L-3 Communications Announces Third Quarter 2006 Results.-Net 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 Increase 23.9%, 25.1% and 18.0%, 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 2006 third quarter, with net sales Net Sales The amount a seller receives from the buyer after costs associated with the sale are deducted. Notes: This amount is calculated by subtracting the following items from gross sales: merchandise returned for credit, allowances for damaged or missing goods, freight of $3,104.5 million, including organic sales growth(1) of 9.0%, operating income of $333.3 million, diluted earnings per share of $1.31, net cash from operating activities of $260.5 million and free cash flow(2) of $225.4 million. 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. ) for the 2006 third quarter increased by $0.20, or 18.0%, to $1.31, compared to $1.11 for the 2005 third quarter. Effective January 1, 2006, the company adopted the provisions of SFAS SFAS Statement of Financial Accounting Standards SFAS Special Forces Assessment and Selection SFAS Student Financial Aid Services SFAS Sport Fishing Association of Singapore SFAS Safety Features Actuation System SFAS Statewide Fixed Assets System No. 123R, Share-Based Payment (SFAS 123R), which reduced the 2006 third quarter 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 by $0.06, compared to the 2005 third quarter diluted EPS. Net income for the 2006 third quarter increased by $28.5 million, or 21.1%, to $163.8 million, compared to net income of $135.3 million for the 2005 third quarter. For the 2006 third quarter, consolidated net sales increased by $598.1 million, or 23.9%, to $3,104.5 million, compared to consolidated net sales of $2,506.4 million for the 2005 third quarter. The increase in consolidated net sales from acquired businesses was $372.3 million, or 14.9%, including $191.8 million from The Titan Corporation (Titan) which L-3 acquired on July 29, 2005. Consolidated organic sales growth was 9.0%, or $225.8 million, driven primarily by strong demand for government services, secure networked communications products, intelligence, surveillance and reconnaissance Intelligence, Surveillance and Reconnaissance may refer to:
Consolidated operating income increased by $66.8 million, or 25.1%, to $333.3 million for the 2006 third quarter, compared to $266.5 million for the 2005 third quarter, and consolidated operating margin Operating Margin A ratio used to measure a company's pricing strategy and operating efficiency. Calculated by: increased by 0.1 percentage points to 10.7% for the 2006 third quarter, compared to 10.6% for the 2005 third quarter. Consolidated operating margin increased by 0.9 percentage points due to higher sales, improved contract performance, lower indirect costs Indirect costs are costs that are not directly accountable to a particular function or product; these are fixed costs. Indirect costs include taxes, administration, personnel and security costs. See also
Interest and other (income) expense netted to $6.4 million of income for the 2006 third quarter, compared to income of $0.9 million for the 2005 third quarter. The increase was primarily due to earnings from unconsolidated joint ventures due to improved operating results, higher interest income and a 2005 third quarter loss of $3.0 million to write-down 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, which did not recur in the 2006 third quarter. Interest expense for the 2006 third quarter increased by $16.9 million, or 28.2%, to $76.8 million, compared to interest expense of $59.9 million for the 2005 third quarter, primarily due to interest expense on debt incurred to finance the Titan acquisition. The effective income tax rate for the 2006 third quarter increased to 36.9% from 34.0% for the 2005 third quarter. This increase was primarily due to the favorable fa·vor·a·ble adj. 1. Advantageous; helpful: favorable winds. 2. Encouraging; propitious: a favorable diagnosis. 3. disposition of certain tax contingencies in the 2005 third quarter that did not recur in the 2006 third quarter. Funded orders for the 2006 third quarter increased by $704.8 million, or 26.8%, to $3,337.2 million, from $2,632.4 million for the 2005 third quarter. Funded backlog at September 30, 2006 increased by $1,249.6 million, or 17.8%, to $8,250.5 million from $7,000.9 million at December 31, 2005. Net cash from operating activities for the 2006 third quarter increased by $41.5 million, or 18.9%, to $260.5 million from $219.0 million for the 2005 third quarter. Free cash flow for the 2006 third quarter increased by $31.5 million, or 16.2%, to $225.4 million, compared to free cash flow of $193.9 million for the 2005 third quarter. "Building upon our excellent operating performance during the first half of 2006, L-3 achieved strong results for the 2006 third quarter, with record quarterly sales, diluted EPS and funded backlog," said Michael T. Strianese, President and Chief Executive Officer and Chief Financial Officer of L-3 Communications. "We had strong performance across all of our segments." YEAR TO DATE RESULTS Diluted EPS decreased by $0.11, or 3.7%, to $2.84 for the 2006 nine-month period, compared to $2.95 per share for the 2005 nine-month period. Net income for the 2006 nine-month period