L-3 Communications Announces Fourth Quarter 2005 Results; Sales, Operating Income and Diluted Earnings Per Share Increase 51.7%, 39.5% and 22.8%, Respectively.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- 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 strong results for the 2005 fourth quarter, including sales of $2,900.2 million, 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. of $306.1 million, 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 of $1.24, net cash from operating activities of $267.3 million and free cash flow(1) of $287.0 million. For the 2005 fourth quarter, consolidated sales increased by $989.0 million, or 51.7%, to $2,900.2 million from consolidated sales of $1,911.2 million for the 2004 fourth quarter. The increase in consolidated sales from acquired businesses was $784.4 million, or 41.0%, including $608.6 million from the acquisition of The Titan Titan, in astronomy Titan (tī`tən), in astronomy, the largest of the named moons, or natural satellites, of Saturn. Also known as Saturn VI (or S6), Titan is 3,200 mi (5,150 km) in diameter, orbits Saturn at a mean distance of Corporation (Titan) on July July: see month. 29, 2005. Consolidated organic sales growth(2) was 10.7%, or $204.6 million. Organic sales growth for the company's defense businesses was 11.0%, or $186.2 million, driven primarily by strong demand for intelligence, surveillance and reconnaissance Intelligence, Surveillance and Reconnaissance may refer to:
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, and maintenance, government services and several specialized spe·cial·ize v. spe·cial·ized, spe·cial·iz·ing, spe·cial·iz·es v.intr. 1. To pursue a special activity, occupation, or field of study. 2. products, including those for simulation devices, guidance and navigation, electro-optical/infrared (EO/IR EO/IR Electro-Optical/Infra-Red ) and acoustic acoustic /acous·tic/ (ah-kldbomacs´tik) relating to sound or hearing. a·cous·tic or a·cous·ti·cal adj. Of or relating to sound, the sense of hearing, or the perception of sound. undersea anti-submarine warfare “A/S” redirects here. For the Danish stock company form, see Aktieselskab. “A/S” redirects here. For the Norwegian stock company form, see aksjeselskap. products. Organic sales growth for the company's commercial businesses was 8.5%, or $18.4 million, primarily due to volume increases for airport security products and microwave components, which were partially offset by volume decreases for commercial aviation products. Consolidated operating income for the 2005 fourth quarter increased by 39.5% to $306.1 million from $219.5 million for the 2004 fourth quarter. Consolidated 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: ) was 10.6% for the 2005 fourth quarter, compared to 11.5% for the 2004 fourth quarter. This decrease was principally due to the Titan acquired businesses, which reduced consolidated operating margin by 60 basis points because Titan's business is largely performed under lower margin (and lower risk) cost-reimbursable type and time-and-material type contracts. The changes in operating margin are further explained in the company's segment results discussed below. Interest and other (income) expense was a loss of $0.9 million for the 2005 fourth quarter, compared with income of $9.0 million for the 2004 fourth quarter. The decrease in other income is due primarily to a write-down Write-Down Reducing the book value of an asset because it is overvalued compared to the market value. Notes: This is usually reflected in the company's income statement as an expense, thereby reducing net income. of $5.8 million of the carrying value Carrying Value Also know as "book value," it is a company's total assets minus intangible assets and liabilities, such as debt. Notes: This is different than market value, as it can be higher or lower depending on the circumstances. of certain investments because the decline in values were determined to be other than temporary. Interest expense for the 2005 fourth quarter increased by $29.1 million, or 75.6%, to $67.6 million, compared to the 2004 fourth quarter, primarily due to interest incurred on debt issued to finance the Titan acquisition. Net income for the 2005 fourth quarter increased by 26.9% to $151.4 million, compared to net income of $119.3 million for the 2004 fourth 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 by 22.8% to $1.24, compared to $1.01 for the 2004 fourth quarter. For the 2005 fourth quarter, funded orders increased by 32.1% to $2,773.0 million, compared to funded orders of $2,098.6 million for the 2004 fourth quarter. At December December: see month. 31, 2005, funded backlog Backlog The total value of sales orders waiting to be fulfilled. Notes: This figure is used mainly in the manufacturing industry. Increases or decreases in a company's backlog indicate the future direction of sales and earnings. was $7,000.9 million, an increase of 47.1%, compared to funded backlog of $4,757.9 million at December 31, 2004. Net cash from operating activities for the 2005 fourth quarter increased by 25.7% to $267.3 million from $212.7 million for the 2004 fourth quarter. The 2005 fourth quarter included payments of $67.4 million to settle Titan shareholder class action and derivative action A lawsuit brought by a shareholder of a corporation on its behalf to enforce or defend a legal right or claim, which the corporation has failed to do. A derivative action, more popularly known as a Stockholder's Derivative Suit, is derived from the primary right of the lawsuits, which were assumed by L-3 as part of the Titan acquisition. Free cash flow for the 2005 fourth quarter increased by $98.9 million, or 52.6%, to $287.0 million, compared to free cash flow of $188.1 million for the 2004 fourth quarter. Free cash flow for the 2005 fourth quarter excludes the aforementioned a·fore·men·tioned adj. Mentioned previously. n. The one or ones mentioned previously. aforementioned Adjective mentioned before Adj. 1. legal settlement payments. "L-3 finished the year with strong fourth-quarter performance," said Frank C. Lanza Lan·za , Mario Originally Alfredo Arnold Cocozza. 