8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the

Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): July 16, 2012

L-3 COMMUNICATIONS HOLDINGS, INC.

L-3 COMMUNICATIONS CORPORATION

(Exact names of registrants as specified in their charters)

DELAWARE	001-14141 333-46983	13-3937434 13-3937436
(State or other Jurisdiction of Incorporation)	(Commission File Numbers)	(IRS Employer Identification Nos.)

600 THIRD AVENUE, NEW YORK, NEW YORK	10016
(Address of Principal Executive Offices)	(Zip Code)

Registrants’ telephone number, including area code: (212) 697-1111

(Former name or former address if changed since last report.)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

¨ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

¨ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

¨ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

¨ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Section 1 — Registrant’s Business and Operations

Item 1.01. Entry into a Material Definitive Agreement.

Distribution Agreement

On July 16, 2012, L-3 Communications Holdings, Inc. (“Holdings”) entered into a Distribution Agreement (the “Distribution Agreement”) with Engility Holdings, Inc. (“Engility”). The Distribution Agreement sets forth Holdings’ agreements with Engility regarding the principal actions needed to be taken in connection with the spin-off of Engility (the “Spin-off”). It also sets forth other agreements that govern certain aspects of Holdings’ relationship with Engility following the Spin-off.

Transfer of Assets and Assumption of Liabilities. The Distribution Agreement provides for those transfers of assets and assumptions of liabilities that are necessary in advance of Engility’s separation from Holdings so that each of Engility and Holdings retains the assets necessary to operate its respective business and retains or assumes the liabilities allocated to it in accordance with the separation plan. The Distribution Agreement also provides for the settlement or extinguishment of certain liabilities and other obligations between and among Engility and Holdings. In particular, the Distribution Agreement provides that, subject to the terms and conditions contained in the Distribution Agreement:

• All of the assets and liabilities (including whether accrued, contingent or otherwise, and subject to certain exceptions) associated with Engility’s business will be retained by or transferred to Engility or one of Engility’s subsidiaries.

• All other assets and liabilities (including whether accrued, contingent or otherwise, and subject to certain exceptions) of Holdings will be retained by or transferred to Holdings or one of its subsidiaries (other than Engility or one of Engility’s subsidiaries).

• Liabilities (including whether accrued, contingent or otherwise) related to, arising out of or resulting from businesses or assets formerly owned or managed by Engility or Engility’s subsidiaries that were previously terminated or divested will be assumed or retained by Engility.

• Engility will assume or retain any liabilities (including under applicable federal and state securities laws) arising under or in connection with Engility registering Engility’s common stock to be distributed by Holdings in the Spin-off, subject to exceptions for certain information for which Holdings will retain liability.

• Except as otherwise provided in the Distribution Agreement or any ancillary agreement, Engility will be responsible for any costs or expenses incurred by Engility or Engility’s subsidiaries after the date of the distribution in connection with the distribution, including costs and expenses relating to legal counsel, filing and printing, financial advisors and accounting advisory work related to the distribution.

Further Assurances. To the extent that any transfers of assets or assumptions of liabilities contemplated by the Distribution Agreement have not been consummated on or prior to the date of the distribution, the parties agreed to cooperate to effect such transfers or assumptions as promptly as practicable following the date of the distribution. In addition, each of the parties agreed to use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable law or contractual obligations to consummate and make effective the transactions contemplated by the Distribution Agreement and the ancillary agreements.

Representations and Warranties. In general, neither Engility nor Holdings made any representations or warranties regarding any assets or liabilities transferred or assumed, any consents or approvals that may be required in connection with such transfers or assumptions, the value or freedom from any lien or other security interest of any assets transferred, the absence of any defenses relating to any claim of either party or the legal sufficiency of any conveyance documents, or any other matters. Except as expressly set forth in the Distribution Agreement or in any ancillary agreement, all assets were transferred on an “as is,” “where is” basis.

The Distribution. The Distribution Agreement governs the rights and obligations of the parties regarding the proposed distribution and certain actions that must occur prior to the proposed distribution, such as the election of directors.

