L-3 Communications Announces Strong Fourth Quarter 2001 Results; Sales, Operating Income and Diluted Earnings Per Share Increase 26.6%, 22.8% and 19.1%, Respectively.Business Editors NEW YORK--(BUSINESS WIRE)--Jan. 30, 2002 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 fourth quarter ended December 31, 2001, reflecting significant increases in 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. , and 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 compared to the same period a year ago. Sales in the fourth quarter of 2001 were $705.8 million, a 26.6% increase over sales of $557.6 million in the fourth quarter of 2000. Operating income in the 2001 fourth quarter was $92.8 million, a 22.8% increase over operating income of $75.6 million for the same period of 2000. Operating income as a percentage of sales was 13.1% in the 2001 fourth quarter, compared with 13.6% for the same period in 2000. 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.
For the fourth quarter of 2001, the company reported net income of $44.6 million, an increase of 42.9% over net income of $31.2 million in the fourth quarter of 2000. Diluted earnings per share in the 2001 fourth quarter rose 19.1% to $1.06 per diluted share, versus $0.89 per diluted share for the 2000 fourth quarter. Diluted shares outstanding in the fourth quarter of 2001 increased approximately 26% to 44.5 million from 35.2 million in the fourth quarter of 2000, principally reflecting the company's sale of common stock, completed in April of 2001, and the dilutive effect Dilutive effect Result of a transaction that decreases earnings per common share (EPS). of the convertible notes sold last year. Free cash flow for the 2001 fourth quarter amounted to approximately $72 million compared to approximately $54 million in the year ago period. As of December 31, 2001, the company had $361.0 million in cash, compared to $32.7 million at December 31, 2000. Debt on December 31, 2001 was $1,325.0 million compared to $1,095.0 million on December 31, 2000. The company had strong bookings in the 2001 fourth quarter, with funded orders increasing 18.4% to $751.9 million, compared to $635.1 million in the same period last year. Funded backlog at December 31, 2001 was $1,719.3 million, an increase of 27.0% over funded backlog of $1,354.0 million at December 31, 2000. "The fourth quarter of 2001 was an excellent one for L-3," said Frank C. Lanza, chairman and chief executive officer of L-3 Communications. "We ended the year with strong performance in a number of key product areas including data links, secure communications, simulation and training, ocean products and satellite terminals." "The nation's military forces and defense assets have executed very well in the war in Afghanistan, and we are very pleased with the performance of L-3's defense electronics," continued Mr. Lanza. "The ability to gather fused Intelligence, Surveillance and Reconnaissance Intelligence, Surveillance and Reconnaissance may refer to:
During the fourth quarter, the company also announced the acquisition of key companies that added to L-3's defense products and services: - Spar Aerospace, a leading global provider of turnkey aviation life-cycle management services. The division provides high-end aviation product modernization and services on a number of fixed and rotary wing platforms for various military organizations around the world. - Emergent Government Services Group (GSG), a leading engineering and information services company with expertise in C4ISR (Command, Control, Communications, Computers, Intelligence, Surveillance and Reconnaissance), modeling and simulation, space science data systems development and high-end systems engineering and technical assistance (SETA) support. - Bulova Technologies, which has since been renamed BT Fuze Products, a leading manufacturer of military fuzes and safe and arm devices. It is also recognized as a top precision engineering, manufacturing and production organization for its military customers, offering turnkey solutions, including mechanical assembly and testing capabilities. In the beginning of January, 2002, L-3 announced three additional acquisitions: - PerkinElmer's Detection Systems business, which offers X-ray screening for three major security applications: aviation systems for checked and oversized o·ver·size n. 1. A size that is larger than usual. 2. An oversize article or object. adj. o·ver·size also o·ver·sized Larger in size than usual or necessary. baggage, break bulk cargo That which is generally shipped in volume where the transportation conveyance is the only external container; such as liquids, ore, or grain. and air freight air freight n → flete m por avión air freight n → fret aérien air freight air n → Luftfracht f ; port and border applications and facility protection, such as parcels, mail and cargo screening. - SY Technology, which specializes in air warfare air warfare Military operations conducted by airplanes, helicopters, or other aircraft against aircraft or targets on the ground and in the water. Air warfare did not become important until World War I (1914–18). simulation; Command, Control, Communications, Computers and Intelligence (C4I C4I Command, Control, Communications, Computers, & Intelligence (US DoD) C4I Command Control Communications Computer and Intelligence ) architectures; and 