decreased by $4.6 million, or 1.3%, to $352.5 million, compared to $357.1 million for the 2005 nine-month period. The 2006 nine-month period included a litigation An action brought in court to enforce a particular right. The act or process of bringing a lawsuit in and of itself; a judicial contest; any dispute. When a person begins a civil lawsuit, the person enters into a process called litigation. charge of $129.0 million ($78.2 million after income taxes, or $0.63 per share) for a jury verdict rendered against the company concerning a non-binding letter of intent with OSI Systems OSI Systems, Inc. (NASDAQ: OSIS) is a worldwide company based in California that develops and markets security and inspection systems such as airport security X-ray machines and metal detectors, medical monitoring and anesthesia systems, and optoelectronic devices. , Inc. relating to relating to relate prep → concernant relating to relate prep → bezüglich +gen, mit Bezug auf +acc the company's acquisition of the detection systems business of PerkinElmer Inc. in 2002 (the "Litigation Charge") and a charge of $39.2 million ($25.5 million after-tax, or $0.20 per share) in connection with the company's voluntary review of its past stock option granting practices and the related accounting (the "Stock-Based Charge"). Each of these charges was recorded in the 2006 second quarter, and are more fully described in the company's Quarterly Report on Form 10-Q Form 10-Q See 10-Q. for the period ended June 30, 2006. Before giving effect to the Litigation Charge ($0.63 per share) and the Stock-Based Charge ($0.20 per share), diluted EPS increased by $0.72, or 24.4%, to $3.67 for the 2006 nine-month period, compared to $2.95 per share for the 2005 nine-month period. Excluding these charges, net income for the 2006 nine-month period increased by $99.1 million, or 27.8%, to $456.2 million, compared to $357.1 million for the 2005 nine-month period. SFAS 123R stock-based compensation expense reduced the 2006 nine-month period diluted EPS by $0.18, compared to the 2005 nine-month period. For the 2006 nine-month period, consolidated net sales increased by $2,547.2 million, or 38.9%, to $9,091.7 million from consolidated net sales of $6,544.5 million for the 2005 nine-month period. The increase in consolidated net sales from acquired businesses was $1,930.4 million, or 29.5%, including $1,477.5 million from the Titan acquired businesses. Consolidated organic sales growth was 9.4%, or $616.8 million driven primarily by strong demand for government services, ISR systems, secure networked communications products, aircraft modification A change in the physical characteristics of aircraft, accomplished either by a change in production specifications or by alteration of items already produced. , base support operations, 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, partially offset by volume declines for secure terminal equipment, aircraft support services support services Psychology Non-health care-related ancillary services–eg, transportation, financial aid, support groups, homemaker services, respite services, and other services and airport security systems. Consolidated operating income increased by $79.5 million, or 11.5%, to $770.1 million for the 2006 nine-month period, compared to $690.6 million for the 2005 nine-month period, and consolidated operating margin declined by 2.1 percentage points to 8.5% for the 2006 nine-month period, compared to 10.6% for the 2005 nine-month period. Before giving effect to the Litigation Charge ($129.0 million) and Stock-Based Charge ($39.2 million), consolidated operating income increased by $247.7 million, or 35.9%, to $938.3 million for the 2006 nine-month period, compared to $690.6 million for the 2005 nine-month period, and consolidated operating margin declined by 0.3 percentage points to 10.3% for the 2006 nine-month period, compared to 10.6% for the 2005 nine-month period. Although consolidated operating margin declined, improved contract performance, higher sales volume and lower indirect costs increased operating margin by 0.7 percentage points. This increase was offset by lower margins from acquired businesses, which reduced consolidated operating margin by 0.6 percentage points, and SFAS 123R stock-based compensation expense, which reduced consolidated operating margin by 0.4 percentage points. The changes in operating margin are further explained in the company's reportable segment results discussed below. Interest and other (income) expense, netted to $14.4 million of income for the 2006 nine-month period, compared to income of $6.4 million for the 2005 nine-month period. The increase was due to trends similar to those for the 2006 third quarter, plus $3.5 million of interest income from the favorable settlement of a claim during the 2006 first quarter. Interest expense for the 2006 nine-month period increased by $85.1 million, or 62.3%, to $221.6 million, compared to interest expense of $136.5 million for the 2005 nine-month period. This increase was primarily due to interest expense on debt incurred to finance the Titan acquisition in July 2005. The effective income tax rate for the 2006 nine-month period increased to 36.4% from 35.4% for the 2005 nine-month period. The effective income tax rate for the 2006 