L-3 Announces Second Quarter 2013 Results

  L-3 Announces Second Quarter 2013 Results

  *Diluted earnings per share of $2.03
  *Net sales increased 2% to $3.2 billion
  *Net cash from operating activities of $250 million
  *Funded orders of $3.5 billion, funded backlog of $10.8 billion
  *Updated 2013 financial guidance

Business Wire

NEW YORK -- July 25, 2013

L-3 Communications Holdings, Inc. (NYSE: LLL) today reported diluted earnings
per share (diluted EPS) from continuing operations of $2.03 for the quarter
ended June 28, 2013 (2013 second quarter), an increase of 5%, compared to
$1.94 for the quarter ended June 29, 2012 (2012 second quarter). Net sales of
$3.2 billion for the 2013 second quarter increased by 2% compared to the 2012
second quarter.

“Our second quarter results were very good, underscored by strong orders,
sales and EPS growth and solid cash flow. International and commercial sales
rose 17%, offsetting declines in our U.S. national security-related
businesses. We recorded several strategic new business wins during the quarter
that expanded both our international and domestic security work, demonstrating
that we continue to successfully execute our strategy to grow international
and commercial sales and to increase market share. For the quarter, our funded
orders were $3.5 billion, resulting in a book-to-bill ratio of 1.09,” said
Michael T. Strianese, chairman, president and chief executive officer.“We
continue to closely monitor the effects of sequestration and subsequent budget
uncertainties. Although we have experienced some impacts from sequestration,
including funding delays and cuts, award deferrals and staffing reductions at
select customers, the result is manageable and we are taking the appropriate
action at the affected business units.”

“We continued to execute on our commitment to deliver shareholder value by
repurchasing $126 million of our common stock and paying dividends of $49
million during the quarter, resulting in $349 million of cash returned to our
shareholders year-to-date. At the same time, we continue to increase the
efficiency of our business units, invest wisely in R&D, ensure that our
operations are appropriately sized, address important customer priorities, and
pursue acquisition opportunities that strengthen and expand our business and
customer base.”

Key competitive contract wins for the quarter included: (1) a contract to
provide sustainment and maintenance services for the Canadian Department of
National Defence’s long-range, multi-use A310 aircraft, (2) a contract to
provide fleet management, maintenance and logistics support for the U.S.
Navy’s TH-57 fleet of training helicopters, (3) maintenance and material
management for the National Aeronautics and Space Administration (NASA) fleet
of manned and unmanned aircraft, (4) new international business to upgrade
eight P-3C aircraft for the Republic of Korea, (5) a contract to provide a
full range of professional and information technology (IT) support services to
the Centers for Disease Control (CDC), and (6) a contract to supply SATCOM
terminals to the Australian Defence Force (ADF).

                                                                                    
L-3
Consolidated                                                                         
Results
                                                                                                       
                   Second Quarter Ended                           First Half Ended
($ in
millions,          June 28,    June 29,      Increase/          June 28,    June 29,      Increase/
except per         2013          2012          (decrease)         2013          2012          (decrease)
share data)
                                                                                                       
Net sales          $ 3,192       $ 3,143       $ 49               $ 6,377       $ 6,303       $ 74
Operating          $ 307         $ 331         $ (24  )          $ 620         $ 656         $ (36  ) 
income
Operating            9.6   %       10.5  %      (90  ) bpts       9.7   %       10.4  %      (70  ) bpts
margin
Interest           $ 44          $ 45          $ (1   )          $ 87          $ 90          $ (3   ) 
expense
Interest and
other income,      $ 5           $ 3           $ 2                $ 8           $ 6           $ 2
net
Effective
income tax           30.6  %       33.9  %      (330 ) bpts     29.8  %       33.9  %      (410 ) bpts
rate
Net income
from
continuing         $ 185         $ 191         $ (6   )          $ 378         $ 377         $ 1      
operations
attributable
to L-3
Diluted EPS
from               $ 2.03        $ 1.94        $ 0.09             $ 4.14        $ 3.79        $ 0.35
continuing
operations
Diluted
weighted
average common       91.1          98.5         (7.4 )            91.3          99.4         (8.1 ) 
shares
outstanding
                                                                              
                                                                                                       

Second Quarter Results of Operations: For the 2013 second quarter,
consolidated net sales of $3.2 billion increased $49 million, or 2%, compared
to the 2012 second quarter. Sales growth was primarily from the Platform &
Logistics Solutions (P&LS) and Command, Control, Communications, Intelligence,
Surveillance and Reconnaissance (C^3ISR) segments. Acquired businesses^(1),
which are all included in the Electronic Systems segment, added $24 million to
net sales in the 2013 second quarter. Net sales to commercial and
international customers increased 17%, or $126 million, to $856 million in the
2013 second quarter, including $24 million from acquired businesses, compared
to $730 million in the 2012 second quarter. Net sales to commercial and
international customers, as a percentage of consolidated net sales, increased
to 27% for the 2013 second quarter compared to 23% for the 2012 second
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.

