L-3 Announces Fourth Quarter 2012 Results

  L-3 Announces Fourth Quarter 2012 Results

  *Diluted earnings per share from continuing operations of $2.25
  *Net sales of $3.6 billion
  *Net cash from operating activities of $539 million
  *Funded orders up 17% to $3.3 billion, funded backlog up 10% to $10.9
    billion
  *Updated consolidated financial guidance for 2013

Business Wire

NEW YORK -- January 30, 2013

L-3 Communications Holdings, Inc. (NYSE: LLL) today reported diluted earnings
per share (diluted EPS) from continuing operations of $2.25 for the quarter
ended December 31, 2012 (2012 fourth quarter), compared to $2.49 for the
quarter ended December 31, 2011 (2011 fourth quarter). The 2011 fourth quarter
included a $0.28 net gain for certain items, which are discussed below.
Excluding this net gain, diluted EPS increased by 2% compared to $2.21 for the
2011 fourth quarter. Net sales of $3.6 billion for the 2012 fourth quarter
increased by 0.5% compared to the 2011 fourth quarter.

“Overall, we had a solid fourth quarter underscored by strong orders, sales
and cash flows in spite of the challenges and uncertainty in the U.S. defense
budget. Sales increased in our Electronic Systems and AM&M segments, which
demonstrates that L-3 is well-positioned and executing our strategy to grow
our international and commercial businesses and expand market share,” said
Michael T. Strianese, chairman, president and chief executive officer. “For
the year, orders grew 7% compared to last year, resulting in a book-to-bill
ratio of 1.05x. We ended the quarter with funded backlog of $10.9 billion, up
10% compared to December 2011.”

“We continue to aggressively manage our costs to maintain a competitive
advantage in the markets we serve, while delivering affordable and innovative
solutions to our customers. We remain focused on shareholder value and
deploying our capital using a disciplined and balanced approach that includes
cash dividends and share repurchases, modest debt reduction, investment in
research and development and acquisitions. Consistent with this strategy, we
repurchased $368 million of our common stock and paid dividends of $46 million
during the quarter. For 2012, we repurchased a total of $872 million of our
shares and paid dividends of $195 million, resulting in approximately $1.1
billion of cash returned to our shareholders. In addition, our acquisitions of
the Kollmorgen Electro-Optical business (named L-3 KEO) and the commercial
aircraft simulation business of Thales Group (named Link U.K.), enhance our
market position and also expand our commercial opportunities.”

Key contract wins for the quarter included: (1) an indefinite-delivery,
indefinite-quantity (ID/IQ) contract to supply the second generation of
Advanced Imaging Technology (AIT) systems to the Transportation Security
Administration (TSA), (2) new business to provide contractor logistics
services for specialized pilot training for the U.S. Air Force, and (3) a
production contract for modems and SATCOM On-The-Move (SOTM) antennas to be
used on the U.S. Army’s Warfighter Information Network-Tactical (WIN-T)
program.

L-3 Consolidated Results

                           Fourth Quarter Ended                      Year Ended Dec. 31,            
($ in millions,                                                  Increase/                                          Increase/
except per share                 2012         2011^(1)        (decrease)       2012          2011^(1)         (decrease)
data)
                                                                                                                          
Net sales                        $ 3,560         $ 3,543         0.5%             $ 13,146         $ 13,158         (0.1)%
                                                                                                                          
Operating income                 $ 364           $ 354           3%               $ 1,351          $ 1,399          (3)%
Goodwill impairment              ―               43           nm               ―                43            nm
charge
Segment operating                $ 364          $ 397          (8)%             $ 1,351         $ 1,442         (6)%
income
Operating margin                   10.2  %         10.0  %       20 bpts            10.3   %         10.6   %       (30) bpts
Segment operating                  10.2  %         11.2  %       (100) bpts         10.3   %         11.0   %       (70) bpts
margin
Interest expense                 $ 46            $ 52            (12)%            $ 184            $ 204            (10)%
Interest and other               $ 2             $ (10   )       nm               $ 8              $ ―              nm
income (expense)
Debt retirement                  $ 5             $ 17            (71)%            $ 13             $ 35             (63)%
charge
Effective income tax               31.7  %         7.6   %       nm                 32.2   %         25.5   %       670 bpts
rate
Net income from
continuing
operations                       $ 212           $ 251           (16)%            $ 782            $ 855            (9)%
attributable to
L-3
Q4 2011 Items                    ―               (28   )       nm               ―                (28    )       nm
Net income from
continuing
operations                       $ 212          $ 223          (5)%             $ 782           $ 827           (5)%
attributable
to L-3, excluding
Q4 2011 Items
Diluted EPS from
continuing                       $ 2.25          $ 2.49          (10)%            $ 8.01           $ 8.08           (1)%
operations
Q4 2011 Items                    ―               (0.28 )       nm               ―                (0.26  )       nm
Diluted earnings per
share from
continuing                       $ 2.25         $ 2.21         2%               $ 8.01          $ 7.82          2%
operations,
excluding Q4 2011
Items
                                                                                                                          