Conditions. The Distribution Agreement provides that the distribution is subject to several conditions that must be satisfied or waived by Holdings in its sole discretion. Holdings may, in its sole discretion, determine the distribution date and the terms of the distribution and may at any time prior to the completion of the distribution decide to abandon or modify the distribution.

Termination. The Distribution Agreement provides that it may be terminated by Holdings at any time in its sole discretion prior to the distribution date.

Release of Claims. Holdings and Engility agreed to broad releases pursuant to which Holdings and Engility will each release the other and certain related persons specified in the Distribution Agreement from any claims against any of them existing or arising out of any acts or events occurring or failing to occur or alleged to have occurred or to have failed to have occurred or any conditions existing or alleged to have existed on or before the time of the distribution, including in connection with all activities to implement the distribution and any of the other transactions contemplated by the Distribution Agreement or the ancillary agreements. These releases are subject to certain exceptions set forth in the Distribution Agreement.

Indemnification. The Distribution Agreement provides for cross-indemnities that, except as otherwise provided in the Distribution Agreement, are principally designed to place financial responsibility for the obligations and liabilities of Engility’s business with Engility and financial responsibility for the obligations and liabilities of Holdings’ business with Holdings. Specifically, each party will indemnify, defend and hold harmless the other party, its affiliates and subsidiaries and each of its officers, directors, employees and agents for any losses arising out of or due to:

• the failure to pay, perform or otherwise discharge any of the liabilities or alleged liabilities each such party assumed or retained pursuant to the Distribution Agreement; and

• any breach by such party of the Distribution Agreement.

The amount of each party’s indemnification obligations is subject to reduction by any insurance proceeds received by the party being indemnified. The Distribution Agreement also specifies procedures with respect to claims subject to indemnification and related matters. Indemnification with respect to taxes is governed solely by the Tax Matters Agreement (as described below).

Insurance. Following the Spin-off, Engility is responsible for obtaining and maintaining its own insurance coverage, although Engility will continue to have coverage under certain of Holdings’ pre-Spin-off insurance policies for certain matters that occurred prior to the Spin-off.

Other Matters Governed by the Distribution Agreement. Other matters governed by the Distribution Agreement include access to financial and other information, intellectual property, confidentiality, access to and provision of records and treatment of outstanding guarantees and similar credit support.

Employee Matters Agreement

On July 16, 2012, L-3 Communications Corporation (“L-3”), a wholly-owned subsidiary of Holdings (together with L-3, the “Company”) entered into an Employee Matters Agreement (the “Employee Matters Agreement”) with Engility Corporation, a wholly-owned subsidiary of Engility, with Engility and Holdings as acknowledging parties. The Employee Matters Agreement governs the respective rights, responsibilities and obligations of the parties after the Spin-off with respect to employee related liabilities and their respective health and welfare benefit plans, defined contribution plans, non-qualified deferred compensation plans and equity-based compensation plans (including the treatment of outstanding stock option and restricted stock unit awards thereunder). The Employee Matters Agreement provides for the allocation and treatment of assets, account balances, and liabilities, as applicable, arising out of incentive plans, retirement plans, deferred compensation plans, and employee health and welfare benefit programs in which Engility’s employees participated prior to the Spin-off. Generally, Engility assumed or retained sponsorship of, and liabilities relating to, employee compensation and benefits programs or arrangements relating to Engility’s current employees and employees formerly associated with Engility’s business by assuming the applicable employee benefit programs, or creating substantially similar programs for the benefit of Engility’s employees.

