By Calvin Biesecker
L-3 Communications [LLL] yesterday posted slight increases in its sales and earnings with growth driven by revenues from acquisitions and the higher earnings due to results at the company’s Electronic Systems segment.
However, L-3 lowered its sales and earnings projections for the year due to the loss of its support contract for the Special Operations Command (SOCOM) to Lockheed Martin [LMT] and charges related to the retirement of debt (Defense Daily, June 23).
The company also announced that it reached agreement with the Air Force yesterday calling for the service to lift a suspension against the company’s Special Support Programs Division related to the improper use of an email system by the business’s employees (Defense Daily, June 11). Under the agreement, the Air Force will not suspend L-3’s Integrated Systems business unit.
L-3 said that it has agreed to pay about $330,000 in various costs associated with the settlement, including reimbursing the Air Force’s investigative costs, and also conduct more training for its employees.
Net income increased 3 percent to $228 million, $1.95 earnings per share (EPS), from $225 million ($1.90 EPS) a year ago, nipping consensus estimates by two pennies. The earnings include a nine cents EPS charge related to debt retirement and incremental interest expense.
Sales increased a percent to $4 billion, although the gain was due to $51 million in revenues related to acquisitions, which more than offset a scant decline in organic revenues.
Michael Strianese, L-3’s chairman, president and CEO, said L-3 is conducting due diligence on several companies that are up for sale and are going through an auction process. He said that far more companies are available this year than in 2009, although gaps remain between the bid and ask prices.
As for L-3’s revised outlook for 2010, the company lopped $200 million from expected sales to a new range of between $16 billion and $16.1 billion, reflecting the loss of the SOCOM work. Earnings are expected to be between $8.05 and $8.25 EPS, down 8 cents from prior guidance due to the debt retirement charge and the loss of the SOCOM work. The reduction in earnings guidance was mitigated somewhat by better than expected margins for the C3ISR and Electronic Systems segments.