Diluted weighted
average common                     94.3            100.9         (7)%               97.6             105.6          (8)%
shares outstanding
____________________


        The 2011 fourth quarter and full year results were impacted
        by: (1) a tax benefit of $78 million, or $0.77 per diluted
        share, and (2) non-cash impairment charges of $57 million
        ($50 million after income taxes, or $0.49 per diluted share),
^(1)   comprised of a goodwill impairment charge of $43 million ($42
        million after income taxes, or $0.41 per diluted share), and
        a long-lived asset impairment charge at an equity method
        investment of $14 million ($8 million after income taxes, or
        $0.08 per diluted share). These items are collectively
        referred to as the Q4 2011 Items.
        
        The company believes that the Q4 2011 Items affect the comparability
        of the results of operations of the 2012 fourth quarter and full year
        to the results of operations for the 2011 fourth quarter and full
        year. The company also believes that disclosing net income and diluted
        EPS excluding the Q4 2011 Items will allow investors to more easily
        compare the 2012 fourth quarter and full year results to the 2011
        fourth quarter and full year results. Further, the goodwill impairment
        charge is included in consolidated operating income, but excluded from
        segment operating income because the charge is excluded by management
        for purposes of assessing segment operating performance.
nm   -  not meaningful
                                                                   
                                                                      

Fourth Quarter Results of Operations: For the 2012 fourth quarter,
consolidated net sales of $3.6 billion increased $17 million, or 0.5%,
compared to the 2011 fourth quarter. Sales growth from the Electronic Systems
and Aircraft Modernization and Maintenance (AM&M) segments was partially
offset by lower sales from the Command, Control, Communications, Intelligence,
Surveillance and Reconnaissance (C^3ISR) and National Security Solutions (NSS)
segments. Acquired businesses^(1), which are all included in the Electronic
Systems segment, added $66 million to net sales in the 2012 fourth quarter.
Net sales to commercial and foreign government end customers grew 23% to $897
million for the 2012 fourth quarter compared to $727 million for the 2011
fourth quarter.

___________________________________

     Net sales from acquired businesses are comprised of (i) net sales from
     business acquisitions that are included in L-3’s actual results for less
^(1) than 12 months, less (ii) net sales from business and product line
     divestitures that are included in L-3’s actual results for the 12 months
     prior to the divestitures.
     

Segment operating income for the 2012 fourth quarter decreased by $33 million,
or 8%, compared to the 2011 fourth quarter. Segment operating income as a
percentage of sales (segment operating margin) decreased by 100 basis points
to 10.2% for the 2012 fourth quarter compared to 11.2% for the 2011 fourth
quarter. Higher pension expense of $11 million ($7 million after income tax,
or $0.07 per diluted share) reduced segment operating margin by 30 basis
points. The remaining decrease in segment operating margin is primarily due to
sales mix changes and 2011 fourth quarter favorable contract performance
adjustments that did not recur in the 2012 fourth quarter in the Electronic
Systems segment. See segment results below for additional discussion of sales
and operating margin.

Interest expense declined by $6 million due to lower interest rates on
outstanding fixed rate debt, partially offset by interest expense allocated to
discontinued operations for the 2011 fourth quarter.

Interest and other income increased by $12 million for the 2012 fourth quarter
compared to the same period last year due primarily to a 2011 fourth quarter
impairment charge of $14 million for long-lived assets at an equity method
investment.

The effective tax rate for the 2012 fourth quarter increased to 31.7% from
7.6% for the same period last year. Excluding the Q4 2011 Items, the 2011
fourth quarter effective tax rate would have been 31.9%.

Net income from continuing operations attributable to L-3 in the 2012 fourth
quarter decreased 16% to $212 million compared to the 2011 fourth quarter, and
diluted EPS from continuing operations decreased 10% to $2.25 from $2.49.
Excluding the Q4 2011 Items, net income from continuing operations
attributable to L-3 decreased 5% and diluted EPS increased by 2%. Diluted
weighted average common shares outstanding for the 2012 fourth quarter
declined by 7% compared to the 2011 fourth quarter due to repurchases of L-3
common stock.