Operating income for the 2013 second quarter of $307 million decreased $24
million, or 7%, as compared to the 2012 second quarter. Operating income as a
percentage of sales (operating margin) decreased by 90 basis points to 9.6%
for the 2013 second quarter compared to 10.5% for the 2012 second quarter. The
decrease in operating margin is primarily due to less favorable contract
adjustments and sales mix changes for the C^3ISR and Electronic Systems
segments. In addition, acquired businesses reduced operating margin by 10
basis points and higher pension expense of $4 million ($3 million after income
taxes, or $0.03 per diluted share) reduced operating margin by 10 basis
points. Furthermore, the 2013 second quarter included severance charges that
reduced operating income by $9 million ($6 million after income taxes, or
$0.07 per diluted share), which was higher by $4 million compared to the 2012
second quarter. Higher severance costs reduced operating margin by 10 basis
points. See segment results below for additional discussion of sales and
operating margin trends.

Interest expense declined by $1 million, as lower outstanding debt reduced
interest expense by $8 million, which was partially offset by $7 million of
interest expense that was allocated to discontinued operations in the 2012
second quarter.

The effective tax rate for the 2013 second quarter decreased to 30.6% from
33.9% for the same period last year. The decrease is primarily due to tax
benefits in the 2013 second quarter of: (1) $6 million primarily related to
the reversal of amounts accrued for foreign taxes for years in which the
statute of limitations expired and to the finalization of tax returns in
certain foreign jurisdictions and (2) $3 million related to the U.S. Federal
research and experimentation tax credit.

Net income from continuing operations attributable to L-3 in the 2013 second
quarter decreased 3% to $185 million compared to the 2012 second quarter, and
diluted EPS from continuing operations increased 5% to $2.03 from $1.94.
Diluted weighted average common shares outstanding for the 2013 second quarter
declined by 8% compared to the 2012 second quarter due to repurchases of L-3
common stock.

First Half Results of Operations: For the first half ended June 28, 2013 (2013
first half), consolidated net sales of $6.4 billion increased $74 million, or
1%, compared to the first half ended June 29, 2012 (2012 first half). Sales
growth in the Electronic Systems, P&LS and C^3ISR segments was partially
offset by lower sales from the National Security Solutions (NSS) segment.
Acquired businesses, which are all included in the Electronic Systems segment,
added $72 million to net sales in the 2013 first half. Net sales to commercial
and international customers increased 18%, or $248 million, to $1,663 million
in the 2013 first half, including $65 million from acquired businesses,
compared to $1,415 million in the 2012 first half. Net sales to commercial and
international customers, as a percentage of consolidated net sales, increased
to 26% for 2013 first half compared to 22% for the 2012 first half.

Operating income for the 2013 first half of $620 million decreased $36
million, or 5%, as compared to the 2012 first half. Operating margin decreased
by 70 basis points to 9.7% for the 2013 first half compared to 10.4% for the
2012 first half. The decrease in operating margin is primarily due to
unfavorable contract adjustments for the C^3ISR segment and sales mix changes
for the Electronic Systems segment. In addition, acquired businesses reduced
operating margin by 10 basis points and higher pension expense of $8 million
($5 million after income taxes, or $0.05 per diluted share) reduced operating
margin by 10 basis points. Furthermore, the 2013 first half included severance
charges that reduced operating income by $14 million ($9 million after income
taxes, or $0.10 per diluted share), which was higher by $2 million compared to
the 2012 first half. See segment results below for additional discussion of
sales and operating margin trends.

Interest expense declined by $3 million, as lower outstanding debt reduced
interest expense by $16 million, which was partially offset by $13 million of
interest expense that was allocated to discontinued operations in the 2012
first half.

The effective tax rate for the 2013 first half decreased to 29.8% from 33.9%
for the same period last year. The decrease is primarily due to tax benefits
in the 2013 first half of: (1) $15 million related to the retroactive
reinstatement in January 2013 of the U.S. Federal research and experimentation
tax credit for all of 2012 and 2013, of which $10 million ($0.11 per diluted
share) relates to the 2012 benefit and $5 million relates to the 2013 first
half benefit and (2) $8 million primarily related to the reversal of amounts
accrued for foreign taxes for years in which the statute of limitations
expired and to the finalization of tax returns in certain foreign
jurisdictions.

