L-3 Announces Third Quarter 2013 Results

  L-3 Announces Third Quarter 2013 Results

  *Diluted earnings per share from continuing operations of $2.23
  *Net sales of $3.0 billion
  *Net cash from operating activities of $221 million
  *Funded orders of $2.7 billion, funded backlog of $10.6 billion
  *Updated 2013 financial guidance

Business Wire

NEW YORK -- October 29, 2013

L-3 Communications Holdings, Inc. (NYSE:LLL) today reported diluted earnings
per share (diluted EPS) from continuing operations of $2.23 for the quarter
ended September 27, 2013 (2013 third quarter), compared to $1.98 for the
quarter ended September 28, 2012 (2012 third quarter). The 2013 third quarter
included tax benefits of $24 million ($0.26 per diluted share) compared to $11
million ($0.11 per diluted share) for the 2012 third quarter, which are
discussed below. Net sales of $3.0 billion for the 2013 third quarter
decreased by 8.7% compared to the 2012 third quarter.

“Even in this challenging environment our third quarter results overall
reflect good operational performance, with higher operating margins, EPS and
solid cash flow achieved by the hard work and dedication of L-3’s employees,”
said Michael T. Strianese, chairman, president and chief executive officer.
“We continue to successfully expand our commercial and international business,
which partially offset declines resulting from sequestration and the
Afghanistan drawdown. Notwithstanding the uncertain federal budget
environment, we remain focused on outstanding execution, achieving and
exceeding customer requirements and gaining market share.”

“As such, we are delivering shareholder value and prudently deploying capital
by repurchasing $156 million of our common stock and paying dividends of $50
million for the quarter, representing $555 million of cash returned to
shareholders year-to-date. At the same time, we remain committed to our
strategy of increasing efficiencies, making calculated investments in
innovative technologies and aligning our operations with both customer
priorities and realities.”

Key competitive contract wins for the quarter included: (1) new international
business to provide night vision goggles to the United Arab Emirates, (2) a
contract to provide the eXaminer^® XLB high performance certified detection
system for baggage screening at multiple airports for the Canadian Air
Transport Security Authority, (3) an international contract to provide
state-of-the-art Ground Laser Target Designators (GLTD) to the Republic of
Korea, (4) an indefinite-delivery/indefinite-quantity (ID/IQ) contract to
provide ongoing contractor logistics support and training system support
center activities for the U.S. Air Force’s Predator Mission Aircrew Training
System (PMATS) program, and (5) several other ID/IQ awards including the U.S.
Army’s Communications and Transmissions Systems (CTS) program, the Department
of Homeland Security’s Enterprise Acquisition Gateway for Leading Edge
Solutions (EAGLE) II program and the U.S. Air Force’s Network-Centric
Solutions -2 (NETCENTS-2) program.

                                                                                             
L-3 Consolidated Results                                                                          
                             Third Quarter Ended                          Year-to-Date Ended
                            Sept. 27,      Sept. 28,       Increase/    Sept. 27,  Sept. 28,       Increase/
($ in millions, except per   2013            2012            (decrease)   2013        2012            (decrease)
share data)
                                                                                                            
Net sales                    $     2,996     $     3,283     (8.7 )%      $ 9,373     $   9,586     (2.2  )%
Operating income             $     314       $     331       (5.1 )%      $ 934       $     987       (5.4  )%
Operating margin                   10.5  %         10.1  %   40   bpts    10.0  %         10.3  %   (30   )
                                                                                                            bpts
Interest expense             $     44        $     48        (8.3 )%      $ 131       $     138       (5.1  )%
Interest and other income,   $     3         $     ―         nm           $ 11        $     6         nm
net
Debt retirement charge       $     ―         $     8         nm           $ ―        $     8         nm
Effective income tax rate          23.8  %         29.1  %   (530 )         27.8  %         32.3  %   (450  )
                                                                  bpts                                      bpts
Net income from continuing
operations
attributable to L-3          $     204       $     193       5.7  %       $ 582       $     570       2.1   %
Diluted EPS from             $     2.23      $     1.98      12.6 %       $ 6.37      $     5.78      10.2  %
continuing operations
Diluted weighted average
common shares
outstanding                        91.3            97.4      (6.3 )%        91.3            98.7      (7.5  )%
__________________________
nm – not meaningful                                                                  
                                                                                                            

Third Quarter Results of Operations: For the 2013 third quarter, consolidated
net sales of $3.0 billion decreased $287 million, or 9%, compared to the 2012
third quarter as lower sales to the Department of Defense (DoD) impacted each
segment. Acquired businesses^(1), which are all included in the Electronic
Systems segment, added $9 million to net sales in the 2013 third quarter. Net
sales to commercial and international customers increased 2%, or $20 million,
to $828 million in the 2013 third quarter, including $9 million from acquired
businesses, compared to $808 million in the 2012 third quarter. Net sales to
commercial and international customers, as a percentage of consolidated net
sales, increased to 28% for the 2013 third quarter compared to 25% for the
2012 third quarter.

