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L-3 Announces Third Quarter 2012 Results

  L-3 Announces Third Quarter 2012 Results

  *Diluted earnings per share from continuing operations of $1.98
  *Net sales of $3.3 billion
  *Net cash from operating activities of $352 million
  *Funded orders of $3.2 billion, funded backlog of $11.0 billion
  *Updated 2012 financial guidance

Business Wire

NEW YORK -- November 01, 2012

L-3 Communications Holdings, Inc. (NYSE: LLL) today reported diluted earnings
per share (diluted EPS) from continuing operations of $1.98 for the quarter
ended September 28, 2012 (2012 third quarter), compared to $2.02 for the
quarter ended September 30, 2011 (2011 third quarter). The 2012 third quarter
included a tax benefit of $0.11 per diluted share that is discussed below. Net
sales of $3.3 billion for the 2012 third quarter decreased by 0.5% compared to
the 2011 third quarter.

On July 17, 2012, L-3 completed the previously announced spin-off of its
subsidiary, Engility Holdings, Inc. (Engility). The spin-off was a tax-free
distribution to L-3 shareholders for U.S. federal tax purposes in which L-3
shareholders of record on July 16, 2012 (the record date) received one share
of Engility common stock for every six shares of L-3 common stock held on the
record date.In connection with the spin-off, Engility made a cash
distribution of $335 million to L-3. L-3 used a portion of the proceeds to
redeem $250 million of its 6 ^3/[8]% Senior Subordinated Notes due 2015 (2015
Notes) on July26, 2012.L-3 intends to use the remaining proceeds primarily
to repurchase additional outstanding shares of its common stock. L-3’s results
present Engility as a discontinued operation.

“Overall, we had a solid third quarter and performed well in our core areas
and we continued to make progress in our international and commercial
businesses. In spite of the challenges and uncertainty in the U.S. defense
budget, sales grew in our Electronic Systems, C^3ISR and AM&M segments, which
demonstrates that L-3 is well-positioned and executing on its strategy to grow
market share and be adaptable and agile in the markets we serve,” said Michael
T. Strianese, chairman, president and chief executive officer. “Orders for the
quarter were $3.2 billion, resulting in a book-to-bill ratio of 0.99x. We
ended the quarter with funded backlog of $11.0 billion, up 11% compared to
December 2011.”

“We remain focused on delivering innovation to our customers and value to all
of our stakeholders. We are proactively reducing our operating costs and right
sizing our business units, while also investing in research and development.
We continue to deploy our capital using a disciplined and balanced approach,
with cash dividends and share buybacks, modest debt reduction, plus
acquisitions that expand our market share and strengthen our businesses. On
August 7, 2012, we acquired the commercial aircraft simulation business of
Thales Group, which extends our simulation and training business into the
global commercial marketplace and also provides us a full-motion simulator
capability. Going forward, this strategy will continue to serve L-3 well.”

Key contract wins for the quarter included: (1) continued operations and
sustainment for the U.S. Army Constant Hawk aircraft, (2) an
indefinite-delivery/indefinite-quantity (ID/IQ) contract to supply VideoScout®
products and related upgrades to the Marine Corps, (3) communications systems
for NASA’s Common Communications for Visiting Vehicles (C2V2) program, and (4)
an ID/IQ contract to supply medium-speed explosives detection and ProVision®
ATD (Automatic Target Detection) advanced imaging technology systems to the
Transportation Security Administration (TSA).

Mr. Strianese continued, “We remain committed to shareholder value, deploying
capital and free cash flow to enhance our operations and return cash to our
shareholders. During the quarter, we repurchased $189 million of our common
stock and paid dividends of $51 million, resulting in $653 million of cash
returned to our shareholders year-to-date.”

L-3 Consolidated Results

                              Third Quarter Ended                Year-to-Date Ended    
                               Sept. 28,  Sept. 30,   Increase/    Sept. 28,  Sept. 30,   Increase/
($ in millions, except per     2012        2011        (decrease)   2012        2011        (decrease)
share data)
                                                                                            
Net sales                      $ 3,283     $ 3,301     (0.5   )%    $ 9,586     $ 9,615     (0.3   )%
                                                                                            
Operating income               $ 331       $ 359       (8     )%    $ 987       $ 1,045     (6     )%
                                                                                            
Operating margin                 10.1  %     10.9  %   (80) bpts      10.3  %     10.9  %   (60) bpts
                                                                                            
Net interest expense and       $ 48        $ 47        2      %     $ 132       $ 142       (7     )%
other income
                                                                                            
Debt retirement charge         $ 8         $ —         nm           $ 8         $ 18        (56    )%
                                                                                            
Effective income tax rate        29.1  %     31.4  %   (230) bpts     32.3  %     31.1  %   120 bpts
                                                                                            
Net income from continuing
operations                     $ 193       $ 212       (9     )%    $ 570       $ 604       (6     )%
attributable to L-3
                                                                                            
Diluted EPS from continuing    $ 1.98      $ 2.02      (2     )%    $ 5.78      $ 5.62      3      %
operations
                                                                                            
Diluted weighted average         97.4        104.8     (7     )%      98.7        107.2     (8     )%
common shares outstanding
____________________________
nm – not meaningful                                                              
                                                                                            

Third Quarter Results of Operations: For the 2012 third quarter, consolidated
net sales of $3.3 billion were 0.5% lower than the 2011 third quarter. Sales
growth from the Aircraft Modernization and Maintenance (AM&M), Command,
Control, Communications, Intelligence, Surveillance and Reconnaissance
(C^3ISR) and Electronic Systems segments was offset by lower sales from the
National Security Solutions (NSS) ^ (1) segment. Acquired businesses^(2),
which are all included in the Electronic Systems segment, added $63 million to
net sales in the 2012 third quarter. Net sales to commercial and foreign
government end customers grew 19% to $808 million for the 2012 third quarter
compared to $679 million for the 2011 third quarter.

