L-3 Announces Fourth Quarter 2013 Results

  L-3 Announces Fourth Quarter 2013 Results

  *Diluted earnings per share from continuing operations of $2.17
  *Net sales of $3.3 billion
  *Net cash from operating activities of $646 million
  *Funded orders of $3.0 billion, funded backlog of $10.3 billion
  *Issues initial financial guidance for 2014

Business Wire

NEW YORK -- January 30, 2014

L-3 Communications Holdings, Inc. (NYSE:LLL) today reported diluted earnings
per share (diluted EPS) from continuing operations of $2.17 for the quarter
ended December 31, 2013 (2013 fourth quarter), compared to $2.25 for the
quarter ended December 31, 2012 (2012 fourth quarter). Net sales of $3.3
billion for the 2013 fourth quarter decreased by 9% compared to the 2012
fourth quarter.

“We performed well in the fourth quarter amid very challenging conditions
caused by declining U.S. national security budgets and sequestration. We
generated solid operating margin and cash flow despite declining sales,” said
Michael T. Strianese, chairman, president and chief executive officer. “We
also expanded our international and commercial business, which partially
offset declines in our U.S. national security business. Our consistent and
strong program execution, combined with cost take out measures, continues to
drive our performance as we focus on growing in areas that align with our
customers’ priorities.”

“Our acquisition in December of Mustang Technology Group, a developer and
manufacturer of radar-based sensors and systems, adds important synergies,
technologies and customers in our Electronic Systems segment. Mustang is
another example of a niche acquisition that enhances L-3’s portfolio with
innovative and disruptive products to grow our market share. We also continued
to deploy our cash flow to increase shareholder value, with $444 million of
cash returned to shareholders during the quarter and $1 billion for 2013,
through repurchases and dividends.”

Key competitive contract wins for the quarter included: (1) a contract to
design, manufacture and test Medium Range Ballistic Missile (MRBM) target
launch vehicles and support equipment for the U.S. Missile Defense Agency
(MDA), (2) a contract to design and develop a next generation transmission
system for the U.S. Army’s Gemini Transmission program to modernize its ground
combat vehicles, (3) a contract to provide network operations support to the
U.S. Strategic Command for the Phoenix Air to Ground Communications Network
(PAGCN) Contractor Logistics Support program, (4) a contract to design, build
and install mission-critical shelters and electromagnetic shielding at the
MDA’s Aegis Ashore site in Romania, and (5) a contract to provide Cathay
Pacific Airlines full motion flight simulators and support for its Airbus 350
fleet.

L-3 Consolidated Results
                                 Fourth Quarter Ended    Increase/     Year Ended Dec. 31,       Increase/
($ in millions, except per         2013       2012          (decrease)      2013        2012           (decrease)
share data)
Net sales                          $ 3,256     $ 3,560       (8.5)%         $ 12,629     $ 13,146       (3.9)%
Operating income                   $ 324       $ 364         (11.0)%         $ 1,258      $ 1,351        (6.9)%
Operating margin                     10.0  %     10.2  %     (20)       10.0   %     10.3   %     (30)
                                                             bpts                                        bpts
Interest expense                   $ 46        $ 46          nm             $ 177        $ 184          (3.8)%
Interest and other income, net     $ 4         $ 2           nm             $ 15         $ 8            nm
Debt retirement charge             $ ―      $ 5           nm             $ ―        $ 13           nm
Effective income tax rate            29.4  %     31.7  %     (230)       28.2   %     32.2   %     (400)
                                                             bpts                                        bpts
Net income from continuing         $ 196       $ 212         (7.5)%        $ 778        $ 782          (0.5)%
operations attributable to L-3
Diluted EPS from continuing        $ 2.17      $ 2.25        (3.6)%        $ 8.54       $ 8.01         6.6%
operations
Diluted weighted average             90.5        94.3        (4.0)%          91.1         97.6         (6.7)%
common shares outstanding
______________________________                               
nm – not meaningful                                                                     
                                                                                                         

Fourth Quarter Results of Operations: For the 2013 fourth quarter,
consolidated net sales of $3.3 billion decreased $304 million, or 9%, compared
to the 2012 fourth quarter as lower sales to the Department of Defense (DoD)
impacted each segment. Net sales to international and commercial customers
increased 8%, or $73 million, to $970 million in the 2013 fourth quarter,
compared to $897 million in the 2012 fourth quarter. Net sales to
international and commercial customers, as a percentage of consolidated net
sales, increased to 30% for the 2013 fourth quarter compared to 25% for the
2012 fourth quarter.