__________________________
         Net sales from acquired businesses are comprised of: (i) net sales
         from business acquisitions that are included in L-3’s actual results
^(1)    for less 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 third quarter of $314 million decreased $17
million, or 5%, as compared to the 2012 third quarter. Operating income as a
percentage of sales (operating margin) increased by 40 basis points to 10.5%
for the 2013 third quarter compared to 10.1% for the 2012 third quarter. The
increase in operating margin is primarily due to improved contract performance
for the Electronic Systems segment and lower operating costs at National
Security Solutions (NSS), partially offset by higher costs and reduced
productivity for the Command, Control, Communications, Intelligence,
Surveillance and Reconnaissance (C^3ISR) segment. Higher pension expense of $3
million ($2 million after income taxes, or $0.02 per diluted share) reduced
operating margin by 10 basis points. In addition, both the 2013 third quarter
and the 2012 third quarter included severance charges that reduced operating
income by $5 million. See segment results below for additional discussion of
sales and operating margin trends.

Interest expense declined by $4 million, primarily due to lower outstanding
debt. The increase in interest and other income, net, was primarily due to a
$3 million ($2 million after income tax, or $0.02 per diluted share) non-cash
impairment charge in the 2012 third quarter related to the dissolution of an
unconsolidated joint venture.

The effective tax rate for the 2013 third quarter decreased to 23.8% from
29.1% for the same period last year. The decrease is primarily due to a $14
million tax benefit in the 2013 third quarter for the U.S. Federal research
and experimentation tax credit. Tax benefits related to the reversal of
amounts accrued for tax years in which the statute of limitations had expired
were $10 million for the 2013 third quarter and $11 million for the 2012 third
quarter.

Net income from continuing operations attributable to L-3 in the 2013 third
quarter increased 6% to $204 million compared to the 2012 third quarter, and
diluted EPS from continuing operations increased 13% to $2.23 from $1.98.
Diluted weighted average common shares outstanding for the 2013 third quarter
declined by 6% compared to the 2012 third quarter due to repurchases of L-3
common stock.

Year-to-Date Results of Operations: For the year-to-date period ended
September 27, 2013 (2013 year-to-date period), consolidated net sales of $9.4
billion decreased $213 million, or 2%, compared to the year-to-date period
ended September 28, 2012 (2012 year-to-date period) as lower sales to the DoD
impacted each segment. Acquired businesses, which are all included in the
Electronic Systems segment, added $81 million to net sales in the 2013
year-to-date period. Net sales to commercial and international customers
increased 12%, or $268 million, to $2,491 million in the 2013 year-to-date
period, including $74 million from acquired businesses, compared to $2,223
million in the 2012 year-to-date period. Net sales to commercial and
international customers, as a percentage of consolidated net sales, increased
to 27% for the 2013 year-to-date period compared to 23% for the 2012
year-to-date period.

Operating income for the 2013 year-to-date period of $934 million decreased
$53 million, or 5%, as compared to the 2012 year-to-date period. Operating
margin decreased by 30 basis points to 10.0% for the 2013 year-to-date period
compared to 10.3% for the 2012 year-to-date period. The decrease in operating
margin is primarily due to higher design and production costs for the C^3ISR
segment. In addition, acquired businesses reduced operating margin by 10 basis
points and higher pension expense of $11 million ($7 million after income
taxes, or $0.08 per diluted share) reduced operating margin by 10 basis
points. Furthermore, both the 2013 year-to-date period and the 2012
year-to-date period included severance charges that reduced operating income
by $19 million. See segment results below for additional discussion of sales
and operating margin trends.

Interest expense declined by $7 million, as lower outstanding debt reduced
interest expense by $21 million, which was partially offset by $14 million of
interest expense that was allocated to discontinued operations in the 2012
year-to-date period. The increase in interest and other income, net, was
primarily due to the $3 million non-cash impairment charge recorded in the
2012 third quarter.

