simulation and Support Services (TS&SS) sales for the 2003 first quarter increased $36.6 million to $231.4 million from $194.8 million for the 2002 first quarter. The Telos, TMA TMA Turnaround Management Association TMA Texas Medical Association TMA Transportation Management Association TMA Training and Management Assistance (a component of OHRD, which is a component of OWR) TMA Tooling & Manufacturing Association and Ship Analytics acquired businesses provided $36.2 million of the increase in sales. Excluding the increase in sales from acquisitions, sales grew $0.4 million or 0.2%. Increases in sales for communications software (communications, software) communications software - Application programs, operating system components, and probably firmware, forming part of a communication system. These different software components might be classified according to the functions within the Open Systems and engineering support services were offset by timing differences between contracts approaching their scheduled completion and new contracts, which caused sales declines for training services. Sales for ballistic bal·lis·tic adj. 1. a. Of or relating to the study of the dynamics of projectiles. b. Of or relating to the study of the internal action of firearms. 2. missile targets and services were unchanged from year ago levels. The company continues to expect the TS&SS segment sales growth excluding acquisitions to be between 6% and 7% for the full year 2003. TS&SS generated $28.5 million of operating income for the 2003 first quarter, compared to $21.5 million for the 2002 first quarter. Operating margin increased to 12.3% from 11.0% primarily because of higher margins for military communications Military communications, or Signals, is a field of military activities, tactics and equipment dealing with communications. First of all, military communications are battlefield (combat) communications, including intercommunication with a higher command or country's software and engineering support services. Orders for the TS&SS segment were $295.9 million during the 2003 first quarter and included: -- Continued strong support from the U.S. Army's Installation Management Agency (IMA (Interactive Multimedia Association, Annapolis, MD) An earlier trade association founded in 1988 originally as the Interactive Video Industry Association. It provided an open process for adopting existing technologies and was involved in subjects such as networked services, scripting ), which is implementing integrated execution for Army posts and stations worldwide, as well as receiving full-up funding for the execution of recruiting and related support activities for the Army's Recruiting Command. -- Continued worldwide support of training systems to a variety of domestic and international customers. The E-3A E-3A Sentry; AWACS (Airborne Early Warning and Control System) Aircraft Contractor Training Simulation Service is successfully providing E-3A AWACS AWACS (Airborne Warning and Control System) Mobile, long-range radar surveillance-and-control centre for air defense. Used by the U.S. Air Force since 1977, AWACS is mounted in a specially modified Boeing 707 aircraft, with its main radar antenna affixed to a rotating dome. flight crews essential qualification and mission readiness training. -- Selection by the National Reconnaissance Office's Deputy Director of Military Support to provide intelligence analysis and support. Selection by the Aviation Tactics Evaluation Group to support U.S. Special Operations Command A subordinate unified or other joint command established by a joint force commander to plan, coordinate, conduct, and support joint special operations within the joint force commander's assigned operational area. Also called SOC. See also special operations. (USSOCOM USSOCOM United States Special Operations Command ). -- An award to support the Special Operations Operations conducted in hostile, denied, or politically sensitive environments to achieve military, diplomatic, informational, and/or economic objectives employing military capabilities for which there is no broad conventional force requirement. for the U.S. Navy's Naval Sea Systems Command's Coastal Systems Station SEAL Swimmer Delivery Vehicle Swimmer Delivery Vehicles (SDVs) are midget submersibles designed to transport combat swimmers from a combat swimmer unit or naval Special Forces underwater, over long distances. SDVs carry a pilot, co-pilot, and combat swimmer team and their equipment, to and from maritime mission . Aviation Products & Aircraft Modernization Aviation Products and Aircraft Modernization (AP&AM) 2003 first quarter sales increased $51.6 million to $158.9 million, from $107.3 million in the 2002 first quarter. Excluding the increase in sales from the IS acquired business of $42.8 million, sales grew $8.8 million, or 8.2%, primarily because of sales on contracts awarded in 2002 to upgrade C-130 aircraft for Greece and Malaysia, and higher volume for maritime voyage recorders. These sales increases were partially offset by lower volume on commercial aviation products. AP&AM generated operating income of $19.9 million for the 2003 first quarter, compared with $17.5 million for the 2002 first quarter. Operating margin declined to 12.5% from 16.3%, primarily because of lower margins on volume declines for commercial aviation products caused by the continued weakness