Tax Matters Agreement

On July 16, 2012, Holdings entered into a Tax Matters Agreement (the “Tax Matters Agreement”) with Engility. The Tax Matters Agreement governs the respective rights, responsibilities and obligations of Holdings and Engility after the Spin-off with respect to tax liabilities and benefits, tax attributes, tax contests and other tax sharing regarding U.S. federal, state, local and foreign income taxes, other tax matters and related tax returns. As a business of Holdings, Engility has (and will continue to have following the Spin-off) several liability with Holdings to the United States Internal Revenue Service (“IRS”) for the consolidated U.S. federal income taxes of Holdings’ consolidated group relating to the taxable periods in which Engility was part of that group. However, the Tax Matters Agreement specifies the portion, if any, of this tax liability for which Engility bears responsibility, and Holdings agreed to indemnify Engility against any amounts for which Engility is not responsible. The Tax Matters Agreement provides special rules for allocating tax liabilities in the event that the Spin-off is not tax-free. The Tax Matters Agreement provides for certain covenants that may restrict Engility’s ability to pursue strategic or other transactions that otherwise could maximize the value of Engility’s business and may discourage or delay a change of control that may be considered favorable. Though valid as between the parties, the Tax Matters Agreement will not be binding on the IRS.

Transition Services Agreement

On July 16, 2012, L-3 entered into a Transition Services Agreement (the “Transition Services Agreement”) with Engility Corporation. Pursuant to the Transition Services Agreement, L-3 will provide or cause to be provided to Engility Corporation certain services for a limited time to help ensure an orderly transition for each of L-3 and Engility Corporation following the distribution. Under the Transition Services Agreement, Engility Corporation will receive certain services (including information technology, financial, telecommunications, benefits support services and other specified services) from L-3 and/or third party providers at specified prices. These services are planned to extend for a period of two to eighteen months in most circumstances.

Master Supply Agreements

On July 16, 2012, L-3 entered into two Master Supply Agreements (the “Master Supply Agreements”) with Engility Corporation, one as the seller of goods and services, and one as the buyer. Effective upon the distribution, the Master Supply Agreements governs the conversion of certain commercial arrangements between Engility Corporation and L-3 into third-party contracts based on existing intercompany work orders and L-3’s general terms and conditions.

Section 2 — Financial Information

Item 2.01. Completion of Acquisition or Disposition of Assets.

On July 17, 2012, Holdings announced that it had completed the previously announced Spin-off. Effective as of 5:00 p.m., New York time, on July 17, 2012 (the “Distribution Date”), the common stock of Engility was distributed, on a pro rata basis, to Holdings’ shareholders of record as of July 16, 2012 (the “Record Date”). On the Distribution Date, each of the shareholders of Holdings received one share of Engility for every six shares of Holdings’ common stock held by such shareholder on the Record Date. The Spin-off was completed pursuant to the Distribution Agreement. On July 17, 2012, Holdings issued a press release announcing the completion of the Spin-off. A copy of this press release is attached hereto as Exhibit 99.1.

After the Distribution Date, the Company does not beneficially own any shares of Engility common stock and, following such date, does not expect to consolidate the financial results of Engility for the purpose of its own financial reporting. The unaudited pro forma financial information of the Company giving effect to the Spin-off and the related notes thereto, is attached hereto as Exhibit 99.2.

4

Section 9 – Financial Statements and Exhibits

Item 9.01. Financial Statements and Exhibits.

(b) Pro Forma Financial Information

The unaudited pro forma condensed consolidated statements of operations for L-3 Communications Holdings, Inc. for the years ended December 31, 2011, 2010 and 2009 and the quarters ended March 30, 2012 and April 1, 2011 and the unaudited pro forma condensed consolidated balance sheet of L-3 Communications Holdings, Inc. as of March 30, 2012 are filed as Exhibit 99.2 to this Current Report on Form 8-K.

(d) Exhibits

Exhibit Number	Title
99.1	Press release dated July 17, 2012.
99.2	Unaudited pro forma condensed consolidated statements of operations of L-3 Communications Holdings, Inc. and L-3 Communications Corporation for the years ended December 31, 2011, 2010 and 2009 and quarters ended March 30, 2012 and April 1, 2011 and unaudited pro forma condensed consolidated balance sheet of L-3 Communications Holdings, Inc. and L-3 Communications Corporation dated as of March 30, 2012.