Full Year Results of Operations: For the year ended December 31, 2012
consolidated net sales decreased by $12 million, or 0.1%, compared to the year
ended December 31, 2011. Higher sales from the C^3ISR, Electronic Systems and
AM&M segments were offset by lower sales from the NSS segment. Acquired
businesses, which are all included in the Electronic Systems segment, added
$196 million to net sales in the year ended December 31, 2012. Net sales to
commercial and foreign government end customers grew 15% to $3,120 million for
the year ended December 31, 2012 compared to $2,719 million for the year ended
December 31, 2011.

Segment operating income for the year ended December 31, 2012 decreased by $91
million, or 6%, compared to the year ended December 31, 2011. Segment
operating margin decreased by 70 basis points to 10.3% for the year ended
December 31, 2012 compared to 11.0% for the year ended December 31, 2011.
Higher pension expense of $38 million ($24 million after income tax, or $0.25
per diluted share) reduced segment operating margin by 30 basis points. The
remaining decrease in segment operating margin is primarily due to sales mix
changes in the Electronic Systems and C^3ISR segments and $9 million of legal
fees and inventory write-downs related to security and safety equipment in the
NSS segment. See segment results below for additional discussion of sales and
operating margin.

Interest expense declined by $20 million due to lower interest rates on
outstanding fixed rate debt, partially offset by higher interest expense
allocated to discontinued operations in 2011.

Interest and other income increased by $8 million for the year ended December
31, 2012, compared to the year ended December 31, 2011 primarily due to
reasons similar to the 2012 fourth quarter.

The effective tax rate for the year ended December 31, 2012 increased to 32.2%
from 25.5% for the year ended December 31, 2011. Excluding the Q4 2011 Items,
the effective tax rate for the year ended December 31, 2011 would have been
31.2%. The increase in the effective tax rate is primarily due to 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 year ended
December 31, 2012 decreased 9% to $782 million compared to the year ended
December 31, 2011, and diluted EPS from continuing operations decreased to
$8.01 from $8.08. Excluding the Q4 2011 Items, net income from continuing
operations attributable to L-3 decreased 5% and diluted EPS increased 2%.
Diluted weighted average common shares outstanding for the year ended December
31, 2012 declined by 8% compared to the year ended December 31, 2011 due to
repurchases of L-3 common stock.

Orders: Funded orders for the 2012 fourth quarter increased 17% to $3.3
billion compared to $2.9 billion for the 2011 fourth quarter. Funded orders
for the year ended December 31, 2012 increased 7% to $13.8 billion compared to
$12.9 billion for the year ended December 31, 2011. Funded backlog grew 10% to
$10.9 billion at December 31, 2012, compared to $9.9 billion at December 31,
2011.

Cash flow: Net cash from operating activities from continuing operations was
$1,231 million for each of the years ended December 31, 2012 and 2011. Capital
expenditures, net of dispositions of property, plant and equipment, were $205
million for the year ended December 31, 2012, compared to $181 million for the
year ended December 31, 2011.

Cash returned to shareholders: The table below summarizes the cash returned to
shareholders during the year ended December 31, 2012, compared to the year
ended December 31, 2011.

                                                
                                                
                                                     Year Ended Dec. 31,
                                                                 
($ in millions)                                      2012            2011
                                                                     
Net cash from operating activities from              $ 1,231         $ 1,231
continuing operations
Less: Capital expenditures, net of                     (205  )         (181  )
dispositions
Plus: Income tax payments attributable to             24            63    
discontinued operations
Free cash flow^(1)                                   $ 1,050        $ 1,113 
Dividends paid                                       $ 195           $ 188
Common stock repurchases                              872           958   
Cash returned to shareholders                        $ 1,067        $ 1,146 
Percent of free cash flow returned to                  102   %         103   %
shareholders
___________________

       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) plus income tax payments
       attributable to discontinued operations. Free cash flow represents cash
       generated after paying for interest on borrowings, income taxes,
       pension benefit contributions, capital expenditures and changes in
^(1)  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

                                                                                           
                                                                                                
                      Fourth Quarter Ended                                   Year Ended Dec. 31,
                                                                                        
($ in                 2012              2011              Increase/          2012              2011              Increase/
millions)                                                 (decrease)                                             (decrease)
Net sales             $ 1,616.7         $ 1,555.1         4     %            $ 5,676.8         $ 5,627.9         1     %
Operating             $ 192.1           $ 215.1           (11   )%           $ 672.5           $ 718.9           (6    )%
income
Operating               11.9    %         13.8    %       (190) bpts           11.8    %         12.8    %       (100) bpts
margin
                                                                             