Operating income for the 2013 fourth quarter of $324 million decreased $40
million, or 11%, as compared to the 2012 fourth quarter. Operating income as a
percentage of sales (operating margin) decreased by 20 basis points to 10.0%
for the 2013 fourth quarter compared to 10.2% for the 2012 fourth quarter. The
decrease in operating margin is primarily due to lower sales and higher
severance costs. The 2013 fourth quarter included severance charges that
reduced operating income by $11 million ($7 million after taxes, or $0.08 per
diluted share) compared to severance charges of $6 million ($4 million after
taxes, or $0.04 per diluted share) in the 2012 fourth quarter, reducing
operating margin by 10 basis points. See segment results below for additional
discussion of sales and operating margin trends.

Interest and other income, net, in the 2013 fourth quarter increased primarily
due to a $2 million non-cash impairment charge recorded in 2012 for the
dissolution of an unconsolidated joint venture.

The effective tax rate for the 2013 fourth quarter decreased to 29.4% from
31.7% for the same period last year. The decrease is primarily due to $8
million related to certain deferred tax benefits and $4 million for the U.S.
Federal research and experimentation tax credit.

Net income from continuing operations attributable to L-3 in the 2013 fourth
quarter decreased 8% to $196 million compared to the 2012 fourth quarter, and
diluted EPS from continuing operations decreased 4% to $2.17 from $2.25.
Diluted weighted average common shares outstanding for the 2013 fourth quarter
declined by 4% compared to the 2012 fourth quarter due to repurchases of L-3
common stock.

Full Year Results of Operations: For the year ended December 31, 2013,
consolidated net sales of $12.6 billion decreased $517 million, or 4%,
compared to the year ended December 31, 2012 as lower sales to the DoD caused
by declining budgets, sequestration cuts and the continuing U.S. military
drawdown from Afghanistan impacted each segment. Acquired businesses^(1),
which are all included in the Electronic Systems segment, added $81 million to
net sales in the year ended December 31, 2013. Net sales to international and
commercial customers increased 11%, or $341 million, to $3,461 million in the
year ended December 31, 2013, including $74 million from acquired businesses,
compared to $3,120 million in the year ended December 31, 2012. Net sales to
international and commercial customers, as a percentage of consolidated net
sales, increased to 27% for the year ended December 31, 2013 compared to 24%
for the year ended December 31, 2012.

______________________________
        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 year ended December 31, 2013 of $1,258 million
decreased $93 million, or 7%, as compared to the year ended December 31, 2012.
Operating margin decreased by 30 basis points to 10.0% for the year ended
December 31, 2013 compared to 10.3% for the year ended December 31, 2012. The
decrease in operating margin is primarily due to higher design and production
costs for the Command, Control, Communications, Intelligence, Surveillance and
Reconnaissance (C^3ISR) segment. 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. Additionally, the years ended December 31, 2013 and 2012 included
severance charges that reduced operating income. In 2013, the severance
charges were $29 million ($18 million after income taxes, or $0.20 per diluted
share) compared to $23 million ($14 million after income taxes, or $0.14 per
diluted share) for 2012. See segment results below for additional discussion
of sales and operating margin trends.

Interest expense for the year ended December 31, 2013 declined by $7 million
due to lower outstanding debt, which reduced interest expense by $21 million,
partially offset by $14 million of interest expense that was allocated to
discontinued operations in 2012. The increase in interest and other income,
net, was primarily due to a $5 million non-cash impairment charge recorded in
2012 for the dissolution of an unconsolidated joint venture.