____________________________
        [L-3’s Government Services segment has been renamed National Security
^(1)   Solutions and comprises L-3’s cyber security, intelligence, enterprise
        information technology and security solutions businesses.]
        [Net sales from acquired businesses are comprised of (i) net sales
        from business acquisitions that are included in L-3’s actual results
^(2)    for less than 12 months, less (ii) net sales from business
        divestitures that are included in L-3’s actual results for the 12
        months prior to the divestitures.]
        

Operating income for the 2012 third quarter decreased by $28 million compared
to the 2011 third quarter. Operating income as a percentage of sales
(operating margin) decreased by 80 basis points to 10.1% for the 2012 third
quarter compared to 10.9% for the 2011 third quarter. Higher pension expense
of $15 million ($9 million after income tax, or $0.09 per diluted share)
reduced operating margin by 40 basis points. See segment results below for
additional discussion of sales and operating margin.

Net interest expense and other income increased by $1 million for the 2012
third quarter compared to the same period last year. The 2012 third quarter
includes a $3 million ($2 million after income tax, or $0.02 per diluted
share) non-cash asset impairment charge related to the planned dissolution of
an unconsolidated joint venture. Interest expense declined by $2 million due
to lower interest rates on outstanding fixed rate debt.

During the 2012 third quarter, the company recorded a debt retirement charge
of $8 million ($5 million after income tax, or $0.05 per diluted share)
related to the redemption of $250 million of the 2015 Notes.

The effective tax rate for the 2012 third quarter decreased by 230 basis
points compared to the same period last year. The effective tax rate decreased
by 390 basis points due to a tax benefit of $11 million, primarily related to
the reversal of amounts previously accrued for tax years in which the statute
of limitations had expired, partially offset by the expiration of the U.S.
Federal research and experimentation tax credit on December 31, 2011.

Net income from continuing operations attributable to L-3 in the 2012 third
quarter decreased 9% to $193 million compared to the 2011 third quarter, and
diluted EPS from continuing operations decreased 2% to $1.98 from $2.02.
Diluted weighted average common shares outstanding for the 2012 third quarter
declined by 7% compared to the 2011 third quarter due to repurchases of L-3
common stock.

Year-to-Date Results of Operations: For the year-to-date period ended
September 28, 2012 (2012 year-to-date period) consolidated net sales decreased
by $29 million compared to the year-to-date period ended September 30, 2011
(2011 year-to-date period). Higher sales from the C^3ISR and AM&M segments
were offset by lower sales from the NSS and Electronic Systems segments.
Acquired businesses, which are all included in the Electronic Systems segment,
added $130 million to net sales in the 2012 year-to-date period. Net sales to
commercial and foreign government end customers grew 12% to $2,223 million for
the 2012 year-to-date period compared to $1,992 million for the 2011
year-to-date period.

Operating income for the 2012 year-to-date period decreased by $58 million
compared to the 2011 year-to-date period. Operating margin decreased by 60
basis points to 10.3% for the 2012 year-to-date period compared to 10.9% for
the 2011 year-to-date period. Higher pension expense of $28 million ($17
million after income tax, or $0.17 per diluted share) reduced operating margin
by 30 basis points. See segment results below for additional discussion of
sales and operating margin.

Net interest expense and other income decreased by $10 million for the 2012
year-to-date period compared to the same period last year. Lower interest
expense of $13 million on outstanding fixed rate debt was partially offset by
the $3 million non-cash asset impairment charge, recorded in the 2012 third
quarter, related to the planned dissolution of an unconsolidated joint
venture.

The company recorded debt retirement charges of $8 million ($5 million after
income tax, or $0.05 per diluted share) during the 2012 year-to-date period
and $18 million ($11 million after income tax, or $0.10 per diluted share)
during the 2011 year-to-date period as a result of debt redemptions and
refinancings.

The effective tax rate for the 2012 year-to-date period increased by 120 basis
points compared to the same period last year primarily due to the expiration
of the U.S. Federal research and experimentation tax credit on December 31,
2011. The 2012 and 2011 year-to-date periods included tax benefits of $11
million and $12 million, respectively, primarily related to the reversal of
amounts previously accrued for prior tax years.

Net income from continuing operations attributable to L-3 in the 2012
year-to-date period decreased 6% to $570 million compared to the 2011
year-to-date period, and diluted EPS from continuing operations increased 3%
to $5.78 from $5.62. Diluted weighted average common shares outstanding for
the 2012 year-to-date period declined by 8% compared to the 2011 year-to-date
period due to repurchases of L-3 common stock.

Orders: Funded orders for the 2012 year-to-date period increased 4% to $10.5
billion compared to $10.0 billion for the 2011 year-to-date period. Funded
backlog grew 11% to $11.0 billion at September 28, 2012, compared to $9.9
billion at December 31, 2011.

