- Diluted earnings per share (EPS)
from continuing operations of $2.08
- Net sales of $2.4 billion
- Net cash from operating activities
from continuing operations of $112 million
- Book-to-bill ratio of 1.10x on
funded orders of $2.6 billion, increasing funded backlog 3% to $8.7
billion
- Updated 2016 financial
guidance
L-3 Communications Holdings, Inc. (NYSE:LLL) today reported
diluted EPS from continuing operations of $2.08 for the quarter
ended March 25, 2016 (2016 first quarter) compared to diluted EPS
from continuing operations for the quarter ended March 27, 2015
(2015 first quarter) of $1.20 and adjusted diluted EPS(1) for the
2015 first quarter of $1.38. Net sales of $2.4 billion for the 2016
first quarter decreased by 5% compared to the 2015 first quarter.
Excluding sales from divestitures and acquisitions(2), net sales
(organic sales) decreased 2.1%.
“Our on-going efforts to transform L-3 into a stronger, more
efficient company and enhance margins were evident with our solid
first quarter performance,” said Michael T. Strianese, chairman and
chief executive officer. “All of our segments contributed to our
strong operating margin performance, which increased 230 basis
points to 10.7 percent, driven by favorable contract performance
and operational efficiencies across the organization. We also
completed the sale of the National Security Solutions (NSS)
business, a key milestone in our plan to re-focus the company on
higher margin, higher returning businesses. I am pleased with our
start to the year, especially our operating margins and
book-to-bill ratio.”
_______________________
(1)
Adjusted diluted earnings per share from
continuing operations is a non-GAAP financial measure. See Table E
for a reconciliation and a discussion of why this information is
presented.
(2)
Sales from business divestitures are
defined as sales from business divestitures that are included in
L-3’s actual results for the 12 months prior to the divestitures.
Sales from acquired businesses are defined as sales from business
acquisitions that are included in L-3’s actual results for less
than 12 months
.
L-3 Consolidated Results
The table below provides L-3’s selected financial data,
excluding discontinued operations. The results of operations of NSS
are reported as discontinued operations for each period
presented.
First Quarter Ended (in millions,
except per share data)
March
25,
March 27,
Increase/
2016 2015 (decrease) Net sales
$
2,353 $ 2,488 (5) % Operating income
$ 252 $
187 35 % Loss related to business divestiture
-
22 nm Segment operating income
$ 252 $ 209 21
% Operating margin
10.7 % 7.5 % 320 bpts Segment operating
margin
10.7 % 8.4 % 230 bpts Interest expense
$
(41) $ (39) 5 % Effective income tax rate
22.3 % 30.5
% (820) bpts Net income from continuing operations attributable to
L-3
$ 164 $ 101 62 % Adjusted net income from
continuing operations attributable to L-3 (a)
$ 164 $
116 41 % Diluted earnings per share from continuing operations
$ 2.08 $ 1.20 73 % Adjusted diluted earnings per
share from continuing operations (a)
$ 2.08 $ 1.38 51
% Diluted weighted average common shares outstanding
79.0
83.8 (6) %
_______________________
(a)
Non-GAAP metric that excludes the loss
related to business divestiture. See Table E for a reconciliation
of this measure.
nm - not meaningful
First Quarter Results of Operations: For the 2016 first quarter,
consolidated net sales of $2.4 billion decreased $135 million, or
5%, compared to the 2015 first quarter. Organic sales declined by
$52 million, or 2.1%, for the 2016 first quarter. Organic sales
exclude $114 million of sales declines related to business
divestitures and $31 million of sales increases related to business
acquisitions. For the 2016 first quarter, organic sales to the U.S.
Government increased $62 million, or 4%, and organic sales to
international and commercial customers decreased $114 million, or
14%.
Segment operating income for the 2016 first quarter increased by
$43 million, or 21%, compared to the 2015 first quarter. Segment
operating income as a percentage of sales (segment operating
margin) increased by 230 basis points to 10.7% for the 2016 first
quarter, compared to 8.4% for the 2015 first quarter. Segment
operating margin increased by: (1) 170 basis points due to improved
contract performance, (2) 70 basis points due to higher margins
resulting from acquisitions and divestitures and (3) 50 basis
points due to lower pension expense of $11 million. These increases
were partially offset by a decrease of 60 basis points due to a $15
million increase in the product returns allowance for EoTech
holographic weapons sight (HWS) products. See the reportable
segment results below for additional discussion of sales and
operating margin trends.