The effective tax rate for the year ended December 31, 2013 decreased to 28.2%
from 32.2% for the same period last year. The decrease is primarily due to tax
benefits in the year ended December 31, 2013 of: (1) $33 million ($0.36 per
diluted share) for the U.S. Federal research and experimentation tax credit
retroactively reinstated in 2013, of which $17 million ($0.19 per diluted
share) relates to 2012, and (2) $8 million related to deferred tax benefits.

Net income from continuing operations attributable to L-3 in the year ended
December 31, 2013 decreased 1% to $778 million compared to the year ended
December 31, 2012, and diluted EPS from continuing operations increased 7% to
$8.54 from $8.01. Diluted weighted average common shares outstanding for the
year ended December 31, 2013 declined by 7% compared to the year ended
December 31, 2012 due to repurchases of L-3 common stock.

Orders: Funded orders for the 2013 fourth quarter were $3.0 billion, a decline
of 11% compared to the 2012 fourth quarter. Funded orders for the year ended
December 31, 2013 were $12.1 billion compared to $13.8 billion for the year
ended December 31, 2012. Funded backlog declined 5% to $10.3 billion at
December 31, 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 $107 million, or 20%, to
$646 million for the 2013 fourth quarter, compared to $539 million for the
2012 fourth quarter. Net cash from operating activities from continuing
operations increased by $32 million, or 3%, to $1,263 million for the year
ended December 31, 2013, compared to $1,231 million for the year ended
December 31, 2012. The increase in net cash from operating activities from
continuing operations in both periods was primarily due to a decrease in
working capital and reduced income tax payments and pension contributions. The
table below summarizes the cash returned to shareholders during the 2013 and
2012 fourth quarter periods, and the years ended December 31, 2013 and 2012.


                           Fourth Quarter Ended   Year Ended Dec. 31,
($ in millions)               2013       2012        2013        2012
                                                                     
Net cash from operating
activities from               $  646       $ 539       $ 1,263       $ 1,231
continuing operations
Capital expenditures,            (60 )       (87 )       (197  )       (205  )
net of dispositions
Income tax payments
attributable to               ―           ―          ―             24    
discontinued operations
Free cash flow^(1)            $  586      $ 452      $ 1,066      $ 1,050 
Dividends paid                $  48        $ 46        $ 199         $ 195
Common stock                    396       368       800         872   
repurchases
Cash returned to              $  444      $ 414      $ 999        $ 1,067 
shareholders
Percent of free cash
flow returned to                76  %      92  %      94    %      102   %
shareholders
______________________________

       Free cash flow is defined as net cash from operating activities less
       net capital expenditures (capital expenditures less cash proceeds from
       dispositions of property, plant and equipment) plus income tax payments
       attributable to discontinued operations. Free cash flow represents cash
       generated after paying for interest on borrowings, income taxes,
       pension benefit contributions, capital expenditures and changes in
^(1)  working capital, but before repaying principal amount of outstanding
       debt, paying cash dividends on common stock, repurchasing shares of our
       common stock, investing cash to acquire businesses, and making other
       strategic investments. Thus, a key assumption underlying free cash flow
       is that the company will be able to refinance its existing debt.
       Because of this assumption, free cash flow is not a measure that should
       be relied upon to represent the residual cash flow available for
       discretionary expenditures.
     

Reportable Segment Results



C^3ISR
             Fourth Quarter                      Year Ended Dec. 31,   
                Ended
($ in           2013     2012      Decrease           2013       2012        Decrease
millions)
Net sales       $ 846     $ 967     (12.5    )%        $ 3,367     $ 3,601     (6.5      )%
Operating       $ 77      $ 92      (16.3    )%        $ 301       $ 364       (17.3     )%
income
Operating     9.1 %   9.5 %  (40)    8.9   %   10.1  %  (120)
margin                              bpts                                       bpts
                                                                               

Fourth Quarter: C^3ISR net sales for the 2013 fourth quarter decreased by $121
million, or 13%, compared to the 2012 fourth quarter. Sales decreased by $63
million for networked communication systems and $58 million for ISR Systems.
The decrease in sales for networked communication systems was due to: (1)
lower volume primarily for airborne and ground-based systems due to contracts
nearing completion, declining demand caused by sequestration and other DoD
budget reductions and the U.S. military drawdown from Afghanistan and (2)
lower U.S. Army demand for remote video terminals primarily due to the U.S.
military drawdown from Afghanistan. The decrease in sales for ISR Systems was
primarily due to $39 million of lower volume for small ISR aircraft systems
primarily due to the U.S. military drawdown from Afghanistan and $35 million
of lower volume primarily for logistics support and fleet management services
for U.S. Government customers. These decreases were partially offset by $16
million of higher volume on ISR platforms for foreign military customers.

