L-3 Communications Announces Strong Third Quarter Results.

Business & Technology Editors

NEW YORK--(BUSINESS WIRE)--Oct. 23, 2000

Sales, operating income and diluted earnings per share

increase 34.5%, 46.7% and 35.3%, respectively

L-3 Communications (NYSE:LLL) today announced strong results for the third quarter ended September 30, 2000.

For the third quarter of 2000, sales increased 34.5% to $514.4 million, from $382.4 million in the third quarter of 1999.

Operating income in the third quarter of 2000 increased 46.7% to $62.8 million compared with operating income of $42.8 million for the year ago period. Operating income as a percentage of sales was 12.2% in the third quarter, versus 11.2% for the same period in 1999.

Earnings before interest, taxes, depreciation and amortization (EBITDA) increased 44.0% to $81.8 million in the 2000 third quarter, compared with $56.8 million for the third quarter of 1999.

For the third quarter of 2000, net income increased 39.3% to $24.1 million, or $0.69 per diluted share, compared with net income of $17.3 million, or $0.51 per diluted share, in the third quarter of 1999. Included in the 2000 third quarter was an after-tax gain of $0.01 per diluted share, related to the sale of a 60% interest in a business. Free cash flow for the 2000 third quarter amounted to approximately $13 million.

"This has been another good quarter for L-3 Communications," said Frank C. Lanza, chairman and chief executive officer. "We had solid performance in our core businesses, particularly data links for both manned and unmanned aerial vehicles, ocean systems, aviation recorders and display products, and from our recent acquisitions."

Mr. Lanza noted that the company continued to achieve strong bookings activity in the third quarter, recording $505.4 million in funded orders, an increase of 62.7% from the year ago third quarter. Resulting backlog at September 30, 2000 was $1,262.8 million, up 43.5% from $879.9 million at September 30, 1999.

"L-3's Department of Defense business continued to be strong during the third quarter," continued Mr. Lanza. He noted that the U-2 program continues to be an important DoD priority with the decision to use L-3's next generation data links to upgrade the platform. In a major extension to its presence on key UAV (Unmanned Aerial Vehicle) platforms, L-3 also won the VTUAV (Vertical Takeoff Unmanned Aerial Vehicle) contract.

L-3 had a record quarter for sales in the Secure Terminal Equipment (STE) market, and also received an initial order for new-generation portable STE products. Link Simulation and Training won a number of key programs, including the F-18 E/F virtual simulators, and Aviation Recorders won contracts for the C-17 and C-130 platforms. The company was also selected by the Boeing Company to provide recorders as part of Boeing's JSF (Joint Strike Fighter) bid team. Another important win for L-3, was the solid state UHF Electronically Scanned Antenna, a next-generation antenna for the E-2C as part of the Navy's Cooperative Engagement Capability (CEC) initiative.

In addition, L-3 is becoming a major supplier of power transfer switches to Internet infrastructure companies and web-based businesses. In the third quarter, L-3 won bids to supply its Static Transfer Switches to AT&T Corp., General Motors and AboveNet, a provider of fiber optic networks and Internet data centers.

The company also made investments that expand L-3's defense and commercial operations. At the end of June, L-3 acquired MPRI, a teaching and training provider to domestic and international governments and commercial customers. "From the start, MPRI was a well-managed company with good growth potential, but their performance to date has been particularly strong," said Mr. Lanza. "We continue to see good growth in this business, as the U.S. military increases its reliance on outsourcing to reduce costs and address personnel shortages."

In addition, during July L-3 acquired a 53.5% stake in LogiMetrics, a producer of broadband wireless communications infrastructure equipment for Ka-band Point-to-Multipoint (PMP) distribution services to both terrestrial and satellite markets. As part of the agreement, L-3 has assumed management responsibility for LogiMetrics' operations. Mr. Lanza noted that LogiMetrics gives L-3 a key transceiver product for Local Multipoint Distribution Services (LMDS). LMDS has significant growth potential as the demand for high-speed Internet access, real- time multimedia file transfer, corporate local area networks, interactive video, video-on-demand, video conferencing and telephony is built out.

In the commercial telecom market, the broadband segment is beginning to offer up many new product opportunities for L-3. During the quarter, L-3 began beta-testing its new wireless test equipment products and has received positive responses from customers. "The wireless test equipment market is estimated to be a $12 billion opportunity," said Frank Lanza. "This is because rapid advances in broadband telecommunications technologies have made existing test equipment obsolete at a time when the industry has an urgent need to test digital broadband systems, particularly as they upgrade their manufacturing facilities. We believe that L-3's cost-efficient and technologically advanced product line gives us a distinct competitive advantage, and we are working hard to bring our wireless test equipment products to market by the first quarter of 2001."

"Our opportunities for the fourth quarter and next year are excellent," stated Mr. Lanza. "We continue to see strong demand for our products, and expect double-digit growth in microwave products, ocean products and transportation products. Backlog is at record levels, and we expect strong orders for the fourth quarter of 2000 and for 2001."

"The acquisition landscape continues to look excellent," continued Mr. Lanza. "There is no shortage of good properties to acquire in the defense arena, whether they are private companies or assets of larger corporations. We are looking at a number of good opportunities and, as we have shown, we will continue to exercise financial discipline in the bidding and integration processes."