Forward-Looking Statements

Certain of the matters discussed in this report that are predictive in nature, that depend upon or refer to events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions constitute forward-looking statements. Although we believe that these statements are based upon reasonable assumptions they are subject to several risks and uncertainties, and therefore, we can give no assurance that these statements will be achieved. Such statements will also be influenced by factors which include, among other things: our dependence on the defense industry and the business risks peculiar to that industry, including changing priorities or reductions in the U.S. Government defense budget; backlog processing and program slips resulting from delayed funding of the Department of Defense (DoD) budget; our reliance on contracts with a limited number of agencies of, or contractors to, the U.S. Government and the possibility of termination of government contracts by unilateral government action or for failure to perform; the extensive legal and regulatory requirements surrounding our contracts with the U.S. or foreign governments and the results of any investigation of our contracts undertaken by the U.S. or foreign governments; our ability to retain our existing business and related contracts (revenue arrangements); our ability to successfully compete for and win new business and related contracts (revenue arrangements) and to win re-competitions of our existing contracts; our ability to identify and acquire additional businesses in the future with terms that are attractive to the Company and to integrate acquired business operations; the impact of any strategic initiatives undertaken by us, including but not limited to the spin-off of Engility, and our ability to achieve anticipated benefits; our ability to maintain and improve our consolidated operating margin and total segment operating margin in future periods; our ability to obtain future government contracts (revenue arrangements) on a timely basis; the availability of government funding or cost-cutting initiatives and changes in customer requirements for our products and services; our significant amount of debt and the restrictions contained in our debt agreements; our ability to continue to retain and train our existing employees and to recruit and hire new qualified and skilled employees as well as our ability to retain and hire employees with U.S. Government security clearances; actual future interest rates, volatility and other assumptions used in the determination of pension benefits and equity based compensation, as well as the market performance of benefit plan assets; our collective bargaining agreements, our ability to successfully negotiate contracts with labor unions and our ability to favorably resolve labor disputes should they arise; the business, economic and political conditions in the markets in which we operate, including those for the commercial aviation, shipbuilding and communications markets; global economic uncertainty; the DoD’s contractor support services in-sourcing and efficiency initiatives; events beyond our control such as acts of terrorism; our ability to perform contracts (revenue arrangements) on schedule; our international operations; our extensive use of fixed-price type contracts as compared to cost-plus type and time-and-material type contracts; the rapid change of technology and high level of competition in the defense industry and the commercial industries in which our businesses participate; our introduction of new products into commercial markets or our investments in civil and commercial

products or companies; the outcome of litigation matters, including in connection with jury trials; results of audits by U.S. Government agencies; results of on-going governmental investigations, including potential suspensions or debarments; the impact on our business of improper conduct by our employees, agents or business partners; anticipated cost savings from business acquisitions not fully realized or realized within the expected time frame; the outcome of matters relating to the Foreign Corrupt Practices Act (FCPA) and similar non-U.S. regulations; ultimate resolution of contingent matters, claims and investigations relating to acquired businesses, and the impact on the final purchase price allocations; competitive pressure among companies in our industry; and the fair values of our assets, which can be impaired or reduced by other factors, some of which are discussed above.

For a discussion of these and other risks and uncertainties that could impair our results of operations or financial condition, see “Part I — Item 1A — Risk Factors” and Note 19 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2011, and any material updates to these factors contained in any of our future filings.

Our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this report to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrants have duly caused this report to be signed on their behalf by the undersigned hereunto duly authorized.

L-3 COMMUNICATIONS HOLDINGS, INC.
L-3 COMMUNICATIONS CORPORATION
By:	/s/    ALLEN E. DANZIG
Name:		Allen E. Danzig
Title:		Vice President Assistant General Counsel and Assistant Secretary

Dated: July 20, 2012

EX-99.1

Exhibit 99.1

Contact:	L-3 Communications
	Corporate Communications
	212-697-1111

For Immediate Release

L-3 Successfully Completes Spin-Off of Engility Holdings, Inc.

– L-3 Continues to Trade as NYSE: LLL –

NEW YORK, July 17, 2012 – L-3 Communications Holdings, Inc. (NYSE: LLL) announced today that it has successfully completed the previously announced spin-off of its subsidiary, Engility Holdings, Inc. L-3 shareholders of record as of July 16, 2012 (the “record date”) received one share of Engility common stock for every six shares of L-3 common stock held on the record date. The spin-off has been structured to qualify as a tax-free distribution to L-3 shareholders for U.S. federal tax purposes, except for cash received in lieu of fractional shares. Following the spin-off, L-3 will report Engility financial results as discontinued operations beginning with L-3’s 2012 third quarter, along with all prior periods.