Fourth Quarter: Electronic Systems net sales for the 2012 fourth quarter
increased by $62 million, or 4%, compared to the 2011 fourth quarter. Sales
increased: (1) $66 million for Simulation & Training of which $25 million was
from the Link U.K. acquisition and $41 million was primarily due to increased
deliveries of U.S. Army rotary wing training systems for the Flight School XXI
program, (2) $17 million for Precision Engagement primarily due to increased
deliveries of ordnance products, (3) $15 million for Marine Services primarily
due to the landing craft air cushion vehicle service life extension program,
(4) $13 million for Microwave Products primarily due to increased deliveries
of mobile and ground-based satellite communication systems for the U.S.
military, and (5) $4 million for Sensor Systems ($35 million from the L-3 KEO
acquisition partially offset by a decline of $31 million due to lower volume
for airborne EO/IR turrets for the U.S. Department of Defense (DoD)). These
increases were partially offset by sales decreases of: (1) $39 million for
Power & Control Systems due to lower demand for commercial shipbuilding
products, which reduced sales by $19 million including $5 million of negative
foreign currency translation, and lower shipments of tactical quiet generators
for the U.S. Army, which reduced sales by $20 million, and (2) $14 million for
Warrior Systems due to reduced U.S. Army requirements for night vision and
illumination products.

Electronic Systems operating income for the 2012 fourth quarter decreased by
$23 million, or 11%, compared to the 2011 fourth quarter. Operating margin
decreased by 190 basis points to 11.9%. Operating margin declined by 120 basis
points primarily due to lower sales at Power & Control Systems and sales mix
changes at Sensor Systems and 60 basis points due to more favorable contract
performance adjustments during the 2011 fourth quarter as compared to the 2012
fourth quarter. Higher pension expense of approximately $1 million reduced
operating margin by 10 basis points.

Full Year: Electronic Systems net sales for the year ended December 31, 2012
increased by $49 million, or 1%, compared to the year ended December 31, 2011.
Sales increased: (1) $149 million for Sensor Systems primarily for the L-3 KEO
acquisition, (2) $85 million for Microwave Products primarily due to increased
deliveries of mobile and ground-based satellite communication systems for the
U.S. military and power devices for commercial satellite communication
systems, (3) $72 million for Simulation & Training of which $49 million was
from the Link U.K. acquisition and $23 million was primarily due to increased
deliveries of U.S. Army rotary wing training systems for the Flight School XXI
program, and (4) $30 million for Marine Services due to reasons similar to the
2012 fourth quarter. These increases were partially offset by sales declines
of: (1) $157 million for Power & Control Systems due to reduced shipments of
tactical quiet generators for the U.S. Army, which reduced sales by $92
million, and by $65 million due to negative foreign currency translation of
$41 million and lower demand for commercial shipbuilding, (2) $82 million for
Warrior Systems due to reduced U.S Army requirements for night vision and
illumination products, and (3) $48 million for Precision Engagement due to
lower volume from completed contracts.

Electronic Systems operating income for the year ended December 31, 2012
decreased by $46 million, or 6%, compared to the year ended December 31, 2011.
Operating margin decreased by 100 basis points to 11.8%. Operating margin
declined by 90 basis points primarily due to lower sales for Power & Control
Systems and higher pension expense of $5 million, which reduced operating
margin by 10 basis points.

C^3ISR

                                                                                       
                                                                                          
                  Fourth Quarter Ended                               Year Ended Dec. 31,
                                                                                
($ in             2012            2011              Decrease         2012              2011              Increase/
millions)                                                                                                (decrease)
Net sales         $ 967.1         $ 1,013.2         (5)%             $ 3,601.2         $ 3,479.9         3     %
Operating         $ 91.9          $ 109.7           (16)%            $ 363.7           $ 394.4           (8    )%
income
Operating           9.5   %         10.8    %       (130)              10.1    %         11.3    %       (120) bpts
margin                                              bpts
                                                                       
                                                                                                         

Fourth Quarter: C^3ISR net sales for the 2012 fourth quarter decreased by $46
million, or 5%, compared to the 2011 fourth quarter. Sales declined by $52
million for networked communication systems and by $21 million for logistics
support and fleet management services. The decline for networked communication
systems was primarily due to: (1) lower volume for manned and unmanned
platforms for DoD customers as contracts near completion and for the Hawklink
contract as development and low rate initial production work near completion,
and (2) fewer deliveries of remote video terminals to the U.S. Army. The sales
decline for logistics support and fleet management services was due to lower
demand for ISR aircraft supporting U.S. military operations in Iraq and
Afghanistan. These decreases were partially offset by $27 million of higher
sales for ISR Systems due to increased demand for airborne ISR systems for
U.S. government and foreign military customers.