The effective tax rate for the 2013 year-to-date period decreased to 27.8%
from 32.3% for the same period last year. The decrease is primarily due to a
tax benefit in the 2013 year-to-date period of $28 million ($0.31 per diluted
share) for the U.S. Federal research and experimentation tax credit, of which
$17 million ($0.19 per diluted share) relates to 2012. Tax benefits related to
the reversal of amounts accrued for tax years in which the statute of
limitations had expired were $10 million for the 2013 year-to-date period and
$11 million for the 2012 year-to-date period.

Net income from continuing operations attributable to L-3 in the 2013
year-to-date period increased $12 million to $582 million compared to the 2012
year-to-date period, and diluted EPS from continuing operations increased 10%
to $6.37 from $5.78. Diluted weighted average common shares outstanding for
the 2013 year-to-date period declined by 7% compared to the 2012 year-to-date
period due to repurchases of L-3 common stock.

Orders: Funded orders for the 2013 third quarter were approximately $2.7
billion, a decline of 16% compared to the 2012 third quarter. Funded orders
for the 2013 year-to-date period were approximately $9.1 billion compared to
approximately $10.5 billion for the 2012 year-to-date period. Funded backlog
declined 3% to $10.6 billion at September 27, 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 decreased by $134 million, or 38%, to
$221 million for the 2013 third quarter, compared to $355 million for the 2012
third quarter. Net cash from operating activities from continuing operations
decreased by $75 million, or 11%, to $617 million for the 2013 year-to-date
period, compared to $692 million for the 2012 year-to-date period. The
decrease in net cash from operating activities from continuing operations was
primarily due to an increase in working capital. The table below summarizes
the cash returned to shareholders during the 2013 and 2012 third quarter and
year-to-date periods.

                                                       
                         Third Quarter Ended       Year-to-Date Ended
                           Sept. 27,   Sept. 28,     Sept. 27,   Sept. 28,
($ in millions)            2013          2012          2013          2012
                                                                     
Net cash from
operating activities       $  221        $  355        $  617        $  692
from continuing
operations
Capital expenditures,         (36  )        (43  )        (137 )        (118 )
net of dispositions
Income tax payments
attributable to            ―              8         ―              24   
discontinued
operations
Free cash flow^(1)         $  185       $  320       $  480       $  598  
Dividends paid             $  50         $  51         $  151        $  149
Common stock                 156         189         404         504  
repurchases
Cash returned to           $  206       $  240       $  555       $  653  
shareholders
Percent of free cash
flow returned to             111  %       75   %       116  %       109  %
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
^(1)    changes in working capital, but before repaying principal amount of
         outstanding debt, paying cash dividends on common stock, repurchasing
         shares of our common stock, investing cash to acquire businesses, and
         making other strategic investments. Thus, a key assumption underlying
         free cash flow is that the company will be able to refinance its
         existing debt. Because of this assumption, free cash flow is not a
         measure that should be relied upon to represent the residual cash
         flow available for discretionary expenditures.
      

                                                                     
Reportable Segment Results
C^3ISR
                Third Quarter                         Year-to-Date Ended
                Ended
                Sept.    Sept.                       Sept. 27,  Sept. 28,
                27,       28,
($ in           2013      2012       Decrease         2013        2012        Decrease
millions)
Net sales       $ 750     $ 886      (15.3 )%         $ 2,521     $ 2,634     (4.3  )%
Operating       $ 63      $ 93       (32.3 )%         $ 224       $ 272       (17.6 )%
income
Operating     8.4 %   10.5 %  (210  )        8.9   %   10.3  %  (140  )
margin                                     bpts                                     bpts
                                                                                    

Third Quarter: C^3ISR net sales for the 2013 third quarter decreased by $136
million, or 15%, compared to the 2012 third quarter. Sales decreased by $90
million for networked communication systems and $46 million for ISR Systems.
The decrease in sales for networked communication systems was due to: (1)
lower volume for airborne and ground-based systems due to contracts nearing
completion and declining demand caused by sequestration and other DoD budget
reductions, (2) lower U.S. Army demand for remote video terminals primarily
due to the U.S. military drawdown from Afghanistan, and (3) lower productivity
due to the implementation of new enterprise resource planning (ERP) systems
during the third quarter, which caused sales volume to decline by
approximately $45 million. The decrease in sales for ISR Systems was due to
lower volume for small ISR aircraft systems of $70 million primarily due to
the drawdown from Afghanistan. This decrease was partially offset by higher
volume on ISR platforms for foreign military customers and logistics support
and fleet management services for U.S. Government customers.