Engility will begin trading regular-way as an independent publicly traded company on the New York Stock Exchange under the ticker symbol EGL on July 18, 2012.

“I am pleased to announce the completion of the spin-off, and the beginning of an exciting new chapter for both L-3 and Engility,” said Michael T. Strianese, chairman, president and chief executive officer of L-3. “We believe that this transaction positions both L-3 and Engility to capitalize on their strengths, pursue new business opportunities, and become leaders in their respective markets. We thank everyone at Engility for their contributions to L-3 and for their dedicated service to their customers, and wish them continued success in the years to come.”

L-3 has retained its cyber, intelligence and security solutions businesses, which will collectively be called National Security Solutions going forward. These businesses develop unique solutions to address growing challenges for U.S. Department of Defense, intelligence and global security customers.

“Following the transaction, L-3 will have a sharper focus on areas that are core to our strategy of providing market-leading, value-added products and solutions to our customers,” continued Mr. Strianese. “Our capabilities are well-positioned within areas that are priorities in the current environment and will remain priorities in the future. Looking ahead, we will continue to execute against our strategic goals, generating value for both our customers and our shareholders.”

L-3 reiterated its 2012 financial guidance provided on June 26, 2012 and that it intends to use the net proceeds of approximately $325 million from Engility in connection with the spin-off to redeem $250 million aggregate principal amount of its 6 ³/₈% Senior Subordinated Notes due in 2015 on July 26, 2012 and repurchase approximately $75 million of its outstanding shares.

About L-3

Headquartered in New York City, L-3 employs approximately 51,000 people worldwide and is a prime contractor in C³ISR (Command, Control, Communications, Intelligence, Surveillance and Reconnaissance) systems, aircraft modernization and maintenance, and national security solutions. L-3 is also a leading provider of a broad range of electronic systems used on military and commercial platforms.

To learn more about L-3, please visit the company’s website at www.L-3com.com. L-3 uses its website as a channel of distribution of material company information. Financial and other material information regarding L-3 is routinely posted on the company’s website and is readily accessible.

Forward-Looking Statements

Certain of the matters discussed in this release that are predictive in nature, that depend upon or refer to events or conditions or that include words such as “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions constitute forward-looking statements. Although we believe that these statements are based upon reasonable assumptions, they are subject to several risks and uncertainties, and therefore, we can give no assurance that these statements will be achieved. Such statements will also be influenced by factors which include, among other things: our dependence on the defense industry and the business risks peculiar to that industry, including changing priorities or reductions in the U.S. Government defense budget; backlog processing and program slips resulting from delayed funding of the Department of Defense (DoD) budget; our reliance on contracts with a limited number of agencies of, or contractors to, the U.S. Government and the possibility of termination of government contracts by unilateral government action or for failure to perform; the extensive legal and regulatory requirements surrounding our contracts with the U.S. or foreign governments and the results of any investigation of our contracts undertaken by the U.S. or foreign governments; our ability to retain our existing business and related contracts (revenue arrangements); our ability to successfully compete for and win new business and related contracts (revenue arrangements) and to win re-competitions of our existing contracts; our ability to identify and acquire additional businesses in the future with terms that are attractive to L-3 and to integrate acquired business operations; the impact of any strategic initiatives undertaken by us, including but not limited to the spin-off of Engility, and our ability to achieve anticipated benefits; our ability to maintain and improve our consolidated operating margin and total segment operating margin in future periods; our ability to obtain future government contracts (revenue arrangements) on a timely basis; the availability of government funding or cost-cutting initiatives and changes in customer requirements for our products and services; our significant amount of debt and the restrictions contained in our debt agreements; our ability to continue to retain and train our existing employees and to recruit and hire new qualified and skilled employees as well as our ability to retain and hire employees with U.S. Government security clearances; actual future interest rates, volatility and other assumptions used in the determination of pension benefits and equity-based compensation, as well as the market performance of benefit plan assets; our collective bargaining agreements, our ability to successfully negotiate contracts with labor unions and our ability to favorably resolve labor disputes should they arise; the business, economic and political conditions in the markets in which we operate, including those for the commercial aviation, shipbuilding and communications markets; global economic uncertainty; the DoD’s contractor support services in-sourcing and efficiency initiatives; events beyond our control such as acts of terrorism; our ability to perform contracts (revenue arrangements) on schedule; our international operations; our extensive use of fixed-price type contracts as compared to cost-plus type and time-and-material type contracts; the rapid change of technology and high level of competition in the defense industry and the commercial industries in which our businesses participate; our introduction of new products into commercial markets or our investments in civil and commercial products or companies; the outcome of litigation matters, including in connection with jury trials; results of audits by U.S. Government agencies; results of ongoing governmental investigations, including potential suspensions or debarments; the impact on our business of improper conduct by our employees, agents or business partners; anticipated cost savings from business acquisitions not fully realized or realized within the expected time frame; the outcome of matters relating to the Foreign Corrupt Practices Act (FCPA) and similar non-U.S. regulations; ultimate resolution of contingent matters, claims and investigations relating to acquired businesses, and the impact on the final purchase price allocations; competitive pressure among companies in our industry; and the fair values of our assets, which can be impaired or reduced by other factors, some of which are discussed above.