in the commercial aviation market, and the IS acquired business, which was included in the company's results for the entire 2003 first quarter and only during March for the 2002 first quarter and has lower margins than the segment's other businesses. Orders for the AP&AM segment were $165.1 million during the 2003 first quarter and included: -- Selection to provide logistics support to the USSOCOM. This program, known as Special Operations Forces Those Active and Reserve Component forces of the Military Services designated by the Secretary of Defense and specifically organized, trained, and equipped to conduct and support special operations. Also called SOF. - Support Activity (SOF SOF abbr. sound on film - SA), provides logistics support to USSOCOM, its component commands, selected Department of Defense customers and designated government agencies. This is a ten-year, $1.5 billion Indefinite Delivery/Indefinite Quantity (IDIQ IDIQ Indefinite Delivery, Indefinite Quantity (contracting/procurement) ) contract that became effective on April 1, 2003. The company only includes amounts for IDIQ contracts in its orders as they are funded. -- Follow-on production orders for aviation recorders from various airframe manufacturers including Gulfstream, Boeing and Cessna. The demand for the Maritime Hardened Voyage Recorder continues to grow with major orders from Japan Radio Corporation and Kongsberg Norcontrol. -- Selection by the Boeing Company to provide cockpit displays for F-15K Eagle fighter aircraft fighter aircraft Aircraft designed primarily to secure control of essential airspace by destroying enemy aircraft in combat. Designed for high speed and maneuverability, they are armed with weapons capable of striking other aircraft in flight. . AP&AM was also selected to provide displays for the Royal Australian Air Force The Royal Australian Air Force (RAAF) is the Air Force branch of the Australian Defence Force. The RAAF began in March 1914 as the Australian Flying Corps and became a fully independent Air Force in March 1921. C-130 aircraft. This is the linchpin linch·pin or lynch·pin n. 1. A locking pin inserted in the end of a shaft, as in an axle, to prevent a wheel from slipping off. 2. for other future electronic flight instruments/radar display units awards for C-130 aircraft. -- An award for the Army Airborne Command and Control Systems (A2C A2C Airman Second Class A2C Administration-to-Customer 2) program. This is a tactical operations command post that is hosted on a UH-60 BlackHawk helicopter. The A2C2 allows for an on-the-move command and control system enabling commanders and their staff to maintain digital connectivity while operating from a temporary remote site or while moving through battle. Specialized Products Specialized Products' sales for the 2003 first quarter increased $140.1 million to $377.4 million from $237.3 million in the 2002 first quarter. The Detection Systems, Ruggedized Command and Control, Electron Devices, Wolf Coach Inc., International Microwave Corporation, Westwood Corporation and Wescam Inc. acquired businesses provided $138.6 million of the increase in sales. Excluding the increase in sales from acquisitions, sales grew $1.5 million or 0.6%. Increases in sales of security products and naval power equipment were largely offset by volume declines on fuzing products and acoustic undersea warfare Operations conducted to establish battlespace dominance in the underwater environment, which permits friendly forces to accomplish the full range of potential missions and denies an opposing force the effective use of underwater systems and weapons. products arising from certain contracts approaching their scheduled completion, as well as lower volumes for telemetry telemetry Highly automated communications process by which data are collected from instruments located at remote or inaccessible points and transmitted to receiving equipment for measurement, monitoring, display, and recording. and space products and microwave components due to continued weakness in those commercial markets. Specialized Products generated operating income of $27.1 million for the 2003 first quarter, compared with $15.9 million for the 2002 first quarter. Operating margin improved to 7.2% from 6.7% primarily because of sales increases for security products, which have higher margins. Orders for the Specialized Products segment were $380.2 million during the 2003 first quarter and included: -- An award from Raytheon Company for the Common Air Launch Navigation System A GPS-based electronic system in a car or truck that provides a real time map of the vehicle's current location as well as step-by-step directions to a programmed destination. See GPS and vehicle tracking. (CALNS). This represents the first integrated GPS/MEMS IMU Noun 1. IMU - a terrorist group of Islamic militants formed in 1996; opposes Uzbekistan's secular regime and wants to establish an Islamic state in central Asia; is a conduit for drugs from Afghanistan to central Asian countries for a missile platform. -- Orders from Raytheon Missile Systems Raytheon Missile Systems Company is a subsidiary of Raytheon Company. Headquartered in Tucson, Arizona, its president is Louise Francesconi. Formerly, known as Hughes Missile Systems Company before acquired by Raytheon Company The division's products include: Telemetry System (XM-982). This includes the