C^3ISR operating income for the 2013 third quarter of $63 million, which
included severance charges of $2 million, decreased by $30 million, or 32%,
compared to the 2012 third quarter. Operating margin decreased by 210 basis
points to 8.4%. Higher costs and lower productivity due to the implementation
of new ERP systems at networked communication systems during the 2013 third
quarter reduced operating margin by 140 basis points. In addition, lower sales
volume for networked communication systems reduced operating margin by 120
basis points. Higher pension expense of $4 million reduced operating margin by
50 basis points. These decreases were partially offset by an increase of 100
basis points primarily due to improved productivity on certain contracts for
ISR Systems.

Year-to-Date: C^3ISR net sales for the 2013 year-to-date period decreased by
$113 million, or 4%, compared to the 2012 year-to-date period. Sales decreased
$146 million for networked communication systems, which was partially offset
by an increase of $33 million for ISR Systems. The decrease in sales for
networked communication systems was due to: (1) declining U.S. Army demand for
remote video terminals due to the U.S. military drawdown from Afghanistan, (2)
lower volume for airborne and ground-based systems and vehicle mounted
satellite communication ground stations due to contracts nearing completion
and declining demand caused by sequestration and other DoD budget reductions,
and (3) lower productivity due to the implementation of new ERP systems during
the third quarter. The increase in sales for ISR Systems was primarily due to
small ISR aircraft sales to the DoD.

C^3ISR operating income for the 2013 year-to-date period of $224 million,
which included severance charges of $5 million, decreased by $48 million, or
18%, compared to the 2012 year-to-date period. Operating margin decreased by
140 basis points to 8.9%. Operating margin declined by 200 basis points
primarily due to higher design and production costs for select contracts and
40 basis points for higher costs and lower productivity due to the
implementation of new ERP systems at networked communication systems. Higher
pension expense of $12 million reduced operating margin by 50 basis
points.These decreases were partially offset by 80 basis points primarily due
to sales mix changes and 70 basis points due to improved productivity on
certain contracts for ISR Systems.

                                                                        
Electronic Systems
                Third Quarter Ended                      Year-to-Date Ended
                Sept. 27,  Sept. 28,   Increase/        Sept. 27,  Sept. 28,
($ in           2013        2012        (decrease)       2013        2012        Decrease
millions)
Net sales       $ 1,333     $ 1,395     (4.4 )%          $ 4,040     $ 4,060     (0.5 )%
Operating       $ 173       $ 158       9.5  %           $ 468       $ 480       (2.5 )%
income
Operating     13.0  %   11.3  %  170  bpts     11.6  %   11.8  %  (20  )
margin                                                                                bpts
                                                                                      

Third Quarter: Electronic Systems net sales for the 2013 third quarter
decreased by $62 million, or 4%, compared to the 2012 third quarter. Sales
declined by $98 million primarily for: (1) Microwave Products due to reduced
deliveries of power devices for commercial satellite communication systems and
mobile and ground-based satellite communication systems for the U.S. military
as programs ended, (2) Security & Detection Systems due to order delays from
the Transportation Security Administration (TSA), and (3) Sensor Systems due
to lower volume primarily for airborne EO/IR turrets due to the U.S. military
drawdown from Afghanistan. These declines were partially offset by $27 million
of increased demand primarily for Warrior Systems’ night vision and
illumination products for the U.S. Army and holographic weapon sights for the
sporting and recreation market. Sales also increased from the Link U.K.
acquisition by $9 million.

Electronic Systems operating income for the 2013 third quarter of $173
million, which included severance charges of $3 million, increased by $15
million, or 9%, compared to the 2012 third quarter. Operating margin increased
by 170 basis points to 13.0%. Operating margin increased by: (1) 80 basis
points due to improved contract performance across several business areas,
including Microwave Products, Space & Propulsion Systems, Sensor Systems and
Marine Services, (2) 60 basis points, or $8 million, due to a reduction in the
estimated fair value of previously accrued contingent consideration for
business acquisitions, and (3) 30 basis points due to sales mix changes for
Aviation Products.

