L-3 Communications Holdings Inc.
(LLL) has completed the acquisition of Insight Technology Incorporated. Insight develops and manufactures mission critical night vision and electro-optical equipment including laser aiming and illumination devices, laser rangefinders, laser markers and designators, night vision goggles and monoculars, and thermal imaging systems.
Headquartered in Londonderry, New Hampshire, Insight employs approximately 1,100 people. Insight’s products are used by the U.S. military, federal law enforcement agencies and other nations.
L-3 Communications has renamed the acquired business as L-3 Insight Technology Incorporated. The acquisition will expand and broaden L-3 Communications’ warrior systems capabilities. The company expects the acquisition to add approximately $200 million to sales in fiscal 2010.
L-3 Communications’ strong balance sheet provides financial flexibility in matters of earnings accretive acquisitions, incremental dividend, and ongoing share repurchases. As of Jan 28, 2010, the company had a low debt-to-capitalization of 38.2% (Zacks industry average was 99.2%), total long-term debt was $4.1 billion along with cash holdings of $1 billion and unutilized credit facility close to $900 million.
Headquartered in New York City, L-3 Communications is a prime contractor in C3ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) systems, aircraft modernization and maintenance and government services. The company is also a leading provider of a broad range of electronic systems used on military and commercial platforms. The company reported 2009 sales of $15.6 billion.
L-3 Communications remains a key player within the defense segment and mainly competes with FLIR Systems Inc. (FLIR), Herley Industries Inc. (HRLY), Cyalume Technologies Holdings Inc. (CYLU), and Raytheon Company (RTN). We believe it is one of the best-positioned pure defense plays by virtue of its non-platform focus, and broad diversification of programs.
Our bullish outlook for L-3 Communications is supported by its strong performance mainly from the C3ISR equipment, precision-guided weapons, unmanned aerial vehicles, and other electro-mechanical robotic capabilities, networked information technologies, special operations forces, and missile defense.
However, these are partially offset by risks related to key projects execution, divestitures, higher pension funding, and declining Linguist and commercial businesses revenues. We maintain our market Neutral recommendation on the Zacks #3 stock.
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