L-3 Communications Announces Strong Second Quarter 2001 Results; Sales, Operating Income and Earnings Per Share Increase 21.8%, 21.7% and 27.7%, Respectively.Business Editors NEW YORK--(BUSINESS WIRE)--July 24, 2001 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 second quarter of 2001, including 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 earnings per share compared to the same period a year ago. Sales in the second quarter of 2001 were $561.6 million, a 21.8% increase over sales of $461.0 million in the second quarter of 2000. Operating income in the 2001 second quarter was $60.5 million, a 21.7% increase over operating income of $49.7 million for the same period in 2000. Operating income as a percentage of sales was 10.8% in the second quarter of 2001, and remained unchanged from the second quarter of 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 second quarter of 2001, the company reported net income of $23.3 million, an increase of 41.2% over net income of $16.5 million in the second quarter of 2000. 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 rose 27.7% to $0.60 per diluted share, versus $0.47 per diluted share for the second quarter of 2000. The increase in diluted shares outstanding was principally related to the company's sale of 4,575,000 shares of common stock, which was completed in April of 2001. Results for the second quarter of 2001 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. Included in the company's 2000 second quarter results was a net gain of $0.8 million, or $0.02 per diluted share, consisting of an after-tax gain of $2.0 million on the sale of a business offset by certain charges. Excluding the effects of these non-recurring items, diluted earnings per share increased 31.1% over the prior year's quarter. Free cash flow for the second quarter of 2001 declined to $4.1 million, from $20 million in the year ago period. The second quarter of 2001 includes the previously disclosed increases in working capital for the company's Prime Wave(TM) communications business, as well as working capital increases on the Aviation Combined Arms Combined arms is an approach to warfare which seeks to integrate different arms of a military to achieve mutually complementary effects. Though the lower-echelon units of a combined arms team may be of homogeneous types, a balanced mixture of such units are combined into an Tactical Trainer (AVCATT AVCATT Aviation Combined Arms Tactical Trainer (Army) ) contract, which was assumed as a part of the training business acquired from Raytheon in February of 2000. The company expects its free cash flow to significantly improve during the second half of 2001. As of June 30, 2001, the company had $68.3 million in cash, compared to $32.7 million at December 31, 2000. The company continued to record strong bookings in the 2001 second quarter, with funded orders increasing 18.9% to $571.2 million, compared to $480.5 million in the same period last year. Funded backlog at June 30, 2001 was $1,530.6 million, an increase of 20.7% over funded backlog of $1,268.6 million at June 30, 2000. "I am pleased to report that we had a fine second quarter," said Frank C. Lanza, chairman and chief executive officer of L-3 Communications. "L-3 had solid performance across the board, with particularly good results from ocean products, aviation products, simulation and training, and microwave components." Mr. Lanza said that the company's defense business was very good for the quarter. He noted key orders for data links for both unmanned and manned aerial vehicles, Secure Terminal Equipment (STE STE Saint (French) STE Suite (US Postal Service) STE Societe (French: Society) STE Spanning Tree Explorer STE Software Test Engineer ), S/TAR(TM) recorders for the Shared Reconnaissance Pod (SHARP), displays for a number of aircraft platforms, initial funding for the company's state-of-the-art sonar system - Tsunami(TM) as well as international orders for low frequency dipping sonars (HELRAS HELRAS Helicopter Long-Range Active Sonar ). "We have been very pleased with the excellent performance of L-3 products in the 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 tests that have taken place recently," said Mr. Lanza. Coleman Aerospace successfully launched its Hera target missile in support of the Patriot Advanced Capability - 3 (PAC-3) mission on July 9. In addition, IEC (International Electrotechnical Commission, Geneva, Switzerland, www.iec.ch) An organization that sets international electrical and electronics standards founded in 1906. It is made up of national committees from over 60 countries. IEC - International Electrotechnical Commission contributed 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) hardware for range safety tracking of the entire National Missile Defense National Missile Defense (NMD) as a generic term is a military strategy and associated systems to shield an entire country against incoming Intercontinental Ballistic Missiles (ICBMs). The missiles could be intercepted by other missiles, or possibly by lasers. flight on July 14. Other products L-3 contributes to missile defense programs include 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. encoders and transmitters for launch vehicles This is a list of space launch vehicles sorted by country/operator in alphabetical order, commercial vehicles are listed under their corresponding country.
