L-3 Communications announced on May 24 that it has agreed to acquire Crestview Aerospace Corporation (CAC) for $135 million in cash. The business is expected to have annual sales of approximately $120 million in 2006, and will be included in L-3's Aircraft Modernization and Maintenance (AM&M) reportable segment. The acquisition is expected to close in the third quarter of 2006, subject to customary closing conditions, and to be slightly accretive to L-3's earnings in 2006.

With facilities in Fairhope, Alabama, and Crestview, Florida, CAC provides aircraft structures, major airframe assemblies and military aircraft modifications for leading prime contractors and original equipment manufacturers (OEMs). Customers of its AeroStructures Group include the U.S. Department of Defense (DoD), Bell Helicopter Textron, Boeing, GKN-Westland, Vought Aircraft Industries, Northrop Grumman and Lockheed Martin. Select partners for its Aircraft Modifications Group include Boeing, Lockheed Martin, MTC Technologies, Aerospace Integration Corporation (AIC) and Northrop Grumman. Additionally, L-3 currently partners with CAC for C-130 aircraft, as well as for H-60 and H-35 helicopters.

"CAC has a great heritage as part of the old Fairchild Industries," said Frank C. Lanza, chairman and chief executive officer of L-3 Communications. "The business was bought in 1990, and was subsequently turned around by the Shanklin family and its highly skilled workforce. Since that time, CAC has grown substantially to become an industry leader and preferred supplier to the primes because of its focus on quality, service, customers and cost-effectiveness."

"CAC offers a number of advantages to L-3 in our efforts to pursue future major structure and airframe modification and upgrade opportunities," continued Mr. Lanza. "CAC gives L-3 turnkey manufacturing and modification capabilities that are within 80 miles of seven military bases, and it is geographically situated for business with Special Operations Command (SOCOM), and Air Force Special Operations Command (AFSOC)."

Mr. Lanza also noted that CAC is synergistic with L-3's existing aircraft modification and modernization operations, which include L-3 Integrated Systems' support of special operations forces, L-3 Vertex's maintenance operations, L-3 SPAR's work with C-130 aircraft and helicopters, and L-3 TCS, which was acquired in the first quarter of 2006. "TCS offers high-end design and engineering capability," said Mr. Lanza "and when it partners with CAC's installation expertise and capacity, L-3 can provide a turnkey solution for reset and reconstitution of the C-130 and special mission helicopters."

"We believe that aircraft reset will be a growing budget area for the DoD," said Mr. Lanza," particularly as troops are withdrawn from the wars in Iraq and Afghanistan, and the Pentagon focuses on the maintenance and upgrade of existing aircraft to ensure future readiness. By adding CAC's facilities in Alabama and Florida to those we have in Texas, Mississippi and Canada, L-3 will offer customers the advantage of unmatched service, significant capacity, and cost-effective solutions." CAC was acquired by the Shanklin family in 1990. It has grown from 13 employees to more than 1,200 today, making it the largest private employer in Okaloosa County, Florida.

"The results of our dedication and hard work have been incredible. However, our needs caused by such success require us to find a company that will support continued growth in the future. That company is L-3 Communications," said Charles E. Shanklin, chairman and chief executive officer of CAC.