L3 Announces First Quarter 2019 Results

  • Book-to-bill ratio of 1.25x on funded orders of $3.4 billion
  • Sales increased 14% to $2.7 billion
  • Diluted earnings per share (EPS) from continuing operations of $2.71
  • Adjusted diluted EPS from continuing operations(1)
    of $2.89
  • Cash from continuing operations of $174 million
  • Free cash flow of $146 million
  • Increased 2019 full-year financial guidance

NEW YORK–(BUSINESS WIRE)–May 1, 2019–
L3 Technologies, Inc. (NYSE:LLL) today reported diluted earnings per
share (EPS)from continuing operations of $2.71 and adjusted
diluted EPS from continuing operations of $2.89 for the quarter ended
March 29, 2019 (2019 first quarter), an increase of 16% and 24%,
respectively, compared to diluted EPS from continuing operations for the
quarter ended March 30, 2018 (2018 first quarter) of $2.34. Adjusted
diluted EPS excludes $15 million ($11 million after income taxes, or
$0.14 per diluted share) of merger and acquisition related expenses and
$3 million ($0.04 per diluted share) related to business divestitures,
primarily a loss on the sale of business. Net sales of $2,700 million
for the 2019 first quarter increased by 14% compared to the 2018 first
quarter.

“We had strong first quarter performance highlighted by a notable
book-to-bill ratio of 1.25 and increases in sales, operating income,
operating margin, EPS and free cash flow,” said Christopher E. Kubasik,
L3’s Chairman, Chief Executive Officer and President. “Across L3, our
team continues to be engaged, productive and efficient, and their
outstanding work is reflected in our financial results. I appreciate
this focus, which lays the groundwork for becoming a more agile and
integrated technology leader with the impending merger of L3 and Harris.”

_________________

(1)

Adjusted diluted EPS from continuing operations is not
calculated in accordance with accounting principles generally
accepted in the United States of America (U.S. GAAP) and
represents diluted EPS from continuing operations excluding
merger, acquisition and divestiture related expenses and losses.
The company believes that merger, acquisition and divestiture
related expenses and losses affect the comparability of the
results of operations and that disclosing diluted EPS from
continuing operations excluding these items is useful to investors
as it allows investors to more easily compare 2019 first quarter
results to 2018 first quarter results. However, these non-GAAP
financial measures may not be defined or calculated by other
companies in the same manner.

L3 Consolidated Results

The table below provides L3’s selected financial data.

First Quarter Ended

March March
(in millions, except per share data) 29, 30, Increase/
2019 2018 (decrease)
Net sales $2,700 $2,371 14 %
Operating income $293 $251 17 %
Plus: Merger, acquisition and divestiture related expenses and losses 18 $– nm
Segment operating income $311 $251 24 %
Segment operating margin 11.5% 10.6% 90 bpts
Interest expense $(37) $(41) (10) %
Interest and other income, net 4 6 nm
Effective income tax rate(a) 14.2% 11.1% nm
Net income from continuing operations attributable to L3 $217 $187 16 %
Adjusted net income from continuing operations attributable to L3 $231 $187 24 %
Diluted earnings per share from continuing operations $2.71 $2.34 16 %
Adjusted diluted earnings per share from continuing operations $2.89 $2.34 24 %
Diluted weighted average common shares outstanding 80.0 79.9 %
Net cash provided from (used in) operating activities from
continuing operations
$174 $(35) nm
Less: Capital expenditures (49) (56) (13) %
Plus: Disposition of property, plant and equipment 3 2 nm
Tax and transaction payments related to divestitures 1 4 nm
Merger and acquisition related payments 17 nm
Free cash flow(b)(c) $146 $(85) nm

_________________

(a) The effective income tax rate corresponding to adjusted
diluted EPS was 14.7% for the 2019 first quarter.

(b) 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),
plus tax and transaction payments related to divestitures, and
merger and acquisition

related payments. The company believes free cash flow is a
useful measure for investors because it portrays the company’s
ability to generate cash from

operations for purposes such as repaying debt, returning cash
to shareholders and funding acquisitions. The company also uses
free cash flow as

a performance measure in evaluating management.