C^3ISR operating income for the 2013 fourth quarter of $77 million, which
included severance charges of $3 million, decreased by $15 million, or 16%,
compared to the 2012 fourth quarter. Operating margin decreased by 40 basis
points to 9.1%. Higher pension expense and severance charges reduced operating
margin by 60 basis points. These decreases were partially offset by an
increase of 20 basis points primarily due to improved productivity on certain
contracts for ISR Systems.

Full Year: C^3ISR net sales for the year ended December 31, 2013 decreased by
$234 million, or 7%, compared to the year ended December 31, 2012. Sales
decreased $208 million for networked communication systems and $26 million for
ISR Systems. The decrease in sales for networked communication systems was due
to: (1) lower U.S. Army demand for remote video terminals due to the U.S.
military drawdown from Afghanistan, (2) lower volume primarily 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 enterprise resource planning (ERP) systems during
the third quarter, which caused sales volume to decline by $45 million. The
decrease in sales for ISR Systems was primarily due to $154 million of lower
volume for small ISR aircraft systems due to the U.S. military drawdown from
Afghanistan. This decrease was partially offset by $78 million of higher
volume on ISR platforms for foreign military customers and $50 million of
small ISR aircraft sales to the DoD.

C^3ISR operating income for the year ended December 31, 2013 of $301 million,
which included severance charges of $8 million, decreased by $63 million, or
17%, compared to the year ended December 31, 2012. Operating margin decreased
by 120 basis points to 8.9%. Operating margin declined by: (1) 150 basis
points primarily due to higher design and production costs for networked
communication systems, (2) 60 basis points due to higher pension expense and
severance charges, and (3) 30 basis points for higher costs and lower
productivity due to the implementation of new ERP systems at networked
communication systems. These decreases were partially offset by 70 basis
points primarily due to improved productivity on certain contracts and 50
basis points due to sales mix changes primarily for ISR Systems.

Electronic Systems
             Fourth Quarter                        Year Ended Dec. 31,   
                Ended                   Decrease
($ in           2013       2012                         2013       2012       Decrease
millions)
Net sales       $ 1,484     $ 1,617     (8.2    )%       $ 5,524     $ 5,677     (2.7   )%
Operating       $ 177       $ 192       (7.8    )%       $ 645       $ 672       (4.0   )%
income
Operating     11.9  %   11.9  %  ―bpts    11.7  %   11.8  %  (10)
margin                                                                           bpts
                                                                                 

Fourth Quarter: Electronic Systems net sales for the 2013 fourth quarter
decreased by $133 million, or 8%, compared to the 2012 fourth quarter. Sales
declined: (1) $69 million for Microwave Products primarily due to lower DoD
demand for mobile and ground-based satellite communication systems, (2) $63
million for Precision Engagement due to declining DoD demand caused by
sequestration primarily for ordnance and guidance products, and (3) $30
million for Simulation & Training due to reduced deliveries of U.S. Army
rotary wing training systems for the Flight School XXI program. These declines
were partially offset by $29 million of higher sales primarily for Marine &
Power Systems due to the timing of deliveries of commercial shipbuilding
products.

Electronic Systems operating income for the 2013 fourth quarter of $177
million, which included severance charges of $6 million, decreased by $15
million, or 8%, compared to the 2012 fourth quarter. Operating margin remained
the same at 11.9% as improved contract performance across several business
areas, including Space & Propulsion Systems and Microwave Products, was offset
by sales declines and mix changes.