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In its commercial product lines, Mr. Lanza said that L-3's aviation recorders, hardened voyage recorders and Aviation Communications and Surveillance Systems (ACSS) business were strong performers during the second quarter. In the quarter, L-3 also successfully closed on its joint venture agreement with Thales Avionics, through which Thales received a 30% interest in the newly formed ACSS division in exchange for $72 million in cash. Additionally, at the Paris Air Show The Paris Air Show (Salon International de l'Aéronautique et de l'Espace, Paris-Le Bourget) is an international trade fair for the aerospace business. It is held at Le Bourget airport near Paris, France every odd year, alternating both with the Farnborough International , ACSS announced the introduction of T2CAS T2CAS Terrain and Traffic Collision Avoidance System (avionics) (TM), a safety avionics system that integrates aircraft performance-based Terrain Avoidance Warning System (TAWS) capability into ACSS' market leading Traffic Alert and Collision Avoidance System (1) See adaptive cruise control. (2) A passenger car system that detects objects on the road that the driver may not be able to see. Using radar or infrared sensors, distant objects, such as a deer crossing the road at night or in a fog, are projected onto the (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 ) product line. In addition, L-3 also announced the Passenger Internet Access System in conjunction with Tenzing Communications. This joint effort is a completely functional, innovative entertainment product that provides commercial airline passengers with in-flight Internet, email and wireless television and movie viewing capabilities. Several major airlines and the U.S. government have expressed strong initial interest in the system. In the second quarter, L-3 announced the acquisition of EER EER - An extended entity-relationship model. Systems, which specializes in communications systems, training and simulation equipment and a broad range of hardware and software for the US military and other government agencies. The company also announced that it had acquired KDI KDI Knowledge and Distributed Intelligence (NSF) KDI Korean Development Institute KDI Kernel Debug Interface KDI Kernel Downloadable Image (LynxOS) KDI Kosovo Democratic Institute Precision Products, a leading provider of premium fuzing products. "EER and KDI are performing very well, just as we expected when we announced them earlier this year," said Mr. Lanza. Mr. Lanza cited a number of key high technology wins and milestones for L-3: - Interstate Electronics Corporation received a $30 million award to provide intelligent displays for the US Army's new Interim Armored Vehicle (IAV) program, which is a lighter, more intelligent transporter that provides swift deployment and support armament capability. - SPD's Henschel business unit was awarded a contract to supply the Internal Communications System (ICS) for three of the United Kingdom's Astute Class submarines, with an option to provide three additional ICS sets. The ICS provides the submarine with critical telecommunications and wireless communications capabilities. - The Army awarded a $10.3 million contract to Link Simulation and Training to begin low rate initial production of its Aviation Combined Arms Tactical Trainer-Aviation Reconfigurable Manned Simulator (AVCATT-A) program. - Link Simulation and Training was also selected to upgrade CH-47D and UH-60 helicopter simulators used by the US Army. Link also successfully delivered the first of four F-16 unit training devices for the Egyptian Air Force and the business was awarded an additional contract for program management, scheduling and quality assurance services associated with the Navy's E-6 Take Charge and Move Out (TACAMO) program. In addition, Link was awarded a contract from Textron for a Landing Craft Air Cushion (LCAC) Full Mission Trainer (FMT) for the Japanese Maritime Self Defense Force. - Display Systems introduced its newest flat panel Liquid Crystal Display (LCD) cockpit display, the Model 550 Electronic Flight Indicator. - EMP Systems was selected to build an X-band tracking system for the Australian Surveying and Land Information Group for use at one of the world's leading remote sensing data centers. The Swedish Space Corporation also selected EMP Systems to provide a 13-meter Remote Sensing Satellite Data Reception and Telemetry, Tracking & Control Antenna System for its Space Operations Center. - A joint partnership between L-3 Storm, Inmarsat and Astruim was formed enabling Storm to design, build and offer Satellite Control Center Software and related services for future EUROSTAR satellite customers. In the financial markets, the company completed its public offering of a total of 6.9 million shares, of which 4.6 million were primary shares issued by the company. "We are very pleased to have successfully completed this offering, and believe that it demonstrates the confidence that the investment community has in L-3 Communications and its operating strategy, particularly in light of the challenging conditions in today's financial markets. The offering proceeds of $353.8 million strengthen our balance sheet and enable us to continue to execute our acquisition strategy," said Mr. Lanza. "As we look out into the future, we continue to remain encouraged about prospects for increased defense spending," said Mr. Lanza. "From the beginning, we predicted that it would take time for the new administration to do a thorough review and develop its plans and budget to transform the U.S. military and we took that into account when we established our plans going forward. For the short term, we are very pleased with the 2001 supplemental budget increase that provides additional funding for Unmanned Aerial Vehicles