(c) Excludes free cash flow from discontinued operations.

nm = not meaningful

First Quarter Results of Operations: For the 2019 first quarter,
consolidated net sales of $2,700 million increased $329 million, or 14%,
compared to the 2018 first quarter. Organic sales(2)
increased by $333 million, or 14%, to $2,670 million for the 2019 first
quarter. Organic sales exclude $30 million of sales increases related to
business acquisitions and $34 million of sales declines related to
business divestitures. For the 2019 first quarter, organic sales to the
U.S. Government increased $287 million, or 18%, to $1,916 million, and
organic sales to international and commercial customers increased $46
million, or 6%, to $754 million.

____________________

(2)

Organic sales represent net sales excluding the sales impact
of acquisitions and divestitures. Sales increases related to
acquired businesses are sales from acquisitions that are included
in L3’s actual results for less than 12 months. Sales declines
related to business divestitures are sales from divestitures that
are included in L3’s actual results for the 12 months prior to the
divestitures. The company believes organic sales is a useful
measure for investors because it provides period-to-period
comparisons of the company’s ongoing operational and financial
performance.

Segment operating income for the 2019 first quarter increased by $60
million, or 24%, compared to the 2018 first quarter. Segment operating
income as a percentage of sales (segment operating margin) increased by
90 basis points to 11.5% for the 2019 first quarter from 10.6% for the
2018 first quarter. Favorable contract performance primarily at
Communications and Networked Systems (C&NS), lower severance and general
& administrative (G&A) expenses at C&NS and Electronic Systems segments
and lower pension expense across all three segments were partially
offset by sales mix changes at Electronic Systems, primarily Commercial
Aviation Solutions.

See the reportable segment results below for additional discussion of
sales and operating margin trends.

The effective income tax rate for the 2019 first quarter increased to
14.2% from 11.1% for the 2018 first quarter. The increase was driven by
a reduction in tax benefits from equity compensation partially offset by
an increased tax benefit on export sales.

Orders: Funded orders for the 2019 first quarter increased 28% to
$3,383 million compared to $2,636 million for the 2018 first quarter.
The book-to-bill ratio was 1.25x for the 2019 first quarter. Funded
backlog increased 7% to $10,396 million at March 29, 2019, compared to
$9,704 million at December 31, 2018.

The table below provides funded orders data for the first quarter of
2019.

First Quarter Ended
($ in millions)

March 29,
2019

March 30,
2018

Increase/
(decrease)

ISRS $ 1,734 $ 1,097 58 %
C&NS 934 743 26 %
Electronic Systems 715 796 (10 )%
Total $ 3,383 $ 2,636 28 %

Cash Flow: Net cash provided from operating activities from
continuing operations was $174 million for the 2019 first quarter, an
increase of $209 million compared to net cash used of $35 million for
the 2018 first quarter. The increase was primarily due to higher
operating income and timing of billings and collections across several
business areas in all three segments. Cash on hand at March 29, 2019 was
$1,108 million, an increase of $42 million compared to December 31, 2018.

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, merger and acquisition related expenses, divestiture related
costs, and certain other items that are excluded by management for
purposes of evaluating the performance of the company’s business
segments.

Intelligence, Surveillance and Reconnaissance Systems

First Quarter Ended Increase
($ in millions)

March 29,
2019

March 30,
2018

Net sales $ 1,253 $ 1,016 23 %
Operating income $ 130 $ 93 40 %
Operating margin 10.4 % 9.2 % 120 bpts

First Quarter: ISRS net sales for the 2019 first quarter
increased by $237 million, or 23%, compared to the 2018 first quarter.
Organic sales increased by $252 million, or 25%, compared to the 2018
first quarter. Organic sales exclude $19 million of sales increases
related to business acquisitions and $34 million of sales declines
related to business divestitures. Organic sales increased by: (1) $135
million for Surveillance & Strike Systems primarily due to higher volume
related to procurement and ISR missionization of business jet aircraft
systems for the U.S. Air Force (USAF) EC-37B Compass Call Recap
aircraft, the Royal Australian Air Force (RAAF) MC-55A Peregrine
aircraft and the High Altitude Observatory (HALO) aircraft for the U.S.
Missile Defense Agency (MDA), (2) $53 million for Reconnaissance Mission
Systems due to procurement and modification related to special mission
aircraft for the U.S. Government, (3) $36 million for Integrated Land
Systems primarily due to increased deliveries of night vision products
to an international customer and (4) $35 million due to increased
deliveries of airborne turret systems to U.S. and foreign militaries.
These increases were partially offset by $7 million for Intelligence &
Mission Systems primarily due to fewer deliveries of electronic warfare
countermeasures products as contracts near completion.