Net income from continuing operations attributable to L-3 in the 2013 first
half increased $1 million to $378 million compared to the 2012 first half, and
diluted EPS from continuing operations increased 9% to $4.14 from $3.79.
Diluted weighted average common shares outstanding for the 2013 first half
declined by 8% compared to the 2012 first half due to repurchases of L-3
common stock.

Orders: Funded orders for the 2013 second quarter were approximately $3.5
billion and declined 2% compared to the 2012 second quarter. Funded orders for
the 2013 first half were approximately $6.4 billion compared to approximately
$7.2 billion for the 2012 first half. The book-to-bill ratio was 1.09 for the
2013 second quarter and 1.00 for the 2013 first half. Funded backlog declined
1% to $10.8 billion at June 28, 2013, compared to $10.9 billion at December
31, 2012.

Cash flow and cash returned to shareholders: Net cash from operating
activities from continuing operations increased by $59 million, or 18%, to
$396 million for the 2013 first half, compared to $337 million for the 2012
first half. The table below summarizes the cash returned to shareholders
during the 2013 first half compared to the 2012 first half.

                                                            
                                                        First Half Ended
($ in millions)                                          June 28,   June 29,
                                                         2013         2012
                                                                      
Net cash from operating activities from continuing       $ 396        $  337
operations
Less: Capital expenditures, net of dispositions            (101 )        (75 )
Plus: Income tax payments attributable to discontinued    ―           16  
operations
Free cash flow^(1)                                       $ 295       $  278 
Dividends paid                                           $ 101        $  98
Common stock repurchases                                  248         315 
Cash returned to shareholders                            $ 349       $  413 
Percent of free cash flow returned to shareholders         118  %        149 %
____________________

     
       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
C^3ISR                                                                             
                                                                                                    
               Second Quarter                               First Half Ended
               Ended
($ in          June        June        Increase/            June 28,      June 29,      Increase/
millions)      28,        29,         (decrease)           2013         2012          (decrease)
               2013        2012
Net sales      $ 881.7     $ 862.0     $ 19.7               $ 1,770.1     $ 1,748.1     $ 22.0
Operating      $ 69.2      $ 86.3      $ (17.1 )           $ 160.7       $ 178.9       $ (18.2 )   
income
Operating     7.8   %   10.0  %  (220    )  bpts    9.1     %   10.2    %  (110    )  bpts
margin
                                                                                                    

Second Quarter: C^3ISR net sales for the 2013 second quarter increased by $20
million, or 2%, compared to the 2012 second quarter. Sales increased by $10
million for networked communication systems and $10 million for ISR Systems.
The increase for networked communication systems was due to higher volume of
airborne and ground datalink systems for manned and unmanned platforms,
partially offset by lower volume as the production work on a contract for
vehicle mounted satellite communication ground stations nears completion and
declining U.S. Army demand for remote video terminals. Sales increased for ISR
Systems primarily due to higher volume for U.S. Government customers for
logistics support and fleet management services.

C^3ISR operating income for the 2013 second quarter of $69 million, which
included severance charges of $3 million, decreased by $17 million, or 20%,
compared to the 2012 second quarter. Operating margin decreased by 220 basis
points to 7.8%. Operating margin declined by 100 basis points due to sales mix
changes for ISR Systems and 70 basis points due to less favorable contract
adjustments compared to the 2012 second quarter, primarily due to higher
design and production costs on select networked communication systems
contracts. Higher pension expense of $4 million reduced operating margin by 50
basis points.

First Half: C^3ISR net sales for the 2013 first half increased by $22 million,
or 1%, compared to the 2012 first half. Sales increased by $78 million for ISR
Systems and decreased $56 million for networked communication systems. The
increase for ISR Systems was due to small ISR aircraft sales to the Department
of Defense (DoD) and higher volume for U.S. Government customers for logistics
support and fleet management services and ISR platforms for foreign military
customers. The decrease in sales for networked communication systems was due
to lower volume as the production work on a contract for vehicle mounted
satellite communication ground stations nears completion and declining U.S.
Army demand for remote video terminals. These decreases were partially offset
by higher volume for airborne and ground datalink systems for manned and
unmanned platforms.

C^3ISR operating income for the 2013 first half of $161 million, which
included severance charges of $3 million, decreased by $18 million, or 10%,
compared to the 2012 first half. Operating margin decreased by 110 basis
points to 9.1%. Operating margin declined by 200 basis points due to
unfavorable contract adjustments compared to favorable contract adjustments in
the 2012 first half, primarily due to higher design and production costs for
select networked communication systems contracts. Higher pension expense of $8
million reduced operating margin by 40 basis points.These decreases were
partially offset by 130 basis points primarily due to sales mix changes for
ISR Systems.