Full Year: Electronic Systems net sales for the year ended December 31, 2013
decreased by $153 million, or 3%, compared to the year ended December 31,
2012. Sales declined: (1) $140 million for 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) $40 million for Space & Propulsion Systems due to
certain funding constraints for the MDA’s air-launched target programs, (3)
$39 million for Sensor Systems due to lower volume primarily for airborne
EO/IR turrets for the U.S. Army Persistent Threat Detection System (PTDS)
contract due to the U.S. military drawdown from Afghanistan, (4) $35 million
for Security & Detection Systems due to lower orders from the Transportation
Security Administration (TSA) caused by U.S. Government sequestration cuts and
the completion of certain international contracts, and (5) $31 million for
Precision Engagement primarily due to programs for ordnance products ending.
These decreases were partially offset by a sales increase of $35 million
primarily for Warrior Systems due to increased demand for holographic weapon
sights for the commercial sporting and recreation markets and $16 million for
Simulation & Training due to upgrades for F/A-18 flight simulator trainers and
volume on new commercial aircraft simulation contracts. Sales also increased
by $81 million primarily due to the Link U.K. and L-3 KEO acquisitions.

Electronic Systems operating income for the year ended December 31, 2013 of
$645 million, which included severance charges of $19 million, decreased by
$27 million, or 4%, compared to the year ended December 31, 2012. Operating
margin decreased by 10 basis points to 11.7%. Sales declines and mix changes
were mostly offset by improved contract performance across several business
areas, including Space & Propulsion Systems and Microwave Products. Sales from
acquired businesses reduced operating margin by 20 basis points.

Platform & Logistics Solutions (P&LS)
             Fourth Quarter                      Year Ended Dec. 31,   
                Ended
($ in           2013     2012      Decrease           2013       2012        Decrease
millions)
Net sales       $ 616     $ 629     (2.1     )%        $ 2,443     $ 2,483     (1.6   )%
Operating       $ 51      $ 57      (10.5    )%        $ 227       $ 236       (3.8   )%
income
Operating     8.3 %   9.1 %  (80)    9.3   %   9.5   %  (20)
margin                              bpts                                       bpts
                                                                               

Fourth Quarter: P&LS net sales for the 2013 fourth quarter decreased by $13
million, or 2%, compared to the 2012 fourth quarter. Platform Solutions sales
decreased by $31 million, which was partially offset by a sales increase of
$18 million for Logistics Solutions. The Platform Solutions sales decrease was
primarily due to lower volume for U.S. Navy maritime patrol aircraft resulting
from reduced funding caused by the U.S. Government sequestration cuts and
lower U.S. Air Force (USAF) Joint Cargo Aircraft (JCA) volume as the program
nears completion, partially offset by Australia C-27J aircraft due to timing
of contract deliverables. The increase in Logistics Solutions was primarily
due to increased volume for field maintenance and sustainment services for
USAF training aircraft driven by a new competitively won contract and U.S.
Army C-12 aircraft.

P&LS operating income for the 2013 fourth quarter of $51 million, which
included severance charges of $2 million, decreased by $6 million, or 11%,
compared to the 2012 fourth quarter. Operating margin decreased by 80 basis
points to 8.3% primarily due to lower margin sales mix for Logistics
Solutions, partially offset by improved contract performance for Platform
Solutions.

Full Year: P&LS net sales for the year ended December 31, 2013 decreased by
$40 million, or 2%, compared to the year ended December 31, 2012 due to a
sales decline for Logistics Solutions. Platform Solutions sales remained
substantially the same as 2012. 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. These decreases were
partially offset by increased volume for field maintenance and sustainment
services for USAF training aircraft and U.S. Army C-12 aircraft. For Platform
Solutions, higher volume on USAF EC-130 and international head of state
aircraft, and aircraft maintenance for the Canadian Department of National
Defence was offset by lower volume for U.S. Navy maritime patrol aircraft and
JCA, as well as reduced deliveries of aircraft cabin assemblies.

P&LS operating income for the year ended December 31, 2013 of $227 million,
which included severance charges of $2 million, decreased by $9 million, or
4%, compared to the year ended December 31, 2012. Operating margin decreased
by 20 basis points to 9.3% primarily due to the decrease in sales for
Logistics Solutions.