The effective tax rate for the 2016 first quarter decreased to
22.3% from 30.5% primarily due to: (1) the early adoption of a new
accounting standard related to income tax benefits from employee
stock based compensation awards, which resulted in a $10 million
reduction to income tax expense, and increased diluted EPS by
$0.13, and (2) a benefit from the reinstatement of the Federal
Research and Experimentation (R&E) tax credit.
Diluted EPS from continuing operations increased 51% compared to
adjusted diluted EPS of $1.38 for the 2015 first quarter. The 2015
first quarter adjusted diluted EPS from continuing operations
excludes a pre-tax loss of $22 million ($15 million after income
taxes), or $0.18 per diluted share, related to the divestiture of
Marine Systems International. Diluted weighted average common
shares outstanding for the 2016 first quarter declined by 6%
compared to the 2015 first quarter due to repurchases of L-3 common
stock.
Orders: Funded orders for the 2016 first quarter were $2.6
billion, substantially unchanged compared to the 2015 first
quarter. The book-to-bill ratio was 1.10x for the 2016 first
quarter. Excluding the impacts of business divestitures and
acquisitions, orders grew by $73 million, or 3%. Funded backlog
increased 3% to $8.7 billion at March 25, 2016, compared to $8.4
billion at December 31, 2015.
The table below summarizes the cash returned to shareholders
during the 2016 and 2015 first quarters.
First Quarter Ended ($ in
millions) March 25, March 27,
2016
2015 Net cash from operating activities from continuing
operations
$ 112 $ 112 Less: Capital expenditures,
net of dispositions
(28 ) (39 ) Free
cash flow(1)
$ 84 $ 73 Dividends paid
($0.70 per share in 2016; $0.65 per share in 2015)
$
58 $ 58 Common stock repurchases
198
100 Total cash returned to shareholders
$
256 $ 158
_______________________
(1)
Free cash flow is defined as net cash from
operating activities from continuing operations less net capital
expenditures (capital expenditures less cash proceeds from
dispositions of property, plant and equipment). Free cash flow
represents cash generated after paying for interest on borrowings,
income taxes, pension benefit contributions, capital expenditures
and changes in working capital, but before repaying principal
amount of outstanding debt, paying cash dividends on common stock,
repurchasing shares of our common stock, investing cash to acquire
businesses, and making other strategic investments. Thus, a key
assumption underlying free cash flow is that the company will be
able to refinance its existing debt. Because of this assumption,
free cash flow is not a measure that should be relied upon to
represent the residual cash flow available for discretionary
expenditures.
Redemption of Senior Notes: To improve the company’s leverage
metrics, on March 24, 2016, the company initiated a redemption of
$300 million aggregate principal amount of its 3.95% Senior Notes
due in November 2016 (the 2016 Notes). The Notes will be redeemed
on May 20, 2016 (the Redemption Date), at a redemption price equal
to the greater of: (1) 100% of the aggregate principal amount, or
(2) the present value of the remaining principal and interest
payments discounted to the date of redemption, on a semi-annual
basis, at the treasury rate (as defined in the indenture governing
the 2016 Notes), plus a spread of 50 basis points.
Reportable Segment Results
The Company has three reportable segments. The company evaluates
the performance of its segments based on their sales, operating
income and operating margin. Corporate expenses are allocated to
the company’s operating segments using an allocation methodology
prescribed by U.S. Government regulations for government
contractors. Accordingly, segment results include all costs and
expenses, except for goodwill impairment charges, gains or losses
related to business divestitures and certain other items that are
excluded by management for purposes of evaluating the operating
performance of the company’s business segments.
Electronic Systems
First Quarter Ended ($ in millions) March
25, March 27,
2016 2015 Decrease Net sales
$
877 $ 1,017 (13.8) % Operating income
$ 95 $
113 (15.9) % Operating margin
10.8 % 11.1 % (30) bpts
Electronic Systems net sales for the 2016 first quarter
decreased by $140 million, or 14%, compared to the 2015 first
quarter. Excluding $114 million of sales declines related to
business divestitures (primarily MSI divestiture on May 29, 2015)
and $26 million of sales increases related to business
acquisitions, organic sales decreased by $52 million, or 5%. The
decrease was driven by: (1) $24 million for Power & Propulsion
Systems due to decreased volume on contracts nearing completion
primarily for foreign government customers, (2) $15 million for
Warrior Systems related to an increase in the product returns
allowance for EoTech HWS products and (3) $13 million for Sensor
Systems, due to the completion of contracts for infrared detection
and space electronics products primarily for the U.S. Air
Force.