design and development of the XM-982 guided artillery projectile projectile something thrown forward. projectile syringe see blow dart. projectile vomiting forceful vomiting, usually without preceding retching, in which the vomitus is thrown well forward. . -- An order to supply five high energy x-ray imaging cargo systems The cargo system (also known as the civil-religious hierarchy, fiesta or mayordomía system) is a collection of secular and religious positions held by men or households in rural indigenous communities throughout central and southern Mexico and Central America. to the Kingdom of Saudi Arabia Saudi Arabia (sä  `dē ərā`bēə, sou`–, sô–), officially Kingdom of Saudi Arabia, kingdom (2005 est. pop. . The company was also awarded thefirst ever hold baggage systems (HBS HBS Harvard Business School HBs Hepatitis B Surface HBS Heinrich Boell Stiftung (German Political Foundation) HBS Household Budget Survey HBS Hogere Burgerschool HBS Hawaii Biological Survey (Bishop Museum) ) contract in Poland. In addition, the company received follow-on orders from the TSA TSA See tax-sheltered annuity (TSA). for 20 eXaminers to be installed at various airports in the United States. -- An award to provide the pilot and maintenance training devices required to support operational fielding of the F/A-22 Raptor. -- An order from the U.S. Navy's Space & Naval Warfare naval warfare Military operations conducted on, under, or over the sea and waged against other seagoing vessels or targets on land or in the air. The earliest naval attacks were raids by the armed men of a tribe or town using fishing boats or merchant ships. Systems Command for Fly-Away Tri-Band Satellite Terminals (FTSAT FTSAT Flyaway Triband Satellite Terminal ) and Quad Band Dual-Hub Satellite Terminal (QBHT) Mobile Terminals mounted on humvees. Additionally, the U.S. Army's Communications Electronics Command placed an order for FTSAT units. There is a growing demand for small, portable and mobile multi-band satellite ground terminals in the future. Acquisitions On March 28, 2003, the company completed the acquisition of Avionics Systems, a former Goodrich Corporation Goodrich Corporation (formerly the B.F. Goodrich Company) NYSE: GR, is an American aerospace manufacturing company based in Charlotte, North Carolina. Founded in Akron, Ohio in 1870 as Goodrich, Tew & Co. by Dr. Benjamin Franklin Goodrich. division. The purchase price of $188 million was financed using cash on hand. Following the acquisition the business was renamed L-3 Communications Avionics Systems. Avionics Systems develops and manufactures innovative avionics solutions for all segments of the aviation market, and sells its products in the following markets: military (23%), business jets (36%), general aviation (22%), rotary wing (7%) and air transport (12%). L-3 Avionics Systems was not included in the company's results of operations for the 2003 first quarter. OUTLOOK "The war in Iraq has demonstrated not only the courage, training, perseverance Perseverance See also Determination. Ainsworth redid dictionary manuscript burnt in fire. [Br. Hist.: Brewer Handbook, 752] Call of the Wild, The dogs trail steadfastly through Alaska’s tundra. [Am. Lit. and weapons of our nation's military forces and those of our coalition partners," said Frank Lanza, "but also confirms the success of recapitalizing based on the lessons learned from the Gulf War, and underpins the transformation of our military and industrial base going forward, and reinforces the modernization and transformation efforts outlined by Secretary Rumsfeld and the Department of Defense. "Those efforts include a greater use of ISR on both manned and unmanned platforms to provide warfighters a real-time view of the battlefield and the opportunity for rapid response. Many military experts have concluded that ISR Command and Control (C(2)) and precision strikes were the key elements in the amazing a·maze v. a·mazed, a·maz·ing, a·maz·es v.tr. 1. To affect with great wonder; astonish. See Synonyms at surprise. 2. Obsolete To bewilder; perplex. v.intr. success of our military forces. "The military also employed transformational ways of fighting, using speed instead of mass to accomplish its objectives. In addition, just as in Afghanistan, military forces were able to use existing platforms, some of which are decades old, but recapitalized with modern sensors, C(2), weapons and ISR. This war is a benchmark example of our military fighting as a highly coordinated unified force. It is expected that spending for modernization and transformation efforts will continue to grow this year and well into the decade," continued Mr. Lanza, "as the DoD selects new platforms for development and modernizes existing platforms with new technologies. In addition, the military will also have to replenish re·plen·ish v. re·plen·ished, re·plen·ish·ing, re·plen·ish·es v.tr. 1. To fill or make complete again; add a new stock or supply to: replenish the larder. 