NSS
         Fourth                            Year Ended Dec.     
          Quarter Ended                       31,                   Increase/
($ in     2013    2012      Decrease          2013      2012        (decrease)
millions)
Net sales $ 310   $ 347     (10.7)%       $ 1,295   $ 1,385     (6.5)%
Operating $ 19    $ 23      (17.4)%       $ 85      $ 79        7.6%
income
Operating  6.1 %  6.6 %  (50)   6.6   %  5.7   %  90
margin                      bpts                                    bpts

Fourth Quarter: NSS net sales for the 2013 fourth quarter decreased by $37
million, or 11%, compared to the 2012 fourth quarter. The decrease in sales
was primarily due to lower demand for a technical support contract for a U.S.
Government agency due to U.S. Government sequestration cuts, 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 fourth quarter of $19 million decreased by
$4 million, or 17%, compared to the 2012 fourth quarter. Operating margin
decreased by 50 basis points to 6.1%. Operating margin decreased by 140 basis
points primarily due to lower sales and mix changes and 20 basis points due to
the timing of award fees for intelligence support services. These decreases
were partially offset by 60 basis points due to 2012 fourth quarter legal fees
of $2 million related to a supplier dispute, which did not recur, 30 basis
points for improved contract performance and 20 basis points due to lower
operating costs.

Full Year: NSS net sales for the year ended December 31, 2013 decreased by $90
million, or 7%, compared to the year ended December 31, 2012 primarily due to
reasons similar to those discussed above for the 2013 fourth quarter.

NSS operating income for the year ended December 31, 2013 of $85 million
increased by $6 million, or 8%, compared to the year ended December 31, 2012.
Operating margin increased by 90 basis points to 6.6%. Operating margin
increased by: (1) 70 basis points due to legal fees of $5 million related to a
supplier dispute and a $4 million inventory write-down of security and safety
equipment in 2012, which did not recur in 2013, (2) 50 basis points due to
lower operating costs, and (3) 40 basis points for improved contract
performance. These increases were partially offset by 70 basis points
primarily due to lower sales and mix changes.

Financial Guidance

Based on information known as of today, the company issued initial
consolidated and segment financial guidance for the year ending December 31,
2014. 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 2014 Financial Guidance
($ in millions, except per share data)
                                                       
Net sales                                                 $11,900 to $12,100
Operating margin                                                  10.5       %
Interest expense                                          $       176
Interest and other income                                 $       14
Effective tax rate                                                33.0       %
Diluted shares                                                    87.5
Diluted EPS from continuing operations                    $ 8.15 to $8.35
Net cash from operating activities from continuing        $       1,195
operations
Capital expenditures, net of dispositions of
property, plant and equipment                                    (195       )
Free cash flow                                            $       1,000      

                                                                             


Segment 2014 Financial Guidance
($ in millions)
                               
Net Sales:
C^3ISR                              $3,075 to $3,175
Electronic Systems                  $5,275 to $5,375
P&LS                                $2,350 to $2,450
National Security Solutions         $1,100 to $1,200
Operating Margins:
C^3ISR                              11.2% to 11.4%
Electronic Systems                  11.0% to 11.2%
P&LS                                9.5% to 9.7%
National Security Solutions         7.3% to 7.5%
                               
                                    

The consolidated 2014 guidance assumes: (1) the U.S. Federal research and
experimentation tax credit that expired on December 31, 2013, is not extended,
which increases the effective tax rate by 130 basis points and reduces EPS by
$0.16, and (2) share repurchases of $500 million.

Additional financial information regarding the 2013 fourth quarter and full
year 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, January 30, 2014 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:
10039360), 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 48,000 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.