Electronic Systems operating income for the 2016 first quarter
decreased by $18 million, or 16%, compared to the 2015 first
quarter. Operating margin decreased by 30 basis points to 10.8%.
Operating margin decreased by: (1) 160 basis points due to sales
mix changes, primarily for Aviation Products & Security Systems
and (2) 150 basis points for Warrior Systems due to an increase of
$15 million in the product returns allowance for EoTech HWS
products. These decreases were partially offset by: (1) 160 basis
points due to higher margins resulting from acquisitions and
divestitures, (2) 90 basis points due to improved contract
performance primarily for Power & Propulsion Systems and (3) 30
basis points due to lower pension expense of $3 million.
As previously disclosed, in November 2015, the company commenced
a voluntary return program and began accepting customer returns for
various EoTech HWS products that may have been affected by certain
performance issues. The refund program gives eligible owners of
such HWS products the option to return their products in exchange
for a refund of the purchase price, including shipping costs.
During the first quarter of 2016, the Company increased the product
returns allowance by recording a reduction to net sales of $15
million. The Company will continue to review the product returns
allowance as the program matures and new information becomes
available. The Company’s ongoing evaluation may cause it to record
further adjustments to the allowance in future periods. These
adjustments could be material.
Aerospace Systems
First Quarter Ended ($ in millions) March 25,
March 27, Increase/
2016 2015 (decrease) Net sales
$
1,005 $ 1,026 (2.0) % Operating income
$ 106 $
60 76.7 % Operating margin
10.5 % 5.8 % 470 bpts
Aerospace Systems net sales for the 2016 first quarter decreased
by $21 million, or 2%, compared to the 2015 first quarter,
primarily related to ISR Systems. Sales decreased for ISR Systems
by $37 million for ISR aircraft systems for foreign military
customers as contracts near completion and $18 million for small
ISR aircraft fleet management services for the U.S. Air Force due
to reduced demand resulting from the U.S. military drawdown in
Afghanistan. The decreases were partially offset by higher volume
of $26 million for large ISR aircraft systems and $11 million for
small ISR aircraft systems for the U.S. Government. Sales decreased
by $3 million for Logistics Solutions due to the completion of
contracts for field maintenance and sustainment services, primarily
for the U.S. Army.
Aerospace Systems operating income for the 2016 first quarter
increased by $46 million, or 77%, compared to the 2015 first
quarter. Operating margin increased by 470 basis points to 10.5%.
Operating margin increased by: (1) 170 basis points due to improved
contract performance at Aircraft Systems, primarily international
head-of-state aircraft modification contracts, for which a $17
million cost growth charge was recorded in the 2015 first quarter,
(2) 140 basis points due to improved performance at Logistics
Solutions primarily related to the Army C-12 contract due to
improved pricing terms on the new contract which began on August 1,
2015, (3) 110 basis points primarily due to a higher than planned
price adjustment for a contract in ISR Systems and (4) 50 basis
points due to lower pension expense of $5 million.
Communication Systems
First Quarter Ended ($ in millions) March
25, March 27,
2016 2015 Increase Net sales
$
471 $ 445 5.8 % Operating income
$ 51 $ 36
41.7 % Operating margin
10.8 % 8.1 % 270 bpts
Communication Systems net sales for the 2016 first quarter
increased by $26 million, or 6%, compared to the 2015 first
quarter. The increase was due to: (1) $19 million for Broadband
Communication Systems, primarily due to increased volume and
deliveries of secure networked communication systems for the DoD,
(2) $8 million for Tactical Satellite Communications products
primarily due to increased deliveries on a satellite communication
land terminals contract for the Australian Defence Force (ADF), (3)
$5 million related to business acquisitions, and (4) $4 million for
Advanced Communications products primarily due to increased
deliveries of secure mission data storage systems for the Joint
Strike Fighter program. These increases were partially offset by a
decrease of $10 million for Space & Power Systems, primarily
due to reduced demand for power devices for commercial
satellites.
Communication Systems operating income for the 2016 first
quarter increased by $15 million, or 42%, compared to the 2015
first quarter. Operating margin increased by 270 basis points to
10.8%. Operating margin increased by: (1) 150 basis points due to
increased manufacturing productivity and favorable contract
performance adjustments, primarily for secure networked
communications and secure communications systems, (2) 60 basis
points due to lower pension expense of $3 million and (3) 60 basis
points due to a $3 million gain on the sale of land in the Space
& Power Systems Sector.
