L-3 Communications (NYSE: LLL)

L-3 Communications (NYSE:LLL) | Products & Business Units

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L-3 Holdings, a Delaware corporation organized in April 1997, derives all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications. L-3 Communications, a Delaware corporation, is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment, and security and detection systems. L-3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. L-3's customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers. L-3 Communications is headquartered in New York City.

On July 28, 2011, L-3 Communications announced that its Board of Directors approved a plan to spin-off a new, independent government services company that will be publicly traded. The new company will be named Engility Holdings, Inc. On July 17, 2012, L-3 completed the spin-off of Engility Holdings to its shareholders.

On December 8, 2015, L-3 entered into a definitive agreement to sell its National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016.

L-3 Communications operates in three principal business segments:

Electronic Systems
Aerospace Systems
Communication Systems



The following table highlights L-3's sales from 2013 to 2015 by segment:
L-3's Segment Sales



A description of the business of each of the company's segments is set forth below.


Electronic Systems

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The businesses in the Electronic Systems segment provide a broad range of products and services, including components, products, subsystems, systems and related services to military and commercial customers in several niche markets.

The data below provides a summary of the segment's business areas and the percentage that each contributed to Electronic Systems' net sales in 2015:



Precision Engagement & Training 25%
Power & Propulsion Systems 20%
Aviation Products & Security 20%
Sensor Systems 18%
Warrior Systems 10%
Marine Systems International (divested on May 29, 2015) 4%
Advanced Programs 3%



Precision Engagement & Training:
(1) Military and commercial aircraft flight simulators, reconfigurable training devices, distributed mission training suites; (2) Training services, courseware integrated logistics support and maintenance; (3) Fuzing and ordnance systems; (4) Unmanned systems and components; (5) Radar-based sensors and systems; (6) Global Positioning System (GPS) receivers; (7) Global airline pilot training and crew resourcing; and (8) Navigation systems and positioning navigation units.



Power & Propulsion Systems:
(1) Naval power delivery, conversion and switching products, and hybrid electric drives; (2) Heavy fuel engines, cross drive variable transmissions, turret drive systems, vehicle suspension, advanced drive systems and auxiliary power generators; (3) Airborne dipping sonars, submarine and surface ship towed arrays; (4) Underwater sensor ranges; (5) Service life extensions; (6) In-service engineering, ship repair, overhaul, upgrades and maintenance, and battle force tactical training; (7) Power plant simulation, modeling, computer systems, and training services; (8) Automation, navigation, communications, and sensors and integrated Command, Control, Communications, Computers and Navigation (C4N) solutions; (9) High power microwave sources, systems & effects, pulse power systems and electromagnetics hardened construction; and (10) Ballistic missile targets.



Aviation Products & Security:
(1) Cockpit and mission displays; (2) Airborne traffic and collision avoidance systems, terrain awareness warning systems; (3) Advanced cockpit avionics; (4) Solid state crash protected cockpit voice and flight data recorders; (5) Airport security systems, explosives detection systems and whole body imaging systems; and (6) Non-invasive security systems and portals, and sophisticated sensors with threat detection capabilities.



Sensor Systems:
(1) Targeted stabilized camera systems with integrated sensors and wireless communication systems; (2) Airborne and ground based high energy laser beam directors, laser designators and high tracking rate telescopes; (3) Submarine photonic systems and periscopes; (4) Force protection, electronic warfare and satellite monitoring; and (5) ISR mission management software and geospatial application technology programs.



Warrior Systems:
(1) Enhanced vision and weapon sights products and (2) Laser designation and range finder systems.



Precision Engagement Products:
Optics, telescopes and precision optical subsystems.


In 2015, Electronic Systems had net sales of $4,269 million, representing 41% of L-3's total net sales.