Cash flow: Net cash from operating activities was $692 million for the 2012
year-to-date period, a decrease of $57 million, compared to $749 million for
the 2011 year-to-date period. The decrease in net cash from operating
activities was primarily due to the decline in income from continuing
operations and higher income tax payments, partially offset by lower interest
payments. Capital expenditures, net of dispositions of property, plant and
equipment, were $118 million for the 2012 year-to-date period, compared to
$119 million for the 2011 year-to-date period.

Cash returned to shareholders: The table below summarizes the cash returned to
shareholders during the 2012 year-to-date period compared to the 2011
year-to-date period.

                         
                                Year-to-Date Ended
($ in millions)                 Sept. 28,                 Sept. 30,
                                2012                       2011
                                                           
Net cash from operating
activities from                 $      692                 $     749
continuing operations
Less: Capital
expenditures, net of                  118                     119     
dispositions
Free cash flow^(1)              $      574                $     630     
Dividends paid                  $      149                 $     143
Common stock repurchases              504                     800     
Cash returned to                $      653                $     943     
shareholders
Percent of free cash
flow returned to                       114     %                 150     %
shareholders
______________
^(1) Free cash flow is defined as net cash from operating activities less net
capital expenditures (capital expenditures less cash proceeds from
dispositions of property, plant and equipment). Free cash flow represents cash
generated after paying for interest on borrowings, income taxes, pension
benefit contributions, capital expenditures and changes in working capital,
but before repaying principal amount of outstanding debt, paying cash
dividends on common stock, repurchasing shares of our common stock, investing
cash to acquire businesses, and making other strategic investments. Thus, a
key assumption underlying free cash flow is that the company will be able to
refinance its existing debt. Because of this assumption, free cash flow is not
a measure that should be relied upon to represent the residual cash flow
available for discretionary expenditures.


Reportable Segment Results

Electronic Systems

              Third Quarter Ended                     Year-to-Date Ended        
($ in             Sept. 28,    Sept. 30,     Increase/      Sept. 28,    Sept. 30,     Decrease
millions)         2012          2011          (decrease)     2012          2011
Net sales         $ 1,395.1     $ 1,385.8     1     %        $ 4,060.1     $ 4,072.8     (0.3  )%
Operating         $ 158.3       $ 165.8       (5    )%       $ 480.4       $ 503.8       (5    )%
income
Operating      11.3    %   12.0    %  (70) bpts     11.8    %   12.4    %  (60)
margin                                                                                   bpts
                                                                                         

Third Quarter: Electronic Systems net sales for the 2012 third quarter
increased by $9 million, or 1%, compared to the 2011 third quarter. Sales
increased for: (1) Microwave Products by $35 million primarily for increased
deliveries of mobile and ground-based satellite communication systems for the
U.S. military and power devices for commercial satellite communication
systems, (2) Sensor Systems by $30 million primarily from the Kollmorgen
Electro-Optical (KEO) acquisition, which was completed in February 2012, and
(3) Simulation & Training by $20 million primarily due to the commercial
aircraft simulation business acquired from Thales Group, which was completed
in August 2012 and named Link Simulation & Training U.K., Limited (Link U.K.).
These increases were partially offset by a sales decrease of $63 million for
Marine & Power Systems due to lower demand primarily for commercial
shipbuilding products, which reduced sales by $37 million (including $15
million of negative foreign currency translation), and reduced shipments of
tactical quiet generators for the U.S. Army, which reduced sales by $26
million. Also, sales declined by $13 million for Precision Engagement due to
lower volume from contracts nearing completion during the quarter and lower
demand.

Electronic Systems operating income for the 2012 third quarter decreased by $8
million, or 5%, compared to the 2011 third quarter. Operating margin decreased
by 70 basis points to 11.3%. Sales mix changes reduced operating margin by 40
basis points and higher pension expense of $4 million reduced operation margin
by 30 basis points.

Year-to-Date: Electronic Systems net sales for the 2012 year-to-date period
decreased by $13 million, or 0.3%, compared to the 2011 year-to-date period.
Sales declined for: (1) Marine & Power Systems by $105 million primarily due
to reduced shipments of tactical quiet generators for the U.S. Army, which
reduced sales by $72 million, and $33 million of negative foreign currency
translation, (2) Warrior Systems by $68 million for night vision and
illumination products due to reduced U.S. Army requirements, (3) Precision
Engagement by $65 million due to contracts nearing completion and lower
demand. These declines were partially offset by sales increases of: (1) $135
million for Sensor Systems, comprised of $100 million from the KEO acquisition
and $35 million primarily for higher sales of airborne EO/IR turrets for the
U.S. Department of Defense (DoD), (2) $66 million primarily for Microwave
Products due to reasons similar to the 2012 third quarter, and (3) $24 million
for the Link U.K. acquisition.

Electronic Systems operating income for the 2012 year-to-date period decreased
by $23 million, or 5%, compared to the 2011 year-to-date period. Operating
margin decreased by 60 basis points to 11.8%. Sales mix changes reduced
operating margin by 80 basis points and higher pension expense of $4 million
reduced operating margin by 10 basis points. This decrease was partially
offset by improved contract performance, primarily for Displays, Warrior
Systems and Precision Engagement, which increased operating margin by 30 basis
points.