1921-1957. American tenor and actor who recorded both popular music and opera. His films include That Midnight Kiss (1946). , chairman and chief executive officer of L-3 Communications. "We had solid growth in several of our business areas, including ISR, secure communications, government services, security detection systems, simulation devices, microwave components, EO/IR products and displays." FULL YEAR RESULTS For the year ended December 31, 2005, consolidated sales increased by $2,547.7 million, or 36.9%, to $9,444.7 million from consolidated sales of $6,897.0 million for the year ended December 31, 2004. The increase in consolidated sales from acquired businesses was $1,744.4 million, or 25.3%, including $1,052.3 million from the Titan acquisition. Consolidated organic sales growth was 11.6%, or $803.3 million. Organic sales growth for the company's defense businesses was 11.7%, or $722.1 million, driven primarily by continued strong demand for ISR systems and products, secure networked communications systems, aircraft modernization and maintenance, government services and several specialized products, including simulation devices, acoustic undersea anti-submarine warfare products, naval power equipment, military displays and antenna systems and EO/IR products. Organic sales growth for the company's commercial businesses was 11.0%, or $81.2 million, primarily due to increases for airport security systems and commercial aviation products. Consolidated operating income for the year ended December 31, 2005 increased by 33.1% to $996.7 million from $748.6 million for the year ended December 31, 2004. Consolidated operating margin was 10.6% for the year ended December 31, 2005, compared to 10.9% for the year ended December 31, 2004. The decrease in operating margin was primarily due to the Titan acquired businesses. Other income for the year ended December 31, 2005 was $5.5 million, compared to $7.3 million for the year ended December 31, 2004. The decrease is primarily due to write-downs of the carrying value of investments, as discussed earlier, offset by higher interest income earned because of higher average interest rates on cash and cash equivalents. Interest expense for the year ended December 31, 2005 increased by $58.9 million, or 40.5%, to $204.2 million, compared to the year ended December 31, 2004, primarily due to interest incurred on debt issued to finance the Titan acquisition. The income tax provision for the year ended December 31, 2005, was based on an effective income tax rate of 35.5%, compared to 36.0%, for the year ended December 31, 2004. The income tax provision for 2005 included a tax benefit for the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. disposition of certain tax contingencies Contingencies (ISSN 1048-9851) is the bimonthly magazine of the American Academy of Actuaries, providing a large and diverse readership with general interest and technical articles on a wide range of issues related to the actuarial profession. , which reduced the full year effective tax rate by approximately 100 basis points and was recorded in the 2005 third quarter. Additionally, during 2005 the company's income tax credits for research and experimentation expenditures declined because of the Titan acquired businesses. Net income for the year ended December 31, 2005 increased by 33.2% to $508.5 million, compared to net income of $381.9 million for the year ended December 31, 2004. Diluted di·lute tr.v. di·lut·ed, di·lut·ing, di·lutes 1. To make thinner or less concentrated by adding a liquid such as water. 2. To lessen the force, strength, purity, or brilliance of, especially by admixture. EPS increased by 26.1% to $4.20, compared to $3.33 for the year ended December 31, 2004. For the year ended December 31, 2005, funded orders increased by 37.0% to $10,365.4 million, compared to funded orders of $7,563.7 million for the year ended December 31, 2004. Net cash from operating activities for the year ended December 31, 2005 increased by 36.4% to $846.8 million from $620.7 million for the year ended December 31, 2004. Free cash flow for the year ended December 31, 2005 increased by $245.4 million, or 44.4%, to $797.5 million, compared to free cash flow of $552.1 million for the year ended December 31, 2004. As discussed earlier, the 2005 fourth quarter included payments of $67.4 million to settle Titan shareholder class action and derivative action lawsuits, which were assumed by L-3 as part of the Titan acquisition. Free cash flow for the year ended December 31, 2005 excludes the aforementioned legal settlement payments. The company's cash and cash equivalents decreased by $259.5 million to $393.9 million at December 31, 2005, compared to $653.4 million at December 31, 2004. The decrease in cash was primarily due to amounts used to finance business acquisitions, including the Titan acquisition, partially offset by increases in the company's free cash flow and net proceeds Net Proceeds The amount received after all costs are deducted from the sale of a piece of property or security. Notes: In the case of an investor selling a security, net proceeds represent the proceeds from the sale minus any trading costs (i.e. commissions). from debt offerings. Total debt increased by $2,443.7 million to $4,633.5 million at December 31, 2005 from $2,189.8 million at December 31, 2004, primarily due to $2,450.0 million of borrowings to finance the Titan acquisition. 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 after reduction for outstanding letters of credit were approximately $895.2 million at December 31, 2005. 