nine-month period excluding the Litigation Charge and Stock-Based Charge was 36.9%. The increase in the effective income tax rate excluding these charges was primarily due to the favorable disposition of certain tax contingencies in the 2005 third quarter, partially offset by higher income tax benefits in the current period relating to foreign tax credits resulting from the repatriation Repatriation The process of converting a foreign currency into the currency of one's own country. Notes: If you are American, converting British Pounds back to U.S. dollars is an example of repatriation. of certain foreign earnings. Funded orders for the 2006 nine-month period increased by $2,196.5 million, or 28.9%, to $9,788.9 million from $7,592.4 million for the 2005 nine-month period. Net cash from operating activities for the 2006 nine-month period increased by $155.6 million, or 26.8%, to $735.2 million from $579.6 million for the 2005 nine-month period. Free cash flow for the 2006 nine-month period increased by $123.3 million, or 24.1%, to $633.9 million, compared to free cash flow of $510.6 million for the 2005 nine-month period. The company's cash and cash equivalents decreased by $146.2 million to $247.7 million at September 30, 2006 from $393.9 million at December 31, 2005. The decrease was primarily due to cash paid for business acquisitions, partially offset by the company's free cash flow for the 2006 nine-month period. Total debt was $4,634.6 million at September 30, 2006, compared to $4,633.5 million at December 31, 2005. 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 $923.0 million at September 30, 2006. 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 $570.9 million to $5,061.6 million at September 30, 2006, compared to $4,490.7 million at December 31, 2005, resulting from the company's net income plus proceeds from the exercise of stock options during the 2006 nine-month period, less dividends paid. 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) decreased to 47.4% at September 30, 2006 from 50.3% at December 31, 2005, primarily because of the increase in shareholders' equity described above. REPORTABLE SEGMENTS Command, Control, Communications, Intelligence, Surveillance and Reconnaissance (C(3)ISR) C3ISR C3ISR Command, Control, Communication, Intelligence, Surveillance and Reconnaissance net sales for the 2006 third quarter increased by $129.3 million, or 21.4%, to $732.6 million from net sales of $603.3 million for the 2005 third quarter. The increase in net sales from acquired businesses was $92.0 million, and was primarily related to the Titan acquired businesses. Organic sales growth was $37.3 million, or 6.2%, driven by recent new business awards resulting in higher sales for airborne mission and ISR systems and secure networked communications products, which were partially offset by lower sales for secure terminal equipment, a product that faces declining demand as it continues to approach full deployment in the marketplace. C3ISR generated operating income of $75.2 million for the 2006 third quarter, compared to $69.6 million for the 2005 third quarter. The increase in operating income was due to higher sales volume, partially offset by lower operating margins. Operating margin for the 2006 third quarter decreased by 1.2 percentage points to 10.3% from 11.5% for the 2005 third quarter. C3ISR operating margin declined by 0.9 percentage points primarily due to lower volume for secure terminal equipment and 0.4 percentage points for SFAS 123R stock-based compensation expense, partially offset by an increase of 0.1 percentage points due to higher margin from acquired businesses. Orders for the C3ISR segment were $627.1 million during the 2006 third quarter. For the 2006 nine-month period, net sales increased by $682.8 million, or 46.6%, to $2,147.7 million from net sales of $1,464.9 million for the 2005 nine-month period. The increase in net sales from acquired businesses was $538.6 million, primarily related to the Titan acquired businesses. Organic sales growth was $144.2 million, or 9.8%, driven largely by trends similar to those for the 2006 third quarter. C3ISR generated operating income of $224.2 million for the 2006 nine-month period, compared to $178.5 million for the 2005 nine-month period. The increase in operating income was due to higher sales volume, partially offset by lower operating margins. Operating margin for the 2006 nine-month period decreased by 1.8 percentage points to 10.4% from 12.2% for the 2005 nine-month period. C3ISR operating margin declined by 1.1 percentage points primarily due to higher development costs for new secure communications products which are expected to provide future sales growth, and higher sales volume on contracts with greater material and subcontractor One who takes a portion of a contract from the principal contractor or from another subcontractor. When an individual or a company is involved in a large-scale project, a contractor is often hired to see that the work is done. content, which generally have lower margin, 0.3 percentage points due to lower margins from acquired businesses and 0.4 percentage points for SFAS 123R stock-based compensation expense. Government Services Government Services net sales for the 2006 third quarter increased by $188.3 million, or 34.0%, to $741.9 million from net sales of $553.6 million for the 2005 third quarter. The increase in net sales from acquired businesses was $107.2 million, primarily related to the Titan acquired businesses. Organic sales growth was $81.1 million, or 14.6%, driven by increased sales volume for (1) intelligence support services because of recent competitive contract awards primarily for the support of U.S. military operations This is a list of missions, operations, and projects. Missions in support of other missions are not listed independently. World War I ''See also List of military engagements of World War I