C^3ISR

              Third Quarter Ended                  Year-to-Date Ended        
($ in             Sept.       Sept.       Increase/        Sept. 28,     Sept. 30,     Increase/
millions)         28,        30,         (decrease)       2012         2011          (decrease)
                  2012        2011
Net sales         $ 885.9     $ 874.9     1     %          $ 2,634.1     $ 2,466.7     7     %
Operating         $ 92.9      $ 100.1     (7    )%         $ 271.8       $ 284.7       (5    )%
income
Operating      10.5  %   11.4  %  (90) bpts      10.3    %   11.5    %  (120) bpts
margin
                                                                                       

Third Quarter: C^3ISR net sales for the 2012 third quarter increased by $11
million, or 1%, compared to the 2011 third quarter. Sales for ISR Systems
increased by $49 million primarily due to higher volume for airborne ISR
systems. These increases were partially offset by lower sales of $38 million
for networked communication systems primarily from fewer deliveries of remote
video terminals and lower volume on the Hawklink contract due to development
and low rate initial production work nearing completion.

C^3ISR operating income for the 2012 third quarter decreased by $7 million, or
7%, compared to the 2011 third quarter. Operating margin decreased by 90 basis
points to 10.5%. Higher pension expense of $10 million reduced operating
margin by 110 basis points and sales mix changes reduced operating margin by
40 basis points. This decrease was partially offset by improved contract
performance, which increased operating margin by 60 basis points.

Year-to-Date: C^3ISR net sales for the 2012 year-to-date period increased by
$167 million, or 7%, compared to the 2011 year-to-date period. Sales for ISR
Systems increased by $144 million primarily due to higher volume on airborne
ISR systems and increased demand for logistic support and fleet management
services. Sales also increased by $23 million primarily for networked
communication systems due to higher volume for manned and unmanned platforms
for DoD customers.

C^3ISR operating income for the 2012 year-to-date period decreased by $13
million, or 5%, compared to the 2011 year-to-date period. Operating margin
decreased by 120 basis points to 10.3%. Higher pension expense of $19 million
reduced operating margin by 70 basis points and sales mix changes reduced
operating margin by 80 basis points. These decreases were partially offset by
improved contract performance, which increased operating margin by 30 basis
points.

AM&M

              Third Quarter Ended               Year-to-Date Ended        
($ in             Sept.       Sept.                    Sept. 28,     Sept. 30,     Increase/
millions)         28,        30,         Increase     2012         2011          (decrease)
                  2012        2011
Net sales         $ 648.9     $ 622.7     4    %       $ 1,854.5     $ 1,825.4     2      %
Operating         $ 65.0      $ 60.4      8    %       $ 178.8       $ 180.5       (0.9   )%
income
Operating      10.0  %   9.7   %  30 bpts     9.6     %   9.9     %  (30) bpts
margin
                                                                                   

Third Quarter: AM&M net sales for the 2012 third quarter increased by $26
million, or 4%, compared to the 2011 third quarter. Platform systems sales
increased by $99 million, partially offset by a decline of $73 million for
logistics support services. The platform systems increase was due primarily to
volume on new contracts, including the Australia C-27J and international
head-of-state aircraft modification contracts, and increased scope on the
EC-130 aircraft for the U.S. Air Force (USAF). Logistics support services
decreased due primarily to the competitive loss of a task order for U.S. Army
contract field team support services in Southwest Asia.

AM&M operating income for the 2012 third quarter increased by $5 million, or
8%, compared to the 2011 third quarter. Operating margin increased 30 basis
points to 10.0%. Operating margin increased by 100 basis points due to lower
costs related to the Joint Cargo Aircraft (JCA). This increase was partially
offset by 50 basis points primarily due to sales mix changes and 20 basis
points due to higher pension expense of $1 million.

Year-to-Date: AM&M net sales for the 2012 year-to-date period increased by $29
million, or 2%, compared to the 2011 year-to-date period. Platform systems
sales increased by $78 million, which was partially offset by a decline of $49
million for logistic support services. The platform systems increase was due
primarily to volume on new contracts, including the Australia C-27J and
international head-of-state aircraft modification contracts, and increased
scope on the EC-130 aircraft for the USAF. These increases were partially
offset by lower JCA volume for the USAF. Logistics support services decreased
due primarily to the loss of a task order for U.S. Army contract field team
support services in Southwest Asia, partially offset by increased demand for
field maintenance and sustainment services on a U.S. Army rotary wing aircraft
contract that was competitively won in September 2011 and for U.S. Army C-12
aircraft.

AM&M operating income for the 2012 year-to-date period decreased by $2
million, or 0.9%, compared to the 2011 year-to-date period. Operating margin
decreased by 30 basis points to 9.6%. The decrease in operating margin was due
to a $6 million, or 30 basis points, net favorable adjustment in the 2011
year-to-date period, comprised of a favorable price adjustment for an
international modification contract, partially offset by start-up costs for
the U.S. Army C-12 aircraft maintenance contract. Pension expense increased by
$5 million, which reduced operating margin by 30 basis points. These decreases
were partially offset by 30 basis points primarily due to lower costs related
to JCA.