C^3ISR operating income for the 2012 fourth quarter decreased by $18 million,
or 16%, compared to the 2011 fourth quarter. Operating margin decreased by 130
basis points to 9.5%. Operating margin declined by 70 basis points primarily
due to lower sales and mix changes. Higher pension expense of $6 million
reduced operating margin by 60 basis points.

Full Year: C^3ISR net sales for the year ended December 31, 2012 increased by
$121 million, or 3%, compared to the year ended December 31, 2011. The
increase in sales was primarily due to higher demand for airborne ISR systems
for U.S. government and foreign military customers.

C^3ISR operating income for the year ended December 31, 2012 decreased by $31
million, or 8%, compared to the year ended December 31, 2011. Operating margin
decreased by 120 basis points to 10.1%. Higher pension expense of $24 million
reduced operating margin by 70 basis points and sales mix changes reduced
operating margin by 50 basis points.

AM&M

                                                                                   
                                                                                        
                  Fourth Quarter Ended                             Year Ended Dec. 31,
                                                                              
($ in             2012            2011            Increase         2012              2011              Increase
millions)
Net sales         $ 628.8         $ 614.1         2    %           $ 2,483.3         $ 2,439.5         2    %
Operating         $ 57.4          $ 47.6          21   %           $ 236.2           $ 228.1           4    %
income
Operating           9.1   %         7.8   %       130 bpts           9.5     %         9.4     %       10 bpts
margin
                                                                         
                                                                                                       

Fourth Quarter: AM&M net sales for the 2012 fourth quarter increased by $15
million, or 2%, compared to the 2011 fourth quarter. Platform systems sales
increased by $52 million, which was partially offset by a sales decline of $37
million for logistics support services. The platform systems sales increase
was due primarily to volume on new contracts, including international
head-of-state aircraft modification contracts and the Australia C-27J, and
increased scope on the EC-130 aircraft for the U.S. Air Force (USAF). The
logistics support services decrease was due primarily to the competitive loss
of a task order for U.S. Army contract field team support services in
Southwest Asia, partially offset by increased volume for field maintenance and
sustainment services for U.S. Army C-12 aircraft, training aircraft for the
USAF and U.S. government agency aircraft.

AM&M operating income for the 2012 fourth quarter increased by $10 million, or
21%, compared to the 2011 fourth quarter. Operating margin increased 130 basis
points to 9.1%. Operating margin increased by 190 basis points due to a $12
million charge in the 2011 fourth quarter for the reduction in the USAF Joint
Cargo Aircraft (JCA) aircraft order quantity. This increase was partially
offset by higher pension expense of $4 million, which reduced operating margin
by 60 basis points.

Full Year: AM&M net sales for the year ended December 31, 2012 increased by
$44 million, or 2%, compared to the year ended December 31, 2011. Platform
systems sales increased by $130 million, which was partially offset by a sales
decline of $86 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 year ended December 31, 2012 increased by $8
million, or 4%, compared to the year ended December 31, 2011. Operating margin
increased by 10 basis points to 9.5%. Unfavorable contract performance in 2011
primarily for JCA increased operating margin by 110 basis points. This
increase was partially offset by sales mix changes, which reduced operating
margin by 60 basis points, and an increase in pension expense of $9 million,
which reduced operating margin by 40 basis points.

NSS

                                                                                  
                                                                                       
                  Fourth Quarter Ended                           Year Ended Dec. 31,
                                                                            
($ in             2012            2011            Decrease       2012              2011              Decrease
millions)
Net sales         $ 347.5         $ 360.2         (4   )%        $ 1,385.0         $ 1,610.3         (14  )%
Operating         $ 22.9          $ 24.5          (7   )%        $ 79.0            $ 100.4           (21  )%
income
Operating           6.6   %         6.8   %       (20)             5.7     %         6.2     %       (50)
margin                                            bpts                                               bpts
                                                                    
                                                                                                     

Fourth Quarter: NSS net sales for the 2012 fourth quarter decreased by $13
million, or 4%, compared to the 2011 fourth quarter due to a $10 million
decline in information technology (IT) support services for select non-DoD
U.S. Government agencies as a result of contract losses in 2011 and 2012, and
a $3 million decline for intelligence support services due to the drawdown of
U.S. military forces in Iraq.

NSS operating income for the 2012 fourth quarter decreased by $2 million, or
7%, compared to the 2011 fourth quarter. Operating margin decreased by 20
basis points to 6.6%, primarily due to legal fees of $2 million related to a
supplier dispute, which reduced operating margin by 60 basis points. This
decrease was partially offset by reduced overhead costs, which increased
operating margin by 40 basis points.