                                                                                                 
Electronic                                                                               
Systems
                                                                                                          
               Second Quarter Ended                             First Half Ended
($ in          June 28,     June 29,      Increase/            June 28,       June 29,      Increase/
millions)      2013          2012          (decrease)           2013            2012          (decrease)
Net sales      $ 1,357.4     $ 1,352.3     $ 5.1                 $ 2,707.3     $ 2,664.9     $ 42.4
Operating      $ 152.0       $ 170.6       $ (18.6 )             $ 295.7       $ 322.1       $ (26.4 )   
income
Operating     11.2    %   12.6    %  (140    )  bpts     10.9    %   12.1    %  (120    )  bpts
margin
                                                                                                          

Second Quarter: Electronic Systems net sales for the 2013 second quarter
increased by $5 million compared to the 2012 second quarter. Sales increased:
(1) $37 million for Simulation & Training, of which $25 million was due to the
Link U.K. acquisition and $12 million was primarily due to increased
deliveries of U.S. Army rotary wing training systems for the Flight School XXI
program, (2) $23 million for Precision Engagement primarily due to the timing
of deliveries of ordnance products, and (3) $9 million for Marine Services
primarily due to volume for life-cycle support services for U.S. Navy towed
arrays and the landing craft air cushion (LCAC) vehicle service life extension
program. These increases were partially offset by sales decreases of: (1) $28
million for Microwave Products primarily due to a decline in deliveries of
power devices for commercial satellite communication systems, (2) $20 million
for Security & Detection Systems primarily due to completion of certain
international contracts and the timing of deliveries to the Transportation
Security Administration (TSA), and (3) $16 million primarily for Space &
Propulsion Systems due to funding declines for the Missile Defense Agency’s
(MDA) air-launched target programs and lower sales of transmissions for
Bradley fighting vehicles.

Electronic Systems operating income for the 2013 second quarter of $152
million, which included severance charges of $6 million, decreased by $19
million, or 11%, compared to the 2012 second quarter. Operating margin
decreased by 140 basis points to 11.2%. Operating margin declined by 60 basis
points due to less favorable contract adjustments primarily for Power &
Control Systems, Aviation Products and Warrior Systems compared to the 2012
second quarter, 40 basis points due to acquired businesses, 20 basis points
primarily due to the sales decline for Microwave Products and Security &
Detection Systems, and 20 basis points due to higher severance costs.

First Half: Electronic Systems net sales for the 2013 first half increased by
$42 million, or 2%, compared to the 2012 first half. Sales increased: (1) $86
million for Simulation & Training, of which $54 million was due to the Link
U.K. acquisition and $32 million was primarily due to increased deliveries of
U.S. Army rotary wing training systems for the Flight School XXI program and
upgrades for F/A-18 trainers, (2) $39 million for Precision Engagement
primarily due to the timing of deliveries of ordnance products, and (3) $20
million for Marine Services primarily due to volume for life-cycle support
services for U.S. Navy towed arrays and the LCAC vehicle service life
extension program. These increases were partially offset by sales decreases
of: (1) $35 million for Space & Propulsion Systems primarily due to certain
funding constraints for the MDA’s air-launched target programs, (2) $27
million for Power & Control Systems primarily due to lower demand for
commercial shipbuilding products, (3) $19 million for Security & Detection
Systems primarily due to the completion of certain international contracts and
the timing of deliveries to the TSA, (4) $14 million primarily for Microwave
Products ($46 million of lower sales due to a decline in deliveries of power
devices for commercial satellite communication systems, partially offset by
$32 million of higher sales due to increased deliveries of mobile and
ground-based satellite communication systems for the U.S. military), and (5)
$8 million for Sensor Systems ($77 million of lower volume primarily for
airborne EO/IR turrets for the Persistent Threat Detection System contract due
to the U.S. military troop drawdown in Afghanistan, partially offset by $55
million in increased volume for force protection products for a foreign
military customer and sales of $14 million from the L-3 KEO acquisition).

Electronic Systems operating income for the 2013 first half of $296 million,
which included severance charges of $10 million, decreased by $26 million, or
8%, compared to the 2012 first half. Operating margin decreased by 120 basis
points to 10.9%. Operating margin declined by: (1) 140 basis points primarily
due to the sales declines for Sensor Systems, Security & Detection Systems,
and Space & Propulsion Systems discussed above and lower margin sales mix at
Warrior Systems, (2) 30 basis points due to acquired businesses, and (3) 10
basis points due to higher severance costs. These declines were partially
offset by 60 basis points due to more favorable contract adjustments in the
2013 first half compared to the 2012 first half across several business areas,
including Microwave Products and Space & Propulsion Systems.