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 2014 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; U.S.
Government 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)
                                                               
                           Fourth Quarter Ended    Year Ended Dec. 31,
                           2013        2012         2013         2012
Net sales                  $ 3,256      $ 3,560      $ 12,629      $ 13,146
Cost of sales               (2,932 )    (3,196 )    (11,371 )    (11,795 )
Operating income             324          364          1,258         1,351
                                                                   
Interest expense             (46    )     (46    )     (177    )     (184    )
Interest and other           4            2            15            8
income, net
Debt retirement charge     ―            (5     )   ―             (13     )
Income from continuing
operations before income     282          315          1,096         1,162
taxes
Provision for income        (83    )    (100   )    (309    )    (374    )
taxes
Income from continuing     $ 199        $ 215        $ 787         $ 788
operations
Income from discontinued
operations, net of         ―           ―           ―             32      
income tax
Net income                   199          215          787           820
Net income from
continuing operations        (3     )     (3     )     (9      )     (6      )
attributable to
noncontrolling interests
Net income from
discontinued operations    ―           ―           ―             (4      )
attributable to
noncontrolling interests
Net income attributable    $ 196       $ 212       $ 778        $ 810     
to L-3
                                                                   
Basic earnings per share
attributable to L-3
Holdings’ common
shareholders:
Continuing operations      $ 2.23       $ 2.28       $ 8.70        $ 8.12
Discontinued operations    ―           ―           ―             0.29    
Basic earnings per share   $ 2.23      $ 2.28      $ 8.70       $ 8.41    
                                                                   
Diluted earnings per
share attributable to
L-3 Holdings’ common
shareholders:
Continuing operations      $ 2.17       $ 2.25       $ 8.54        $ 8.01
Discontinued operations    ―           ―           ―             0.29    
Diluted earnings per       $ 2.17      $ 2.25      $ 8.54       $ 8.30    
share
                                                                   
L-3 Holdings’ weighted
average common shares
outstanding:
Basic                       88.0       93.0       89.4        96.3    
Diluted                     90.5       94.3       91.1        97.6    
                                                                             

                                                     Table B
L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED SELECT FINANCIAL DATA

(in millions)
                                                       
                               Fourth Quarter Ended    Year Ended Dec. 31,
                               2013       2012        2013        2012
Segment operating data
Net sales:
C^3ISR                         $ 846       $ 967       $ 3,367      $ 3,601
Electronic Systems               1,484       1,617       5,524        5,677
P&LS                             616         629         2,443        2,483
NSS                             310       347       1,295      1,385  
Total                          $ 3,256    $ 3,560    $ 12,629    $ 13,146 
Operating income:
C^3ISR                         $ 77        $ 92        $ 301        $ 364
Electronic Systems               177         192         645          672
P&LS                             51          57          227          236
NSS                             19        23        85         79     
Total                          $ 324      $ 364      $ 1,258     $ 1,351  
Operating margin:
C^3ISR                           9.1   %     9.5   %     8.9    %     10.1   %
Electronic Systems               11.9  %     11.9  %     11.7   %     11.8   %
P&LS                             8.3   %     9.1   %     9.3    %     9.5    %
NSS                              6.1   %     6.6   %     6.6    %     5.7    %
Total                            10.0  %     10.2  %     10.0   %     10.3   %
Depreciation and
amortization:
C^3ISR                         $ 12        $ 13        $ 45         $ 47
Electronic Systems               36          42          141          147
P&LS                             5           5           17           20
NSS                             3         3         11         14     
Total                          $ 56       $ 63       $ 214       $ 228    
Funded order data
C^3ISR                         $ 897       $ 1,094     $ 3,231      $ 3,706
Electronic Systems               1,371       1,370       5,506        5,745
P&LS                             499         614         2,152        2,916
NSS                             214       268       1,167      1,431  
Total                          $ 2,981    $ 3,346    $ 12,056    $ 13,798 
                                                                    
                                                       Dec. 31,     Dec. 31,
                                                       2013        2012
Period end data
Funded backlog                                         $ 10,316     $ 10,884
                                                                             

                                                          Table C

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED

BALANCE SHEETS

(in millions)
                                                                    
                                                           Dec. 31,   Dec. 31,
                                                           2013
                                                                      2012
ASSETS
                                                                      
Cash and cash equivalents                                  $ 500      $ 349
Billed receivables, net                                      1,015      968
Contracts in process                                         2,526      2,592
Inventories                                                  359        363
Deferred income taxes                                        113        95
Other current assets                                        124       138
Total current assets                                        4,637     4,505
Property, plant and equipment, net                           1,039      1,016
Goodwill                                                     7,796      7,776
Identifiable intangible assets                               285        314
Deferred debt issue costs                                    24         29
Other assets                                                215       151
Total assets                                               $ 13,996   $ 13,791
                                                                      