Full Year: NSS net sales for the year ended December 31, 2012 decreased by
$225 million, or 14%, compared to the year ended December 31, 2011. Less
demand for U.S. Special Operations Command IT support services, due to our
previous single-award contract converting to several multiple-award contracts
which reduced our work share, lowered sales by $82 million. A decline in IT
support services for select non-DoD U.S. Government agencies lowered sales by
$93 million comprised of: (1) $38 million due to customer IT spending
reductions, and (2) $55 million due to contract losses in 2011 and 2012. Sales
also declined by $50 million for intelligence support services due to the
drawdown of U.S. military forces in Iraq.

NSS operating income for the year ended December 31, 2012 decreased by $21
million, or 21%, compared to the year ended December 31, 2011. Operating
margin decreased by 50 basis points to 5.7%. The decrease in operating margin
was due primarily to legal fees of $5 million related to a supplier dispute,
which reduced operating margin by 40 basis points, and a $4 million inventory
write-down for security and safety equipment, which reduced operating margin
by 30 basis points. These decreases were partially offset by reduced overhead
costs, which increased operating margin by 20 basis points.

Financial Guidance

Based on information known as of today, the company has updated its
consolidated and segment financial guidance for the year ending December 31,
2013, previously provided on December 4, 2012, as presented in the tables
below. 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 2013 Financial Guidance^(1)
($ in millions, except per share data)
                                                             Prior
                                  Current             
                                                             (December 4,
                                                             2012)
Net Sales                            $ 12,550 to             $ 12,550 to
                                     $12,750                 $12,750
Operating margin                            10.0%                    10.0%
Interest expense                     $     176              $      176
Interest and other income            $     12               $      12
Effective tax rate                          32.0%                    33.7%
Diluted Shares                              90.1                     90.1
Diluted EPS from continuing          $ 8.15 to $ 8.35       $ 7.95 to $ 8.15
operations
Net cash from operating
activities from continuing           $     1,225            $      1,210
operations
Less: Capital expenditures,
net of dispositions of                     195                     180
property, plant and equipment
Free cash flow                       $     1,030            $      1,030
_________________


       The 2013 guidance assumes that the Sequestration spending reductions to
       the fiscal year 2013 (FY13) DoD budget, mandated by the Budget Control
^(1)  Act of 2011 and scheduled to take effect on March 1, 2013, do not
       occur. The 2013 guidance also assumes the FY13 DoD Continuing
       Resolution Authority that expires on March 27, 2013 will not be
       extended.
     
       

The change to our consolidated financial guidance is due to the enactment of
the American Taxpayer Relief Act of 2012 on January 2, 2013, which
retroactively reinstated and extended the U.S. Federal research and
experimentation tax credit (R&E Credit) for all of 2012 and 2013. As a result,
the company expects to recognize a tax benefit of $18 million, or $0.20 per
diluted share, reducing its 2013 expected effective tax rate by 170 basis
points. The company expects to record $10 million, or $0.11 per diluted share,
of the R&E Credit tax benefit during the first quarter of 2013 for the portion
of the R&E Credit related to the 2012 tax year.



Segment 2013 Financial Guidance
($ in millions)
                                  Current^(1)
Net Sales:
Electronic Systems                      $5,425 to $5,525
C^3ISR                                  $3,500 to $3,600
AM&M                                    $2,325 to $2,425
National Security Solutions             $1,200 to $1,300
                                        
Operating Margins:
Electronic Systems                      10.7% to 10.9%
C^3ISR                                  10.4% to 10.6%
AM&M                                    9.1% to 9.3%
National Security Solutions             6.4% to 6.6%
_________________


^(1)  The current segment 2013 financial guidance has not changed from the
       previous guidance provided on
       December 4, 2012.
       
     
       

Additional financial information regarding the 2012 fourth quarter results and
the 2013 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,
Wednesday, January 30, 2013 at 9:30 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.