Year-to-Date: Electronic Systems net sales for the 2013 year-to-date period
decreased by $20 million, or 0.5%, compared to the 2012 year-to-date period.
Sales declined by $192 million primarily for: (1) Microwave Products due to a
decline in deliveries of power devices for commercial satellite communication
systems, (2) Space & Propulsion Systems due to certain funding constraints for
the Missile Defense Agency’s air-launched target programs, (3) Security &
Detection Systems due to order delays from the TSA and the completion of
certain international contracts, and (4) Sensor Systems due to lower volume
primarily for airborne EO/IR turrets for the Persistent Threat Detection
System (PTDS) contract due to the U.S. military drawdown from Afghanistan.
These decreases were partially offset by a sales increase of $91 million
primarily for Simulation & Training due to upgrades for F/A-18 flight
simulator trainers and increased deliveries of U.S. Army rotary wing training
systems for the Flight School XXI program and Warrior Systems due to increased
demand for holographic weapon sights for the sporting and recreation market.
Sales also increased by $81 million primarily due to the Link U.K. and L-3 KEO
acquisitions.

Electronic Systems operating income for the 2013 year-to-date period of $468
million, which included severance charges of $13 million, decreased by $12
million, or 3%, compared to the 2012 year-to-date period. Operating margin
decreased by 20 basis points to 11.6%. Sales declines and mix changes were
mostly offset by improved contract performance across several business areas,
including Microwave Products and Space & Propulsion Systems. Sales from
acquired businesses reduced operating margin by 20 basis points.

                                                                               
Platform & Logistics Solutions (P&LS)
             Third Quarter                   Year-to-Date Ended    
                Ended
                Sept.    Sept.                   Sept. 27,  Sept. 28,
                27,       28,
($ in           2013      2012       Decrease     2013        2012        Decrease
millions)
Net sales       $ 590     $ 649      (9.1  )%     $ 1,827     $ 1,854     (1.5 )%
Operating       $ 52      $ 65       (20.0 )%     $ 176       $ 179       (1.7 )%
income
Operating     8.8 %   10.0 %  (120  )      9.6   %   9.7   %  (10  )
margin                                     bpts                                bpts
                                                                               

Third Quarter: P&LS net sales for the 2013 third quarter decreased by $59
million, or 9%, compared to the 2012 third quarter. Platform Solutions sales
decreased by $71 million, which was partially offset by a sales increase of
$12 million for Logistics Solutions. The Platform Solutions sales decrease was
primarily for the Australia C-27J aircraft due to timing of contract
deliverables, U.S. Navy maritime patrol aircraft due to reduced funding caused
by sequestration and reduced deliveries of aircraft cabin assemblies. The
increase in Logistics Solutions was primarily due to increased volume for
field maintenance and sustainment services for U.S. Air Force (USAF) training
aircraft driven by a new competitively won contract.

P&LS operating income for the 2013 third quarter of $52 million decreased by
$13 million, or 20%, compared to the 2012 third quarter. Operating margin
decreased by 120 basis points to 8.8% primarily due to lower margin sales mix
for Logistics Solutions.

Year-to-Date: P&LS net sales for the 2013 year-to-date period decreased by $27
million, or 1%, compared to the 2012 year-to-date period. Logistics Solutions
sales decreased by $59 million, which was partially offset by a sales increase
of $32 million for Platform Solutions. 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 contract for the USAF. These decreases were
partially offset by increased volume for field maintenance and sustainment
services for USAF training aircraft. Platform Solutions sales increased
primarily due to increased volume for USAF EC-130 and international head of
state aircraft, and aircraft maintenance for the Canadian Department of
National Defence, partially offset by lower volume for the Joint Cargo
Aircraft (JCA), Australia C-27J aircraft, and U.S. Navy maritime patrol
aircraft, as well as reduced deliveries of aircraft cabin assemblies.

P&LS operating income for the 2013 year-to-date period of $176 million
decreased by $3 million, or 2%, compared to the 2012 year-to-date period.
Operating margin decreased by 10 basis points to 9.6% primarily due to the
decrease in sales for Logistics Solutions.