For a discussion of these and other risks and uncertainties that could impair our results of operations or financial condition, see “Part I — Item 1A — Risk Factors” and Note 19 to our audited consolidated financial statements, included in our Annual Report on Form 10-K for the year ended December 31, 2011, and any material updates to these factors contained in any of our future filings.

Our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this release to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

EX-99.2

Exhibit 99.2

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

On July 17, 2012, L-3 Communications Holdings, Inc. (L-3), completed the previously announced spin-off of Engility Holdings, Inc. (Engility) through a pro rata distribution to L-3 shareholders of one share of Engility common stock for every six shares of L-3 common stock held by such shareholders as of July 16, 2012, the record date, or approximately 16 million shares of Engility common stock. In connection with the spin-off, Engility made a cash distribution of $335 million to L-3. Engility filed a registration statement on Form 10 (Registration Statement) with the Securities and Exchange Commission (SEC) describing the spin-off and other information about Engility. The Registration Statement was declared effective by the SEC on July 2, 2012.

Engility includes the systems engineering and technical assistance (SETA), training and operational support services businesses that were previously part of L-3’s Government Services segment. L-3 retained the cyber security, intelligence, enterprise information technology and security solutions businesses that were part of its Government Services segment, which has been renamed the National Security Solutions segment. L-3 will report the Engility financial results as discontinued operations beginning with L-3’s 2012 third quarter, along with all comparative prior periods.

Prior to the completion of the spin-off, L-3 and Engility entered into a Distribution Agreement and several other agreements that govern the post-separation relationship between L-3 and Engility. These agreements generally provide that each party is responsible for its respective assets, liabilities and obligations following the spin-off. The agreements also describe future commitments to provide transition services between L-3 and Engility.

The following unaudited pro forma condensed consolidated financial information consists of the unaudited pro forma condensed consolidated statement of operations for the quarters ended March 30, 2012 and April 1, 2011, and the years ended December 31, 2011, 2010 and 2009, and an unaudited pro forma condensed consolidated balance sheet as of March 30, 2012, which have been derived from L-3’s historical consolidated financial statements.