ISRS operating income for the 2019 first quarter increased $37 million,
or 40%, compared to the 2018 first quarter. Operating margin increased
by 120 basis points to 10.4% driven by higher sales volume, lower
pension expense, which increased operating margin by 60 basis points and
the impact from divestiture of lower margin businesses.

Communications and Networked Systems

First Quarter Ended Increase
($ in millions)

March 29,
2019

March 30,
2018

Net sales $ 785 $ 707 11 %
Operating income $ 84 $ 64 31 %
Operating margin 10.7 % 9.1 % 160 bpts

First Quarter: C&NS net sales for the 2019 first quarter
increased by $78 million, or 11%, compared to the 2018 first quarter.
Organic sales increased by $72 million, or 10%, compared to the 2018
first quarter. Organic sales exclude $6 million of sales increases
related to business acquisitions. Organic sales increased by: (1) $46
million for Broadband Communications due to higher production volume for
Unmanned Aerial Vehicle (UAV) communication systems for the U.S.
Department of Defense (DoD) and (2) $26 million primarily for
Communications & Microwave Products due to increased deliveries of
mobile and ground-based SATCOM systems for the U.S. Special Operations
Command (USSOCOM).

C&NS operating income for the 2019 first quarter increased by $20
million, or 31%, compared to the 2018 first quarter. Operating margin
increased by 160 basis points to 10.7%. Operating margin increased by:
(1) 90 basis points primarily due to favorable contract performance, (2)
40 basis points due to lower severance and G&A expenses and (3) 30 basis
points due to lower pension expenses.

Electronic Systems

First Quarter Ended Increase
($ in millions) March 29, 2019 March 30, 2018
Net sales $ 662 $ 648 2 %
Operating income $ 97 $ 94 3 %
Operating margin 14.7 % 14.5 % 20 bpts

First Quarter: Electronic Systems net sales for the 2019 first
quarter increased by $14 million, or 2%, compared to the 2018 first
quarter. Organic sales increased by $9 million, or 1%, compared to the
2018 first quarter. Organic sales exclude $5 million of sales increases
related to business acquisitions. Organic sales increased by $29 million
for Precision Engagement Systems due to new awards on classified
programs and increased volume for fuzing and ordnance and guidance
systems products primarily to the U.S. Army. These increases were
partially offset by: (1) $15 million for Defense Training Solutions
primarily due to the loss of the USAF C-17 contract recompetition last
year as our incumbent contract ended in November 2018 and (2) $5 million
for Commercial Aviation Solutions primarily due to lower volume for
commercial flight simulators as certain contracts near completion.

Electronic Systems operating income for the 2019 first quarter increased
by $3 million, or 3%, compared to the 2018 first quarter. Operating
margin increased by 20 basis points to 14.7%. Operating margin increased
by 140 basis points due to lower G&A expenses and 30 basis points due to
lower pension expense. These increases were offset by 150 basis points
due to sales mix changes primarily at Commercial Aviation Solutions.

Financial Guidance

Based on information known as of the date of this release, the company
has updated its consolidated and segment financial guidance for the year
ending December 31, 2019, as presented in the tables below. All
financial guidance amounts are based on results from continuing
operations and are estimates subject to change, including as a result of
matters discussed under the “Forward-Looking Statements” cautionary
language beginning on page 6. The company undertakes no duty to update
its guidance.

Consolidated 2019 Financial Guidance
(in millions, except per share data)
Current Guidance

Prior Guidance
(January 29, 2019)

Net sales $10,900 $10,750
Operating margin 12.0% 12.0%
Interest expense $155 $155
Interest and other income $30 $30
Effective tax rate 19% 20%
Minority interest expense(1) $22 $22
Net cash from operating activities from continuing operations $1,285 $1,275
Capital expenditures, net of dispositions of property, plant and
equipment
(230) (230)
Free cash flow $1,055 $1,045

_____________

(1) Minority interest expense represents net income from
continuing operations attributable to non-controlling interests.