                                 9:30 a.m. ET

                                 8:30 a.m. CT

                                 7:30 a.m. MT

                                 6:30 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) 286-8010 (passcode:
15485672), 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, as modified by the Form 8-K filed on November 20, 2012, “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 September 28, 2012, 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)
                                
                                  Fourth Quarter Ended   Year Ended Dec. 31,
                                  2012      2011          2012      2011
Net sales                         $  3,560   $ 3,543       $ 13,146   $ 13,158
Cost of sales                     3,196        3,146       11,795       11,716
Impairment charge^(a)             ―          43           ―           43
Operating income                  364        354           1,351        1,399
                                                                      
Interest expense                  46         52            184          204
Interest and other income, net    2          (10     )     8            —
Debt retirement charge            5          17           13          35
Income from continuing            315        275           1,162        1,160
operations before income taxes
Provision for income taxes        100        21           374         296
Income from continuing            $  215     $ 254         $ 788      $ 864
operations
Income from discontinued            ―       23           32          104
operations, net of income tax
Net income                        215          277         820          968
Less: Net income from
continuing operations             3            3           6            9
attributable to noncontrolling
interests
Less: Net income from
discontinued operations           —           —          4           3
attributable to noncontrolling
interests
Net income attributable to L-3    $  212     $ 274         $ 810      $ 956
Less: Net income allocable to     ―          ―            ―           2
participating securities
Net income allocable to L-3       $  212     $ 274        $ 810      $ 954
Holdings’ common shareholders
                                                                      
Basic earnings per share
allocable to L-3 Holdings’
common shareholders:
Continuing operations             $  2.28    $ 2.52        $ 8.12     $ 8.17
Discontinued operations           $  ―       $ 0.23       $ 0.29     $ 0.97
Basic earnings per share          $  2.28    $ 2.75       $ 8.41     $ 9.14
                                                                      
Diluted earnings per share
allocable to L-3 Holdings’
common shareholders:
Continuing operations             $  2.25    $ 2.49        $ 8.01     $ 8.08
Discontinued operations           $  ―       $ 0.23       $ 0.29     $ 0.95
Diluted earnings per share        $  2.25    $ 2.72       $ 8.30     $ 9.03
                                                                      
L-3 Holdings’ weighted average
common shares outstanding:
Basic                             93.0        99.7       96.3        104.4
Diluted                           94.3        100.9      97.6        105.6

____________________________
^(a) Represents a fourth quarter 2011 non-cash goodwill impairment charge due
     to a decline in the estimated fair value of our Marine Services business.
     


Table B
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED SELECT FINANCIAL DATA
(in millions)
                      
                        Fourth Quarter Ended       Year Ended Dec. 31,
                        2012         2011         2012          2011
                                                                  
Segment Operating
Data
Net Sales:
Electronic Systems      $ 1,616.7     $ 1,555.1    $ 5,676.8      $ 5,627.9
C^3ISR                    967.1         1,013.2      3,601.2        3,479.9
AM&M                      628.8         614.1        2,483.3        2,439.5
NSS                      347.5       360.2      1,385.0      1,610.3  
Total                   $ 3,560.1    $ 3,542.6   $ 13,146.3    $ 13,157.6 
Operating income:
Electronic Systems      $ 192.1       $ 215.1      $ 672.5        $ 718.9
C^3ISR                    91.9          109.7        363.7          394.4
AM&M                      57.4          47.6         236.2          228.1
NSS                      22.9        24.5       79.0         100.4    
Total                   $ 364.3      $ 396.9     $ 1,351.4     $ 1,441.8  
Operating margin:
Electronic Systems        11.9    %     13.8    %    11.8     %     12.8     %
C^3ISR                    9.5     %     10.8    %    10.1     %     11.3     %
AM&M                      9.1     %     7.8     %    9.5      %     9.4      %
NSS                       6.6     %     6.8     %    5.7      %     6.2      %
Total                     10.2    %     11.2    %    10.3     %     11.0     %
Depreciation and
amortization:
Electronic Systems      $ 41.3        $ 38.8       $ 146.7        $ 148.3
C^3ISR                    12.2          11.5         46.6           44.1
AM&M                      5.5           5.5          20.4           18.9
NSS                      3.4         6.2        13.9         18.8     
Total                   $ 62.4       $ 62.0      $ 227.6       $ 230.1    
Funded order data:
Electronic Systems      $ 1,370       $ 1,111      $ 5,745        $ 5,326
C^3ISR                    1,094         994          3,706          3,779
AM&M                      614           500          2,916          2,296
NSS                      268         249        1,431        1,490    
Total                   $ 3,346      $ 2,854     $ 13,798      $ 12,891   
                                                                  
                                                                  
                                                   Dec. 31,       Dec. 31,
                                                   2012           2011
Period end data:
Funded backlog                                     $ 10,884       $ 9,899
                                                                             


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

                                                       Dec. 31,   Dec. 31,
                                                         2012         2011
ASSETS
                                                                      