     Financial results for L-3 Communications' Electronic Systems segment were as follows:
Financial Results for L-3 Communications' principal lines of business

Electronic Systems net sales for the year ended December 31, 2015 decreased by $376 million, or 8%, compared to the year ended December 31, 2014. Excluding $354 million related to the divestitures of MSI, BSI, and the Tinsley Product Line, and $49 million for the CTC and ForceX acquisitions, organic sales declined $71 million, or 2%. The decrease was due to: (1) $85 million related to foreign currency exchange rate changes and (2) $24 million related to reduced sales at Warrior Systems driven by lower volume for night vision goggles and $20 million related to the holographic weapons sight voluntary return program at EoTech. These decreases were partially offset by $58 million, primarily for Aviation Products & Security Systems, due to deliveries of cockpit avionics products to commercial and DoD customers and airport security systems products to international customers.

Electronic Systems operating income for the year ended December 31, 2015 decreased by $44 million, or 8%, compared to the year ended December 31, 2014. Operating margin remained at 11.5% compared to the year ended December 31, 2014. Operating margin increased by: (1) 50 basis points due to acquisitions and divestitures, (2) 40 basis points for favorable contract performance adjustments and (3) 20 basis points due to lower severance expense of $8 million. These increases were offset by decreases of: (1) 80 basis points primarily due to lower volume for Sensor Systems and sales mix changes for Aviation Products & Security and (2) 30 basis points due to higher pension expense of $13 million.


Aerospace Systems

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The businesses in the Aerospace Systems segment provide products and services for the global ISR market, specializing in signals intelligence (SIGINT) and multi-intelligence platforms, to include full motion video, electro-optical, infrared, and synthetic aperture radars, along with other types of information gathering systems. These products and services provide the warfighter with the ability to collect and analyze data from command centers, communication nodes and air defense systems for real-time situational awareness and response. The businesses in this reportable segment provide select Command, Control and Communications (C3) systems products for military and other U.S. Government and select foreign government intelligence, reconnaissance and surveillance applications. According to L-3, these products and services are critical elements for a substantial number of major command, control and communication and intelligence gathering systems. The businesses in this reportable segment also provide modernization, upgrades and sustainment, maintenance and logistics support solutions for military and various government aircraft and other platforms. L-3 sells these services primarily to the DoD and select foreign governments.

Major products and services for this reportable segment include:



• highly specialized fleet management sustainment and support services, including procurement, systems integration, sensor development, modifications and periodic depot maintenance for ISR and special mission aircraft and airborne systems;

• strategic and tactical SIGINT systems that detect, collect, identify, analyze and disseminate information;

• engineering, modification, maintenance, logistics and upgrades for aircraft, ground vehicles and personnel equipment;

• turnkey aviation life cycle management services that integrate custom developed and commercial off-the-shelf products for various military fixed and rotary wing aircraft, including heavy maintenance and structural modifications and interior modifications; and

• aerospace and other technical services related to large fleet support, such as aircraft and vehicle modernization, maintenance, repair and overhaul, logistics, support and supply chain management, primarily for military training, tactical, transport cargo and utility aircraft.



The data below provides a summary of the segment's business areas and the percentage that each contributed to Aerospace Systems' net sales in 2015:



ISR Systems 52%
Logistics Solutions 30%
Aircraft Systems 18%



ISR Systems:
(1) Prime mission systems integration, sensor development and operations and support; (2) Fleet management of special mission aircraft, including avionics and mission system upgrades and logistics support; and (3) ISR operations and support.



Logistics Solutions:
(1) Logistics support and maintenance; (2) Contract Field Teams (CFT); and (3) Contractor Operated and Managed Base Supply (COMBS).



Aircraft Systems:
(1) Modernization and life extension maintenance upgrades and support and (2) Fabrication and assembly of fixed and rotary wing aerostructures.




In 2015, Aerospace Systems had net sales of $4,156 million, representing 40% of L-3's total net sales.