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. increased by $690.9 million to $4,490.7 million at December 31, 2005, compared to $3,799.8 million at December 31, 2004, resulting from the company's net income, less dividends paid plus proceeds from the exercise of stock options during the year ended December 31, 2005. Total debt as a percentage of book capitalization capitalization n. 1) the act of counting anticipated earnings and expenses as capital assets (property, equipment, fixtures) for accounting purposes. 2) the amount of anticipated net earnings which hypothetically can be used for conversion into capital assets. (total debt plus minority interests plus shareholders' equity) increased to 50.3% at December 31, 2005, from 36.1% at December 31, 2004, reflecting the additional borrowings described above. REPORTABLE SEGMENTS Command, Control, Communications, Intelligence, Surveillance and Reconnaissance (C3ISR C3ISR Command, Control, Communication, Intelligence, Surveillance and Reconnaissance ) C3ISR sales for the 2005 fourth quarter increased by $281.9 million, or 66.6%, to $705.2 million from sales of $423.3 million for the 2004 fourth quarter. The increase in sales from acquired businesses was $215.0 million, primarily related to the Titan acquired businesses. Organic sales growth was $66.9 million, or 15.8%, driven by demand for upgrades of airborne airborne /air·borne/ (ar´born) suspended in, transported by, or spread by air. airborne, adj carried through the air. In health care settings, viruses or bacteria may become airborne, e.g. mission and ISR systems for allied foreign governments, secure networked communications systems and secure terminal equipment. C3ISR generated operating income of $71.4 million for the 2005 fourth quarter, compared to $61.4 million for the 2004 fourth quarter. Operating margin decreased to 10.1% from 14.5% for the 2004 fourth quarter. The decrease in operating margin is primarily due to lower margins from the Titan acquired businesses, lower unit sales unit sales Sales measured in terms of physical units rather than dollars. Unit sales data are often used by financial analysts when evaluating the health of a company. prices on secure terminal equipment and certain contracts in the early stages of performance that replaced higher-margin sales on certain mature contracts. Orders for the C3ISR segment were $622.1 million during the 2005 fourth quarter. For the year ended December 31, 2005, sales for C3ISR increased by $506.5 million, or 30.4%, to $2,170.1 million from sales of $1,663.6 million for the year ended December 31, 2004. The increase in sales from acquired businesses was $377.0 million. Organic sales growth was $129.5 million, or 7.8%. C3ISR generated operating income of $249.9 million for the year ended December 31, 2005, compared to $218.0 million for the year ended December 31, 2004. Operating margin decreased to 11.5% from 13.1%. The trends affecting C3ISR results for the year ended December 31, 2005 were similar to those affecting the 2005 fourth quarter, except that organic sales growth was greater in the 2005 fourth quarter due to the timing of product shipments and an increase in production. Additionally, for the full year 2005 the negative effects on operating margins from the Titan acquired businesses and lower margins on contracts in the early stages of performance were less pronounced than in the 2005 fourth quarter. Government Services Government Services sales for the 2005 fourth quarter increased by $384.0 million, or 130.4%, to $678.5 million from sales of $294.5 million for the 2004 fourth quarter. The increase in sales from acquired businesses was $320.4 million, primarily related to the Titan acquired businesses. Organic sales growth was $63.6 million, or 21.6%, driven primarily by increased volume for international training services and intelligence support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services , as well as sales growth for communications systems and engineering support, equipment logistics support and recruiting services for the U.S. Army. Government Services generated operating income of $65.5 million for the 2005 fourth quarter, compared to $39.0 million for the 2004 fourth quarter. Operating margin decreased to 9.7% from 13.2%, primarily due to lower margins from the Titan acquired businesses, and lower margins on certain contracts in the early stages of performance that replaced higher-margin sales on certain mature contracts. Orders for the Government Services segment were $728.2 million during the 2005 fourth quarter. For the year ended December 31, 2005, sales for Government Services increased by $759.9 million, or 71.7%, to $1,819.8 million from sales of $1,059.9 million for the year ended December 31, 2004. The increase in sales from acquired businesses was $600.5 million. Organic sales growth was $159.4 million, or 15.0%. Government Services generated operating income of $168.6 million for the year ended December 31, 2005, compared to $124.1 million for the year ended December 31, 2004. Operating margin decreased to 9.3% from 11.7%. The trends affecting Government Services results for the year ended December 31, 2005 were similar to those affecting the 2005 fourth quarter, but the full year 2005 also included higher sales due to increased support services for the U.S. Missile Defense Missile defence is an air defence system, weapon program, or technology involved in the detection, tracking, interception and destruction of attacking missiles. Originally conceived as a defence against nuclear-armed ICBMs, its application has broadened to include shorter-ranged Agency. Operating margins for the full year 2005 also included cost overruns Noun 1. cost overrun - excess of cost over budget; "the cost overrun necessitated an additional allocation of funds in the budget" cost - the total spent for goods or services including money and time and labor on certain fixed price contracts, which occurred in the first quarter of 2005. In addition, the negative impact on operating margins from the Titan acquired