Jan 25, 2018 • 11:00 am ET



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Good day, and welcome to the L3 Technologies Fourth Quarter 2017 and Full Year Conference Call. (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

Thank you. Good morning, and thanks for joining us for L3 2017 Fourth Quarter and Full Year Earnings Conference Call. With me today are Chris Kubasik, CEO and President; and Ralph D'Ambrosio, SVP and CFO. After their formal remarks, management will be available to take your questions. (Forward-Looking Cautionary Statements) Please also note that this call is simultaneously broadcast over the Internet.

I would now like to turn the call over to Chris Kubasik. Chris, please go ahead.

Chris Kubasik

Thank you, and good morning everyone.We're beginning an exciting new turn in the history of L3. 2018 kicks off a new era as we transition to L3 3.0. As you may have seen, we hit the ground running in early January with new organizational announcements. We're adding well-respected outside leaders to help us intensify our drive for growth and bring a fresh perspective. We'll been rolling out a number of new initiatives to further my three key themes for 2018 integration, collaboration, and innovation. If we go back to our investor conference in December, we spoke about our focus in 2018 on better integrating the enterprise. This is a company with a lot of potential and a lot of work to be done.

We are actively at work improving our processes; streamlining our procedures; deepening our L365 initiatives, which is our continuous improvement focus; and in some areas, moving and changing our people for improved growth and accountability. We're positioning the company for higher margins this year, and at the same time, we're investing in new processes as well as getting more strategic on our technology road map. It's important to push open the aperture for more top line growth in the years ahead.

I believe and our segment presidents believe we can be doing better across the board, and we're raising expectations to achieve that. I'm a big believer in continuous improvement, and we have embarked on a number of internal initiatives. Before we discuss our results, I want to touch quickly on the Defense budget. The recent vote to end the shutdown and fund the government for 3 weeks shows some progress, but it is still temporary. Like the rest of the industry, we are concerned about how the continuing resolution impacts the U.S. Military's ability to plan and execute its mission.

We will leverage our strength of agility and adaptability to support our customers as they navigate in this uncertain budget environment. We are watching the matter closely, and our guidance assumes that we don't have a protracted CR.

In terms of our financials. We had a good quarter and ended the year with increased sales, improved margins and a double-digit increase in EPS. Our 2017 EPS and margins could have been higher, but we continue to make decisions to