n. 1. A person who speaks several languages fluently. 2. A specialist in linguistics. [Latin lingua, language; see contract with the U.S. Army's Intelligence and Security Command (INSCOM INSCOM United States Army Intelligence & Security Command ), which was extended through a contract option to December 9, 2006. The linguist contract generated sales of $161.8 million for the 2006 third quarter and is currently the company's largest contract in terms of annual sales. INSCOM issued a new competitive procurement The fancy word for "purchasing." The procurement department within an organization manages all the major purchases. for future linguist services, under which it will procure To cause something to happen; to find and obtain something or someone. Procure refers to commencing a proceeding; bringing about a result; persuading, inducing, or causing a person to do a particular act; obtaining possession or control over an item; or making a person linguist services from multiple sources instead of from a single contractor, which will increase competition. The company can provide no assurance that INSCOM will exercise its remaining option to extend the company's linguist contract to March 9, 2007, or that the company will win the re-competition for the linguist contract or, even if it does win, that it will receive the same volume of sales. Government Services generated operating income of $69.1 million for the 2006 third quarter, compared to $47.4 million for the 2005 third quarter. The increase in operating income was due to higher sales volume. Operating margin for the 2006 third quarter increased 0.7 percentage points to 9.3% from 8.6% for the 2005 third quarter. Government Services operating margin increased by 1.0 percentage points due to higher sales volume and lower indirect costs partially offset by lower margins on the linguist contract, which is a cost plus fixed fee type contract. This increase was partially offset by a 0.3 percentage point reduction for SFAS 123R stock-based compensation expense. Orders for the Government Services segment were $974.1 million during the 2006 third quarter. For the 2006 nine-month period, net sales increased by $1,031.1 million, or 90.3%, to $2,172.4 million from net sales of $1,141.3 million for the 2005 nine-month period. The increase in net sales from acquired businesses was $801.2 million, primarily related to the Titan acquired businesses. Organic sales growth was $229.9 million, or 20.1%, driven primarily by trends similar to those for the 2006 third quarter. The linguist contract generated sales of $456.5 million for the 2006 nine-month period and is expected to generate sales in excess of $550 million for the year ending December 31, 2006. Government Services generated operating income of $194.6 million for the 2006 nine-month period, compared to $103.1 million for the 2005 nine-month period. The increase in operating income was due to higher sales volume. Operating margin for the 2006 nine-month period was unchanged at 9.0% compared to the 2005 nine-month period. Although operating margin was unchanged, improved contract performance and lower indirect costs increased operating margin by 0.7 percentage points. This increase was offset by a 0.4 percentage point reduction because of lower margins from acquired businesses (primarily because of lower margins on the linguist contract) and a 0.3 percentage point reduction for SFAS 123R stock-based compensation expense. Aircraft Modernization modernization Transformation of a society from a rural and agrarian condition to a secular, urban, and industrial one. It is closely linked with industrialization. As societies modernize, the individual becomes increasingly important, gradually replacing the family, and Maintenance (AM&M) AM&M net sales for the 2006 third quarter increased by $74.0 million, or 13.5%, to $623.0 million from net sales of $549.0 million in the 2005 third quarter. The increase in net sales from acquired businesses was $32.8 million, primarily due to the acquisition of Crestview Aerospace Corporation on June 29, 2006. Organic sales growth was $41.2 million, or 7.5%, driven by increased sales volume for base support operations related to continued support of U.S. military operations in Iraq and Afghanistan, U.S. Army aviation training aircraft and the completion of performance milestones for the Canadian Maritime 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 support services sales declined primarily because of the loss of a contract to provide maintenance and support services for U.S. Navy fixed wing training aircraft. AM&M generated operating income of $64.1 million for the 2006 third quarter, compared