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 and space systems. - Aircraft Integration Systems (AIS), a division of Raytheon Company, which is a leader in the global ISR market, and is a leader in communications intelligence (COMINT n. 1. an abbreviation for communications intelligence ltname>; technical and intelligence information derived from foreign communications by other than the intended recipients. Noun 1. ), signals intelligence (SIGINT Noun 1. SIGINT - intelligence information gathered from communications intelligence or electronics intelligence or telemetry intelligence signals intelligence ) and unique sensors for DoD and allied intelligence organizations. AIS is also a leader in integration services and modernization of key, special purpose fixed and rotary wing platforms and programs, including the U-2, the RC-135 Rivet Joint, EP-3, AC-130 and the UK ASTOR program. "The acquisition of Detection Systems opens up significant opportunity for L-3 in the growing airport security business and makes us the largest US producer in this market," said Mr. Lanza. "The company gives us Level 1 technology and when combined with our existing Level 3 computer tomography (CT) scanners, we have a complete solution for European and Middle East markets. Detection Systems also broadens our presence into the growing cargo market. In addition, it gives us a well respected marketing organization and an increased manufacturing capacity so we can quickly ramp up Ramp Up To increase a company's operations in anticipation of increased demand. Notes: A company might 'ramp up' operations if they just signed a contract creating substantially more demand for their product. See also: Demand, Economies of Scale to meet increased Department of Transportation (DoT) requirements throughout the year." Mr. Lanza noted that the AIS acquisition was an important milestone for L-3. "This is a very strategic acquisition for L-3," said Mr. Lanza, "and the largest one we have made to date. When you combine AIS's ISR products with our current secure communications offerings, L-3 becomes a major player in providing products that give our military information dominance. In addition to modernization for special purpose platforms and programs, AIS gives L-3 a window into the next generation of products needed by the military and allows us many opportunities for pull-through of L-3's existing products." Those products would include communication links, signal processing, antennas, data recorders, displays and traffic control and collision avoidance systems. "The prospects for 2002 remain excellent for L-3," said Mr. Lanza. "There has been a sharp increase in defense spending for 2002 and that pace should continue. The high-end electronics portion of the DoD budget is growing even faster and that is favorable for L-3, particularly since a primary focus of DoD spending in the next few years will be on the modernization of legacy platforms. It is clear that these platforms performed well during the war in Afghanistan. In fact, we saw for the first time 40-year-old aircraft using precision weapons to provide close air support at a level of accuracy never seen before. That is a remarkable achievement." "Most of our business segments are robust and growing. However, our projections for 2002 also include a slowdown in aviation products as a result of the downturn in the commercial aviation industry," said Mr. Lanza. "This will be offset by growing DoD demand for products as well as the growth in the maritime industry for products such as displays and new crash/event recorders. As we have noted before, the space 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. market will remain flat this year, but we expect a pick up in 2003." "We also expect that the acquisition environment will remain robust and that we will continue to add to our core businesses during 2002, while taking steps to successfully integrate our recent purchases into L-3," continued Mr. Lanza. "By adding synergistic businesses, developing next-generation products and exercising strong financial controls, we expect to continue growing our business 20% top and bottom line. This is a goal we set out for ourselves when we were formed, and our plan is to continue to achieve it as we go forward." $751.9 million in the fourth quarter bookings included the following notable contract awards: - Secure Communication Systems booked approximately $434.9 million in funded orders. Key bookings included follow-on funding for the company's core Air Force Data Link programs including U-2, Global Hawk and Predator, the Navy awarded additional funding for Common Highband Data Link (CHBDL CHBDL Common High Bandwidth Data Link ), a shipboard ship·board n. 1. The condition of being aboard a ship: on shipboard. 