2. its stocks and continue its work on upgrading the assets that were deployed in the Iraqi war." Mr. Lanza noted that L-3's products and services are positioned to play an important role in all of these efforts. The company is a major player in the ISR market and has a vital role in aircraft modernization and mission systems integration along with providing products for upgrading aircraft, ships, ground vehicles, satellites and missiles. The company offers Global Positioning System Global Positioning System: see navigation satellite. Global Positioning System (GPS) Precise satellite-based navigation and location system originally developed for U.S. military use. (GPS) products, premium fuzes, safety and arming devices and proximity sensors for munitions mu·ni·tion n. War materiel, especially weapons and ammunition. Often used in the plural. tr.v. mu·ni·tioned, mu·ni·tion·ing, mu·ni·tions To supply with munitions. and simulation and training products to assist military forces in preparing for combat. "Homeland Security Noun 1. Homeland Security - the federal department that administers all matters relating to homeland security Department of Homeland Security executive department - a federal department in the executive branch of the government of the United States is another growing market for L-3," continued Mr. Lanza. "We expect that the Transportation Security Administration will order additional explosive detection systems Noun 1. explosive detection system - a rapid automatic system to detect plastic explosives in passengers' luggage using X-ray technology and computers; designed for use in airports EDS in 2003. We continue to expect growth in the international markets for our airport security products, and we saw evidence of that with contracts from Austria, Singapore and Poland in the first quarter. Cargo inspection is another key market, and L-3 recently received an award from the Saudi Arabian government for these products. U.S. Coast Guard modernization is another opportunity for L-3. L-3 is providing integrated communications equipment as a subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. to Lockheed Martin For the former company, see . Lockheed Martin (NYSE: LMT) is a leading multinational aerospace manufacturer and advanced technology company formed in 1995 by the merger of Lockheed Corporation with Martin Marietta. for the Deepwater program. Crisis management, maritime, port and border security are also growing markets. L-3 won a contract from the Government of Indonesia for maritime training, and is presently providing sensors and C(2) along the northern and southern borders of the United States The United States shares international borders with two nations:
"With positive trends in defense spending and homeland security, we continue to be confident about our results for the rest of 2003," said Mr. Lanza. "The acquisition pipeline is robust, with many opportunities among public and privately held companies privately held company A firm whose shares are held within a relatively small circle of owners and are not traded publicly. and assets of larger businesses in the $50 to $300 million range." Mr. Lanza noted that from 2002 to 2003, the overall DoD budget rose 10%. The investment account from which the military purchases its platforms and products, rose 20%. In addition, the DoD spends about $30 billion from its Operations and Maintenance (O&M) accounts for "spares and repairs", another area where L-3 receives funding for its products. "We expect that the overall DoD budget and the O&M account will each grow at a rate of 4% to 5% for the next five years, and we believe the investment account will grow at a rate of 7% to 8%," said Mr. Lanza. Mr. Lanza said, "With the acquisitions that we've completed through March 31, 2003 including Avionics Systems, we expect our sales to grow by about 20% for the full year 2003 compared to 2002. We expect operating income growth to exceed 25% for 2003 compared to 2002, resulting in 2003 diluted earnings per share of between $2.70 and $2.75. Additionally, given our strong cash flow performance for the 2003 first quarter, we are increasing our free cash flow estimate for 2003 from $285 million to $300 million." The company's expected sales for 2003 includes growth, excluding acquisitions, of 8% to 10%, after adjusting for the expected decline in EDS (Electronic Data Systems, Plano, TX, www.eds.com) Founded in 1962 by H. Ross Perot (independent candidate for the President of the U.S. in 1992), EDS is the largest outsourcing and data processing services organization in the country. systems sales for 2003 to $175 million from $339 million for 2002, with the balance of sales growth coming from acquisitions. The company's free cash flow estimate for 2003 is comprised of approximately $385 million of cash from operating activities less approximately $85 million of capital expenditures, net of dispositions of property, plant and equipment of approximately $5.0 million. MILESTONE During the 2003 first quarter the company learned that its 2002 results placed L-3 in the prestigious Fortune 500 for the first time at No. 398, and made it the 14th fastest growing Fortune 500 company based on revenues. Additionally, L-3 was listed as a "top ten" defense contractor Noun 1. defense contractor - a contractor concerned with the development and manufacture of systems of defense armed forces, armed services, military, military machine, war machine - the military forces of a nation; "their military is the largest in the region"; . CONFERENCE CALL In conjunction with this release, L-3 Communications will host a conference call, which will be simultaneously broadcast live over the Internet. Frank C. Lanza, chairman and chief executive officer, Robert V. LaPenta, president and chief financial