"The projected defense budget for 2001 will exceed $100 billion for R&D and Procurement," concluded Mr. Lanza, "which benefits L-3 due to our broad base of defense electronics products. As we look forward to 2002 and beyond, the government is planning to report its Congressionally-mandated Quadrennial Review in the summer of 2001, which will have a long-term impact on future force structure. It is conceivable, however, that this review may be postponed to allow the new administration sufficient time to implement their organizational structure and vision."

There are many new platform opportunities for L-3 in 2001 and beyond. Key upcoming platforms include the DD-21, the DDG-51, the Joint Strike Fighter, the E-2C AEW upgrade, and the Canadian Maritime Patrol. Also on the horizon are various international sonar programs, U.S. military communications upgrades, the move toward electric power drive for the U.S. Navy, numerous space programs, and the increased use of information security products.

The $505.4 million in third quarter bookings included the following notable contract awards:

-- Secure Communications Systems booked approximately $233.1 million in funded
orders. Key bookings included additional awards for the company's core data
link programs for the U-2, CHBDL and Hawklink programs. L-3 won the Vertical
Takeoff Unmanned Aerial Vehicle contract, as well as additional funding for
various signal intelligence programs, communication systems on the
International Space Station and continued strong orders for Secure Terminal
Equipment, as previously mentioned. In addition, awards received for the
Simulation and Training business included mission capability upgrades to the
B-2 Weapons Systems Trainers, continued funding for the F-22 Raptor Pilot and
Maintenance Trainer Suites, and additional funding for the U.S. Army's ROTC
program, which supports the Army's Force Management Support Program.

-- Specialized Communication Products booked approximately $272.3 million in
funded orders. Ocean Products bookings were paced by orders for the company's
core power distribution equipment, dipping sonars for the Italian Navy's SH-3
helicopters and for the U.S. Navy's SH-60 helicopters. In addition, L-3
received orders to supply solid state flight data recorders for the C-130
program and the C-17 retrofit program. Also, the quarter showed continued
interest from the Internet data center market for L-3's Static Transfer
Switches, an application of the company's DoD product line. Telemetry and
Instrumentation and Space Products included awards for the next generation
Ultra High Frequency Electronically Scanned Antenna for the E-2C aircraft, and
various awards for the company's tri-band satellite terminal. Microwave
Components posted another strong quarter in orders performance, led by products
for base station applications for customers ranging from Original Equipment
Manufacturers (OEMs) to service providers.

For the 2000 nine-month period, the company reported total sales of $1,352.4 million, an increase of 39.1% over sales of $972.4 million in the nine-month period ended September 30, 1999.

Operating income for the first nine months of 2000 was $147.1 million, an increase of 47.0% when compared with operating income of $100.1 million in the same period last year. As a percentage of sales, operating income was 10.9%, versus 10.3% for the same period a year ago.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the 2000 nine-month period rose 42.5% to $200.2 million, compared with $140.5 million in the first nine months of 1999.

For the first nine months of 2000, net income increased 44.7% to $51.5 million, or $1.48 per diluted share, from $35.6 million, or $1.06 per diluted share, in the first nine months of 1999. Included in the company's nine month results were net gains of $0.04 per diluted share, consisting of after-tax gains of $9.2 million on the sale of three businesses, offset by certain charges.

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, October 23, 2000 at 11:00 a.m. EST. Listeners can access the conference call live and archived over the Internet at http://www.streetfusion.com. 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, 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 Statement under the Private Securities Litigation Reform Act 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     Nine Months Ended
                           September 30,          September 30,
                        2000        1999        2000       1999


Sales                 $514.4     $382.4     $1,352.4     $972.4

Costs and expenses     451.6      339.6      1,205.3      872.3

Operating income        62.8       42.8        147.1      100.1

Interest and
 other income            0.9        0.6          3.5        3.4
Interest expense        24.8       15.2         67.1       45.6

Income before
 income taxes           38.9        28.2        83.5       57.9

Provision for
 income taxes           14.8        10.9        32.0       22.3

Net income             $24.1       $17.3       $51.5      $35.6

Earnings per share:
         Basic        $ 0.72      $ 0.53      $ 1.55     $ 1.12
         Diluted      $ 0.69      $ 0.51      $ 1.48     $ 1.06

Weighted average
  common shares
  outstanding:
         Basic          33.5        32.6        33.3       31.9
         Diluted        35.2        34.2        34.8       33.5



                   L-3 COMMUNICATIONS HOLDINGS, INC.
                        SELECTED FINANCIAL DATA
                             (In millions)

                              (Unaudited)

                        Three Months Ended     Nine Months Ended
                           September 30,         September 30,
                        2000         1999       2000        1999

EBITDA (a)             $81.8        $56.8       $200.2     $140.5

Depreciation and
 amortization          $19.0        $14.0        $53.1      $40.4


Capital expenditures    $8.0         $4.8        $21.4      $15.8


Orders (funded)       $505.4       $310.7     $1,378.6     $918.2


                                     September 30,   December 31,
Period end data:                          2000           1999

  Backlog (funded)                      $1,262.8     $1,003.7


  Cash & cash equivalents                  $30.2        $42.8


  Total debt                            $1,078.7       $605.0


  Shareholders' equity                    $658.7       $583.2

      (a) EBITDA is defined as operating income plus depreciation and
        amortization.