LIABILITIES AND EQUITY
                                                                      
                                                                      
Accounts payable, trade                                    $ 541      $ 494
Accrued employment costs                                     538        551
Accrued expenses                                             460        462
Advance payments and billings in excess of costs             570        618
incurred
Income taxes                                                 10         21
Other current liabilities                                   383       400
Total current liabilities                                   2,502     2,546
Pension and postretirement benefits                          727        1,360
Deferred income taxes                                        641        328
Other liabilities                                            395        385
Long-term debt                                              3,630     3,629
Total liabilities                                           7,895     8,248
Shareholders’ equity                                         6,026      5,467
Noncontrolling interests of continuing operations           75        76
Total equity                                                6,101     5,543
Total liabilities and equity                               $ 13,996   $ 13,791
                                                                        

                                                     
                                                       Table D

L-3 COMMUNICATIONS HOLDINGS, INC.

UNAUDITED PRELIMINARY CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in millions)
                                                       
                                                       Year Ended Dec. 31,
                                                       2013        2012
Operating activities
Net income                                             $ 787        $ 820
Income from discontinued operations, net of tax         ―          (32    )
Income from continuing operations                        787          788
Depreciation of property, plant and equipment            166          170
Amortization of intangibles and other assets             48           58
Deferred income tax provision                            29           112
Stock-based employee compensation expense                59           59
Contributions to employee savings plans in L-3           114          125
Holdings’ common stock
Amortization of pension and postretirement benefit       83           68
plans net loss and prior service cost
Amortization of bond discounts and deferred debt         6            7
issue costs (included in interest expense)
Equity in losses of unconsolidated subsidiaries          ―            3
Other non-cash items                                     2            9
Changes in operating assets and liabilities,
excluding amounts from acquisitions, divestitures
and discontinued operations:
Billed receivables                                       (42    )     147
Contracts in process                                     87           (121   )
Inventories                                              7            (40    )
Other assets                                             (79    )     11
Accounts payable, trade                                  45           81
Accrued employment costs                                 (9     )     (13    )
Accrued expenses                                         5            (106   )
Advance payments and billings in excess of costs         (47    )     33
incurred
Income taxes                                             58           (48    )
Excess income tax benefits related to share-based        (4     )     (3     )
payment arrangements
Other current liabilities                                (12    )     (45    )
Pension and postretirement benefits                      14           (64    )
All other operating activities                          (54    )    ―      
Net cash from operating activities from continuing      1,263      1,231  
operations
                                                                    
Investing activities
Contribution received from the spin-off of Engility      ―            335
Business acquisitions, net of cash acquired              (62    )     (348   )
Proceeds from sale of a business                         4            5
Capital expenditures                                     (209   )     (210   )
Dispositions of property, plant and equipment            12           5
Cash from equity investees                               ―            20
Other investing activities                              (6     )    (7     )
Net cash used in investing activities from              (261   )    (200   )
continuing operations
                                                                    
Financing activities
Redemption of Senior Notes                               ―            (500   )
Borrowings under revolving credit facility               1,893        596
Repayment of borrowings under revolving credit           (1,893 )     (596   )
facility
Common stock repurchased                                 (800   )     (872   )
Dividends paid on L-3 Holdings’ common stock             (199   )     (195   )
Proceeds from exercises of stock options                 128          19
Proceeds from employee stock purchase plan               36           39
Debt issue costs                                         ―            (6     )
Excess income tax benefits related to share-based        4            3
payment arrangements
Other financing activities                              (18    )    (15    )
Net cash used in financing activities from              (849   )    (1,527 )
continuing operations
Effect of foreign currency exchange rate changes on      (2     )     7
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 equivalents     151          (415   )
Cash and cash equivalents, beginning of the year        349        764    
Cash and cash equivalents, end of the year             $ 500       $ 349    
                                                                             

Contact:

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