2. Archaic The side of a ship. adj. data link program for aircraft carriers, and follow-on funding from the Army for the Ground Mobile Forces Program. In addition, the company was awarded follow-on funding for the U.K. Astor Program. This segment also received follow-on orders for the Space Lift Range System (SLRS SLRS Space Lift Range System SLRS Seismic-Load-Resisting System (structures) SLRS Space Launch Range System SLRS Suse Linux Retail Solution ) and Mission Director Support. The company also was notified of the contract award to support the Air Force's Satellite Control Network. L-3 received follow-on funding for communication systems on the International Space Station, an initial award for installation of the company's Marcom Communication System for the Tactical Flag Command Center on board CVN (Card Verification Number) See CSC. Aircraft Carriers, follow-on contracts for internal communications for the U.K. Astute Submarine, and the CVN-69 aircraft carrier and follow-on/initial funding for various signal intelligence programs. Secure Telephone Equipment (STE STE Saint (French) STE Suite (US Postal Service) STE Societe (French: Society) STE Spanning Tree Explorer STE Software Test Engineer ) and Omni encryption phones follow-on orders again outpaced previous funding levels. The Air Force Electronic Systems Command awarded the initial funding to develop the next generation airdrop air·drop n. A delivery, as of supplies or troops, by parachute from aircraft. tr. & intr.v. air·dropped, air·drop·ping, air·drops To drop or be dropped from an aircraft. Noun 1. sensor system. The company received orders for its S/TAR Recorder from the Navy Aircraft Weapons Center as well as a key international order for the Spanish Radar program. Additional follow-on engineering development funding was received for the advanced EHF EHF abbr. extremely high frequency Noun 1. EHF - 30 to 300 gigahertz extremely high frequency radio frequency - an electromagnetic wave frequency between audio and infrared Comsec/Transec System (ACTS) intelligence program. The company also received follow-on orders for development funding in support of the Navy's Area Theater Ballistic Missile Defense program. The Simulation and Training business received an award to build suites three and four of the Army's Aviation Combined Arms Tactical Trainer (AVCATT AVCATT Aviation Combined Arms Tactical Trainer (Army) ), which will enable Army National Guard Pilots to train for the first time ever in a simulated combined Arms Tactical Environment. Also received was development and production funding for F-18 E/F E/F Educator/Facilitator simulators as well as additional requirement funding for the F-22, F-16, B-2 and F-117 platforms. In addition, the company received awards to support the U.S. Army's Communication Electronics Command (CECOM CECOM Communications Electronics Command (US Army) CECOM National Center for Communications of the Civil Protection Agency ) providing software and systems engineering support and from the Nuclear Regulatory Commission. The company also received funding to support maneuver exercises in Kuwait, and support the DoD for both the African Crisis Response Initiative and the African Center for Strategic Studies. - Specialized Communication Products booked approximately $317.0 million in funded orders. Ocean Products bookings were led by orders for the company's Core Power Distribution Equipment of switchboard and circuit breakers Circuit breakers Measures instituted by exchanges to stop trading temporarily when the market has fallen by a certain percentage in a specified period. They are intended to prevent a market free fall by permitting buy and sell orders to rebalance. for the CVN-77 and CVN-69 aircraft carriers. Also received were continued strong orders for undersea electronic warfare dipping sonar products for both domestic and international customers. The company was awarded initial development funding for F-16 and C-130 retrofit cockpit displays, along with follow-on funding for cockpit displays on the U-2, T-38, Apache, JAS-39 and F-14 platforms. Commercial Aviation received additional orders for L-3's Traffic Collision Avoidance System The Traffic alert and Collision Avoidance System (or TCAS) is a computerised avionics device which is designed to reduce the danger of mid-air collisions between aircraft. (TCAS TCAS Traffic Alert and Collision Avoidance System TCAS Traffic Collision Avoidance System TCAS T-Carrier Administration System TCAS Terminal Control Address Space (MVS/TSO) TCAS Technical Control and Analysis System ) as well as cockpit voice and digital flight data recorders from various airlines and platform manufacturers for retrofits and new starts. Telemetry and Instrumentation's Space Products orders included follow-on funding for support on the Trident submarine program and a contract for the modernization of Trident II Submarine Launched Ballistic Missile program. The company's portable tri-band satellite terminal (FTSAT FTSAT Flyaway Triband Satellite Terminal ) experienced continued strong demand. In addition, L-3 received an award from the Egyptian Signal Corps for battlefield communications, and additional radome funding for the E2C E2C Hawkeye; Navy Airborne Warning and Control System Aircraft TRAC-A program. Microwave components continued its strong performance, driven by filter and non-ionizing safety products. Robust demand continued for filters, due to system upgrades by service providers for 2.5G applications in North America. Further, the Service Provider marketplace continued its ongoing program to outfit technicians and maintenance personnel for protection from exposure to RF emissions in order to comply with FCC (1) (Federal Communications Commission, Washington, DC, www.fcc.gov) The U.S. government agency that regulates interstate and international communications including wire, cable, radio, TV and satellite. The FCC was created under the U.S. regulations. For the year ended December 31, 