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L-3 Communications's (LLL) CEO Michael Strianese on Q1 2016 Results - Earnings Call Transcript

L-3 Communications Holdings, Inc. (NYSE:LLL)

Q1 2016 Earnings Conference Call

April 27, 2016 02:00 PM ET


Mahmoud Siddig - IR

Michael Strianese - CEO

Ralph D'Ambrosio - CFO

Christopher Kubasik - COO


Ronald Epstein - Bank of America

Robert Spingarn - Credit Suisse

Cai von Rumohr - Cowen & Company

Myles Walton - Deutsche Bank

Carter Copeland - Barclays

Seth Seifman - JPMorgan

Robert Stallard - Royal Bank of Canada

Richard Safran - Buckingham Research.

Howard Rubel - Jefferies

George Shapiro - Shapiro Research


Good day and welcome to the L-3 Communications First Quarter 2016 Conference Call. All participants will be in a listen-only mode. [Operator Instructions] After today's presentation, there will be opportunity to ask questions. [Operator Instructions] Please note, this event is being recorded.

I would now like to turn the conference over to Mahmoud Siddig. Please go ahead.

Mahmoud Siddig

Thanks Laurie. Good morning and thanks for joining us for L-3's 2016 first quarter earnings conference call. With me today are Michael Strianese, Chairman and Chief Executive Officer; Christopher Kubasik, President and Chief Operating Officer, and Ralph D'Ambrosio, Senior Vice President and Chief Financial Officer. After their formal remarks, management will be available to take your questions.

Please note that, during this call, management will reiterate forward-looking statements that were made in the press release issued this morning. Please refer to this press release, as well as the company's SEC filings, for a more detailed description of the factors that may cause actual results to differ materially from those anticipated. Please also note that this call is being simultaneously broadcast over the Internet.

I would now like to turn the call over to Michael Strianese. Mike, please go ahead.

Michael Strianese

Okay, Thank you, and good afternoon, everyone. I am pleased to report very solid first quarter results demonstrating our continue progress and increasing margins and driving organic revenue growth as well as the aligning our portfolio to our core businesses. I'll start out with an overview of our results and then we will provide some color on the current environment, our strategic focus areas and where we see opportunities for growth moving forward, then Chris will discuss our operational performance and Ralph will provide financial details before we take your questions.

For the first quarter we reported net sales of 2.4 billion a decrease of 5% over the same period last year, excluding the impacts of divestures and acquisitions sales decreased by 2% organically. Our EPS was $2.08 which is 50% increase over the first quarter of 2015. We recorded net cash from operations of $112 million, funded orders were $2.6 billion and our book to bill ratio was 1.1.

Our segment margin performance was very strong in the quarter increasing 230 basis points to 10.7%. This includes better than expected contract performance in Aerospace systems where margins increased to 10.5%. As we look at the overall environment we have seen improvements in the U.S. defense budget in 2016 and we are expecting that the budget will continue to grow over the next several years. Our customer continues to focus on affordable solutions and L-3 is well position to compete effectively. We have mapped our strategy to address the DOD spending priorities, which we feel our oriented towards weapons systems sustainment, space, the classified area, protective communications as well as next generation products.

The DOD remains L-3’s largest customer and we worked hard to anticipate and adapt to its needs so that our capabilities and solutions align with their current budget. A major win for us in the quarter was the maintenance at sustainment work for the FA-18, ABC&D aircraft. Building on our UK and Canadian FA-18 experience this U.S. navy competitive win is strategic for us because it represents the first time we’ll performance sustainment work on this platform at our Waco, Texas facility and we expect additional follow on work in the years ahead.