XML 46 R35.htm IDEA: XBRL DOCUMENT v3.10.0.1
Condensed Combining Financial Information of L3 and Its Subsidiaries
 9 Months Ended
Sep. 28, 2018
Condensed Financial Information Disclosure [Abstract]  
Condensed Combining Financial Information of L3 and Its Subsidiaries
Condensed Combining Financial Information of L3 and Its Subsidiaries
The debt of L3, including the senior notes and borrowings under amounts drawn against the Credit Facility, are guaranteed, on a joint and several, full and unconditional basis, by certain of its 100% owned domestic subsidiaries (the Guarantor Subsidiaries). See Note 9 to the audited consolidated financial statements for the year ended December 31, 2017, included in the Company’s Annual Report on Form 10-K for additional information. The foreign subsidiaries and certain domestic subsidiaries of L3 (the Non-Guarantor Subsidiaries) do not guarantee the debt of L3. None of the debt of L3 has been issued by its subsidiaries.
Under the terms of the indentures governing the senior notes, the guarantees of the senior notes will automatically and unconditionally be released and discharged: (1) upon the release of all guarantees of all other outstanding indebtedness of L3 or (2) upon the determination that such guarantor is no longer a “domestic subsidiary.” In addition, the guarantees of the senior notes will be automatically and unconditionally released and discharged in the event of a sale or other disposition of all of the assets of any guarantor, by way of merger, consolidation or otherwise, or a sale of all of the capital stock of such guarantor. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L3.
The following unaudited condensed combining financial information presents the results of operations, financial position and cash flows of: (1) L3 excluding its consolidated subsidiaries (the Parent), (2) the Guarantor Subsidiaries, (3) the Non-Guarantor Subsidiaries and (4) the eliminations to arrive at the information for L3 on a consolidated basis.
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated L3
 
(in millions)
Condensed Combining Balance Sheets:
 
 
 
 
 
 
 
 
 
At September 28, 2018
 
 
 
 
 
 
 
 
 
Current assets:
 
 
 
 
 
 
 
 
 
Cash and cash equivalents
$
258

 
$
21

 
$
251

 
$
(23
)
 
$
507

Billed receivables, net
302

 
322

 
276

 
—

 
900

Contract assets
612

 
878

 
217

 
—

 
1,707

Inventories
382

 
294

 
235

 
—

 
911

Prepaid expenses and other current assets
133

 
199

 
78

 
—

 
410

Total current assets
1,687


1,714


1,057


(23
)

4,435

Goodwill
2,124

 
3,011

 
1,699

 
—

 
6,834

Other assets
695

 
767

 
453

 
—

 
1,915

Investment in and amounts due from consolidated subsidiaries
6,144

 
6,695

 
—

 
(12,839
)
 
—

Total assets
$
10,650


$
12,187


$
3,209


$
(12,862
)

$
13,184

Current liabilities
$
751

 
$
900

 
$
632

 
$
(23
)
 
$
2,260

Amounts due to consolidated subsidiaries
—

 
—

 
444

 
(444
)
 
—

Other long-term liabilities
937

 
791

 
165

 
—

 
1,893

Long-term debt
3,320

 
—

 
—

 
—

 
3,320

Total liabilities
5,008


1,691


1,241


(467
)

7,473

L3 shareholders’ equity
5,642

 
10,496

 
1,968

 
(12,464
)
 
5,642

Noncontrolling interests
—

 
—

 
—

 
69

 
69

Total equity
5,642


10,496


1,968


(12,395
)

5,711

Total liabilities and equity
$
10,650


$
12,187


$
3,209


$
(12,862
)

$
13,184


 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated L3
 
(in millions)
At December 31, 2017
 

 
 

 
 

 
 

 
 

Current assets:
 

 
 

 
 

 
 

 
 

Cash and cash equivalents
$
432

 
$
16

 
$
285

 
$
(71
)
 
$
662

Billed receivables, net
266

 
244

 
213

 
—

 
723

Contracts in process
706

 
912

 
315

 
—

 
1,933

Prepaid expenses and other current assets
330

 
235

 
124

 
—

 
689

Assets held for sale
—

 
135

 
—

 
—

 
135

Assets of discontinued operations
306

 
—

 
—

 
—

 
306

Total current assets
2,040


1,542


937


(71
)

4,448

Goodwill
2,099

 
2,932

 
1,584

 
—

 
6,615

Other assets
658

 
687

 
321

 
—

 
1,666

Investment in and amounts due from consolidated subsidiaries
5,662

 
6,310

 
—

 
(11,972
)
 