                                                                          
Platform & Logistics Solutions (P&LS)                                                  

              Second Quarter                        First Half Ended
              Ended
($ in         June        June                      June 28,      June 29,
millions)     28,        29,         Increase      2013         2012          Increase
              2013        2012
Net sales     $ 620.3     $ 591.5     $ 28.8        $ 1,236.8     $ 1,205.5     $ 31.3
Operating     $ 65.9      $ 51.5      $ 14.4        $ 123.4       $ 113.8       $ 9.6
income
Operating    10.6  %   8.7   %  190    bpts   10.0    %   9.4     %  60     bpts
margin
                                                                                       

Second Quarter: P&LS net sales for the 2013 second quarter increased by $29
million, or 5%, compared to the 2012 second quarter. Platform Solutions sales
increased by $46 million, which was partially offset by a sales decline of $17
million for Logistics Solutions. The Platform Solutions sales increase was
primarily due to increased volume for the Australia C-27J, aircraft
maintenance for the Canadian Department of National Defence, and modifications
for U.S. Air Force (USAF) EC-130 aircraft and international head-of-state
aircraft. The decrease in Logistics Solutions was primarily due to the
competitive loss of a task order for U.S. Army contract field team support
services in Southwest Asia, which was completed in 2012, and reduced fleet
management services due to the loss of the Joint Primary Aircraft Training
Systems (JPATS) contract for the USAF, partially offset by increased volume
for field maintenance and sustainment services for USAF training aircraft.

P&LS operating income for the 2013 second quarter of $66 million increased by
$14 million, or 28%, compared to the 2012 second quarter. Operating margin
increased by 190 basis points to 10.6% primarily due to higher margin sales
mix for Logistics Solutions.

First Half: P&LS net sales for the 2013 first half increased by $31 million,
or 3%, compared to the 2012 first half. Platform Solutions sales increased by
$102 million, which was partially offset by a sales decline of $71 million for
Logistics Solutions. The Platform Solutions sales increase and the Logistics
Solutions sales decrease were due to trends similar to the 2013 second
quarter.

P&LS operating income for the 2013 first half of $123 million increased by $10
million, or 8%, compared to the 2012 first half. Operating margin increased by
60 basis points to 10.0% primarily due to higher margin sales mix for
Logistics Solutions.

                                                                                     
NSS                                                                          
                                                                                              
              Second Quarter                              First Half Ended
              Ended
($ in         June        June                            June        June
millions)     28,        29,         Decrease            28,        29,         Decrease
              2013        2012                            2013        2012
Net sales     $ 332.8     $ 337.2     $ (4.4 )           $ 662.5     $ 684.9     $ (22.4 )   
Operating     $ 19.5      $ 22.7      $ (3.2 )           $ 40.1      $ 41.6      $ (1.5  )   
income
Operating    5.9   %   6.7   %  (80    )  bpts    6.1   %   6.1   %  ―         bpts
margin
                                                                                              

Second Quarter: NSS net sales for the 2013 second quarter decreased by $4
million, or 1%, compared to the 2012 second quarter. Sales decreased by $12
million primarily due to lower demand for a technical support contract for a
U.S. Government agency due to sequestration funding reductions and less demand
for U.S. Special Operations Command (USSOCOM) IT support services, as our
previous single-award contract converted to several multiple-award contracts,
which reduced our workshare. These decreases were partially offset primarily
by $8 million of higher sales due to increased demand for intelligence and IT
support services for the U.S. Government and U.S. Government agencies on
existing contracts.

NSS operating income for the 2013 second quarter of $20 million decreased by
$3 million, or 14%, compared to the 2012 second quarter. Operating margin
decreased by 80 basis points to 5.9%. Operating margin decreased by 110 basis
points primarily due to lower margin sales mix and 40 basis points primarily
due to the timing of award fees. These decreases were partially offset by 70
basis points due to more favorable contract adjustments compared to the 2012
second quarter.

First Half: NSS net sales for the 2013 first half decreased by $22 million, or
3%, compared to the 2012 first half primarily due to less demand for USSOCOM
IT support services as a result of a trend similar to the 2013 second quarter.

NSS operating income for the 2013 first half of $40 million, which included
severance charges of $1 million, decreased by $2 million, or 4%, compared to
the 2012 first half. Operating margin was 6.1%. More favorable contract
adjustments in the 2013 first half compared to the 2012 first half were offset
by lower margin sales mix.

