Financial Information of L3 and Its Subsidiaries

The debt of L3, including the senior notes and borrowings under amounts drawn against the Credit Facility, is guaranteed, on a joint and several, full and unconditional basis, by certain of its 100% owned domestic subsidiaries (the Guarantor Subsidiaries). See Note 10 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.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

The following 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 December 31, 2018:
Current assets:
Cash and cash equivalents	$	756	$	21	$	306	$	(17	)	$	1,066
Billed receivables, net	291		341		287		—			919
Contract assets	562		833		195		—			1,590
Inventories	378		258		243		—			879
Prepaid expenses and other current assets	127		166		63		—			356
Total current assets	2,114		1,619		1,094		(17		)	4,810
Goodwill	2,124		3,009		1,675		—			6,808
Other assets	690		765		445		—			1,900
Investment in and amounts due from consolidated subsidiaries	5,931		6,912		—		(12,843		)	—
Total assets	$	10,859	$	12,305	$	3,214	$	(12,860	)	$	13,518
Current liabilities	$	821	$	955	$	688	$	(17	)	$	2,447
Amounts due to consolidated subsidiaries	—		—		417		(417		)	—
Other long-term liabilities	878		804		161		—			1,843
Long-term debt	3,321		—		—		—			3,321
Total liabilities	5,020		1,759		1,266		(434		)	7,611
L3 shareholders’ equity	5,839		10,546		1,948		(12,494		)	5,839
Noncontrolling interests	—		—		—		68			68
Total equity	5,839		10,546		1,948		(12,426		)	5,907
Total liabilities and equity	$	10,859	$	12,305	$	3,214	$	(12,860	)	$	13,518



	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 year ended December 31, 2018:
Total net sales	$	3,626		$	5,259		$	1,806		$	(447	)	$	10,244
Total operating costs and expenses	(3,180		)	(4,943		)	(1,462		)	447			(9,138		)
Gain on sale of Crestview & TCS Businesses	—			42			—			—			42
Merger and acquisition related expenses	(28		)	—			—			—			(28		)
Operating income	418			358			344			—			1,120
Interest expense	(163		)	—			(1		)	—			(164		)
Interest and other income, net	31			3			3			—			37
Debt retirement charges	(69		)	—			—			—			(69		)
Income from continuing operations before income taxes	217			361			346			—			924
Provision for income taxes	(24		)	(40		)	(39		)	—			(103		)
Equity in net income of consolidated subsidiaries	607			184			—			(791		)	—
Income from continuing operations	800			505			307			(791		)	821
Income from discontinued operations, net of income tax	205			—			—			—			205
Net income	1,005			505			307			(791		)	1,026
Net income attributable to noncontrolling interests	—			—			—			(21		)	(21		)
Net income attributable to L3	$	1,005		$	505		$	307		$	(812	)	$	1,005
Comprehensive income attributable to L3	$	971		$	427		$	226		$	(653	)	$	971

For the year ended December 31, 2017:
Total net sales	$	3,520		$	4,852		$	1,581		$	(380	)	$	9,573
Total operating costs and expenses	(3,169		)	(4,446		)	(1,307		)	380			(8,542		)
Operating income	351			406			274			—			1,031
Interest expense	(168		)	—			(1		)	—			(169		)
Interest and other income (loss), net	6			(8		)	11			—			9
Income from continuing operations before income taxes	189			398			284			—			871
Provision for income taxes	(22		)	(47		)	(33		)	—			(102		)
Equity in net income of consolidated subsidiaries	586			144			—			(730		)	—
Income from continuing operations	753			495			251			(730		)	769
Loss from discontinued operations, net of income tax	(76		)	—			—			—			(76		)
Net income	677			495			251			(730		)	693
Net income attributable to noncontrolling interests	—			—			—			(16		)	(16		)
Net income attributable to L3	$	677		$	495		$	251		$	(746	)	$	677
Comprehensive income attributable to L3	$	712		$	604		$	378		$	(982	)	$	712

