L-3 Communications Holdings Inc.’s (LLL) subsidiary L-3 GCS has been awarded a $170 million contract by the U.S. Special Operations Command (USSOCOM). The five year contract is for supplying Panther Very Small Aperture Terminal (VSAT) manpack satellite communications systems and associated equipment. The systems will be used in support of USSOCOM’s Special Operations Forces Deployable Node-Lite (SDN-Lite) program, which will help Special Operations Forces field personnel connect to the worldwide satellite communications.
Located in Victor, New York, L-3 GCS is a leading provider of satellite communications (SATCOM) systems that integrate data, broadband Internet, telephony, multimedia, audio, video and computer networking. These are utilized by the Department of Defense and Department of Homeland Security as well as other federal agencies and various commercial sector customers.
Headquartered in New York City, L-3 Communications is a prime contractor for C3ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) systems, aircraft modernization and maintenance, and government services. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms.
L-3 Communications stands out among pure defense players by virtue of its non-platform focus, prominent position as a sub-contractor/supplier to other defense primes, broad diversification of programs, strong order bookings, and order backlog of approximately $11.1 billion at the end of the first half of fiscal 2010. Revenue and earnings growth continues to be driven by its strong presence in the current focus areas of command, control, communications, intelligence, surveillance and reconnaissance (C3ISR) equipment; precision-guided weapons; unmanned aerial vehicles (UAVs); and other electro-mechanical robotic capabilities, networked information technologies, special operations forces, and helicopter crew training.
L-3 Communications’ strong balance sheet provides financial flexibility in matters of incremental dividend, ongoing share repurchase and earnings accretive acquisitions. As of first half-end of 2010, the company had a low long-term debt-to-capitalization of 33.7% (Zacks industry average was 93.8%) with a total long-term debt of $3.4 billion along with cash holdings of approximately $1 billion and unutilized credit facility close to $967 million. The company is focused in refinancing its debt through lower cost debts. Earlier the company came up with an offering of bonds worth $800 million in May 2010, at a coupon rate of 4.8%. The proceeds were used to pay down dearer debts – $800 million worth of notes bearing a coupon of 6.1% due in 2013–2014, effectively reducing its interest liability.
L-3 Communications mainly competes with FLIR Systems Inc. (FLIR), Herley Industries Inc. (HRLY), Cyalume Technologies Holdings Inc. (CYLU), and Raytheon Company (RTN). We currently have a Neutral recommendation on the Zacks #3 Rank stock.
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