—

Total assets
$
10,459


$
11,471


$
2,842


$
(12,043
)

$
12,729

Current liabilities
$
811

 
$
832

 
$
564

 
$
(71
)
 
$
2,136

Liabilities held for sale
—

 
17

 
—

 
—

 
17

Liabilities of discontinued operations
226

 
—

 
—

 
—

 
226

Amounts due to consolidated subsidiaries
—

 
—

 
391

 
(391
)
 
—

Other long-term liabilities
1,009

 
729

 
131

 
—

 
1,869

Long-term debt
3,330

 
—

 
—

 
—

 
3,330

Total liabilities
5,376


1,578


1,086


(462
)

7,578

L3 shareholders’ equity
5,083

 
9,893

 
1,756

 
(11,649
)
 
5,083

Noncontrolling interests
—

 
—

 
—

 
68

 
68

Total equity
5,083


9,893


1,756


(11,581
)

5,151

Total liabilities and equity
$
10,459


$
11,471


$
2,842


$
(12,043
)

$
12,729



 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated L3
 
(in millions)
Condensed Combining Statements of Operations:
 

 
 

 
 

 
 

 
 

For the quarter ended September 28, 2018:
 

 
 

 
 

 
 

 
 

Total net sales
$
872

 
$
1,274

 
$
456

 
$
(83
)
 
$
2,519

Total operating costs and expenses
(759
)
 
(1,200
)
 
(362
)
 
83

 
(2,238
)
Loss on sale of the Crestview & TCS Businesses
—

 
(4
)
 
—

 
—

 
(4
)
Merger, acquisition and divestiture related expenses
(5
)
 
—

 
—

 
—

 
(5
)
Operating income
108


70


94


—


272

Interest expense
(40
)
 
—

 
—

 
—

 
(40
)
Interest and other income, net
14

 
1

 
—

 
—

 
15

Debt retirement charge
(21
)
 
—

 
—

 
—

 
(21
)
Income from continuing operations before income taxes
61


71


94


—


226

Provision for income taxes
(6
)
 
(4
)
 
(8
)
 
—

 
(18
)
Equity in net income of consolidated subsidiaries
147

 
48

 
—

 
(195
)
 
—

Net income
202


115


86


(195
)

208

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(6
)
 
(6
)
Net income attributable to L3
$
202


$
115


$
86


$
(201
)

$
202

Comprehensive income attributable to L3
$
213

 
$
115

 
$
83

 
$
(198
)
 
$
213

 
 
 
 
 
 
 
 
 
 
For the quarter ended September 29, 2017:
 
 
 
 
 
 
 
 
 
Total net sales
$
836

 
$
1,157

 
$
386

 
$
(86
)
 
$
2,293

Total operating costs and expenses
(747
)
 
(1,081
)
 
(319
)
 
86

 
(2,061
)
Operating income
89


76


67


—


232

Interest expense
(41
)
 
—

 
(1
)
 
—

 
(42
)
Interest and other income, net
1

 
—

 
1

 
—

 
2

Income from continuing operations before income taxes
49


76


67


—


192

Provision for income taxes
(11
)
 
(19
)
 
(16
)
 
—

 
(46
)
Equity in net income of consolidated subsidiaries
105

 
34

 
—

 
(139
)
 
—

Income from continuing operations
143

 
91

 
51

 
(139
)
 
146

Income from discontinued operations, net of income taxes
(121
)
 
—

 
—

 
—

 
(121
)
Net income
22


91


51


(139
)

25

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(3
)
 
(3
)
Net income attributable to L3
$
22


$
91


$
51


$
(142
)

$
22

Comprehensive income attributable to L3
$
85

 
$
139

 
$
101

 
$
(240
)
 
$
85

 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated L3
 
(in millions)
Condensed Combining Statements of Operations:
 

 
 

 
 

 
 

 
 

For the year-to-date period ended September 28, 2018:
 

 
 

 
 

 
 

 
 

Total net sales
$
2,598

 
$
3,841

 
$
1,309

 
$
(275
)
 
$
7,473

Total operating costs and expenses
(2,300
)
 
(3,594
)
 
(1,049
)
 
275

 
(6,668
)
Gain on sale of the Crestview & TCS Businesses
—

 
44

 
—

 
—

 
44

Merger, acquisition and divestiture related expenses
(5
)
 
—

 
—

 
—

 
(5
)
Operating income
293

 
291

 
260

 
—

 
844

Interest expense
(124
)
 