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 April 25, 2013, to include anticipated reductions
related to DoD sequestration cuts 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
(in millions, except per share data)
                                                             Prior
                              Current               (April 25,      
                                                             2013)
Net sales                         $ 12,500 to                $ 12,550 to
                                  $12,600                    $12,750
Operating margin                         9.8       %                10.0     %
Interest expense                  $      176                 $      176
Interest and other income         $      15                  $      12
Effective tax rate                       31.0      %                32.0     %
Diluted shares                           90.4                       90.1
Diluted EPS from                  $ 8.05 to $8.15            $ 8.15 to $8.35
continuing operations
Net cash from operating
activities from                   $      1,225               $      1,225
continuing operations
Less: Capital
expenditures, net of
dispositions                            215                      195      
of property, plant and
equipment
Free cash flow                    $      1,010              $      1,030    
                                                                             
                                                                 



Segment 2013 Financial Guidance
($ in millions)
                                Current              Prior
                                                             (April 25, 2013)
Net Sales:
C^3ISR                              $3,425 to $3,475         $3,500 to $3,600
Electronic Systems                  $5,425 to $5,475         $5,425 to $5,525
P&LS                                $2,375 to $2,425         $2,325 to $2,425
National Security Solutions         $1,225 to $1,275         $1,200 to $1,300
Operating Margins:
C^3ISR                              9.5% to9.7%            10.4% to 10.6%
Electronic Systems                  10.7%to 10.9%           10.7% to 10.9%
P&LS                                9.2% to 9.4%            9.1% to9.3%
National Security Solutions         6.8% to 7.0%            6.4% to 6.6%
                                                             
                                                   
                                                             
                                                             

The revisions to our 2013 financial guidance (the “Current Guidance”) compared
to our prior 2013 financial guidance issued on April 25, 2013 (the “Prior
Guidance”) are primarily due to the anticipated reductions to our sales,
operating margin and EPS for the DoD sequestration cuts. The Prior Guidance
did not include any impact from sequestration, but we estimated at the time we
issued such guidance that the sequestration cuts could reduce our 2013
guidance by up to $500 million for net sales, 30 basis points for operating
margin, $0.65 for diluted EPS, and $80 million for free cash flow. The Current
Guidance compared to the Prior Guidance includes decreases primarily related
to sequestration in: (1) net sales of $100 million, (2) operating margin of 20
basis points, and (3) diluted EPS of $0.15. The Current Guidance includes a
pre-tax expense of approximately $25 million for severance charges, which
represents an increase of $21 million ($13 million after income taxes, or
$0.15 per diluted share) compared to the Prior Guidance primarily to resize
businesses affected by the sequestration cuts. The $21 million increase in
severance charges impacted the C^3ISR segment by $10 million, the Electronic
Systems segment by $9 million, and the P&LS and NSS segments by $1 million
each.

The revised 2013 financial guidance excludes any potential non-cash goodwill
impairment charges that could result from additional DoD budget reductions in
the future due to sequestration or other DoD budget cuts for which the
information is presently not known.

Additional financial information regarding the 2013 second quarter results 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, July 25, 2013 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. EDT

                                10:00 a.m. CDT

                                9:00 a.m. MDT

                                8:00 a.m. PDT

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:
18276106), 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,
platform and logistics solutions, and national security solutions. L-3 is also
a leading provider of a broad range of electronic systems used on military and
commercial platforms. The company reported 2012 sales of $13.1 billion.

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 2013 financial outlook are forward-looking statements
within the meaning of the Private Securities Litigation Reform Act of 1995.
All statements other than historical facts, may be forward-looking statements,
such as “may,” “will,” “should,” “likely,” “projects,” ‘‘expects,’’
‘‘anticipates,’’ ‘‘intends,’’ ‘‘plans,’’ ‘‘believes,’’ ‘‘estimates,’’ and
similar expressions are used to identify forward-looking statements. The
company cautions investors that these statements are subject to risks and
uncertainties many of which are difficult to predict and generally beyond the
company’s control that could cause actual results to differ materially from
those expressed in, or implied or projected by, the forward-looking
information and statements. Some of the factors that could cause actual
results to differ include, but are not limited to, the following: our
dependence on the defense industry; backlog processing and program slips
resulting from delayed funding of the Department of Defense (DoD) budget; the
outcome of sequestration cuts to the defense budget and the apportionment of
available funding between programs; our reliance on contracts with a limited
number of customers and the possibility of termination of government contracts
by unilateral government action or for failure to perform; the extensive legal
and regulatory requirements surrounding many of our contracts; our ability to
retain our existing business and related contracts; our ability to
successfully compete for and win new business; or, identify, acquire and
integrate additional businesses; our ability to maintain and improve our
operating margin; the availability of government funding 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 recruit, retain and train our employees; 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; global economic
uncertainty; the DoD’s in-sourcing and efficiency initiatives; events beyond
our control such as acts of terrorism; our ability to perform contracts on
schedule; our international operations; our extensive use of fixed-price type
contracts; the rapid change of technology and high level of competition 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; results of audits by U.S.
Government agencies and of on-going governmental investigations; the impact on
our business of improper conduct by our employees, agents or business
partners; ultimate resolution of contingent matters, claims and investigations
relating to acquired businesses, and the impact on the final purchase price
allocations; and the fair values of our assets.