businesses for the full year 2005 was less pronounced than in the 2005 fourth quarter. Aircraft Modernization and Maintenance (AM&M) AM&M sales for the 2005 fourth quarter increased by $40.0 million, or 7.4%, to $584.2 million from sales of $544.2 million in the 2004 fourth quarter. Organic sales growth was $16.4 million, or 3.0%, driven by the recent competitively awarded Canadian Canadian (kənā`dēən), river, 906 mi (1,458 km) long, rising in NE New Mexico. and flowing E across N Texas and central Oklahoma into the Arkansas River in E Oklahoma. Maritime INTEREST, MARITIME. By maritime interest is understood the profit of money lent on bottomry or respondentia, which is allowed to be greater than simple interest because the capital of the lender is put in jeopardy. Helicopter Program (MHP MHP Multimedia Home Platform (consumer electronics) MHP Milliyetci Hareket Partisi (Turkish: National People's Party) MHP Mobile Home Park (district) MHP Maximum Human Performance ). Aircraft base operations support volume declined slightly due to the loss of a utility aircraft support contract. The increase in sales from the L-3 Electronics Systems acquired business, which was acquired on December 30, 2004, was $23.6 million. AM&M generated operating income of $57.7 million for the 2005 fourth quarter, compared to $44.8 million for 2004 fourth quarter. Operating margin increased to 9.9% from 8.2%, primarily due to higher sales volume on MHP, and aircraft base operations, support and maintenance. Orders for the AM&M segment were $606.8 million during the 2005 fourth quarter. For the year ended December 31, 2005, sales for AM&M increased by $376.2 million, or 19.7%, to $2,289.1 million from sales of $1,912.9 million for the year ended December 31, 2004. Organic sales growth was $285.4 million, or 14.9%, driven by volume increases in aircraft base operations support and the MHP contract. The increase in sales from acquired businesses was $90.8 million. AM&M generated operating income of $227.4 million for the year ended December 31, 2005, compared to $186.1 million for the year ended December 31, 2004. Operating margin increased to 9.9% from 9.7%, primarily due to higher volume on aircraft base operations support, partially offset by lower margins for the L-3 Electronics Systems acquired business. Specialized Products Specialized Products sales for the 2005 fourth quarter increased by $283.1 million, or 43.6%, to $932.3 million from sales of $649.2 million in the 2004 fourth quarter. The increase in sales from acquired businesses was $225.4 million. Acquired businesses primarily include certain divisions of Titan, CAE's Marine Controls division, Boeing (language) BOEING - An early system on the IBM 1130. [Listed in CACM 2(5):16, May 1959]. Electron Dynamic Devices, Inc., and General Dynamics' Propulsion Systems Noun 1. propulsion system - a system that provides a propelling or driving force system - instrumentality that combines interrelated interacting artifacts designed to work as a coherent entity; "he bought a new stereo system"; "the system consists of a motor and a business unit, all of which were acquired in 2005, and the Raytheon Commercial Infrared An invisible band of radiation at the lower end of the visible light spectrum. With wavelengths from 750 nm to 1 mm, infrared starts at the end of the microwave spectrum and ends at the beginning of visible light. business and Cincinnati Electronics, Inc., both of which were acquired in 2004. Organic sales growth was $57.7 million, or 8.9%, primarily due to higher sales volume for airport security systems, as well as increases for simulation devices, microwave components, guidance, navigation, EO/IR and acoustic undersea anti-submarine warfare products. These increases were partially offset by volume declines for commercial aviation products. Specialized Products generated operating income of $111.5 million for the 2005 fourth quarter, compared to $74.3 million for the 2004 fourth quarter. Operating margin increased to 12.0% from 11.4%, primarily due to higher margins from several of the acquired businesses, continued cost improvements for naval power equipment and higher sales volume for microwave components. These increases in operating margin were partially reduced by lower sales of higher margin commercial aviation products. Operating income for the 2005 fourth quarter also included a gain of $3.1 million for the recovery of a claim against a supplier related to the Combat Survivor Evader e·vade v. e·vad·ed, e·vad·ing, e·vades v.tr. 1. To escape or avoid by cleverness or deceit: evade arrest. 2. a. Locator LOCATOR, civil law. He who leases or lets a thing to hire to another. His duties are, 1st. To deliver to the hirer the thing hired, that he may use it. 2d. To guaranty to the hirer the free enjoyment of it. 3d. (CSEL CSEL Cable Select (IDE hard drive jumper setting) CSEL Combat Survivor Evader Locator CSEL Command Senior Enlisted Leader CSEL circuit switch select line (US DoD) CSEL Consolidated Support Equipment List ) program. During the nine months ended September 30, 2005, the company had recorded an aggregate charge of $4.3 million for the recall and replacement of previously shipped products for the CSEL program. Orders for the Specialized Products segment were $815.9 million during the 2005 fourth quarter. For the year ended December 31, 2005, sales for Specialized Products increased by $905.1 million, or 40.0%, to $3,165.7 million, from sales of $2,260.6 million for the year ended December 31, 2004. The increase in sales from acquired businesses was $676.1 million. Organic sales growth was $229.0 million, or 10.1%, driven by the same trends affecting the 2005 fourth quarter, but also included higher volume for commercial aviation products due primarily to Federal Aviation Administration Federal Aviation Administration (FAA), component of the U.S. Department of Transportation that sets standards for the air-worthiness of all