The following unaudited pro forma condensed consolidated financial information gives effect to the Engility spin-off and related transactions, including: (1) the transfer to Engility of certain of L-3’s assets and liabilities that are specifically identifiable or otherwise allocable to Engility, (2) the transfer to Engility of certain tax assets and liabilities as defined in the Tax Matters Agreement, (3) the elimination of L-3’s equity interest in Engility, (4) a $335 million cash distribution to L-3 from Engility, and (5) the planned use of a portion of the cash distribution from Engility to redeem $250 million of L-3’s 6 3/8% Senior Subordinated Notes due 2015 (2015 Notes). L-3 assumed the spin-off and related transactions occurred on March 30, 2012 for the unaudited pro forma condensed consolidated balance sheet. For the unaudited pro forma condensed consolidated statement of operations for the years ended December 31, 2011, 2010 and 2009, and the quarters ended March 30, 2012 and April 1, 2011, L-3 assumed the spin-off and related transactions occurred on January 1, 2009, except that the planned redemption of the 2015 Notes is assumed to have occurred on January 1, 2011. The unaudited pro forma financial information should be read in conjunction with L-3’s unaudited condensed consolidated financial statements for the quarter ended March 30, 2012 included in its quarterly report on Form 10-Q filed with the SEC on May 9, 2012 and L-3’s historical audited financial statements and accompanying notes included in its annual report on Form 10-K filed with the SEC on February 29, 2012.

The pro forma adjustments are based on the best information available and assumptions that management believes are reasonable. The pro forma adjustments may differ from those that will be calculated to report Engility as discontinued operations in L-3’s future filings. The unaudited pro forma condensed consolidated financial information is for illustrative and informational purposes only and is not intended to represent or be indicative of what L-3’s results of operations or balance sheet would have been had the spin-off occurred on the dates indicated. The unaudited pro forma condensed consolidated financial information also should not be considered representative of L-3’s future results of operations or financial position.

In addition, L-3 intends to use approximately $75 million of the cash distribution from Engility to repurchase shares of L-3 common stock by the end of 2012. The pro forma condensed consolidated financial information has not been adjusted for such share repurchases as the timing of such share repurchases and the price of L-3’s common stock when those share repurchases are made is currently not known.

See the notes to the unaudited pro forma condensed consolidated financial information for a more detailed discussion of these transactions.

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Quarter Ended March 30, 2012
			Pro Forma Adjustments
$ in millions, except per share data	Historical		Engility [A]			Other			Pro Forma
Sales	$	3,588	$	(477	)	$	49	[B]	$	3,160
Cost of sales		3,231		(436	)		40	[C]		2,835
Operating income		357		(41	)		9			325
Interest and other expense		48		—			(11	)[D]		37
Income before income taxes		309		(41	)		20			288
Provision for income taxes		106		—			(8	)[E]		98
Net income	$	203	$	(41	)	$	28		$	190
Less: Net income attributable to noncontrolling interests		2		(1	)		—			1
Net income attributable to L-3	$	201	$	(40	)	$	28		$	189
Less: Net income allocable to participating securities		—		—			—			—
Net income allocable to L-3 Holdings’ common shareholders	$	201	$	(40	)	$	28		$	189
Earnings per share allocable to L-3 Holdings’ common shareholders:
Basic	$	2.03							$	1.91
Diluted	$	2.01							$	1.89
L-3 Holdings’ weighted average common shares outstanding:
Basic		99.0								99.0
Diluted		100.2								100.2
	Quarter Ended April 1, 2011
			Pro Forma Adjustments
$ in millions, except per share data	Historical		Engility [A]			Other			Pro Forma
Sales	$	3,601	$	(544	)	$	10	[B]	$	3,067
Cost of sales		3,211		(489	)		7	[C]		2,729
Operating income		390		(55	)		3			338
Interest and other expense		79		—			(4	)[D]		75
Income before income taxes		311		(55	)		7			263
Provision for income taxes		104		—			(19	)[E]		85
Net income	$	207	$	(55	)	$	26		$	178
Less: Net income attributable to noncontrolling interests		3		(1	)		—			2
Net income attributable to L-3	$	204	$	(54	)	$	26		$	176
Less: Net income allocable to participating securities		1		—			—			1
Net income allocable to L-3 Holdings’ common shareholders	$	203	$	(54	)	$	26		$	175
Earnings per share allocable to L-3 Holdings’ common shareholders:
Basic	$	1.87							$	1.61
Diluted	$	1.85							$	1.60
L-3 Holdings’ weighted average common shares outstanding:
Basic		108.5								108.5
Diluted		109.5								109.5