to $56.4 million for the 2005 third quarter. The increase in operating income was due to higher sales volume. Operating margin for the 2006 third quarter was unchanged at 10.3% compared to the 2005 third quarter. Although operating margin was unchanged, cost performance incentive fees earned on a U.S. Army aviation training aircraft support contract, partially offset by lower sell prices on a follow-on contract for the support of U.S. Air Force and U.S. Navy training aircraft, increased operating margin by 0.3 percentage points. This increase was offset by 0.2 percentage points because of lower margins from acquired businesses and 0.1 percentage points for SFAS 123R stock-based compensation expense. Orders for the AM&M segment were $591.1 million during the 2006 third quarter. For the 2006 nine-month period, net sales increased by $92.6 million, or 5.4%, to $1,797.5 million from net sales of $1,704.9 million for the 2005 nine-month period. The increase in net sales from acquired businesses was $46.6 million. Organic sales growth was $46.0 million, or 2.7%, driven by increased sales volume for base support operations, aircraft modifications and MHP. These increases were partially offset by lower sales volume for aircraft support services primarily due to the contract loss in the 2006 third quarter discussed above and the loss of a utility aircraft support contract during the 2005 third quarter. Additionally, the sales growth rate for base support operations slowed during the 2006 nine-month period compared to the 2005 nine-month period. AM&M generated operating income of $173.3 million for the 2006 nine-month period, compared to $169.7 million for the 2005 nine-month period. The increase in operating income was due to higher sales volume, partially offset by lower operating margins. Operating margin for the 2006 nine-month period decreased by 0.4 percentage points to 9.6% from 10.0% for the 2005 nine-month period. Operating margin declined by 0.1 percentage points because of lower margins from acquired businesses and 0.3 percentage points for SFAS 123R stock-based compensation expense. Specialized Products Specialized Products net sales for the 2006 third quarter increased by $206.5 million, or 25.8%, to $1,007.0 million from net sales of $800.5 million in the 2005 third quarter. The increase in net sales from acquired businesses was $140.3 million. Acquired businesses primarily include SAM Electronics GmbH, which was acquired on January 31, 2006, and certain of the Titan businesses. Organic sales growth was $66.2 million, or 8.3%, primarily due to higher sales volume for (1) combat vehicle propulsion Vehicle propulsion refers to the act of moving an artificial carrier of people or goods over a distance. The power plant used to drive the vehicles can vary widely. Originally, humans or animals would have provided the means of propulsion, later being supplemented by wind power (eg systems for U.S. military reset and replacement of equipment consumed in the U.S. military operations in Iraq, (2) navigation and guidance systems from recent contract awards, and (3) electron power devices 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. and radio frequency products due to the timing of scheduled deliveries. These increases were partially offset by volume declines for airport security products because of a reduction in procurement of explosive detection systems Noun 1. explosive detection system - a rapid automatic system to detect plastic explosives in passengers' luggage using X-ray technology and computers; designed for use in airports EDS (EDS (Electronic Data Systems, Plano, TX, www.eds.com) Founded in 1962 by H. Ross Perot (independent candidate for the President of the U.S. in 1992), EDS is the largest outsourcing and data processing services organization in the country. ) by the U.S. Transportation Security Administration (TSA TSA See tax-sheltered annuity (TSA). ) and foreign government customers. Specialized Products generated operating income of $124.9 million for the 2006 third quarter, compared to $93.1 million for the 2005 third quarter. The increase in operating income was primarily due to higher sales volume and higher operating margins. Operating margin for the 2006 third quarter increased by 0.8 percentage points to 12.4% from 11.6% for the 2005 third quarter. The increase in Specialized Products operating margin is due to (1) an increase of 2.0 percentage points due to improved contract performance and lower indirect costs for several business areas, including combat vehicle propulsion systems, navigation and guidance products, electro-optical/infrared and telemetry and radio frequency products, naval power equipment and airport security products, (2) an increase of 1.2 percentage points due to a gain of $12.0 million, net of expenses, for the settlement of a claim against a third party for patent infringement patent infringement n. the manufacture and/or use of an invention or improvement for which someone else owns a patent issued by the government, without obtaining permission of the owner of the patent by contract, license or waiver. , (3) a decline of 0.7 percentage points due to a loss of $6.6 million for 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 three separate fixed-price contracts, each