NSS

              Third Quarter Ended               Year-to-Date Ended        
($ in             Sept.       Sept.                    Sept. 28,     Sept. 30,
millions)         28,        30,         Decrease     2012         2011          Decrease
                  2012        2011
Net sales         $ 352.6     $ 417.4     (16  )%      $ 1,037.5     $ 1,250.1     (17  )%
Operating         $ 14.5      $ 32.5      (55  )%      $ 56.1        $ 75.9        (26  )%
income
Operating      4.1   %   7.8   %  (370)       5.4     %   6.1     %  (70)
margin                                    bpts                                     bpts
                                                                                   

Third Quarter: NSS net sales for the 2012 third quarter decreased by $65
million, or 16%, compared to the 2011 third quarter. Less demand for U.S.
Special Operations Command information technology (IT) support services, due
to our previous single-award contract converting to several multiple-award
contracts which reduced our workshare, lowered sales by $27 million. A decline
in IT support services for select non-DoD U.S. Government agencies due to
customer IT spending reductions and competitive contract losses in 2011
lowered sales by $25 million. Sales declined by $13 million for intelligence
support services due to the drawdown of U.S. military forces in Iraq.

NSS operating income for the 2012 third quarter decreased by $18 million, or
55%, compared to the 2011 third quarter. Operating margin decreased by 370
basis points to 4.1%, primarily due to: (1) lower contract profit rates on
re-competitions of existing business and lower sales volume, which reduced
operating margin by 200 basis points, (2) a $4 million inventory write-down
for security and safety equipment, which reduced operating margin by 110 basis
points, and (3) legal fees of $2 million related to a supplier dispute, which
reduced operating margin by 60 basis points.

Year-to-Date: NSS net sales for the 2012 year-to-date period decreased by $213
million, or 17%, compared to the 2011 year-to-date period. The decrease was
primarily due to trends similar to the 2012 third quarter. Specifically, lower
volumes for IT support services reduced sales by $84 million, less U.S.
Special Operations Command IT support services lowered sales by $81 million,
and the drawdown of U.S. military forces in Iraq lowered sales by $48 million.

NSS operating income for the 2012 year-to-date period decreased by $20
million, or 26%, compared to the 2011 year-to-date period. Operating margin
decreased by 70 basis points to 5.4%. Lower sales volume and lower contract
profit rates on re-competitions of existing business decreased operating
margins by 40 basis points, a $4 million inventory write-down for security and
safety equipment reduced operating margin by 40 basis points, and legal fees
of $3 million related to a supplier dispute reduced operating margins by 30
basis points. These decreases were partially offset by the timing of award
fees for acquisition management and IT support services, which increased
operating margin by 40 basis points.

Financial Guidance

All financial guidance amounts are estimates subject to change in the future,
including as a result of matters discussed under the “Forward-Looking
Statements” cautionary language beginning on page 8, and the company
undertakes no duty to update its guidance.

Consolidated L-3 (Excluding Engility) 2012 Financial Guidance
($ in millions, except per share data)
                                                             Prior
                                      Current          
                                                             (July 26, 2012)
                                                                             
  Net Sales                              $13,000 to          $12,950 to
                                         $13,100             $13,150
  Operating margin                             10.3    %           10.3    % 
  Net interest expense and other         $     176           $     177
  income
  Debt retirement charge                 $     13            $     8
  Effective tax rate                           33.2    %           34.4    % 
  Diluted EPS from continuing            $7.80 to $          $7.70 to $
  operations                             7.90                7.85
  Net cash from operating activities     $     1,230         $     1,240
  from continuing operations
  Less: Capital expenditures, net of
  dispositions of property, plant             185               195     
  and equipment
  Free cash flow                         $     1,045        $     1,045   
                                                                      
Segment 2012 Financial Guidance
($ in millions)
                                                             Prior
                                         Current
                                                             (July 26, 2012)
  Net Sales:
  Electronic Systems                     $5,650 to           $5,650 to
                                         $5,700              $5,750
  C^3ISR                                 $3,500 to           $3,500 to
                                         $3,550              $3,600
  AM&M                                   $2,450 to           $2,400 to
                                         $2,500              $2,500
  National Security Solutions            $1,350 to           $1,300 to
                                         $1,400              $1,400
  Operating Margins:
  Electronic Systems                     11.8% to 11.9 %     12.1% to 12.3 %
  C^3ISR                                 10.3% to 10.4 %     10.2% to 10.4 %
  AM&M                                   9.1% to 9.2   %     8.5% to 8.7   %
  National Security Solutions            5.9% to 6.0   %     6.6% to 6.8   %
                                                                  

The revisions to the company’s 2012 consolidated financial guidance compared
to the previous guidance provided on July 26, 2012, are primarily due to the
items listed below:

  *Updated the consolidated and segment guidance ranges for net sales and
    operating margin for: (a) year-to-date nine month actual results, (b) the
    addition of the Link U.K. business acquisition completed on August 6,
    2012, to the Electronic Systems segment, which is expected to add between
    $60 million and $70 million to 2012 sales, and (c) reduced estimated sales
    in the Electronic Systems segment of approximately $90 million, primarily
    due to fewer book-and-ship orders and a lower Euro-U.S. dollar foreign
    exchange rate.
  *Increased diluted EPS range primarily attributable to: (a) the 2012 third
    quarter income tax gain of $0.11, (b) the Link U.K. business acquisition,
    which adds approximately $0.01, (c) a 2012 fourth quarter debt retirement
    charge of $0.03, and (d) the 2012 third quarter $0.02 charge included in
    net interest expense and other income for the dissolution of an
    unconsolidated joint venture.