Segment 2019 Financial Guidance
($ in millions)
Current Guidance

Prior Guidance
(January 29, 2019)

Net Sales:

ISRS $4,825 to $4,925 $4,700 to $4,800
C&NS $3,150 to $3,250 $3,125 to $3,225
Electronic Systems $2,775 to $2,875 $2,775 to $2,875

Operating Margin:

ISRS 11.1% to 11.3% 11.1% to 11.3%
C&NS 11.0% to 11.2% 11.0% to 11.2%
Electronic Systems 14.3% to 14.5% 14.3% to 14.5%

The revisions to our Current Guidance compared to our Prior Guidance
primarily includes:

  • an increase in estimated sales at ISRS for ISR Recap and Special
    Mission aircraft fleet expansion work, and at C&NS for classified
    programs and
  • a lower effective income tax rate due to higher tax benefits on export
    sales to foreign customers and an expected increase in tax benefits
    from equity compensation.

Guidance for 2019 excludes: (i) potential changes to interpretations of
U.S. tax reform, (ii) any potential goodwill impairment charges for
which the information is presently unknown, (iii) potential adverse
results related to litigation contingencies, (iv) gains and losses
related to potential business divestitures, (v) impact of potential
acquisitions and divestitures and (vi) L3 Harris merger, integration and
transaction related payments and expenses.

Additional financial information regarding the 2019 financial guidance
is available on the company’s website at www.L3T.com.

Conference Call

In conjunction with this release, L3 will host a conference call today,
Wednesday, May 1, 2019, at 11:00 a.m. ET that will be simultaneously
broadcast over the Internet. Christopher E. Kubasik, Chairman, Chief
Executive Officer and President, and Ralph G. D’Ambrosio, Senior Vice
President and Chief Financial Officer, will host the call.

Listeners can access the conference call live at the following website
address:

http://www.L3T.com

Please allow 15 minutes prior to the call to visit this site to download
and install any necessary audio software. The archived version of the
call may be accessed at the site or by dialing 1-877-344-7529 (for
domestic callers) or 1-412-317-0088 (for international callers) and
using the Replay Access Code: 10129454 approximately one hour after the
call ends. The Conference Replay will be available through Wednesday,
May 15, 2019.

With headquarters in New York City and approximately 31,000 employees
worldwide, L3 develops advanced defense technologies and commercial
solutions in pilot training, aviation security, night vision and EO/IR,
weapons, maritime systems and space.

To learn more about L3, please visit the company’s website at www.L3T.com.
L3 uses its website as a channel of distribution of material company
information. Financial and other material information regarding L3 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 2019 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: the occurrence of any event, change or other
circumstances that could give us or Harris the right to terminate the
definitive merger agreement between us and Harris; the outcome of any
legal proceedings that may be instituted against us, Harris or our
respective directors with respect to the merger; the ability to obtain
regulatory approvals and satisfy other closing conditions to the merger
in a timely manner or at all, including the risk that regulatory
approvals required for the merger are not obtained or are obtained
subject to conditions that are not anticipated; delay in closing the
merger; difficulties and delays in integrating our business with Harris
business or fully realizing anticipated cost savings and other benefits;
business disruptions from the proposed merger that may harm our business
or Harris business, including current plans and operations; any
announcement relating to the proposed transaction could have adverse
effects on our ability or the ability of Harris to retain and hire key
personnel or maintain relationships with suppliers and customers,
including the U.S. government and other governments, or on our or Harris
operating results and businesses generally; the risk that the
announcement of the proposed transaction could have adverse effects on
the market price of our common stock or Harris common stock and the
uncertainty as to the long-term value of the common stock of the
combined company following the merger; certain restrictions during the
pendency of the merger that may impact our ability or the ability of
Harris to pursue certain business opportunities or strategic
transactions; the business, economic and political conditions in the
markets in which we and Harris operate; 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; 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; 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; 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; the risk that our commercial aviation
products and services businesses are affected by a downturn in global
demand for air travel or a reduction in commercial aircraft OEM
(Original Equipment Manufacturer) production rates; 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 impact on our business of improper conduct by our
employees, agents or business partners; goodwill impairments and the
fair values of our assets; and the 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, 2018 and in the quarterly report on
Form 10-Q for the quarterly period ended March 29, 2019, 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