Financial Guidance
Based on information known as of today, the company has updated
its consolidated and segment financial guidance for the year ending
December 31, 2016, previously provided on January 28, 2016 as
presented in the tables below. All financial guidance amounts are
estimates subject to change in the future, including as a result of
matters discussed under the “Forward-Looking Statements” cautionary
language beginning on page 7. The company undertakes no duty to
update its guidance.
Consolidated 2016 Financial Guidance ($ in
millions, except per share data) Current Guidance
Prior Guidance (January 28, 2016) Net sales $9,950 to
$10,150 $9,950 to $10,150 Segment operating margin 9.8 % 9.8 %
Interest expense and other $ 162 $ 162 Effective tax rate 26.7 %
28.0 % Diluted shares 77.5 77.5 Diluted EPS $7.55 to $7.75 $7.40 to
$7.60 Net cash from operating activities $ 1,030 $ 1,030 Capital
expenditures, net of dispositions of property, plant and equipment
(205
)
(205
)
Free cash flow $ 825 $ 825
Segment
2016 Financial Guidance ($ in millions)
Current Guidance Prior Guidance (January 28, 2016)
Net
Sales:
Electronic Systems $4,150 to $4,250 $4,150 to $4,250
Aerospace Systems $3,900 to $4,000 $3,900 to $4,000 Communication
Systems $1,850 to $1,950 $1,850 to $1,950
Operating
Margins:
Electronic Systems 12.0% to 12.2 % 12.4% to 12.6 % Aerospace
Systems 7.0% to 7.2 % 6.5% to 6.7 % Communication Systems 10.3% to
10.5 % 10.3% to 10.5 %
The revisions to our Current Guidance compared to our Prior
Guidance primarily include:
- A decrease in the estimated effective
tax rate due to the early adoption of a new accounting standard
related to income tax benefits from employee stock based
compensation awards, which is expected to reduce income tax expense
by $10 million,
- A 40 basis point decrease in operating
margin for Electronic Systems due to a $15 million increase in the
product returns allowance recorded during the 2016 first quarter,
and
- A 50 basis point increase in operating
margin for Aerospace Systems primarily due to an improvement in
expected contract performance at ISR Systems sector for 2016.
The current guidance for 2016 excludes: (i) any potential
non-cash goodwill impairment charges for which the information is
presently unknown and (ii) other items such as gains or losses
related to potential business divestitures.
Additional financial information regarding the 2016 first
quarter and the 2016 financial guidance is available on the
company’s website at www.L-3com.com.
Conference Call
In conjunction with this release, L-3 will host a conference
call today, Wednesday, April 27, 2016 at 2:00 p.m. ET that will be
simultaneously broadcast over the Internet. Michael T. Strianese,
chairman and chief executive officer, Christopher E. Kubasik,
president and chief operating officer, and Ralph G. D’Ambrosio,
senior vice president and chief financial officer, will host the
call.
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 (800) 585-8367/ passcode: 85564084 (for domestic callers)
or (404) 537-3406/passcode: 85564084 (for international callers)
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 38,000
people worldwide and is a leading provider of a broad range of
communication and electronic systems and products used on military
and commercial platforms. L-3 is also a prime contractor in
aerospace systems.
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 2016 financial
guidance 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,” “financial
guidance,” ‘‘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 awards
and/or funding from the Department of Defense (DoD) and other major
customers; the U.S. Government fiscal situation; changes in DoD
budget levels and spending priorities; 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 and actions taken by
rating agencies that could result in a downgrade of our debt; 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 Better Buying
Power and other efficiency initiatives; events beyond our control
such as acts of terrorism; our ability to perform contracts on
schedule; our international operations including currency risks and
compliance with foreign laws; our extensive use of fixed-price type
revenue arrangements; the rapid change of technology and high level
of competition in which our businesses participate; risks relating
to technology and data security; our introduction of new products
into commercial markets or our investments in civil and commercial
products or companies; the outcome of litigation matters (see Notes
to our annual report on Form 10-K and quarterly reports on Form
10-Q); results of audits by U.S. Government agencies and of ongoing
governmental investigations, including the Aerospace Systems
segment; our ability to predict the level of participation in and
the related costs of our voluntary return program for certain
EoTech holographic weapons sight products, and our ability to
change and terminate the return program at our discretion; the
impact on our business of improper conduct by our employees, agents
or business partners; goodwill impairments and the fair values of
our assets; and ultimate resolution of contingent matters, claims
and investigations relating to acquired businesses, and the impact
on the final purchase price allocations.