—

 
(1
)
 
—

 
(125
)
Interest and other income, net
25

 
2

 
2

 
—

 
29

Debt retirement charge
(69
)
 
—

 
—

 
—

 
(69
)
Income from continuing operations before income taxes
125

 
293

 
261

 
—

 
679

Provision for income taxes
(16
)
 
(39
)
 
(35
)
 
—

 
(90
)
Equity in net income of consolidated subsidiaries
465

 
141

 
—

 
(606
)
 
—

Income from continuing operations
574

 
395

 
226

 
(606
)
 
589

Income from discontinued operations, net of income tax
206

 
—

 
—

 
—

 
206

Net income
780

 
395

 
226

 
(606
)
 
795

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(15
)
 
(15
)
Net income attributable to L3
$
780

 
$
395

 
$
226

 
$
(621
)
 
$
780

Comprehensive income attributable to L3
$
768

 
$
353

 
$
180

 
$
(533
)
 
$
768

 
 
 
 
 
 
 
 
 
 
For the year-to-date period ended September 29, 2017:
 
 
 
 
 
 
 
 
 
Total net sales
$
2,580

 
$
3,546

 
$
1,136

 
$
(263
)
 
$
6,999

Total operating costs and expenses
(2,328
)
 
(3,226
)
 
(945
)
 
263

 
(6,236
)
Operating income
252

 
320

 
191

 
—

 
763

Interest expense
(125
)
 
—

 
(1
)
 
—

 
(126
)
Interest and other income, net
6

 
—

 
2

 
—

 
8

Income from continuing operations before income taxes
133

 
320

 
192

 
—

 
645

Provision for income taxes
(30
)
 
(73
)
 
(44
)
 
—

 
(147
)
Equity in net income of consolidated subsidiaries
383

 
92

 
—

 
(475
)
 
—

Income from continuing operations
486

 
339

 
148

 
(475
)
 
498

Income from discontinued operations, net of income tax
(98
)
 
—

 
—

 
—

 
(98
)
Net income
388

 
339

 
148

 
(475
)
 
400

Net income attributable to noncontrolling interests
—

 
—

 
—

 
(12
)
 
(12
)
Net income attributable to L3
$
388

 
$
339

 
$
148

 
$
(487
)
 
$
388

Comprehensive income attributable to L3
$
541

 
$
447

 
$
271

 
$
(718
)
 
$
541

 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
Consolidated L3
 
(in millions)
Condensed Combining Statements of Cash Flows
 

 
 

 
 

 
 

 
 

For the year-to-date period ended September 28, 2018:
 

 
 

 
 

 
 

 
 

Operating activities:
 

 
 

 
 

 
 

 
 

Net cash from (used in) operating activities from continuing operations
$
248

 
$
(30
)
 
$
131

 
$
(7
)
 
$
342

Investing activities:
 
 
 
 
 
 
 
 
 
Business acquisitions, net of cash acquired
(192
)
 
—

 
(176
)
 
—

 
(368
)
Proceeds from sale of businesses, net of closing date cash balances
360

 
175

 
—

 
—

 
535

Other investing activities
(99
)
 
(59
)
 
(35
)
 
—

 
(193
)
Net cash from (used in) investing activities from continuing operations
69

 
116

 
(211
)
 
—

 
(26
)
Financing activities:
 
 
 
 
 
 
 
 
 
Proceeds from sale of senior notes
1,798

 
—

 
—

 
—

 
1,798

Repurchases and redemptions of senior notes
(1,865
)
 
—

 
—

 
—

 
(1,865
)
Common stock repurchased
(322
)
 
—

 
—

 
—

 
(322
)
Dividends paid
(191
)
 
—

 
—

 
—

 
(191
)
Other financing activities
82

 
(81
)
 
55

 
55

 
111

Net cash (used in) from financing activities from continuing operations
(498
)
 
(81
)
 
55

 
55

 
(469
)
Effect of foreign currency exchange rate changes on cash
—

 
—

 
(9
)
 
—

 
(9
)
Net increase in cash and cash equivalents of discontinued operations
7

 
—

 
—

 
—

 
7

Net (decrease) increase in cash
(174
)
 
5

 
(34
)
 
48

 
(155
)
Cash and cash equivalents, beginning of the period
432

 
16

 
285

 
(71
)
 
662

Cash and cash equivalents, end of the period
$
258

 
$
21

 
$
251

 
$
(23
)
 