Additional financial information regarding the 2012 third quarter results and
the 2012 updated financial guidance is available on the company’s website at
www.L-3com.com.

Conference Call

In conjunction with this release, L-3 will host a conference call today,
Thursday, November 1, 2012 at 11:00 a.m. ET that will be simultaneously
broadcast over the Internet. Michael T. Strianese, chairman, president and
chief executive officer, and Ralph G. D’Ambrosio, senior vice president and
chief financial officer, will host the call.

                                11:00 a.m. ET

                                10:00 a.m. CT

                                 9:00 a.m. MT

                                 8:00 a.m. PT

Listeners may access the conference call live over the Internet at the
company’s website at:

                            http://www.L-3com.com

Please allow fifteen minutes prior to the call to visit our website to
download and install any necessary audio software. The archived version of the
call may be accessed at our website or by dialing (888) 843-7419 (passcode:
33664521), 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, L-3 employs approximately 51,000 people
worldwide and is a prime contractor in C^3ISR (Command, Control,
Communications, Intelligence, Surveillance and Reconnaissance) systems,
aircraft modernization and maintenance, and national security solutions. L-3
is also a leading provider of a broad range of electronic systems used on
military and commercial platforms.

To learn more about L-3, please visit the company’s website at www.L-3com.com.
L-3 uses its website as a channel of distribution of material company
information. Financial and other material information regarding L-3 is
routinely posted on the company’s website and is readily accessible.

Forward-Looking Statements

Certain of the matters discussed in this release, including information
regarding the company’s 2012 financial outlook 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 constitute forward-looking statements.
Although we believe that these statements are based upon reasonable
assumptions, including projections of total sales growth, sales growth from
business acquisitions, organic sales growth, consolidated operating margins,
total segment operating margins, interest expense, earnings, cash flow,
research and development costs, working capital, capital expenditures and
other projections, they are subject to several risks and uncertainties, and
therefore, we can give no assurance that these statements will be achieved.
Such statements will also be influenced by factors which include, among other
things: our dependence on the defense industry and the business risks peculiar
to that industry, including changing priorities or reductions in the U.S.
Government defense budget; backlog processing and program slips resulting from
delayed funding of the Department of Defense (DoD) budget; our reliance on
contracts with a limited number of agencies of, or contractors to, the U.S.
Government and the possibility of termination of government contracts by
unilateral government action or for failure to perform; the extensive legal
and regulatory requirements surrounding our contracts with the U.S. or foreign
governments and the results of any investigation of our contracts undertaken
by the U.S. or foreign governments; our ability to retain our existing
business and related contracts (revenue arrangements); our ability to
successfully compete for and win new business and related contracts (revenue
arrangements) and to win re-competitions of our existing contracts; our
ability to identify and acquire additional businesses in the future with terms
that are attractive to L-3 and to integrate acquired business operations; the
impact of any strategic initiatives undertaken by us, and our ability to
achieve anticipated benefits; our ability to maintain and improve our
consolidated operating margin and total segment operating margin in future
periods; our ability to obtain future government contracts (revenue
arrangements) on a timely basis; the availability of government funding or
cost-cutting initiatives and changes in customer requirements for our products
and services; our significant amount of debt and the restrictions contained in
our debt agreements; our ability to continue to retain and train our existing
employees and to recruit and hire new qualified and skilled employees as well
as our ability to retain and hire employees with U.S. Government security
clearances; actual future interest rates, volatility and other assumptions
used in the determination of pension benefits and equity based compensation,
as well as the market performance of benefit plan assets; our collective
bargaining agreements, our ability to successfully negotiate contracts with
labor unions and our ability to favorably resolve labor disputes should they
arise; the business, economic and political conditions in the markets in which
we operate, including those for the commercial aviation, shipbuilding and
communications markets; global economic uncertainty; the DoD’s contractor
support services in-sourcing and efficiency initiatives; events beyond our
control such as acts of terrorism; our ability to perform contracts (revenue
arrangements) on schedule; our international operations; our extensive use of
fixed-price type contracts as compared to cost-plus type and time-and-material
type contracts; the rapid change of technology and high level of competition
in the defense industry and the commercial industries in which our businesses
participate; our introduction of new products into commercial markets or our
investments in civil and commercial products or companies; the outcome of
litigation matters, including in connection with jury trials; results of
audits by U.S. Government agencies; results of on-going governmental
investigations, including potential suspensions or debarments; the impact on
our business of improper conduct by our employees, agents or business
partners; anticipated cost savings from business acquisitions not fully
realized or realized within the expected time frame; the outcome of matters
relating to the Foreign Corrupt Practices Act (FCPA) and similar non-U.S.
regulations; ultimate resolution of contingent matters, claims and
investigations relating to acquired businesses, and the impact on the final
purchase price allocations; competitive pressure among companies in our
industry; and the fair values of our assets, which can be impaired or reduced
by other factors, some of which are discussed above.

For a discussion of these and other risks and uncertainties that could impair
our results of operations or financial condition, see ‘‘Part I — Item 1A —
Risk Factors’’ and Note 19 to our audited consolidated financial statements,
included in our Annual Report on Form 10-K for the year ended December 31,
2011, “Part I – Item 2 – Management’s Discussion and Analysis of Financial
Condition and Results of Operations – Overview and Outlook – Industry
Considerations,” included in our Quarterly Reports on Form 10-Q for the
quarters ended June 29, 2012 and March 30, 2012, and any material updates to
these factors contained in any of our future filings.