     Financial results for L-3's Aerospace Systems segment were as follows:
Financial Results for L-3 Communications' principal lines of business

Aerospace Systems net sales for the year ended December 31, 2015 decreased by $165 million, or 4%, compared to the year ended December 31, 2014. Sales decreased $159 million for Aircraft Systems and $63 million for Logistics Solutions. Sales for ISR Systems increased by $57 million. Sales decreased for Aircraft Systems due to lower volume of: (1) $74 million primarily on the USAF Compass Call aircraft and the DoD's retirement of the C-27J Spartan, (2) $39 million on international head-of-state aircraft modification contracts primarily due to unfavorable contract performance adjustments, (3) $28 million for modification contracts primarily for the U.S. Navy maritime patrol aircraft and (4) $18 million primarily for aircraft cabin assemblies and subassemblies. The decrease in sales for Logistics Solutions was due to lower volume for field maintenance and sustainment services, primarily for U.S. Army and U.S. Navy aircraft due to the completion of contracts and lower demand and lower prices due to competitive pressures. The increase in ISR Systems was due to an increase in sales of $182 million primarily for large ISR aircraft systems for U.S. Government customers and small ISR aircraft systems to the DoD and a foreign government, partially offset by $125 million of lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan.

Aerospace Systems operating income for the year ended December 31, 2015 decreased by $78 million, or 28%, compared to the year ended December 31, 2014. Operating margin decreased by 160 basis points to 4.9%. Operating margin decreased by: (1) 250 basis points due to contract performance adjustments at Aircraft Systems, which included $101 million of cost growth on international head-of-state aircraft modification contracts, compared to $15 million of cost growth on the same contracts in the year ended December 31, 2014, (2) 100 basis points primarily due to reduced flight hours and lower pricing due to competitive pressures on logistics and maintenance contracts, including the U.S. Navy T-45 Goshawk contract and (3) 70 basis points due to higher pension expense of $28 million. These decreases were partially offset by: (1) 110 basis points due to favorable contract performance adjustments at ISR Systems, (2) 70 basis points for improved performance on the Army C-12 contract due to better terms on the new contract and $18 million due to a partial recovery of cost overruns recognized in prior periods on the previous contract, (3) 40 basis points due to a $17 million increase in reserves for excess and obsolete inventory at Logistics Solutions recorded during the year ended December 31, 2014 and (4) 40 basis points due to $25 million of outside accounting and legal advisory expenses incurred for the Internal Review completed in October 2014.


Communication Systems

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The businesses in the Communication Systems segment provide network and communication systems, secure communications products, radio frequency components, satellite communication terminals, and space, microwave and telemetry products. These products are used to connect a variety of space, airborne, ground and sea-based communication systems and are used in the transmission, processing, recording, monitoring, and dissemination functions of these communication systems.

Major products and services for this reportable segment include:



• secure data links that enable real-time information collection and dissemination to users of networked communications for airborne, satellite, ground and sea-based remote platforms, both manned and unmanned;

• microwave products, including passive and active microwave components and subsystems, radar antennas and radomes, power devices and mobile and ground-based satellite communications systems;

• secure terminal and communication network equipment and encryption management; and

• communication systems for surface and undersea vessels and manned space flights.



The data below provides a summary of the segment's business areas and the percentage that each contributed to Aerospace Systems' net sales in 2015:



Broadband Communication Systems 50%
Advanced Communications 21%
Space & Power Systems 19%
Tactical Satellite Communication Products 10%



Broadband Communication Systems:
(1) Airborne, space and surface data link terminals, ground stations, and transportable tactical satellite communications (SATCOM) systems; (2) Multi-band Manpack Receivers; (3) Multi-frequency time division multiple access modems and high dynamic small aperture band terminals that support SATCOM on the move using X, Ku, and Ka bands; and (4) Tactical ground based signal intercept and direction finding systems.