L3 TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

First Quarter Ended(a)

March 29,
2019

March 30,
2018

Net sales $ 2,700 $ 2,371
Cost of sales (2,007 ) (1,723 )
General and administrative expenses (382 ) (397 )
Total costs and operating expenses (2,389 ) (2,120 )
Merger, acquisition and divestiture related expenses and losses (18 )
Operating income 293 251
Interest expense (37 ) (41 )
Interest and other income, net 4 6
Income from continuing operations before income taxes 260 216
Provision for income taxes (37 ) (24 )
Income from continuing operations 223 192
Income from discontinued operations, net of income tax 16
Net income 223 208
Net income from continuing operations attributable to
noncontrolling interests
(6 ) (5 )
Net income attributable to L3 $ 217 $ 203
Basic earnings per share attributable to L3’s common shareholders:
Continuing operations $ 2.74 $ 2.40
Discontinued operations 0.20
Basic earnings per share $ 2.74 $ 2.60
Diluted earnings per share attributable to L3’s common
shareholders:
Continuing operations $ 2.71 $ 2.34
Discontinued operations 0.20
Diluted earnings per share $ 2.71 $ 2.54
L3’s weighted average common shares outstanding:
Basic 79.2 78.2
Diluted 80.0 79.9

_______________

(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.

Table B

L3 TECHNOLOGIES, INC.

UNAUDITED SELECT FINANCIAL DATA

(in millions)

First Quarter Ended

March 29,
2019

March 30,
2018

Segment operating data

Net sales:
ISRS $ 1,253 $ 1,016
C&NS 785 707
Electronic Systems 662 648
Total $ 2,700 $ 2,371
Segment operating income:
ISRS $ 130 $ 93
C&NS 84 64
Electronic Systems 97 94
Segment operating income $ 311 $ 251
Segment operating margin:
ISRS 10.4 % 9.2 %
C&NS 10.7 % 9.1 %
Electronic Systems 14.7 % 14.5 %
Total 11.5 % 10.6 %
Depreciation and amortization:
ISRS $ 23 $ 21
C&NS 16 17
Electronic Systems 19 18
Total $ 58 $ 56

Funded order data

ISRS $ 1,734 $ 1,097
C&NS 934 743
Electronic Systems 715 796
Total $ 3,383 $ 2,636
March 29, December 31,
2019 2018

Backlog

Funded $ 10,396 $ 9,704

Table C

L3 TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED

BALANCE SHEETS

(in millions)

March 29,
2019

December 31,
2018

ASSETS
Cash and cash equivalents $ 1,108 $ 1,066
Billed receivables, net 804 919
Contract assets 1,735 1,590
Inventories 896 879
Prepaid expenses and other current assets 362 356
Total current assets 4,905 4,810
Property, plant and equipment, net 1,178 1,169
Operating lease right-of-use assets 618
Goodwill 6,826 6,808
Identifiable intangible assets 378 390
Other assets 358 341
Total assets $ 14,263 $ 13,518
LIABILITIES AND EQUITY
Accounts payable, trade $ 672 $ 699
Accrued employment costs 411 491
Accrued expenses 219 251
Contract liabilities 711 669
Income taxes payable 55 49
Other current liabilities 364 288
Total current liabilities 2,432 2,447
Pension and postretirement benefits 1,202 1,211
Deferred income taxes 205 196
Other liabilities 415 436
Operating lease liabilities 569
Long-term debt 3,322 3,321
Total liabilities 8,145 7,611
Shareholders’ equity 6,051 5,839
Noncontrolling interests 67 68
Total equity 6,118 5,907
Total liabilities and equity $ 14,263 $ 13,518

Table D

L3 TECHNOLOGIES, INC.