including development and production work, two related to fuzes and one for an anti-submarine acoustic warfare Action involving the use of underwater acoustic energy to determine, exploit, reduce, or prevent hostile use of the underwater acoustic spectrum and actions which retain friendly use of the underwater acoustic spectrum. Also called AW. There are three divisions within acoustic warfare. towed array, (4) a decline of 1.2 percentage points because of lower margins from acquired businesses, and (5) a decline of 0.5 percentage points for SFAS 123R stock-based compensation expense. Orders for the Specialized Products segment were $1,144.9 million during the 2006 third quarter. For the 2006 nine-month period, net sales increased by $740.7 million, or 33.2%, to $2,974.1 million from net sales of $2,233.4 million in the 2005 nine-month period. The increase in net sales from acquired businesses was $544.0 million. Acquired businesses primarily include SAM Electronics GmbH, which was acquired on January 31, 2006, and certain divisions of Titan, Boeing Electron Dynamic Devices, Inc. and Combat 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 , all of which were acquired in 2005. Organic sales growth was $196.7 million, or 8.8%, primarily due to higher sales volume of (1) combat vehicle propulsion systems, (2) simulation devices, (3) acoustic 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 driven by sales of the company's next generation airborne dipping sonars to allied foreign governments, and (4) navigation and guidance systems. These increases were partially offset by volume declines for airport security systems. Specialized Products generated operating income of $346.2 million for the 2006 nine-month period, compared to $239.3 million for the 2005 nine-month period. The increase in operating income was primarily due to higher sales volume and operating margins. Operating margin for the 2006 nine-month period increased by 0.9 percentage points to 11.6% from 10.7% for the 2005 nine-month period. Specialized Products operating margin increased by 1.9 percentage points due to improved contract performance and lower indirect costs for several business areas. Operating margin increased another 0.4 percentage points due to the settlement of a claim in the 2006 third quarter. In addition, the 2005 nine-month period included three charges aggregating $10.3 million, which did not recur in the current period and resulted in an increase of 0.3 percentage points to operating margin for the 2006 nine-month period. These 2005 nine-month period charges were comprised of $3.7 million for a product recall on 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, a $3.1 million charge for product reliability costs on certain airborne dipping sonars, and $3.5 million to settle a customer dispute on a telemetry earth station contract. These increases were partially offset by a decline of 0.2 percentage points due to the contract cost overrun charges in the 2006 third quarter, 1.0 percentage points because of lower margins from acquired businesses and 0.5 percentage points for SFAS 123R stock-based compensation expense. OUTLOOK "We believe that L-3 is on track to finish 2006 with solid growth," said Mr. Strianese. "Depending on the size of future war supplemental appropriations, defense spending should continue to grow in 2007. Before the election recess, Congress approved a $462.8 billion FY 2007 defense spending bill, which included a 'bridge fund' of $70 billion for the war efforts in Iraq and Afghanistan, and it is anticipated that the President will submit another supplemental request for war costs early in FY 2007." Mr. Strianese noted that the spending priorities of the 2007 defense budget reflect the continued effort to transform the U.S. military to cope with the global war on terrorism Terrorist acts and the threat of Terrorism have occupied the various law enforcement agencies in the U.S. government for many years. The Anti-Terrorism and Effective Death Penalty Act of 1996, as amended by the usa patriot act , conduct military operations in Iraq and Afghanistan, and to keep pace with the 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) ) strategy. "Key defense trends include larger 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 ), joint and interdependent in·ter·de·pen·dent adj. Mutually dependent: "Today, the mission of one institution can be accomplished only by recognizing that it lives in an interdependent world with conflicts and overlapping interests" solutions, network-centric operations, continued improvements in command, control, communications and computer capabilities (C4), strengthening and centralizing cen·tral·ize v. cen·tral·ized, cen·tral·iz·ing, cen·tral·iz·es v.tr. 1. To draw into or toward a center; consolidate. 