Advanced Communications:
(1) Passive and active microwave components and subsystems and non-ionizing radiation monitoring equipment; (2) Secure communications terminals and equipment, and secure network encryption products; (3) Ground-based satellite communications terminals and payloads; (4) Shipboard communications systems; (5) Ultra-wide frequency and advanced radar antennas and radomes; and (6) Low-power SATCOM products.



Space & Power Systems:
(1) Traveling wave tube amplifiers (TWTAs), power modules, klystrons and digital broadcast and (2) Telemetry and instrumentation systems.



Tactical Satellite Communications Products:
(1) Quick-deploy flyaway very small aperture terminals (VSAT) and vehicular satellite systems and (2) Managed communications security (COMSEC) satellite networks and integrated remote VSAT satellite systems.




In 2015, Communication Systems had net sales of $2,041 million, representing 19% of L-3's total net sales.

     Financial results for L-3's Communication Systems segment were as follows:
Financial Results for L-3 Communications' principal lines of business

Communication Systems net sales for the year ended December 31, 2015 increased by $21 million, or 1%, compared to the year ended December 31, 2014. Excluding $55 million related to the Miteq acquisition, organic sales declined by $34 million, or 2%. The decrease was due to: (1) $37 million for Space & Power Systems, primarily satellite command and control software for U.S. Government agencies and high frequency radios for a foreign government and (2) $20 million for Advanced Communications products, primarily secure data recorders and communications equipment for the U.S. military as contracts near completion. These decreases were offset by $23 million for Broadband Communication Systems, primarily due to increased volume for development and production of secure networked communication systems for the U.S. military. For Tactical Satellite Communications products, lower sales of mobile and ground based satellite communication systems for the U.S. military were offset by sales on a new contract for the Australian Defence Force.

Communication Systems operating income for the year ended December 31, 2015 remained the same at $196 million compared to the year ended December 31, 2014. Operating margin decreased by 10 basis points to 9.6%. Operating margin decreased by 100 basis points due to higher pension expense of $20 million. Improved contract performance and sales and mix changes, partially offset by lower margins from the Miteq acquisition, increased operating margin by 90 basis points.

Company Information

Revenues ('15): $10,466M -13.7%

R&D ('15): $228M -0.4%

Net Profit ('15): $-225M NEG

CAPEX ('15): $197M +7.7%

L-3 Communications - Tier I

Products News Subsidiaries Acquisitions Competitors Customers R&D Spending 5-Year Financials

Aerospace Sector:

   C4ISR; Communication Systems/RF

L-3's Products:


Prime mission systems integration and sensor development; Fleet management of special mission aircraft, including avionics and mission system upgrades and logistics support; ISR operations and support; Logistics support and maintenance; Rotary wing cabin assemblies, new and modified wings and subassemblies, structure and parts fabrication for OEMs; Military and commercial aircraft flight simulators, reconfigurable training devices, distributed mission training suites; Training services, courseware integrated logistics support and maintenance; Fuzing and ordnance systems; Unmanned systems and components; Radar-based sensors and systems; Global Positioning System (GPS) receivers; Global airline pilot training and crew resourcing; Navigation systems and positioning navigation units; Solid state crash protected cockpit voice and flight data recorders; Airborne dipping sonars, submarine and surface ship towed arrays... See more products below!

L-3's Major DoD Defense Programs:


| C-12 | C-17 | DoD Prime ContractorC-27J JCA | C-130 Hercules | E-2D | E-6B | F/A-18E/F | F-22 Raptor |
| F-35 Lightning II | HH-60M | MH-60R | MH-60S | UH-60 Black Hawk |
| RQ-4 Global Hawk | V-22 Osprey |

Commercial Programs:


| Airbus: A320 Series, A330 | Boeing: 737NG, 747, 767, 777, 787 |
| Bombardier: CRJ | Embraer: ERJ |

Sales 2011-2015 Net Income 2011-2015 R&D Spending 2011-2015 # Employees 2011-2015

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