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 report on Form 10-K for the year ended December 31,
2015 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)
First Quarter Ended(a) March 25, March
27,
2016 2015
Net sales $
2,353 $ 2,488
Cost of sales (2,101 )
(2,279 )
Loss related to business divestiture(b)
- (22 )
Operating income
252 187
Interest expense (41 ) (39 )
Interest and other income, net 4
3
Income from continuing operations before income
taxes 215 151
Provision for income taxes
(48 ) (46 )
Income from continuing
operations 167 105
Income from discontinued
operations, net of income taxes (c) 63
4
Net income 230 109
Net
income attributable to noncontrolling interests
(3 ) (4 )
Net income attributable to
L-3 $ 227 $ 105
Basic
earnings per share attributable to L-3 Holdings’ common
shareholders: Continuing operations $ 2.11
$ 1.23
Discontinued operations 0.81
0.05
Basic earnings per share
$ 2.92 $ 1.28
Diluted
earnings per share attributable to L-3 Holdings’ common
shareholders: Continuing operations $ 2.08
$ 1.20
Discontinued operations 0.79
0.05
Diluted earnings per share
$ 2.87 $ 1.25
L-3 Holdings’
weighted average common shares outstanding: Basic
77.8 82.3
Diluted
79.0 83.8
_______________________
(a)
It is the company’s established practice
to close its books for the quarters ending March, June and
September on the Friday preceding the end of the calendar quarter.
The interim financial statements and tables of financial
information included herein have been prepared and are labeled
based on that convention. The company closes its annual books on
December 31 regardless of what day it falls on.
(b)
During the 2015 first quarter, the company
completed the sale of its MSI business and recorded a pre-tax loss
of $22 million.
(c)
Income from discontinued operations, net
of income taxes for the quarterly period ended March 25, 2016
includes an after-tax gain of $64 million on the sale of the
National Security Solutions business.
Table
B
L-3 COMMUNICATIONS
HOLDINGS, INC. UNAUDITED SELECT FINANCIAL DATA (in
millions) First Quarter Ended March 25,
March 27,
2016 2015
Segment operating
data
Net sales: Electronic Systems $
877 $ 1,017
Aerospace Systems 1,005 1,026
Communication Systems 471 445
Total $ 2,353 $ 2,488
Operating
income: Electronic Systems $ 95 $ 113
Aerospace Systems 106 60
Communication Systems
51 36
Total $ 252 $ 209
Operating margin: Electronic Systems
10.8 % 11.1 %
Aerospace Systems 10.5
% 5.8 %
Communication Systems 10.8 %
8.1 %
Total 10.7 % 8.4 %
Depreciation and amortization: Electronic Systems
$ 25 $ 28
Aerospace Systems 13 12
Communication Systems 12 12
Total $ 50 $ 52
Funded order
data
Electronic Systems $ 957 $ 1,053
Aerospace
Systems 1,183 1,078
Communication Systems
451 458
Total $ 2,591 $ 2,589
March 25, December 31,
2016 2015
Period end
data
Funded backlog $ 8,662 $ 8,423
Table
C
L-3
COMMUNICATIONS HOLDINGS, INC. UNAUDITED CONDENSED
CONSOLIDATED BALANCE SHEETS (in millions)
March
25,
December 31,
2016
2015
ASSETS Cash and cash equivalents $
534 $ 207
Billed receivables, net 779
746
Contracts in process 2,226 2,081
Inventories 351 333
Other current assets
173 201
Assets of discontinued operations —
664
Total current assets 4,063
4,232
Property, plant and equipment, net 1,085 1,097
Goodwill 6,306 6,281
Identifiable intangible
assets 195 199
Deferred income taxes 4 3
Other assets 258 255
Total
assets $ 11,911 $ 12,067
LIABILITIES
AND EQUITY Current portion of long-term debt
$ 499 $ 499
Accounts payable, trade 407
297
Accrued employment costs 466 504
Accrued
expenses 406 390
Advance payments and billings in
excess of costs incurred 495 562
Income taxes
3 13
Other current liabilities 403 394
Liabilities of discontinued operations — 220
Total current liabilities 2,679 2,879
Pension and postretirement benefits 1,045 1,047
Deferred income taxes 238 219
Other
liabilities 371 368
Long-term debt
3,127 3,125
Total liabilities
7,460 7,638
Shareholders’ equity 4,378
4,355
Noncontrolling interests 73 74
Total equity 4,451 4,429
Total
liabilities and equity $ 11,911 $ 12,067
Table
D
L-3 COMMUNICATIONS HOLDINGS, INC. UNAUDITED CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS (in
millions) First Quarter
Ended
March
25,
March
27,
2016
2015
Operating
activities
Net income $ 230 $ 109
Less: Income