Cash and cash equivalents                                $ 349        $ 764
Billed receivables, net                                    968          1,093
Contracts in process                                       2,665        2,384
Inventories                                                363          317
Deferred income taxes                                      131          132
Other current assets                                       117          177
Assets of discontinued operations                        ―             1,729
Total current assets                                      4,593       6,596
Property, plant and equipment, net                         1,017        921
Goodwill                                                   7,760        7,472
Identifiable intangible assets                             314          308
Deferred debt issue costs                                  29           33
Other assets                                              150         176
Total assets                                             $ 13,863     $ 15,506
                                                                      
LIABILITIES AND EQUITY
                                                                      
                                                                      
Accounts payable, trade                                  $ 494        $ 395
Accrued employment costs                                   556          563
Accrued expenses                                           439          517
Advance payments and billings in excess of costs           708          567
incurred
Income taxes                                               5            40
Other current liabilities                                  398          379
Liabilities of discontinued operations                   ―             351
Total current liabilities                                 2,600       2,812
Pension and postretirement benefits                        1,363        1,137
Deferred income taxes                                      355          335
Other liabilities                                          369          373
Long-term debt                                            3,629       4,125
Total liabilities                                         8,316       8,782
Shareholders’ equity                                       5,471        6,635
Noncontrolling interests of continuing operations          76           79
Noncontrolling interests of discontinued operations      ―             10
Total equity                                              5,547       6,724
Total liabilities and equity                             $ 13,863     $ 15,506
                                                                        


Table D
L-3 COMMUNICATIONS HOLDINGS, INC.
UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED
STATEMENTS OF CASH FLOWS
(in millions)

                                                      Year Ended Dec. 31,
                                                       2012        2011
Operating activities
Net income                                             $ 820        $ 968
Less: Income from discontinued operations, net of       32         104    
tax
Income from continuing operations                        788          864
Depreciation of property, plant and equipment            170          167
Amortization of intangibles and other assets             58           63
Deferred income tax provision                            82           124
Stock-based employee compensation expense                59           57
Contributions to employee savings plans in L-3           125          113
Holdings’ common stock
Amortization of pension and postretirement benefit       68           48
plans net loss and prior service cost
Amortization of bond discounts and deferred debt         7            13
issue costs (included in interest expense)
Goodwill impairment charge                              ―            43
Equity in losses (earnings) of unconsolidated            3            12
subsidiaries
Other non-cash items                                     9            11
Changes in operating assets and liabilities,
excluding amounts from acquisitions, divestitures
and discontinued operations:
Billed receivables                                       147          (13    )
Contracts in process                                     (181   )     (119   )
Inventories                                              (40    )     (14    )
Accounts payable, trade                                  81           (35    )
Accrued employment costs                                 (13    )     (23    )
Accrued expenses                                         (86    )     24
Advance payments and billings in excess of costs         77           4
incurred
Income taxes                                             (18    )     (18    )
Excess income tax benefits related to share-based        (3     )     (2     )
payment arrangements
Other current liabilities                                (47    )     2
Pension and postretirement benefits                      (61    )     (83    )
All other operating activities                          6          (7     )
Net cash from operating activities from continuing      1,231      1,231  
operations
Investing activities
Contribution received from the spin-off of Engility      335         ―      
Business acquisitions, net of cash acquired              (348   )     (20    )
Capital expenditures                                     (210   )     (187   )
Dispositions of property, plant and equipment            5            6
Investments in equity investees                          20          ―
Other investing activities                              (2     )    2      
Net cash used in investing activities from              (200   )    (199   )
continuing operations
Financing activities
Proceeds from sale of senior notes                      ―            1,143
Redemption of senior subordinated notes                  (500   )     (1,150 )
Redemption of CODES                                     ―            (11    )
Borrowings under revolving credit facility               596          625
Repayment of borrowings under revolving credit           (596   )     (625   )
facility
Common stock repurchased                                 (872   )     (958   )
Dividends paid on L-3 Holdings’ common stock             (195   )     (188   )
Proceeds from exercises of stock options                 19           22
Proceeds from employee stock purchase plan               39           46
Debt issue costs                                         (6     )     (11    )
Excess income tax benefits related to share-based        3            2
payment arrangements
Other financing activities                              (15    )    (14    )
Net cash used in financing activities from              (1,527 )    (1,119 )
continuing operations
Effect of foreign currency exchange rate changes on      7            (4     )
cash and cash equivalents
Cash from (used in) discontinued operations:
Operating activities                                     75           253
Investing activities                                    ―            (4     )
Financing activities                                    (1     )    (1     )
Cash from discontinued operations                       74         248    
Net (decrease) increase in cash and cash equivalents     (415   )     157
Cash and cash equivalents, beginning of the year        764        607    
Cash and cash equivalents, end of the year             $ 349       $ 764    

Contact:

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