civilian aircraft, inspects and licenses them, and regulates civilian and military air traffic through its air traffic control (FAA) mandates for Terrain Awareness Warning Systems (TAWS), which became effective in March 2005. Organic sales growth for the year also included higher sales of military displays, antennas and 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. products. Specialized Products generated operating income of $350.8 million for the year ended December 31, 2005, compared to $220.4 million for the year ended December 31, 2004. Operating margin increased to 11.1% from 9.7%, a larger improvement than for the 2005 fourth quarter, due to trends similar to those affecting the 2005 fourth quarter, as well as higher sales volume and cost improvements for simulation devices and commercial aviation products, partially offset by lower margins on recently introduced cargo security systems. Operating income for the full year 2005 also included a charge of $1.2 million, net of a recovery from a claim against a supplier on the CSEL program. OUTLOOK "We expect that 2006 will be another year of growth for L-3," said Mr. Lanza. "Our current funded backlog continues to be very solid and the defense outlook for 2006 remains strong." Mr. Lanza noted that overall defense spending in 2006 is at $451.5 billion, including $76.9 billion for weapons and equipment and $70.0 billion for research and development, as well as $50.0 billion for the war efforts in Iraq and Afghanistan. Mr. Lanza also said that for some time both parties in the U.S. Congress have expressed concern about spiraling platform costs and have insisted on a number of reforms, including monitoring changes in base-line cost estimates and stricter standards for accounting and cost management. Congress has also asked the Department of Defense (DoD) to provide a report in September 2006, that reviews key Lead Systems Integrator An individual or organization that builds systems from a variety of diverse components. With increasing complexity of technology, more customers want complete solutions to information problems, requiring hardware, software and networking expertise in a multivendor environment. (LSI LSI: see integrated circuit. (Large Scale Integration) Between 3,000 and 100,000 transistors on a chip. See SSI, MSI, VLSI and ULSI. ) practices such as pass-through fees, signifying Signifyin' (slang) is an African-American rhetorical device featuring indirect communication or persuasion and the creating of new meanings for old words and signs. Signifying, in this sense, includes repetition and difference, implication and association, combining words and the legislature's expectation that the Pentagon Pentagon Huge five-sided building (1941–43) in Arlington, Va., that is the headquarters of the U.S. Department of Defense. Designed by George Edwin Bergstrom, it was, on its completion, the world's largest office building, covering 34 acres (14 hectares) and offering find ways of improving supervision and reducing costs. "It is clear that with new platform costs rising dramatically from their original projections, the DoD will not be able to afford every one under development," said Mr. Lanza. "The DoD budgets for 2007 and 2008 in all likelihood will be unable to sustain major increases to accommodate the rising costs of platforms because of demands from other sectors of the federal budget. Instead, we believe that top-line growth for the defense budgets from 2007 on will be in the order of 3% to 4% per year." "As a result, we expect that in the 2008 timeframe the DoD will have to make the difficult decisions on affordability to either delay, reduce or cancel several new programs in order to keep within budget limitations. The need to maintain readiness will require the DoD to continue its modernization and upgrade program, which will be accelerated when troops and their assets are returned from the wars in Iraq and Afghanistan. This is further confirmed by the U.S. Army's chief, who has declared the modernization of the modular brigades Basic Combat Training a top priority." "Some have speculated that the upcoming Quadrennial Defense Review
The Quadrennial Defense Review (QDR) is a report by the United States Department of Defense that analyzes strategic objectives and potential military (QDR QDR Quadrennial Defense Review (US DoD) QDR Quad Data Rate (Memory Technology) QDR Quality Deficiency Report QDR Quality, Durability and Reliability (Toyota Motor Company) ) will focus on specific program cancellations or changes, but that has not been the historical role of this document," continued Mr. Lanza. "We believe the QDR will continue to be a capabilities and force structure road map, outlining how the military will transform itself, how it needs to be structured to handle new threats such as insurgencies and reiterating the need for trained forces and equipment for postwar post·war adj. Belonging to the period after a war: postwar resettlement; a postwar house. postwar Adjective occurring or existing after a war Adj. 1. nation building efforts." "We believe that the transformational capabilities outlined in the QDR and the need for modernization and upgrade of existing assets will favor each of L-3's business segments," said Mr. Lanza. He noted that the capabilities consistently requested by the DoD are communications and ISR, 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. (SOF SOF abbr. sound on film ), mobility programs, sea and precision weaponry, unmanned aerial vehicles
Organization of a nation's armed forces for active military service in time of war or other national emergency. It includes recruiting and training, building military bases and training camps, and procuring and distributing weapons, ammunition, uniforms, and pre-deployment training, leap-ahead non-lethal technologies and sensors