                                                                
NSS
                Third Quarter                    Year-to-Date Ended
                Ended
                Sept.    Sept.     Increase/    Sept.    Sept. 28,   Increase/
                27,       28,                    27,
($ in           2013      2012      (decrease)   2013      2012        (decrease)
millions)
Net sales       $ 323     $ 353     (8.5  )%     $ 985     $ 1,038     (5.1 )%
Operating       $ 26      $ 15      73.3  %      $ 66      $ 56        17.9 %
income
Operating     8.0 %   4.2 %  380   bpts   6.7 %   5.4   %  130  bpts
margin
                                                                            

Third Quarter: NSS net sales for the 2013 third quarter decreased by $30
million, or 8%, compared to the 2012 third quarter. The decrease in sales was
primarily due to lower demand for a technical support contract for a U.S.
Government agency due to sequestration budget reductions, and less demand for
U.S. Special Operations Command (USSOCOM) information technology (IT) support
services, as our previous single-award contract converted to several
multiple-award contracts, which reduced our workshare.

NSS operating income for the 2013 third quarter of $26 million increased by
$11 million, or 73%, compared to the 2012 third quarter. Operating margin
increased by 380 basis points to 8.0%. Operating margin increased by: (1) 180
basis points due to 2012 third quarter charges of $4 million for an inventory
write-down of security and safety equipment and legal fees of $2 million
related to a supplier dispute that did not recur, (2) 170 basis points
primarily due to lower operating costs, and (3) 30 basis points due to the
timing of award fees for IT support services.

Year-to-Date: NSS net sales for the 2013 year-to-date period decreased by $53
million, or 5%, compared to the 2012 year-to-date period primarily due to
reasons similar to those discussed above for the 2013 third quarter.

NSS operating income for the 2013 year-to-date period of $66 million, which
included severance charges of $1 million, increased by $10 million, or 18%,
compared to the 2012 year-to-date period. Operating margin increased by 130
basis points to 6.7%. Operating margin increased by: (1) 70 basis points due
to 2012 year-to-date period charges of $4 million for an inventory write-down
of security and safety equipment and legal fees of $3 million related to a
supplier dispute that did not recur, (2) 30 basis points for improved contract
performance, and (3) 30 basis points primarily due to lower operating costs.

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 July 25, 2013. 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                
                                                            (July 25, 2013)
Net sales                         $ 12,500 to $12,600       $ 12,500 to
                                                            $12,600
Operating margin                          9.8         %            9.8       %
Interest expense                  $       177               $      176
Interest and other income         $       15                $      15
Effective tax rate                        28.9        %            31.0      %
Diluted shares                            90.8                     90.4
Diluted EPS from continuing       $ 8.25 to $8.35           $ 8.05 to $8.15
operations
Net cash from operating
activities from
continuing operations             $       1,225             $      1,225
Capital expenditures, net of
dispositions of
property, plant and equipment            (215        )           (215      )
Free cash flow                    $       1,010            $      1,010     
                                                                     


Segment 2013 Financial Guidance
($ in millions)
                                                                 Prior
                                  Current        
                                                                 (July 25,
                                                                 2013)
Net Sales:
C^3ISR                                         $3,375 to         $3,425 to
                                               $3,425            $3,475
Electronic Systems                             $5,450 to         $5,425 to
                                               $5,500            $5,475
P&LS                                           $2,400 to         $2,375 to
                                               $2,450            $2,425
National Security                              $1,225 to         $1,225 to
Solutions                                      $1,275            $1,275
Operating Margins:
C^3ISR                                         8.8% to 9.0 %     9.5% to 9.7 %
Electronic Systems                             11.1% to    %     10.7% to    %
                                               11.3              10.9
P&LS                                           9.3% to 9.5 %     9.2% to 9.4 %
National Security                              6.8% to 7.0 %     6.8% to 7.0 %
Solutions
                                                          

The revisions to our 2013 financial guidance (the “Current Guidance”) compared
to our prior 2013 financial guidance issued on July 25, 2013 (the “Prior
Guidance”) are primarily due to: (1) a reduction in the effective income tax
rate and an increase in diluted share count, (2) a reduction in estimated
sales and operating margin for the C^3ISR segment caused by lower productivity
due to the implementation of new ERP systems in the third quarter, and (3) an
increase in estimated sales and operating margin for the Electronic Systems
and P&LS segments due to slightly higher sales volume and mix changes.

The Current 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 reductions for which the information
is presently not known.