UNAUDITED CONDENSED CONSOLIDATED

STATEMENTS OF CASH FLOWS

(in millions)

First Quarter Ended
March 29, 2019 March 30, 2018

Operating activities

Net income $ 223 $ 208
Less: (income) loss from discontinued operations, net of tax (16 )
Income from continuing operations 223 192
Depreciation of property, plant and equipment 43 43
Amortization of intangibles and other assets 15 13
Deferred income tax provision 8 16
Stock-based compensation expense 12 20
Contributions to employee savings plans in common stock 30 32
Amortization of pension and postretirement benefit plans net loss
and prior service cost
9 18
Other non-cash items 5 1
Changes in operating assets and liabilities, excluding amounts
from acquisitions and divestitures and

discontinued operations:

Billed receivables 116 (73 )
Contract assets (142 ) (145 )
Inventories (20 ) (65 )
Prepaid expenses and other current assets (31 ) (99 )
Accounts payable, trade (32 ) 56
Accrued employment costs (70 ) (54 )
Accrued expenses (31 ) (6 )
Contract liabilities 43 41
Income taxes 14 (11 )
All other operating activities (18 ) (14 )
Net cash from (used in) operating activities from continuing
operations
174 (35 )

Investing activities

Proceeds from the sale of businesses, net of closing date cash
balances
1
Working capital adjustment on prior divestitures (20 )
Capital expenditures (49 ) (56 )
Dispositions of property, plant and equipment 3 2
Other investing activities (9 ) (29 )
Net cash used in investing activities from continuing operations (74 ) (83 )

Financing activities

Borrowings under revolving credit facility 207
Repayments of borrowings under revolving credit facility (207 )
Common stock repurchased (119 )
Dividends paid (70 ) (65 )
Proceeds from exercise of stock options 19 55
Proceeds from employee stock purchase plan 8
Repurchases of common stock to satisfy tax withholding obligations (22 ) (23 )
Other financing activities (7 ) (2 )
Net cash used in financing activities from continuing operations (80 ) (146 )
Effect of foreign currency exchange rate changes on cash and cash
equivalents
3 6
Cash from (used in) discontinued operations:
Operating activities 19 (29 )
Investing activities (1 )
Cash from (used in) discontinued operations 19 (30 )
Net increase in cash and cash equivalents 42 (288 )
Cash and cash equivalents, beginning of the period 1,066 662
Cash and cash equivalents, end of the period $ 1,108 $ 374

Table E

L3 TECHNOLOGIES, INC.

NON-GAAP FINANCIAL MEASURES

(in millions, except per share amounts)

First Quarter Ended
March 29, 2019 March 30, 2018
Diluted EPS from continuing operations attributable to L3’s common
stockholders
$ 2.71 $ 2.34
EPS impact of merger and acquisition related expenses (1) 0.14
EPS impact of divestiture related expenses and losses(2) 0.04
Adjusted diluted EPS from continuing operations (3) $ 2.89 $ 2.34
Net income from continuing operations attributable to L3 $ 217 $ 187
Merger and acquisition related expenses (1) 11
Divestiture related expenses and losses (2) 3
Adjusted net income from continuing operations attributable to L3 (3) $ 231 $ 187
__________________

(1) Merger and acquisition related expenses

$ (15 )

Tax benefit

4
After-tax impact (11 )
Diluted weighted average common shares outstanding 80.0
Per share impact (4) $ (0.14 )

(2) Divestiture related expenses and losses

$ (3 )
Tax benefit
After-tax impact (3 )
Diluted weighted average common shares outstanding 80.0
Per share impact (4) $ (0.04 )

(3) Adjusted diluted EPS from continuing operations is
diluted EPS from continuing operations excluding merger,
acquisition and divestiture related

expenses and losses. Adjusted net income attributable to L3
is net income attributable to L3 excluding merger, acquisition and
divestiture related

expenses and losses.These amounts are not
calculated in accordance with accounting principles generally
accepted in the United States of America

(U.S. GAAP). We believe that the merger, acquisition and
divestiture related expenses and losses affect the comparability
of the results of operations

for 2019 to the results of operations for 2018. We also
believe that disclosing net income and diluted EPS excluding these
items is useful to investors

as it allows investors to more easily compare the 2019
results to the 2018 results. However, these non-GAAP financial
measures may not be defined or

calculated by other companies in the same manner.

(4) Amounts may not calculate directly due to rounding.

View source version on businesswire.com: https://www.businesswire.com/news/home/20190501005367/en/

Source: L3 Technologies, Inc.

L3 Technologies, Inc.
Corporate Communications
212-697-1111

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