"We see several areas of opportunity for L-3 as we move into the end of the decade," said Mr. Lanza. "We have deliberately structured L-3 to participate in the priority sectors of the investment account, as well as the growing Operations and Maintenance (O&M) budget. Nation building has become an increasingly important part of the capability needed by the DoD, Department of Justice and the State Department, and L-3 has strategic, long-term Long-term Three or more years. In the context of accounting, more than 1 year. long-term 1. Of or relating to a gain or loss in the value of a security that has been held over a specific length of time. Compare short-term. contracts with each of those agencies." "In addition, L-3 has increased its position as a prime contractor in a number of areas, including ISR, Government Services and AM&M programs. As the roles and missions of the SOF expand, L-3 can increase its existing support of those missions. There are also near-term opportunities in Canada and in the United Kingdom to participate in their in-country C3ISR modernization initiatives." In the 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 market, Mr. Lanza said that natural disasters in the fall of 2005 have alerted federal, state and local governments to the need for crisis management, emergency vehicles and products for law enforcement, areas in which L-3 has an array of offerings. L-3 also has one of the largest portfolios of systems, products and services for airport, maritime and port security and intrusion detection See IDS and IPS. and there are many international opportunities to provide these solutions in 2006. The company's Advanced Container Security Device (ACSD ACSD Application of Concurrency to System Design ACSD Adams County School District (Colorado) ACSD Accelerated Child Survival and Development ACSD Assistance for Children with Severe Disabilities (Canada) ) has been funded by the Homeland Security Advanced Research Projects Agency and will enter sea trials when this pre-production phase is completed. L-3's ACSD is designed to sense container breaches, door intrusion, over-temperature and high shock events, and the presence of a living being. The system is designed to have a very low false alarm rate and has an embedded Inserted into. See embedded system. digital signal processor A digital signal processor (DSP) is a specialized microprocessor designed specifically for digital signal processing, generally in real-time computing. Characteristics of typical Digital Signal Processors
Mr. Lanza also noted that there continues to be many attractive business acquisition opportunities in the defense sector. "Many of these potential targets are affordable and in the revenue range of $50 million to $500 million," said Mr. Lanza. "We continue to look to fill niche areas within our existing businesses in key areas such as surface ship power and propulsion Propulsion The process of causing a body to move by exerting a force against it. Propulsion is based on the reaction principle, stated qualitatively in Newton's third law, that for every action there is an equal and opposite reaction. , UAVs, optics, government services, robotics, heavy propulsion, training, simulators, signal intelligence and communications, sensors, general aviation products, sensors for biological, chemical and weapons of mass destruction Weapons that are capable of a high order of destruction and/or of being used in such a manner as to destroy large numbers of people. Weapons of mass destruction can be high explosives or nuclear, biological, chemical, and radiological weapons, but exclude the means of transporting or (WMD WMD white muscle disease. ) analysis, aircraft modernization facilities and microwave and laser products for communications and radar." "In fact, two of our recent acquisitions, EOTech and Applied Signal and Image Technology (ASIT) are already making significant contributions to the expansion of L-3's sensors and signals intelligence with recent contract awards." Financial Outlook for 2006 The company also revised its financial guidance for the year ending December 31, 2006, as follows: --sales in excess of $12 billion including all acquisitions completed to date and SAM Electronics. The 2006 sales includes estimated organic sales growth for the year of between 8% and 10%, although actual organic sales growth could vary significantly each quarter; --diluted EPS of between $4.80 and $4.95, with operating margin of approximately 10.2%, interest expense of approximately $290 million, an estimated effective income tax rate of between 37.0% and 37.5% and weighted average diluted shares outstanding slightly above 123 million. The company's diluted EPS and operating margin estimates for 2006 include the impact of adopting 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 No. 123R, Share-Based Payment, which is expected to reduce diluted EPS for 2006 by approximately $0.20 and reduce operating margin by 30 basis points; and --free cash flow in excess of $800 million, comprised of net cash from operating activities in excess of $940 million, less net capital expenditures of about $140 million. CONFERENCE CALL In conjunction with this release, L-3 Communications will host a conference call on the same day at 10:00 AM ET that will be simultaneously broadcast live over the Internet Internet Publicly accessible computer network connecting many smaller networks from around the world. It grew out of a U.S. Defense Department program called ARPANET (Advanced Research Projects Agency Network), established in 1969 with connections between computers at the . Frank C. Lanza, chairman and chief executive officer, Michael T. Strianese, senior vice president and chief financial officer, and Cynthia Swain, vice president - corporate communications Corporate communications is the process of facilitating information and knowledge exchanges with internal and key external groups and individuals that have a direct relationship with an enterprise. , will host the call today, Tuesday, January 31, 2006.