Our forward-looking statements speak only as of the date of this press release
or as of the date they were made, and we undertake no obligation to update
forward-looking statements. For a more detailed discussion of these factors,
also see the information under the captions “Risk Factors” and “Management’s
Discussion and Analysis of Financial Condition and Results of Operations” in
our most recent annual report on Form 10-K for the year ended December 31,
2012, and any material updates to these factors contained in any of our future
filings.

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.

                         – Financial Tables Follow –

                                             Table A
L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

                  Second Quarter           First Half Ended
                   Ended^(a)
                   June 28,     June 29,    June 28,         June 29,
                   2013          2012        2013              2012
Net sales          $  3,192      $ 3,143       $   6,377       $  6,303
Cost of sales        2,885      2,812        5,757        5,647 
Operating income      307          331               620               656
                                                                             
Interest expense      (44    )     (45   )           (87   )           (90   )
Interest and
other income,        5          3            8            6     
net
Income from
continuing
operations            268          289               541               572
before income
taxes
Provision for        82         98           161          194   
income taxes
Income from
continuing         $  186        $ 191         $     380           $   378
operations
Income from
discontinued       ―             17        ―                  33    
operations, net
of income tax
Net income            186          208               380               411
Less: Net income
from continuing
operations            1          ―                   2                 1
attributable to
noncontrolling
interests
Less: Net income
from
discontinued
operations         ―             3         ―                  4     
attributable to
noncontrolling
interests
Net income
attributable to    $  185       $ 205       $   378        $  406   
L-3
Basic earnings
per share
attributable to
L-3 Holdings’
common
shareholders:
Continuing         $  2.06       $ 1.97        $     4.20          $   3.84
operations
Discontinued       ―             0.14      ―                  0.30  
operations
Basic earnings     $  2.06      $ 2.11      $   4.20       $  4.14  
per share
                                                                             
Diluted earnings
per share
attributable to
L-3 Holdings’
common
shareholders:
Continuing         $  2.03       $ 1.94        $     4.14          $   3.79
operations
Discontinued       ―             0.14      ―                  0.29  
operations
Diluted earnings   $  2.03      $ 2.08      $   4.14       $  4.08  
per share
                                                                             
L-3 Holdings’
weighted average
common shares
outstanding:
Basic                89.9       97.2         90.1         98.1  
Diluted              91.1       98.5         91.3         99.4  

____________________
       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
(a)   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)

                Second Quarter Ended       First Half Ended
                 June 28,     June 29,      June 28,         June 29,
                 2013          2012          2013              2012
Segment                                                       
operating data
Net sales:
C^3ISR           $ 881.7       $ 862.0         $  1,770.1       $  1,748.1
Electronic         1,357.4       1,352.3           2,707.3           2,664.9
Systems
P&LS               620.3         591.5             1,236.8           1,205.5
NSS               332.8       337.2         662.5         684.9   
Total            $ 3,192.2    $ 3,143.0     $  6,376.7     $  6,303.4 
                                                                 
Operating
income:
C^3ISR           $ 69.2        $ 86.3          $   160.7         $   178.9
Electronic         152.0         170.6             295.7             322.1
Systems
P&LS               65.9          51.5              123.4             113.8
NSS               19.5        22.7          40.1          41.6    
Total            $ 306.6      $ 331.1       $  619.9       $  656.4   
                                                                 
Operating
margin:
C^3ISR             7.8     %     10.0    %         9.1     %         10.2    %
Electronic         11.2    %     12.6    %         10.9    %         12.1    %
Systems
P&LS               10.6    %     8.7     %         10.0    %         9.4     %
NSS                5.9     %     6.7     %         6.1     %         6.1     %
Total              9.6     %     10.5    %         9.7     %         10.4    %
                                                                 
Depreciation
and
amortization:
C^3ISR           $ 10.0        $ 11.5          $   21.1          $   23.0
Electronic         34.6          35.3              70.7              71.2
Systems
P&LS               4.3           5.8               8.5               10.7
NSS               2.7         3.0           5.5           5.8     
Total            $ 51.6       $ 55.6        $  105.8       $  110.7   
                                                                 