EKV Erythrokeratodermia Variabilis EKV Enz-Krummenacher-Vittoz (model) ), which all benefit L-3." "For the long term, we believe that ultimately the nation will move toward investing in both the electronics upgrade of existing platforms and in leapfrog technologies where appropriate. Either way, this benefits L-3 because we have developed an impressive array of high technology products to upgrade and retrofit existing platforms as well as next-generation products for the U.S. military's high priority leapfrog platforms," continued Mr. Lanza. "In addition, the business environment continues to be favorable for L-3 Communications," continued Mr. Lanza. "The acquisition pipeline remains robust and there are several large companies and large divisions of companies in addition to an enormous amount of smaller public and private companies that are available. We see no end to the opportunity to purchase market leading niche product companies that enhance our current capabilities." The $571.2 million in second quarter bookings included the following notable contract awards: - Secure Communication Systems booked approximately $301.3 million in funded orders. Key bookings included continued strong follow-on funding for the company's core data link programs for the U-2, Predator, Global Hawk, CHBDL CHBDL Common High Bandwidth Data Link and an initial award for the Tactical Targeting Network System (TTN TTN Technology Transfer Network TTN Titin TTN Transient Tachypnea of the Newborn TTN Technology Transfer Node TTN Trenton, NJ, USA - Mercer County (Airport Code) TTN Total Traffic Network ) to upgrade terminals for the Army and Marines. In addition, the company received initial development funding for the Army's Modulated Interoperable Surface Terminal Program (MIST-II) to provide dual band integrated antennas. The company also received additional funding for STE coupled with initial development funding for a channel encryption unit and to provide new algorithms for the company's OMNI OMNI Omnidirectional OMNI Organising Medical Networked Information OMNI Opportunities for Micronutrient Interventions Project OMNI Operating Missions as a Node on the Internet (NASA networking project) phone for an exportable version of the OMNI. The company also received an award to provide an integrated voice communication Tactical Switch and Terminals (STC-2) which will utilize the new L-3 Marcom system, and an award for the UK Royal Navy to provide an Internal Communication System (ICS (1) (Internet Connection Sharing) A Windows feature that enables two or more computers to share one Internet connection. First introduced in Windows 98 Second Edition, sharing is accomplished with network address translation (NAT), which is the common method. ) for the Astute Class Submarines and an initial contract to provide a solid state power amplifier for the National Missile Defense (NMD NMD Neuromuscular disease, see there ) Enhanced Kill Vehicle (EKV). The S/TAR(TM) recorder continued to receive additional funding for the Shared Reconnaissance Pod (SHARP) program. Also, the company received follow-on funding for the Long Range Air Launch Target (LRALT LRALT Long Range Air Launched Target ) to provide missile targets to support the Army's THAAD THAAD Terminal High-Altitude Area Defense (formerly Theater High Altitude Area Defense) THAAD Theater High Altitude Area Defense (now Terminal High-Altitude Area Defense) program with respect to NMD. The simulation and training business was awarded follow-on funding for the AVCATT and was awarded an international contract to provide training for ship-to-shore hovercraft Hovercraft: see air-cushion vehicle. . Also, initial funding was received to provide organizational assessment and recommendations to the Kuwait National Guard. - Specialized Communications Products booked approximately $269.9 million in funded orders. Continued strong bookings in Ocean Products led by awards for initial funding of the company's Tsunami(TM) surface ship hull mounted sonar product, an international award for low frequency dipping sonar (HELRAS) and various international and U.S. follow-on awards for towed arrays. The company won an award to provide displays for the Army's Interim Armored Vehicle (IAV IAV Interim Armored Vehicle (US Army) IAV Institute for American Values IAV Inventory Adjustment Voucher IAV International Association of Volcanology IAV Irradiance Average IAV International Authorized Version ), follow-on displays orders for C130J, T-38, U-2 and displays for locomotives from GM / GD, solidifying L-3's position. Commercial aviation continues to receive strong orders for L-3's cockpit voice and flight data recorders and 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) from various airlines and platform manufacturers for new starts and retrofits. Telemetry and Instrumentation and Space Products included follow-on funding for the Redundant Inertial Flight Controller Assembly (RIFCA RIFCA Redundant Inertial Flight Control Assembly ), a sophisticated guidance and control device for