2. strategic and operational ISR, as well as the increasing demand for training and services," said Mr. Strianese. "L-3 has a broad base of high technology electronics systems, products and services to serve these markets." Mr. Strianese also noted that the President recently signed a $35 billion 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 spending bill for 2007 that provided funding for several key initiatives. For example, the government will provide funding for mass transit mass transit, public transportation systems designed to move large numbers of passengers. Types and Advantages Mass transit refers to municipal or regional public shared transportation, such as buses, streetcars, and ferries, open to all on a and rail, air cargo air cargo: see aviation. , port and container security and for the U.S. Coast Guard's Deepwater Program. "L-3, with its expertise in sensors and network-centric technology applied to the homeland security market, is introducing several new products, including a next-generation explosives trace detection system, a transportation turnstile for mass transit security with integrated explosives detection, a checkpoint (programming) checkpoint - Saving the current state of a program and its data, including intermediate results, to disk or other non-volatile storage, so that if interrupted the program could be restarted at the point at which the last checkpoint occurred. portal which integrates several sensor systems for superior threat detection and throughput and an advanced X-ray system with an integrated trace system for the aviation and public safety markets. In addition, L-3 has achieved certification from the TSA for its latest threat detection software for the eXaminer 6500 EDS. This new software further reduces the eXaminer's industry-leading low false alarm rate for EDS and provides a sharper image for operator analysis. L-3 also provides communications equipment to the Deepwater Program and serves as the lead communications integrator (1) In electronics, a device that combines an input with a variable, such as time, and provides an analog output; for example, a watt-hour meter. (2) See systems integrator. for the program as well." "On the acquisition front, the fall season has brought more opportunities into the pipeline. Many of these are niche companies in the $50 million to $300 million revenue range and can fit nicely into business areas that will help us increase market share and expand our capability to our customers," concluded Mr. Strianese. Financial Outlook for 2006 Based on the 2006 third quarter results and information known as of today, the company revised its financial guidance for the year ending December 31, 2006, as follows: * sales of approximately $12.4 billion, including all business acquisitions completed to date. The 2006 sales outlook includes estimated organic sales growth for the year of between 8% and 10%; * diluted EPS of approximately $4.16, including the Litigation Charge of $0.63 per share and the Stock-Based Charge of $0.21 per share, which were both recorded in the 2006 second quarter, with operating margin of approximately 8.9%. Excluding these two charges, diluted EPS is expected to be approximately $5.00, with operating margin of approximately 10.3%, an estimated effective income tax rate of approximately 37% and weighted average diluted shares outstanding of approximately 125 million. The company's estimates for 2006 also include the impact of adopting SFAS 123R, effective January 1, 2006, which is expected to reduce diluted EPS for 2006 by approximately $0.23 and reduce operating margin by 0.4 percentage points; and * free cash flow of at least $850 million, comprised of net cash from operating activities of $993 million, less net capital expenditures of about $143 million. The company's free cash flow guidance assumes that the OSI (1) (Open System Interconnection) An ISO standard for worldwide communications that defines a framework for implementing protocols in seven layers. Control is passed from one layer to the next, starting at the application layer in one station, proceeding to the litigation verdict damages of $125.6 million will not be paid during the year ending December 31, 2006, because of the expected amount of time to resolve motions and appeals relating to this matter. CONFERENCE CALL In conjunction with this release, L-3 Communications will host a conference call today, Thursday, October 26, 2006, at 11:00 AM ET that will be simultaneously broadcast live over the Internet. Michael T. Strianese, President and Chief Executive Officer 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.
11 :00 AM ET
10 :00 AM CT
9 :00 AM MT
8 :00 AM PT
Listeners may access the conference call live over the Internet at the
following web address:
http://www.videonewswire.com/event.asp?id=35697
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 either this site or by dialing (800) 642-1687 (passcode: 6642309), 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 In telecommunication, a communications system is a collection of individual communications networks, transmission systems, relay stations, tributary stations, and data terminal equipment (DTE) usually capable of interconnection and interoperation to form an integrated whole. , 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) Organic sales growth is defined as the increase or decrease in
sales for the current period compared to the prior period,
excluding sales in the current period from business acquisitions
that have been included in L-3's actual results of operations for
less than twelve months.
(2) See discussion, definition and calculation of free cash flow on
the financial tables attached to this press release.
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