from discontinued operations, net of tax (63
) (4 )
Income from continuing operations
167 105
Depreciation of property, plant and equipment
40 42
Amortization of intangibles and other assets
10 10
Deferred income tax provision 12 10
Stock-based employee compensation expense 6 13
Contributions to employee savings plans in L-3 Holdings’ common
stock 30 26
Amortization of pension and
postretirement benefit plans net loss and prior service cost
12 17
Amortization of bond discounts and deferred debt
issue costs (included in interest expense) 2 2
Loss
related to business divestitures - 22
Other non-cash
items 1 (6 )
Changes in operating assets and
liabilities, excluding amounts from acquisitions and divestitures
and discontinued operations: Billed receivables
(32 ) 23
Contracts in process (148
) (147 )
Inventories (19 ) (31 )
Other assets 4 ― Accounts payable,
trade 115 98
Accrued employment costs (46
) (8 )
Accrued expenses 16 (56 )
Advance
payments and billings in excess of costs incurred (64
) (19 )
Income taxes 20 27
Other current
liabilities (6 ) 4
Pension and postretirement
benefits (1 ) 4
All other operating
activities (7 ) (24 )
Net cash
from operating activities from continuing operations
112 112
Investing
activities
Business acquisitions, net of cash acquired (27
) (41 )
Proceeds from the sale of businesses
576 ― Capital expenditures (35 )
(40 )
Dispositions of property, plant and equipment 7
1
Other investing activities 9 6
Net cash from (used in) investing activities from
continuing operations 530 (74 )
Financing
activities
Borrowings under revolving credit facility 217 108
Repayment of borrowings under revolving credit facility
(217 ) (108 )
Common stock repurchased
(198 ) (100 )
Dividends paid on L-3 Holdings’
common stock (58 ) (58 )
Proceeds from
exercises of stock options 14 37
Proceeds from
employee stock purchase plan 8 9
Employee restricted
stock units surrendered in lieu of income tax withholding
(20 ) (33 )
Other financing activities
(5 ) (5 )
Net cash used in financing
activities from continuing operations (259
) (150 )
Effect of foreign currency exchange rate
changes on cash and cash equivalents - (11 )
Cash
used in discontinued operations: Operating activities
(56 ) (2 )
Investing activities
- (1 )
Cash used in discontinued
operations (56 ) (3 )
Change in
cash balance included in assets held for sale - 1
Net
increase (decrease) in cash and cash equivalents 327
(125 )
Cash and cash equivalents, beginning of the period
207 442
Cash and cash
equivalents, end of the period $ 534 $ 317
Table
E
L-3 COMMUNICATIONS
HOLDINGS, INC. NON-GAAP FINANCIAL MEASURES (in
millions, except per share amounts) First Quarter
Ended
March
25,
March 27,
2016 2015
Diluted EPS from continuing operations
attributable to L-3 Holdings' common stockholders $
2.08
$ 1.20
EPS impact of loss on MSI business
divestiture(1) ― 0.18
Adjusted
diluted EPS from continuing operations(2) $
2.08
$ 1.38
Net income from continuing operations attributable
to L-3 $
164 $ 101
Loss on MSI business
divestiture(1) ― 15
Adjusted net
income from continuing operations attributable to L-3(2)
$
164 $ 116 _____________ (1) Loss on MSI business
divestiture $ (22) Tax benefit 7 After-tax impact (15)
Diluted weighted average common shares outstanding 83.8 Per share
impact $ (0.18) (2) Adjusted diluted EPS is diluted EPS
attributable to L-3 Holdings’ common stockholders, excluding the
charges relating to business divestitures. Adjusted net income
attributable to L-3 is net income attributable to L-3, excluding
the charges relating to business divestitures. These amounts are
not calculated in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP). The company
believes that the charges relating to business divestitures affect
the comparability of the results of operations of 2015 to the
results of operations for 2016. The company also believes that
disclosing net income and diluted EPS excluding the charges
relating to business divestitures will allow investors to more
easily compare the 2016 results to the 2015 results. However, these
measures may not be defined or calculated by other companies in the
same manner.
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L-3 Communications Holdings, Inc.Corporate
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