the Delta rocket and additional funding for Translated GPS Range System (TGRS TGRS Transactions on Geoscience and Remote Sensing TGRS Transient Gamma-Ray Spectrometer TGRS Translated GPS (Global Positioning System) Range System TGRS Transportable Ground Receive Suite ) to provide a translator product to support the eastern test range and NMD. In addition, the company received follow-on development funding to provide GPS for the THAAD and EKV programs. Also, L-3 was awarded an initial production contract to provide radomes for the Digital Airport Surveillance Radar Radar displaying range and azimuth that is normally employed in a terminal area as an aid to approach- and departure-control. program (DASR DASR Digital Airport Surveillance Radar DASR Direct Access Service Request (deregulated utilities) DASR Direct Air-to-Satellite Relay DASR Directorate of Scientific Agricultural Research (Syria) ) which is for the next generation air traffic control radar. Microwave Components achieved strong results for the quarter, led by orders including linearized channel amplifiers and for the company's filters, isolaters and duplexer products for the base station applications for customers ranging from original equipment manufacturers to service providers. For the six-month period ended June 30, 2001, sales totaled $1,023.5 million, an increase of 22.1% over sales of $838.0 million in the six-month period ended June 30, 2000. Operating income for the 2001 six-month period increased 27.4% to $107.4 million, versus operating income of $84.3 million in the same period a year ago. As a percentage of sales, operating income was 10.5%, versus 10.1% for the first six-months of 2000. Earnings before interest, taxes, depreciation and amortization (EBITDA) for the first half of 2001 increased 26.6% to $150.0 million, versus $118.5 million in the same period last year. For the 2001 six-month period, net income totaled $37.5 million, an increase of 36.9% over net income of $27.4 million in the first six months of 2000. Diluted earnings per share for the six-month period rose 26.6% to $1.00 per diluted share, versus $0.79 per diluted share in the year ago period. The increase in diluted shares outstanding was principally related to the company's sale of 4,575,000 shares of common stock, which was completed in April of 2001. Results for the first half of 2001 include a net after-tax gain 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) business to Thales Avionics, which was largely offset by a $3.9 million after-tax write-down in the carrying value of an investment. Included in the company's 2000 six-month results were net gains of $1.2 million, net of taxes, or $0.03 per diluted share, consisting of after-tax gains of $8.8 million on the sale of two businesses, offset by certain charges. Excluding the effects of these non-recurring items, diluted earnings per share increased 30.3% over the prior year's six-month period. 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, July 24, 2001 at 11:00 a.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 can access the conference call live and archived over the Internet at http://www.videonewswire.com/L3/072401/. Please allow 15 minutes prior to the call to visit the site and download and install any necessary audio software. 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 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. 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.
CONSOLIDATED STATEMENTS OF INCOME
(In millions, except per share data)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
-------------------------------------------
2001 2000 2001 2000
-------------------------------------------
Sales $561.6 $461.0 $1,023.5 $838.0
Costs and
expenses 501.1 411.3 916.1 753.7
-------------------------------------------
Operating
income 60.5 49.7 107.4 84.3
Interest and
other income 0.9 1.7 1.4 2.6
Interest expense 22.0 24.7 46.4 42.3
Minority interest
expense 1.6 -- 1.6 --
-------------------------------------------
Income before
income taxes 37.8 26.7 60.8 44.6
Provision for
income taxes 14.5 10.2 23.3 17.2
-------------------------------------------
Net income $23.3 $16.5 $37.5 $27.4
===========================================
Earnings per
share:
Basic $0.62 $0.49 $1.05 $0.83
===========================================
Diluted $0.60 $0.47 $1.00 $0.79
===========================================
Weighted average
common shares
outstanding:
Basic 37.4 33.3 35.7 33.2
===========================================
Diluted 39.0 34.9 37.4 34.7
===========================================
L-3 COMMUNICATIONS HOLDINGS, INC.
SELECTED FINANCIAL DATA
(In millions)
(Unaudited)
Three Months Ended Six Months Ended
June 30, June 30,
---------------------------------------------
2001 2000 2001 2000
---------------------------------------------
EBITDA (a) $82.8 $68.1 $150.0 $118.5
Depreciation
and amortization $22.3 $18.4 $42.6 $34.2
Capital expenditures $11.2 $8.0 $20.5 $13.4
Orders (funded) $571.2 $480.5 $1,079.6 $873.2
June 30, December 31,
Period end data: 2001 2000
---------------- -----------------------
Backlog (funded) $1,530.6 $1,354.0
Cash & cash
equivalents $68.3 $32.7
Total debt $905.0 $1,095.0
Shareholders'
equity $1,131.4 $692.6
(a) EBITDA represents earnings before interest, taxes, depreciation
and amortization, and is defined as operating income plus
depreciation and amortization expenses.
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