10:00 AM ET
9:00 AM CT
8:00 AM MT
7:00 AM PT
Listeners may access the conference call live over the Internet at
the following web address:
http://phx.corporate-ir.net/playerlink.zhtml?c=120146&s=wm&e=1195908
or
http://www.L-3com.com
Please allow fifteen minutes prior to the call to download To receive a file transmitted over a network. In any communications session, "download" means receive, and "upload" means send. The download/upload often implies a big/little scenario, in which data is being downloaded from the "big" server into the "little" user's computer. and install any necessary audio software. The archived version of the call may be accessed at these sites or by dialing (800) 642-1687 (passcode: 4276033), beginning approximately two hours after the call ends, and will be available until the company's next quarterly earnings release. 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 provider of Intelligence, Surveillance and Reconnaissance (ISR) systems, secure communications systems, aircraft modernization, training and government services. The company is a leading merchant supplier of a broad array of high technology products, including guidance and navigation, sensors, scanners, fuzes, data links, propulsion systems, simulators, avionics avionics (ā'vēŏn`ĭks), electronic instruments used in air or space flight; also the design and production of such instruments. Early planes had few instruments, but as aviation and aircraft became more complex, so did instrumentation. , electro optics, satellite communications, electrical power equipment, encryption The reversible transformation of data from the original (the plaintext) to a difficult-to-interpret format (the ciphertext) as a mechanism for protecting its confidentiality, integrity and sometimes its authenticity. Encryption uses an encryption algorithm and one or more encryption keys. , signal intelligence, antennas and microwave components. L-3 also supports a variety of Homeland Security initiatives with products and services. 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 and aerospace prime contractors. 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. . Statements that are predictive in nature, that depend upon or refer to events or conditions or that include words such as "expects," "anticipates," "intends," "plans," "believes," "estimates" and similar expressions are forward-looking statements. 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. Notes: (1) See discussion, definition and calculation of free cash flow on the financial tables attached to this press release. (2) Organic sales growth is defined as the current period vs. prior period increase or decrease in sales excluding the increase in sales from acquired businesses. - Financial Tables Follow -
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME DATA
(In millions, except per share data)
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
------------------- -------------------
2005 2004 2005 2004
--------- --------- --------- ---------
Sales:
Contracts, primarily U.S.
Government $2,649.0 $1,693.6 $8,549.2 $6,155.6
Commercial, primarily
products 251.2 217.6 895.5 741.4
--------- --------- --------- ---------
Consolidated sales $2,900.2 $1,911.2 $9,444.7 $6,897.0
--------- --------- --------- ---------
Costs and expenses:
Contracts, primarily U.S.
Government $2,372.5 $1,499.0 $7,633.3 $5,476.8
Commercial, primarily
products:
Cost of sales 163.8 138.1 582.2 459.0
Selling, general and
administrative
expenses 41.9 33.9 166.8 141.4
Research and development
expenses 15.9 20.7 65.7 71.2
--------- --------- --------- ---------
Consolidated costs and
expenses $2,594.1 $1,691.7 $8,448.0 $6,148.4
--------- --------- --------- ---------
Operating income 306.1 219.5 996.7 748.6
Interest and other (income)
expense 0.9 (9.0 ) (5.5 ) (7.3 )
Interest expense 67.6 38.5 204.2 145.3
Minority interests in net
income of
consolidated subsidiaries 1.8 1.8 9.7 8.9
Loss on retirement of debt -- 5.0 -- 5.0
--------- --------- --------- ---------
Income before income taxes 235.8 183.2 788.3 596.7
Provision for income taxes 84.4 63.9 279.8 214.8
--------- --------- --------- ---------
Net income $151.4 $119.3 $508.5 $381.9
========= ========= ========= =========
Earnings per share:
Basic $1.26 $1.05 $4.28 $3.54
========= ========= ========= =========
Diluted $1.24 $1.01 (a) $4.20 $3.33 (a)
========= ========= ========= ======
Weighted average common
shares outstanding:
-----------------------------
Basic 120.1 113.7 118.8 107.8
========= ========= ========= =========
Diluted 122.4 118.6 121.2 117.4
========= ========= ========= =========
(a)In order to calculate diluted earnings per share for the three and
twelve months ended December 31, 2004, the after-tax interest
expense savings on the assumed conversions of the CODES must be
added to net income and then divided by the weighted average
number of shares outstanding. The amount to add to net income is
$0.8 million for the three months ended December 31, 2004 and $9.1
million for the twelve months ended December 31, 2004.