2001, sales totaled $2,347.4 million, an increase of 22.9% over sales of $1,910.1 million for the year ended December 31, 2000. Operating income for 2001 totaled $275.3 million, an increase of 23.6% when compared with operating income of $222.7 million in 2000. Operating income as a percentage of sales was 11.7% in 2001, unchanged from 2000. EBITDA for the year ended December 31, 2001 increased 22.0% to $362.3 million, compared with EBITDA of $297.0 million a year ago. For the year ended December 31, 2001, net income increased 39.7% to $115.5 million, compared with $82.7 million in 2000, and diluted earnings per share increased 24.5% to $2.95 compared to $2.37 for 2000. The 2001 results include a net after-tax gain Net after-tax gain Capital gain after income taxes have been paid. of $0.4 million, or $0.01 per diluted share, comprised of an after-tax gain of $4.3 million on the sale of a 30% interest in the company's Aviation Communications and Surveillance Systems (ACSS ACSS Africa Center for Strategic Studies ACSS Aluminum Conductor Steel Supported (cable) ACSS African Crop Science Society ACSS Association of Computer Support Specialists ACSS Aviation Communication and Surveillance Systems ) business to Thales Avionics, which was largely offset by a $3.9 million after-tax write-down in 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 an investment. The 2000 full-year results include $0.04 per diluted share related to net after-tax gains on the sale of three businesses, offset by certain charges. Diluted shares outstanding for 2001 increased approximately 22% to 42.7 million from 35.0 million in 2000, principally reflecting the company's sale of common stock, completed in April of 2001, and the dilutive effect of the convertible notes sold last year. The company generated approximately $126 million in free cash flow in 2001, compared to $98 million for 2000. Bookings in the 2001 full year period increased 22.0% to $2,456.1 million in funded orders, compared with $2,013.7 million in 2000. 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, which is scheduled for today, January 30, 2002 at 11:00 a.m. EST EST electroshock therapy. EST abbr. electroshock therapy . Listeners may access the conference call live over the Internet at the following location: http://www.videonewswire.com/event.asp?id=2942 or by going to http://www.videonewswire.com and selecting the L-3 Communications webcast. Please allow fifteen minutes prior to the call to visit either of these sites to download and install any necessary audio software. The archived version of the call may be accessed at these sites beginning approximately two hours after the call ends through Wednesday, February 13, 2002 at 11:59 p.m. EST. 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 secure communications systems and products, avionics and ocean products, training products, microwave components and telemetry, instrumentation, space and wireless products. Its customers include the Department of Defense, selected US 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. 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.
L-3 COMMUNICATIONS HOLDINGS, INC.
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CONSOLIDATED STATEMENTS OF INCOME
---------------------------------
(In millions, except share data)
--------------------------------
Three Months Ended Year Ended
December 31, December 31,
--------------------- -----------------------
2001 2000 2001 2000
--------- -------- ---------- ----------
Sales $705.8 $557.6 $2,347.4 $1,910.1
Costs and expenses 613.0 482.0 2,072.1 1,687.4
------- ------- -------- --------
Operating income 92.8 75.6 275.3 222.7
Interest and
other income 0.5 0.9 1.8 4.4
Interest expense 21.5 25.9 86.3 93.0
Minority interest
expense 0.5 --- 4.5 ---
------- ------- -------- --------
Income before
income taxes 71.3 50.6 186.3 134.1
Provision for
income taxes 26.7 19.4 70.8 51.4
------- ------- -------- --------
Net income $44.6 $31.2 $115.5 $82.7
======= ======= ======== ========
Earnings per share:
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Basic $1.14 $0.93 $3.08 $2.48
======= ======= ======== ========
Diluted $1.06 $0.89 $2.95 $2.37
======= ======= ======== ========
Weighted average common
-----------------------
shares outstanding:
------------------
Basic 39.2 33.7 37.4 33.4
======= ======= ======== ========
Diluted 44.5 35.2 42.7 35.0
======= ======= ======== ========
L-3 COMMUNICATIONS HOLDINGS, INC.
---------------------------------
SELECTED FINANCIAL DATA
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(In millions)
-------------
Three Months Ended Year Ended
December 31, December 31,
-------------- ---------------
2001 2000 2001 2000
------ ------ ------ -------
EBITDA (a) $114.8 $ 96.7 $ 362.3 $ 297.0
Depreciation and amortization $ 22.0 $ 21.1 $ 87.0 $ 74.3
Capital expenditures $ 18.1 $ 12.2 $ 48.1 $ 33.6
Orders (funded) $751.9 $635.1 $2,456.1 $2,013.7
December 31,
---------------------
Period end data: 2001 2000
---------------- -------- --------
Backlog (funded) $1,719.3 $1,354.0
Cash & cash equivalents $ 361.0 $ 32.7
Total debt $1,325.0 $1,095.0
Shareholders' equity $1,213.9 $ 692.6
(a) EBITDA represents earnings before interest, taxes, deprecation and
amortization and is defined as operating income plus depreciation
and amortization expenses.
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