For the year ended December 31, 2016:
Total net sales	$	3,351		$	4,842		$	1,348		$	(331	)	$	9,210
Total operating costs and expenses	(3,064		)	(4,406		)	(1,113		)	331			(8,252		)
Operating income	287			436			235			—			958
Interest expense	(164		)	—			—			—			(164		)
Interest and other income (loss), net	9			(3		)	11			—			17
Debt retirement charges	(7		)	—			—			—			(7		)
Income from continuing operations before income taxes	125			433			246			—			804
Provision for income taxes	(26		)	(92		)	(53		)	—			(171		)
Equity in net income of consolidated subsidiaries	520			130			—			(650		)	—
Income from continuing operations	619			471			193			(650		)	633
Income from discontinued operations, net of income tax	91			—			—			—			91
Net income	710			471			193			(650		)	724
Net income attributable to noncontrolling interests	—			—			—			(14		)	(14		)
Net income attributable to L3	$	710		$	471		$	193		$	(664	)	$	710
Comprehensive income attributable to L3	$	558		$	409		$	116		$	(525	)	$	558



	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows:
For the year ended December 31, 2018:
Operating activities:
Net cash from operating activities from continuing operations	$	555		$	238		$	256		$	(7	)	$	1,042
Investing activities:
Business acquisitions, net of cash acquired	(193		)	—			(176		)	—			(369		)
Proceeds from sale of businesses, net of closing date cash balances	360			175			—			—			535
Other investing activities	(119		)	(90		)	(48		)	—			(257		)
Net cash from (used in) investing activities from continuing operations	48			85			(224		)	—			(91		)
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	(254		)	—			—			—			(254		)
Other financing activities	376			(318		)	4			61			123
Net cash (used in) from financing activities from continuing operations	(267		)	(318		)	4			61			(520		)
Effect of foreign currency exchange rate changes on cash	—			—			(15		)	—			(15		)
Net decrease in cash and cash equivalents of discontinued operations	(12		)	—			—			—			(12		)
Net increase in cash	324			5			21			54			404
Cash and cash equivalents, beginning of the year	432			16			285			(71		)	662
Cash and cash equivalents, end of the year	$	756		$	21		$	306		$	(17	)	$	1,066

For the year ended December 31, 2017:
Operating activities:
Net cash from operating activities from continuing operations	$	374		$	426		$	263		$	(78	)	$	985
Investing activities:
Business acquisitions, net of cash acquired	(316		)	—			—			—			(316		)
Proceeds from sale of businesses, net of closing date cash balances	17			—			1			—			18
Other investing activities	(92		)	(38		)	(25		)	—			(155		)
Net cash used in investing activities from continuing operations	(391		)	(38		)	(24		)	—			(453		)
Financing activities:
Common stock repurchased	(180		)	—			—			—			(180		)
Dividends paid	(236		)	—			—			—			(236		)
Other financing activities	490			(377		)	(177		)	114			50
Net cash from (used in) financing activities from continuing operations	74			(377		)	(177		)	114			(366		)
Effect of foreign currency exchange rate changes on cash	—			—			20			—			20
Net increase in cash and cash equivalents of discontinued operations	113			—			—			—			113
Net increase in cash	170			11			82			36			299
Cash and cash equivalents, beginning of the year	262			5			203			(107		)	363
Cash and cash equivalents, end of the year	$	432		$	16		$	285		$	(71	)	$	662



	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
For the year ended December 31, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	440		$	509		$	259		$	(186	)	$	1,022
Investing activities:
Business acquisitions, net of cash acquired	(388		)	—			—			—			(388		)
Proceeds from sale of businesses, net of closing date cash balances	563			—			(2		)	—			561
Other investing activities	(63		)	(77		)	(43		)	—			(183		)
Net cash from (used in) investing activities from continuing operations	112			(77		)	(45		)	—			(10		)
Financing activities:
Proceeds from sale of senior notes	547			—			—			—			547
Redemption of senior notes	(856		)	—			—			—			(856		)
Common stock repurchased	(373		)	—			—			—			(373		)
Dividends paid	(220		)	—			—			—			(220		)
Other financing activities	490			(427		)	(163		)	146			46
Net cash used in financing activities from continuing operations	(412		)	(427		)	(163		)	146			(856		)
Effect of foreign currency exchange rate changes on cash	—			—			(13		)	—			(13		)
Net increase in cash and cash equivalents of discontinued operations	13			—			—			—			13
Net increase in cash	153			5			38			(40		)	156
Cash and cash equivalents, beginning of the year	109			—			165			(67		)	207
Cash and cash equivalents, end of the year	$	262		$	5		$	203		$	(107	)	$	363