$
507

For the year-to-date period ended September 29, 2017:
 

 
 

 
 

 
 

 
 

Operating activities:
 

 
 

 
 

 
 

 
 

Net cash from operating activities from continuing operations
$
248

 
$
187

 
$
187

 
$
(41
)
 
$
581

Investing activities:
 
 
 
 
 
 
 
 
 
Business acquisitions, net of cash acquired
(291
)
 
—

 
—

 
—

 
(291
)
Proceeds from sale of businesses, net of closing date cash balances
17

 
—

 
1

 
—

 
18

Other investing activities
(67
)
 
(5
)
 
(19
)
 
—

 
(91
)
Net cash used in investing activities from continuing operations
(341
)
 
(5
)
 
(18
)
 
—

 
(364
)
Financing activities:
 
 
 
 
 
 
 
 
 
Common stock repurchased
(91
)
 
—

 
—

 
—

 
(91
)
Dividends paid
(178
)
 
—

 
—

 
—

 
(178
)
Other financing activities
211

 
(174
)
 
(137
)
 
130

 
30

Net cash used in financing activities from continuing operations
(58
)
 
(174
)
 
(137
)
 
130

 
(239
)
Effect of foreign currency exchange rate changes on cash
—

 
—

 
16

 
—

 
16

Net increase in cash and cash equivalents of discontinued operations
82

 
—

 
—

 
—

 
82

Net (decrease) increase in cash
(69
)
 
8

 
48

 
89

 
76

Cash and cash equivalents, beginning of the period
262

 
5

 
203

 
(107
)
 
363

Cash and cash equivalents, end of the period
$
193

 
$
13

 
$
251

 
$
(18
)
 
$
439

The Company has revised the reported amounts for L3, Guarantor Subsidiaries, Non-Guarantor Subsidiaries and Eliminations in the Condensed Combining Statements of Operations for the quarterly period ended September 29, 2017 and for the year-to-date period ended September 29, 2017, to retrospectively reflect: (a) changes in Guarantor Subsidiaries resulting from the elimination of Vertex Aerospace as a guarantor due to its sale which occurred on June 29, 2018; (b) additional legal entities included as Guarantor Subsidiaries as the result of the Third Supplemental Indenture dated March 30, 2018; and (c) correction of an error related to the understatement of equity in net income of certain Guarantor Subsidiaries. As a result of the error identification discussed in (c) above, Equity in net income of consolidated subsidiaries and Net income of Guarantor Subsidiaries in the Condensed Combining Statements of Operations for the quarter ended September 29, 2017 and for the year-to-date period ended September 29, 2017 was understated by $34 million and $92 million respectively. The Company assessed the materiality of the error on previously issued financial statements in accordance with SEC Staff Accounting Bulleting No. 99 and No. 108, and concluded that the disclosure error is not material to the Company's previously issued financial statements taken as a whole. The impact of the items referred to above to the reported columnar amounts for L3, Guarantor Subsidiaries, Non-Guarantor Subsidiaries and Eliminations are enumerated below.
Condensed Combining Statement of Operations (Third Quarter Ended September 29, 2017)
 
As Reported
 
Adjustment
 
As Adjusted
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
(in millions)
Total net sales
$
840

 
$
1,481

 
$
408

 
$
(83
)
 
$
(4
)
 
$
(324
)
 
$
(22
)
 
$
(3
)
 
$
836

 
$
1,157

 
$
386

 
$
(86
)
Total operating costs and expenses
(746
)
 
(1,390
)
 
(343
)
 
83

 
(1
)
 
309

 
24

 
3

 
(747
)
 
(1,081
)
 
(319
)
 
86

Goodwill impairment charge
—

 
(187
)
 
—

 
—

 
—

 
187

 
—

 
—

 
—

 
—

 
—

 
—

Operating income (loss)
94

 
(96
)
 
65

 
—

 
(5
)
 
172

 
2

 
—

 
89

 
76

 
67

 
—

Interest expense
(42
)
 
—

 
(1
)
 
—

 
1

 
—

 
—

 
—

 
(41
)
 
—

 
(1
)
 
—

Interest and other income (loss), net
7

 
—

 
(1
)
 
—

 
(6
)
 
—

 
2

 
—

 
1

 
—

 
1

 
—

Income (loss) from continuing operations before income taxes
59

 
(96
)
 
63

 
—

 
(10
)
 
172

 
4

 
—

 
49

 
76

 
67

 
—

(Provision) benefit for income taxes
(12
)
 
24

 
(12
)
 