Additional financial information regarding the 2013 third 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,
Tuesday, October 29, 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. ET
                                10:00 a.m. CT
                                 9:00 a.m. MT
                                 8:00 a.m. PT

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

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

Please allow fifteen minutes prior to the call to visit our website to
download and install any necessary audio software. The archived version of the
call may be accessed at our website or by dialing (877) 344-7529 (passcode:
10035148), 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 press 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; future U.S. government shutdowns or
failure to raise the debt ceiling; 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)

                                                                             
                       Third Quarter Ended^(a)       Year-to-Date Ended
                       Sept. 27,    Sept. 28,      Sept. 27,    Sept. 28,
                       2013           2012           2013           2012
Net sales              $ 2,996        $ 3,283        $ 9,373        $ 9,586
Cost of sales           (2,682 )      (2,952 )      (8,439 )      (8,599 )
Operating income         314            331            934            987
                                                                             
Interest expense         (44    )       (48    )       (131   )       (138   )
Interest and other       3            ―                11             6
income, net
Debt retirement        ―              (8     )     ―              (8     )
charge
Income from
continuing               273            275            814            847
operations before
income taxes
Provision for income    (65    )      (80    )      (226   )      (274   )
taxes
Income from
continuing             $ 208          $ 195          $ 588          $ 573
operations
(Loss) income from
discontinued           ―              (1     )     ―              32     
operations, net of
income tax
Net income               208            194            588            605
Net income from
continuing
operations               (4     )       (2     )       (6     )       (3     )
attributable to
noncontrolling
interests
Net income from
discontinued
operations             ―             ―             ―              (4     )
attributable to
noncontrolling
interests
Net income             $ 204         $ 192         $ 582         $ 598    
attributable to L-3
Basic earnings
(loss) per share
attributable to L-3
Holdings’ common
shareholders:
Continuing             $ 2.28         $ 2.01         $ 6.47         $ 5.85
operations
Discontinued           ―              (0.01  )     ―              0.29   
operations
Basic earnings per     $ 2.28        $ 2.00        $ 6.47        $ 6.14   
share
                                                                             
Diluted earnings
(loss) per share
attributable to L-3
Holdings’ common
shareholders:
Continuing             $ 2.23         $ 1.98         $ 6.37         $ 5.78
operations
Discontinued           ―              (0.01  )     ―              0.28   
operations
Diluted earnings per   $ 2.23        $ 1.97        $ 6.37        $ 6.06   
share
                                                                             
L-3 Holdings’
weighted average
common shares
outstanding:
Basic                   89.6         96.1         89.9         97.4   
Diluted                 91.3         97.4         91.3         98.7   

__________________________
        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)
                                                        
                            Third Quarter Ended         Year-to-Date Ended
                            Sept. 27,   Sept. 28,     Sept. 27,    Sept. 28,
                            2013          2012          2013           2012
Segment
operating
data
Net sales:
C^3ISR                      $ 750         $ 886         $ 2,521        $ 2,634
Electronic                    1,333         1,395         4,040          4,060
Systems
P&LS                          590           649           1,827          1,854
NSS                          323         353         985          1,038  
Total                       $ 2,996      $ 3,283      $ 9,373       $ 9,586  
Operating
income:
C^3ISR                      $ 63          $ 93          $ 224          $ 272
Electronic                    173           158           468            480
Systems
P&LS                          52            65            176            179
NSS                          26          15          66           56     
Total                       $ 314        $ 331        $ 934         $ 987    
Operating
margin:
C^3ISR                        8.4   %       10.5  %       8.9    %       10.3   %
Electronic                    13.0  %       11.3  %       11.6   %       11.8   %
Systems
P&LS                          8.8   %       10.0  %       9.6    %       9.7    %
NSS                           8.0   %       4.2   %       6.7    %       5.4    %
Total                         10.5  %       10.1  %       10.0   %       10.3   %
Depreciation
and
amortization:
C^3ISR                      $ 12          $ 11          $ 33           $ 34
Electronic                    34            34            105            105
Systems
P&LS                          4             4             12             15
NSS                          2           5           8            11     
Total                       $ 52         $ 54         $ 158         $ 165    
Funded order
data
C^3ISR                      $ 651         $ 925         $ 2,334        $ 2,612
Electronic                    1,302         1,491         4,135          4,375
Systems
P&LS                          413           447           1,653          2,302
NSS                          358         383         953          1,163  
Total                       $ 2,724      $ 3,246      $ 9,075       $ 10,452 
                                                                       
                                                        Sept. 27,      Dec. 31,
                                                        2013          2012     
Period end
data
Funded                                                  $ 10,581       $ 10,884
backlog
                                                                       

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

                                                                      
                                                        Sept. 27,     Dec. 31,
                                                        2013          2012
ASSETS
                                                                      