Our forward-looking statements are not guarantees of future performance and
the actual results or developments may differ materially from the expectations
expressed in the forward-looking statements. As for the forward-looking
statements that relate to future financial results and other projections,
actual results will be different due to the inherent uncertainties of
estimates, forecasts and projections and may be better or worse than projected
and such differences could be material. Given these uncertainties, you should
not place any reliance on these forward-looking statements. These
forward-looking statements also represent our estimates and assumptions only
as of the date that they were made. We expressly disclaim a duty to provide
updates to these forward-looking statements, and the estimates and assumptions
associated with them, after the date of this release to reflect events or
changes in circumstances or changes in expectations or the occurrence of
anticipated events.

                         – Financial Tables Follow –

                                                    
                                                          Table A
L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)
                                                          
                          Third Quarter Ended^(a)        Year-to-Date Ended
                          Sept. 28,       Sept. 30,       Sept.      Sept. 30,
                                                        28,     
                          2012            2011                       2011
                                                          2012
Net sales                 $  3,283        $  3,301        $ 9,586    $  9,615
Cost of sales               2,952         2,942        8,599        8,570
Operating income             331             359          987           1,045
                                                                     
Interest and other           —               3            6             10
income, net
Interest expense             48              50           138           152
Debt retirement             8             —            8            18
charge
Income from
continuing                   275             312          847           885
operations before
income taxes
Provision for               80            98           274          275
income taxes
Income from
continuing                $  195          $  214          $ 573      $  610
operations
Income (loss) from
discontinued                (1     )       24           32           81
operations, net of
income tax
Net income                   194             238          605           691
Less: Net income
from continuing
operations                   2               2            3             6
attributable to
noncontrolling
interests
Less: Net income
from discontinued
operations                  —             1            4            3
attributable to
noncontrolling
interests
Net income                $  192          $  235          $ 598      $  682
attributable to L-3
Less: Net income
allocable to              ―                —            ―            2
participating
securities
Net income
allocable to L-3          $  192         $  235          $ 598      $  680
Holdings’ common
shareholders
                                                                     
Basic earnings
(loss) per share
allocable to L-3
Holdings’ common
shareholders:
Continuing                $  2.01         $  2.05         $ 5.85     $  5.68
operations
Discontinued              $  (0.01  )     $  0.22         $ 0.29     $  0.74
operations
Basic earnings per        $  2.00        $  2.27         $ 6.14     $  6.42
share
                                                                     
Diluted earnings
(loss) per share
allocable to L-3
Holdings’ common
shareholders:
Continuing                $  1.98         $  2.02         $ 5.78     $  5.62
operations
Discontinued              $  (0.01  )     $  0.22         $ 0.28     $  0.72
operations
Diluted earnings          $  1.97        $  2.24         $ 6.06     $  6.34
per share
                                                                     
L-3 Holdings’
weighted average
common shares
outstanding:
Basic                       96.1          103.5        97.4         106.0
Diluted                     97.4          104.8        98.7         107.2
                                                         
(a) It is the company’s established practice to close its books for the
quarters ending March, June and September on the Friday nearest to the end of
the calendar quarter. The interim financial statements and tables of financial
information included herein have been prepared and are labeled based on that
convention. The company closes its annual books on December 31 regardless of
what day it falls on.
                                    

                                                 
                                                     Table B
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED SELECT FINANCIAL DATA
(in millions)
                                                     
                        Third Quarter Ended          Year-to-Date Ended
                        Sept. 28,     Sept. 30,      Sept. 28,     Sept. 30,
                                                                
                        2012          2011           2012          2011
                                                                   
Segment Operating
Data
Net Sales:
Electronic Systems      $ 1,395.1     $ 1,385.8      $ 4,060.1     $ 4,072.8
C^3ISR                    885.9         874.9          2,634.1       2,466.7
AM&M                      648.9         622.7          1,854.5       1,825.4
NSS                      352.6       417.4        1,037.5     1,250.1 
Total                   $ 3,282.5    $ 3,300.8     $ 9,586.2    $ 9,615.0 
Operating income:
Electronic Systems      $ 158.3       $ 165.8        $ 480.4       $ 503.8
C^3ISR                    92.9          100.1          271.8         284.7
AM&M                      65.0          60.4           178.8         180.5
NSS                      14.5        32.5         56.1        75.9    
Total                   $ 330.7      $ 358.8       $ 987.1      $ 1,044.9 
Operating margin:
Electronic Systems        11.3    %     12.0    %      11.8    %     12.4    %
C^3ISR                    10.5    %     11.4    %      10.3    %     11.5    %
AM&M                      10.0    %     9.7     %      9.6     %     9.9     %
NSS                       4.1     %     7.8     %      5.4     %     6.1     %
Total                     10.1    %     10.9    %      10.3    %     10.9    %
Depreciation and
amortization:
Electronic Systems      $ 34.2        $ 34.9         $ 105.4       $ 109.5
C^3ISR                    11.4          11.0           34.4          32.6
AM&M                      4.2           4.4            14.9          13.4
NSS                      4.7         4.1          10.5        12.6    
Total                   $ 54.5       $ 54.4        $ 165.2      $ 168.1   
Funded order data:
Electronic Systems      $ 1,491       $ 1,771        $ 4,375       $ 4,215
C^3ISR                    925           1,029          2,612         2,785
AM&M                      447           527            2,302         1,796
NSS                      383         512          1,163       1,241   
Total                   $ 3,246      $ 3,839       $ 10,452     $ 10,037  
                                                                   