Funded order
data
C^3ISR           $ 1,000       $ 934           $   1,683         $   1,687
Electronic         1,515         1,410             2,833             2,884
Systems
P&LS               669           852               1,240             1,855
NSS               303         350           595           781     
Total            $ 3,487      $ 3,546       $  6,351       $  7,207   

                                             June 28,          Dec. 31,
                                             2013             2012
Period end
data
Funded backlog                                 $   10,812        $   10,884


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

                                                          June 28,  Dec. 31,
                                                           2013       2012
ASSETS
                                                                      
Cash and cash equivalents                                  $ 328      $ 349
Billed receivables, net                                      1,038      968
Contracts in process                                         2,664      2,652
Inventories                                                  378        363
Deferred income taxes                                        86         95
Other current assets                                        135       144
Total current assets                                        4,629     4,571
Property, plant and equipment, net                           1,029      1,017
Goodwill                                                     7,702      7,744
Identifiable intangible assets                               294        314
Deferred debt issue costs                                    26         29
Other assets                                                182       151
Total assets                                               $ 13,862   $ 13,826
                                                                      
LIABILITIES AND EQUITY
                                                                      
Accounts payable, trade                                    $ 542      $ 494
Accrued employment costs                                     565        551
Accrued expenses                                             387        462
Advance payments and billings in excess of costs             571        671
incurred
Income taxes                                                 7          21
Other current liabilities                                   395       398
Total current liabilities                                   2,467     2,597
Pension and postretirement benefits                          1,366      1,360
Deferred income taxes                                        365        328
Other liabilities                                            360        373
Long-term debt                                              3,630     3,629
Total liabilities                                           8,188     8,287
Shareholders’ equity                                         5,600      5,463
Noncontrolling interests of continuing operations           74        76
Total equity                                                5,674     5,539
Total liabilities and equity                               $ 13,862   $ 13,826


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

                                                          First Half Ended
                                                           June 28,  June 29,
                                                           2013       2012
Operating activities
Net income                                                 $ 380      $ 411
Less: Income from discontinued operations, net of tax      ―          33   
Income from continuing operations                            380        378
Depreciation of property, plant and equipment                81         85
Amortization of intangibles and other assets                 25         26
Deferred income tax provision                                13         35
Stock-based employee compensation expense                    28         29
Contributions to employee savings plans in L-3 Holdings’     61         68
common stock
Amortization of pension and postretirement benefit plans     43         34
net loss and prior service cost
Amortization of bond discounts and deferred debt issue       3          4
costs (included in interest expense)
Changes in operating assets and liabilities, excluding
amounts from acquisitions, divestitures and discontinued
operations:
Billed receivables                                           (76  )     3
Contracts in process                                         (31  )     (273 )
Inventories                                                  (17  )     (68  )
Accounts payable, trade                                      50         177
Accrued employment costs                                     20         1
Accrued expenses                                             (64  )     (158 )
Advance payments and billings in excess of costs             (89  )     20
incurred
Income taxes                                                 27         29
Excess income tax benefits related to share-based            (2   )     (1   )
payment arrangements
Other current liabilities                                    (3   )     (20  )
Pension and postretirement benefits                          3          (34  )
All other operating activities                              (56  )    2    
Net cash from operating activities from continuing          396      337  
operations
Investing activities
Business acquisitions, net of cash acquired                  (1   )     (216 )
Proceeds from sale of a business                             4        ―
Capital expenditures                                         (110 )     (76  )
Dispositions of property, plant and equipment                9          1
Other investing activities                                  (6   )    (4   )
Net cash used in investing activities from continuing       (104 )    (295 )
operations
Financing activities
Borrowings under revolving credit facility                   994        199
Repayment of borrowings under revolving credit facility      (994 )     (199 )
Common stock repurchased                                     (248 )     (315 )
Dividends paid on L-3 Holdings’ common stock                 (101 )     (98  )
Proceeds from exercises of stock options                     33         8
Proceeds from employee stock purchase plan                   18         21
Debt issue costs                                           ―            (6   )
Excess income tax benefits related to share-based            2          1
payment arrangements
Other financing activities                                  (8   )    (3   )
Net cash used in financing activities from continuing       (304 )    (392 )
operations
Effect of foreign currency exchange rate changes on cash     (9   )     (3   )
and cash equivalents
Cash from discontinued operations:
Operating activities                                       ―            71
Financing activities                                       ―          (1   )
Cash from discontinued operations                          ―          70   
Net decrease in cash and cash equivalents                    (21  )     (283 )
Cash and cash equivalents, beginning of the year            349      764  
Cash and cash equivalents, end of the year                 $ 328     $ 481  

Contact:

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