officer, and Cynthia Swain, vice president-corporate communications, will host the call today, Tuesday, April 22, 2003, at 4:00 p.m. EDT EDT abbr. Eastern Daylight Time EDT Eastern Daylight Time EDT n abbr (US) (= Eastern Daylight Time) → hora de verano de Nueva York EDT . Listeners may access the conference call live over the Internet at the following location: http://www.firstcallevents.com/service/ajwz377839782gf12.html Please allow fifteen minutes prior to the call to visit this site to download and install any necessary audio software. The archived version of the call may be accessed at this site or by dialing (800) 642-1687 (passcode: 9563055), beginning approximately two hours after the call ends through Tuesday, April 29, 2003 at 11:59 a.m. EDT. Headquartered in New York City New York City: see New York, city. New York City City (pop., 2000: 8,008,278), southeastern New York, at the mouth of the Hudson River. The largest city in the U.S. , L-3 Communications is a leading merchant supplier of Intelligence, Surveillance and Reconnaissance (ISR) systems and products, secure communications systems and products, avionics and ocean products, training devices and services, microwave components and telemetry, instrumentation, space and navigation products. Its customers include the Department of Defense, Department of Homeland Security Noun 1. Department of Homeland Security - the federal department that administers all matters relating to homeland security Homeland Security executive department - a federal department in the executive branch of the government of the United States , selected U.S. Government intelligence agencies, aerospace prime contractors and commercial telecommunications and wireless customers. To learn more about L-3 Communications, please visit the company's web site at www.L-3Com.com. SAFE HARBOR Safe Harbor 1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated. 2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT The Private Securities Litigation Reform Act of 1995 (PSLRA) implemented several significant substantive changes affecting certain cases brought under the federal securities laws, including changes related to pleading, discovery, liability, class representation and awards fees and OF 1995 Except for historical information contained herein, the matters set forth in this news release are forward-looking statements forward-looking statement A projected financial statement based on management expectations. A forward-looking statement involves risks with regard to the accuracy of assumptions underlying the projections. . The forward-looking statements set forth above involve a number of risks and uncertainties that could cause actual results to differ materially from any such statement, including the risks and uncertainties discussed in the company's Safe Harbor Compliance Statement for Forward-looking Statements included in the company's recent filings, including Forms 10-K and 10-Q, with the Securities and Exchange Commission. The forward-looking statements speak only as of the date made, and the company undertakes no obligation to update these forward-looking statements.
L-3 COMMUNICATIONS HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
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(In millions, except per share data)
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Three Months
Ended
March 31,
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2003 2002
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Sales:
Contracts, primarily U.S. Government $964.8 $618.6
Commercial, primarily products 124.2 78.2
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Consolidated sales 1,089.0 696.8
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Costs and expenses:
Contracts, primarily U.S. Government 858.6 546.6
Commercial, primarily products:
Cost of sales 81.0 43.5
Selling, general and administrative expenses 31.8 25.5
Research and development expenses 8.8 9.9
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Consolidated costs and expenses 980.2 625.5
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Operating income 108.8 71.3
Interest and other income (expense) 1.4 1.0
Interest expense 32.2 26.1
Minority interest expense 0.3 0.9
-------- -------
Income before income taxes and cumulative
effect of a change in accounting principle 77.7 45.3
Provision for income taxes 28.0 16.0
-------- -------
Income before cumulative effect of a change in
accounting principle 49.7 29.3
Cumulative effect of a change in accounting
principle, net of income taxes of $6.4 - (24.4)
-------- -------
Net income $49.7 $4.9
======== =======
Earnings per share before cumulative effect of a
change in accounting principle:
-----------------------------------------------------
Basic $0.52 $0.37
======== =======
Diluted(a) $0.50 $0.36
======== =======
Earnings per share:
-----------------------------------------------------
Basic $0.52 $0.06
======== =======
Diluted
(a) $0.50 $0.06
======== =======
Weighted average common shares outstanding:
-------------------------------------------
Basic 95.1 78.9
======== =======
Diluted 105.0 82.4
======== =======
(a) In order to calculate diluted earnings per share, the after-
tax interest expense savings on the assumed conversion of the
Convertible Notes must be added to net income and then
divided by the weighted average number of shares outstanding.