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED SELECTED FINANCIAL DATA
(In millions)
----------------------------------------------------------------------
Three Months Ended Year Ended
December 31, December 31,
------------------- --------------------
2005 2004 2005 2004
--------- --------- ---------- ---------
Funded Orders $2,773.0 $2,098.6 $10,365.4 $7,563.7
Reportable Segment Operating
Data:
------------------------------
Sales:
C3ISR $705.2 $423.3 $2,170.1 $1,663.6
Government Services 678.5 294.5 1,819.8 1,059.9
Aircraft Modernization and
Maintenance 584.2 544.2 2,289.1 1,912.9
Specialized Products 932.3 649.2 3,165.7 2,260.6
--------- --------- ---------- ---------
Consolidated $2,900.2 $1,911.2 $9,444.7 $6,897.0
========= ========= ========== =========
Operating income:
C3ISR $71.4 $61.4 $249.9 $218.0
Government Services 65.5 39.0 168.6 124.1
Aircraft Modernization and
Maintenance 57.7 44.8 227.4 186.1
Specialized Products 111.5 74.3 350.8 220.4
--------- --------- ---------- ---------
Consolidated $306.1 $219.5 $996.7 $748.6
========= ========= ========== =========
Operating margin:
C3ISR 10.1 % 14.5 % 11.5 % 13.1%
Government Services 9.7 % 13.2 % 9.3 % 11.7%
Aircraft Modernization and
Maintenance 9.9 % 8.2 % 9.9 % 9.7%
Specialized Products 12.0 % 11.4 % 11.1 % 9.7%
Consolidated 10.6 % 11.5 % 10.6 % 10.9%
Depreciation and
amortization:
C3ISR $11.2 $7.7 $35.8 $32.3
Government Services 4.1 1.8 12.6 6.3
Aircraft Modernization and
Maintenance 7.9 5.4 26.9 21.9
Specialized Products 20.6 14.6 77.5 58.5
--------- --------- ---------- ---------
Consolidated $43.8 $29.5 $152.8 $119.0
========= ========= ========== =========
Cash flow data:
-----------------------------
Net cash from operating
activities $267.3 $212.7 $846.8 $620.7
Net cash used in investing
activities (101.4 ) (371.6 ) (3,547.3 ) (555.5 )
Net cash from financing
activities 1.7 444.9 2,441.0 453.3
--------- --------- ---------- --------
Net increase (decrease) in
cash $167.6 $286.0 $(259.5 ) $518.5
========= ========= ========== ========
Reconciliation of GAAP to
Non-GAAP measurements:
-----------------------------
Net cash from operating
activities $267.3 $212.7 $846.8 $620.7
Less: Capital expenditures (48.7 ) (27.0 ) (119.9 ) (80.5 )
Add: Dispositions of
property, plant and
equipment 1.0 2.4 3.2 11.9
Titan class action
settlement payments 67.4 -- 67.4 --
--------- --------- ---------- --------
Free cash flow(b) $287.0 $188.1 $797.5 $552.1
========= ========= ========== ========
December 31, December 31,
2005 2004
------------- --------------
Period end data:
----------------
Funded Backlog $7,000.9 $4,757.9
Cash & cash equivalents $393.9 $653.4
Total debt $4,633.5 $2,189.8
Minority interests $81.2 $77.5
Shareholders' equity $4,490.7 $3,799.8
(b) The company discloses free cash flow because the company believes
that, subject to the limitations discussed below, it is one
indicator of the cash flow generated that is available for
investing activities and financing activities. Free cash flow is
defined as net cash from operating activities less net capital
expenditures (capital expenditures less cash proceeds from
dispositions of property, plant and equipment). For the three
months and year ended December 31, 2005, free cash flow also
excludes payments of $67.4 million to settle Titan shareholder
class action and derivative action lawsuits, which were approved
by L-3 as part of the Titan acquisition and are included in net
cash from operating activities. Free cash flow represents cash
generated after paying for interest on borrowings, income taxes,
capital expenditures and changes in working capital, but before
repaying principal amount of outstanding debt, paying cash
dividends on a common stock and investing cash to acquire
businesses and making other strategic investments. Thus, key
assumptions underlying free cash flow are that the company will
be able to supplementally finance its existing debt and that the
company will be able to supplementally finance any new business
acquisitions it makes by raising new debt or equity capital.
Because of these assumptions, free cash flow is not a measure
that can be relied upon to represent the residual cash flow
available for discretionary expenditures.
|
|
||||||||||||
Printer friendly
Cite/link
Email
Feedback
Reader Opinion