Cash and cash equivalents                               $  377        $ 349
Billed receivables, net                                    1,084        968
Contracts in process                                       2,691        2,636
Inventories                                                420          363
Deferred income taxes                                      98           95
Other current assets                                      127         144
Total current assets                                      4,797       4,555
Property, plant and equipment, net                         1,023        1,016
Goodwill                                                   7,757        7,776
Identifiable intangible assets                             286          314
Deferred debt issue costs                                  25           29
Other assets                                              187         151
Total assets                                            $  14,075     $ 13,841
                                                                      
LIABILITIES AND EQUITY
                                                                      
                                                                      
Accounts payable, trade                                 $  558        $ 494
Accrued employment costs                                   585          551
Accrued expenses                                           414          462
Advance payments and billings in excess of costs           557          668
incurred
Income taxes                                               6            21
Other current liabilities                                 383         395
Total current liabilities                                 2,503       2,591
Pension and postretirement benefits                        1,343        1,360
Deferred income taxes                                      412          328
Other liabilities                                          357          390
Long-term debt                                            3,630       3,629
Total liabilities                                         8,245       8,298
Shareholders’ equity                                       5,755        5,467
Noncontrolling interests of continuing operations         75          76
Total equity                                              5,830       5,543
Total liabilities and equity                            $  14,075     $ 13,841
                                                                      

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

                                                                             
                                                      Year-to-Date Ended
                                                      Sept. 27,    Sept. 28,
                                                      2013           2012
Operating activities
Net income                                            $ 588          $  605
Income from discontinued operations, net of tax       ―               (32  )
Income from continuing operations                       588             573
Depreciation of property, plant and equipment           122             124
Amortization of intangibles and other assets            36              41
Deferred income tax provision                           45              50
Stock-based employee compensation expense               42              44
Contributions to employee savings plans in L-3          90              104
Holdings’ common stock
Amortization of pension and postretirement benefit      63              51
plans net loss and prior service cost
Amortization of bond discounts and deferred debt        5               5
issue costs (included in interest expense)
Other non-cash items                                    1               9
Changes in operating assets and liabilities,
excluding amounts from acquisitions, divestitures
and discontinued operations:
Billed receivables                                      (117   )        152
Contracts in process                                    (36    )        (351 )
Inventories                                             (55    )        (83  )
Other assets                                            (45    )        28
Accounts payable, trade                                 65              47
Accrued employment costs                                27              35
Accrued expenses                                        (41    )        (137 )
Advance payments and billings in excess of costs        (109   )        107
incurred
Income taxes                                            32              (6   )
Excess income tax benefits related to share-based       (3     )        (2   )
payment arrangements
Other current liabilities                               (8     )        (47  )
Pension and postretirement benefits                     (23    )        (53  )
All other operating activities                         (62    )       1    
Net cash from operating activities from continuing     617           692  
operations
Investing activities
Contribution received from the spin-off of Engility   ―                 335
Business acquisitions, net of cash acquired             (2     )        (349 )
Proceeds from sale of a business                        4            ―
Capital expenditures                                    (147   )        (124 )
Dispositions of property, plant and equipment           10              6
Other investing activities                             (6     )       (5   )
Net cash used in investing activities from             (141   )       (137 )
continuing operations
Financing activities
Redemption of Senior Notes                            ―                 (250 )
Borrowings under revolving credit facility              1,382           199
Repayment of borrowings under revolving credit          (1,382 )        (199 )
facility
Common stock repurchased                                (404   )        (504 )
Dividends paid on L-3 Holdings’ common stock            (151   )        (149 )
Proceeds from exercises of stock options                91              12
Proceeds from employee stock purchase plan              28              30
Debt issue costs                                      ―                 (6   )
Excess income tax benefits related to share-based       3               2
payment arrangements
Other financing activities                             (13    )       (18  )
Net cash used in financing activities from             (446   )       (883 )
continuing operations
Effect of foreign currency exchange rate changes on     (2     )        4
cash and cash equivalents
Cash from (used in) discontinued operations:
Operating activities                                  ―                 75
Financing activities                                  ―               (1   )
Cash from discontinued operations                     ―               74   
Net increase (decrease) in cash and cash                28              (250 )
equivalents
Cash and cash equivalents, beginning of the period     349           764  
Cash and cash equivalents, end of the period          $ 377         $  514  
                                                                             

Contact:

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