The amount to add to income before cumulative effect of a
change in accounting principle and net income is $2.6 million
for the three months ended March 31, 2003. The shares and
after-tax interest expense savings upon conversion of the
Convertible Notes were not included in the computation of
diluted EPS for the three months ended March 31, 2002 because
the effect of the assumed conversion was anti-dilutive.
L-3 COMMUNICATIONS HOLDINGS, INC.
SELECTED FINANCIAL DATA
----------------------------------------------------------------------
(In millions)
----------------------------------------------------------------------
Three Months Ended
March 31,
------------------
2003 2002
--------- -------
Operating income $108.8 $71.3
Depreciation and amortization 22.8 15.2
--------- -------
EBITDA(b) $131.6 86.5
========= =======
Net cash from operating activities $106.1 $41.4
Capital expenditures, net of dispositions (16.0) (10.3)
--------- -------
Free cash flow(c) $90.1 $31.1
========= =======
Orders (funded) $1,215.5 $792.5
Reportable Segment Operating Data:
----------------------------------------------------
Sales:
Secure Communications & ISR $321.3 157.4
Training, Simulation &
Support Svs. 231.4 194.8
Aviation Pdts. & Aircraft
Modernization 158.9 107.3
Specialized Products 377.4 237.3
--------- -------
Consolidated $1,089.0 $696.8
========= =======
Operating income:
Secure Communications & ISR $33.3 $16.4
Training, Simulation &
Support Svs. 28.5 21.5
Aviation Pdts. & Aircraft
Modernization 19.9 17.5
Specialized Products 27.1 15.9
--------- -------
Consolidated $108.8 $71.3
========= =======
Operating margin:
Secure Communications & ISR 10.4% 10.4%
Training, Simulation &
Support Svs. 12.3% 11.0%
Aviation Pdts. & Aircraft
Modernization 12.5% 16.3%
Specialized Products 7.2% 6.7%
Consolidated 10.0% 10.2%
Depreciation and amortization:
Secure Communications & ISR $7.1 $4.2
Training, Simulation &
Support Svs. 2.0 1.9
Aviation Pdts. & Aircraft
Modernization 3.9 2.5
Specialized Products 9.8 6.6
--------- -------
Consolidated $22.8 $15.2
========= =======
March December
31, 31,
2003 2002
--------- ---------
Period end data:
----------------
Backlog (funded) $3,395.3 $3,228.6
Cash & cash equivalents $34.4 $134.9
Total debt $1,843.7 $1,847.8
Minority interest $73.5 $73.2
Shareholders' equity $2,270.0 $2,202.2
(b) EBITDA is presented as additional information because we
believe it to be a useful indicator of an entity's debt
capacity and its ability to service its debt. EBITDA is not a
substitute for operating income, net income or cash flows
from operating activities as determined in accordance with
generally accepted accounting principles. EBITDA is not a
complete net cash flow measure because EBITDA is a financial
performance measurement that does not include reductions for
cash payments for an entity's obligation to service its debt,
fund its working capital and capital expenditures and pay its
income taxes. Rather, EBITDA is one potential indicator of an
entity's ability to fund these cash requirements. EBITDA as
we defined it may differ from similarly named measures used
by other entities and, consequently could be misleading
unless all entities calculate and define EBITDA in the same
manner. EBITDA is also not a complete measure of an entity's
profitability because it does not include costs and expenses
for depreciation and amortization, interest and income taxes.
(c) The company discloses free cash flow because the company
believes that it is a measurement of cash flow generated that
is available to common stockholders. Free cash flow is
defined as cash from operating activities less net capital
expenditures (capital expenditures less cash proceeds from
dispositions of property, plant and equipment). Free cash
flow represents cash generated after paying for interest on
borrowings, income taxes, capital expenditures and changes in
working capital, but before repaying outstanding debt and
investing cash to acquire businesses and make other strategic
investments. Thus, key assumptions underlying free cash flow
are that the company will be able to refinance its existing
debt when it matures with new debt, and that the company will
be able to finance any new acquisitions it makes by raising
new debt or equity capital.
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