                                                                   
                                                                   
                                                     Sept. 28,     Dec. 31,
                                                     2012          2011
Period end data:
Funded backlog                                       $ 10,953      $ 9,899
                                                                             


Table C
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED
BALANCE SHEETS
(in millions)
                                                                 
                                                        Sept. 28,     Dec. 31,

                                                        2012          2011
ASSETS
                                                                      
Cash and cash equivalents                               $  514        $ 764
Billed receivables, net                                    962          1,103
Contracts in process                                       2,839        2,351
Inventories                                                401          317
Deferred income taxes                                      131          132
Other current assets                                       139          191
Assets of discontinued operations                       ―              1,729
Total current assets                                      4,986       6,587
Property, plant and equipment, net                         980          921
Goodwill                                                   7,705        7,472
Identifiable intangible assets                             327          308
Deferred debt issue costs                                  32           33
Other assets                                              170         176
Total assets                                            $  14,200     $ 15,497
                                                                      
LIABILITIES AND EQUITY
                                                                      
                                                                      
Accounts payable, trade                                 $  476        $ 395
Accrued employment costs                                   613          563
Accrued expenses                                           437          543
Advance payments and billings in excess of costs           682          537
incurred
Income taxes                                               23           40
Other current liabilities                                  348          388
Liabilities of discontinued operations                  ―              351
Total current liabilities                                 2,579       2,817
Pension and postretirement benefits                        1,090        1,137
Deferred income taxes                                      420          335
Other liabilities                                          391          359
Long-term debt                                            3,878       4,125
Total liabilities                                         8,358       8,773
Shareholders’ equity                                       5,766        6,635
Noncontrolling interests of continuing operations          76           79
Noncontrolling interests of discontinued operations     ―              10
Total equity                                              5,842       6,724
Total liabilities and equity                            $  14,200     $ 15,497
                                                                        

                                                                             
Table D
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)
                                                   
                                                       Year-to-Date Ended
                                                       Sept. 28,     Sept. 30,
                                                                  
                                                       2012          2011
Operating activities
Net income                                             $  605        $  691
Less: Income from discontinued operations, net           32          81   
of tax
Income from continuing operations                         573           610
Depreciation of property, plant and equipment             124           125
Amortization of intangibles and other assets              41            44
Deferred income tax provision                             50            80
Stock-based employee compensation expense                 44            47
Contributions to employee savings plans in L-3            104           89
Holdings’ common stock
Amortization of pension and postretirement                51            36
benefit plans net loss and prior service cost
Amortization of bond discounts and deferred debt          5             10
issue costs (included in interest expense)
Other non-cash items                                      9             5
Changes in operating assets and liabilities,
excluding amounts from acquisitions,
divestitures and discontinued operations:
Billed receivables                                        161           18
Contracts in process                                      (385 )        (204 )
Inventories                                               (83  )        (46  )
Accounts payable, trade                                   47            41
Accrued employment costs                                  35            7
Accrued expenses                                          (120 )        16
Advance payments and billings in excess of costs          94            (74  )
incurred
Income taxes                                              (6   )        55
Excess income tax benefits related to                     (2   )        (2   )
share-based payment arrangements
Other current liabilities                                 (54  )        (1   )
Pension and postretirement benefits                       (53  )        (74  )
All other operating activities                           57          (33  )
Net cash from operating activities from                  692         749  
continuing operations
                                                                             
Investing activities
Contribution received from the spin-off of                335        ―
Engility
Business acquisitions, net of cash acquired               (349 )        (15  )
Capital expenditures                                      (124 )        (124 )
Dispositions of property, plant and equipment             6             5
Other                                                    (5   )       1    
Net cash used in investing activities from               (137 )       (133 )
continuing operations
Financing activities
Proceeds from sale of senior notes                     ―                646
Redemption of senior subordinated notes                   (250 )        (650 )
Redemption of CODES                                    ―                (11  )
Borrowings under revolving credit facility                199           625
Repayment of borrowings under revolving credit            (199 )        (625 )
facility
Common stock repurchased                                  (504 )        (800 )
Dividends paid on L-3 Holdings’ common stock              (149 )        (143 )
Proceeds from exercises of stock options                  12            21
Proceeds from employee stock purchase plan                30            34
Debt issue costs                                          (6   )        (7   )
Excess income tax benefits related to                     2             2
share-based payment arrangements
Other financing activities                               (18  )       (7   )
Net cash used in financing activities from               (883 )       (915 )
continuing operations
                                                                             
Effect of foreign currency exchange rate changes          4             —
on cash and cash equivalents
Cash from (used in) discontinued operations
Operating activities                                      75            235
Investing activities                                   ―                (4   )
Financing activities                                     (1   )       (1   )
Cash from discontinued operations                        74          230  
Net decrease in cash and cash equivalents                 (250 )        (69  )
Cash and cash equivalents, beginning of the              764         607  
period
Cash and cash equivalents, end of the period           $  514       $  538  

Contact:

L-3 Communications Holdings, Inc.
Corporate Communications
212-697-1111
 
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