—

 
1

 
(43
)
 
(4
)
 
—

 
(11
)
 
(19
)
 
(16
)
 
—

Equity in net (loss) income of consolidated subsidiaries
(24
)
 
—

 
—

 
24

 
129

 
34

 
—

 
(163
)
 
105

 
34

 
—

 
(139
)
Income (loss) from continuing operations
23

 
(72
)
 
51

 
24

 
120

 
163

 
—

 
(163
)
 
143

 
91

 
51

 
(139
)
Loss from discontinued operations, net of taxes
(1
)
 
—

 
—

 
—

 
(120
)
 
—

 
—

 
—

 
(121
)
 
—

 
—

 
—

Net income (loss)
22

 
(72
)
 
51

 
24

 
—

 
163

 
—

 
(163
)
 
22

 
91

 
51

 
(139
)
Net income attributable to noncontrolling interests
—

 
—

 
—

 
(3
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(3
)
Net income (loss) attributable to L3
$
22

 
$
(72
)
 
$
51

 
$
21

 
$
—

 
$
163

 
$
—

 
$
(163
)
 
$
22

 
$
91

 
$
51

 
$
(142
)
Comprehensive income (loss) attributable to L3
$
85

 
$
(67
)
 
$
100

 
$
(33
)
 
$
—

 
$
206

 
$
1

 
$
(207
)
 
$
85

 
$
139

 
$
101

 
$
(240
)
Condensed Combining Statement of Operations (Year-to-Date Ended September 29, 2017)
 
As Reported
 
Adjustment
 
As Adjusted
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
L3
 
Guarantor Subsidiaries
 
Non-Guarantor Subsidiaries
 
Eliminations
 
 
 
(in millions)
Total net sales
$
2,603

 
$
4,500

 
$
1,201

 
$
(257
)
 
$
(23
)
 
$
(954
)
 
$
(65
)
 
$
(6
)
 
$
2,580

 
$
3,546

 
$
1,136

 
$
(263
)
Total operating costs and expenses
(2,334
)
 
(4,146
)
 
(1,009
)
 
257

 
6

 
920

 
64

 
6

 
(2,328
)
 
(3,226
)
 
(945
)
 
263

Goodwill impairment charge
—

 
(187
)
 
—

 
—

 
—

 
187

 
—

 
—

 
—

 
—

 
—

 
—

Operating income
269

 
167

 
192

 
—

 
(17
)
 
153

 
(1
)
 
—

 
252

 
320

 
191

 
—

Interest expense
(126
)
 
(1
)
 
(1
)
 
—

 
1

 
1

 
—

 
—

 
(125
)
 
—

 
(1
)
 
—

Interest and other income, net
12

 
—

 
3

 
—

 
(6
)
 
—

 
(1
)
 
—

 
6

 
—

 
2

 
—

Income from continuing operations before income taxes
155

 
166

 
194

 
—

 
(22
)
 
154

 
(2
)
 
—

 
133

 
320

 
192

 
—

Provision for income taxes
(34
)
 
(37
)
 
(43
)
 
—

 
4

 
(36
)
 
(1
)
 
—

 
(30
)
 
(73
)
 
(44
)
 
—

Equity in net income of consolidated subsidiaries
268

 
—

 
—

 
(268
)
 
115

 
92

 
—

 
(207
)
 
383

 
92

 
—

 
(475
)
Income from continuing operations
389

 
129

 
151

 
(268
)
 
97

 
210

 
(3
)
 
(207
)
 
486

 
339

 
148

 
(475
)
Loss from discontinued operations, net of taxes
(1
)
 
—

 
—

 
—

 
(97
)
 
—

 
—

 
—

 
(98
)
 
—

 
—

 
—

Net income
388

 
129

 
151

 
(268
)
 
—

 
210

 
(3
)
 
(207
)
 
388

 
339

 
148

 
(475
)
Net income attributable to noncontrolling interests
—

 
—

 
—

 
(12
)
 
—

 
—

 
—

 
—

 
—

 
—

 
—

 
(12
)
Net income attributable to L3
$
388

 
$
129

 
$
151

 
$
(280
)
 
$
—

 
$
210

 
$
(3
)
 
$
(207
)
 
$
388

 
$
339

 
$
148

 
$
(487
)
Comprehensive income attributable to L3
$
541

 
$
134

 
$
273

 
$
(407
)
 
$
—

 
$
313

 
$
(2
)
 
$
(311
)
 
$
541

 
$
447

 
$
271

 
$
(718
)