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Year Ended December 31, 2011
			Pro Forma Adjustments
$ in millions, except per share data	Historical		Engility [A]			Other			Pro Forma
Sales	$	15,169	$	(2,179	)	$	168	[B]	$	13,158
Cost of sales		13,528		(1,962	)		149	[C]		11,715
Impairment charge		43		—			—			43
Operating income		1,598		(217	)		19			1,400
Interest and other expense		270		—			(39	)[D]		231
Income before income taxes		1,328		(217	)		58			1,169
Provision for income taxes		360		—			(62	)[E]		298
Net income	$	968	$	(217	)	$	120		$	871
Less: Net income attributable to noncontrolling interests		12		(3	)		—			9
Net income attributable to L-3	$	956	$	(214	)	$	120		$	862
Less: Net income allocable to participating securities		2		—			—			2
Net income allocable to L-3 Holdings’ common shareholders	$	954	$	(214	)	$	120		$	860
Earnings per share allocable to L-3 Holdings’ common shareholders:
Basic	$	9.14							$	8.24
Diluted	$	9.03							$	8.14
L-3 Holdings’ weighted average common shares outstanding:
Basic		104.4								104.4
Diluted		105.6								105.6
	Year Ended December 31, 2010
			Pro Forma Adjustments
$ in millions, except per share data	Historical		Engility [A]			Other			Pro Forma
Sales	$	15,680	$	(2,336	)	$	46	[B]	$	13,390
Cost of sales		13,930		(2,060	)		35	[C]		11,905
Operating income		1,750		(276	)		11			1,485
Interest and other expense		266		—			(33	)[D]		233
Income before income taxes		1,484		(276	)		44			1,252
Provision for income taxes		518		—			(90	)[E]		428
Net income	$	966	$	(276	)	$	134		$	824
Less: Net income attributable to noncontrolling interests		11		(2	)		—			9
Net income attributable to L-3	$	955	$	(274	)	$	134		$	815
Less: Net income allocable to participating securities		5		—			—			5
Net income allocable to L-3 Holdings’ common shareholders	$	950	$	(274	)	$	134		$	810
Earnings per share allocable to L-3 Holdings’ common shareholders:
Basic	$	8.31							$	7.09
Diluted	$	8.25							$	7.04
L-3 Holdings’ weighted average common shares outstanding:
Basic		114.3								114.3
Diluted		115.1								115.1

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (Unaudited)

	Year Ended December 31, 2009
			Pro Forma Adjustments
$ in millions, except per share data	Historical		Engility [A]			Other			Pro Forma
Sales	$	15,615	$	(2,523	)	$	55	[B]	$	13,147
Cost of sales		13,959		(2,225	)		46	[C]		11,780
Operating income		1,656		(298	)		9			1,367
Interest and other expense		270		—			(34	)[D]		236
Income before income taxes		1,386		(298	)		43			1,131
Provision for income taxes		475		—			(101	)[E]		374
Net income	$	911	$	(298	)	$	144		$	757
Less: Net income attributable to noncontrolling interests		10		(1	)		—			9
Net income attributable to L-3	$	901	$	(297	)	$	144		$	748
Less: Net income allocable to participating securities		8		—			—			8
Net income allocable to L-3 Holdings’ common shareholders	$	893	$	(297	)	$	144		$	740
Earnings per share allocable to L-3 Holdings’ common shareholders:
Basic	$	7.65							$	6.34
Diluted	$	7.61							$	6.30
L-3 Holdings’ weighted average common shares outstanding:
Basic		116.8								116.8
Diluted		117.4								117.4

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

PRO FORMA CONDENSED CONSOLIDATED BALANCE SHEET (Unaudited)

	As of March 30, 2012
				Pro Forma Adjustments
$ in millions, except per share data	Historical			Engility [A]			Other			Distribution to L-3 From Engility		Pro Forma
Assets
Current assets:
Cash and cash equivalents	$	493		$	(7	)	$	(262	)[F]	$	335	$	559
Receivables, net		1,268			(408	)		—			—		860
Other current assets		3,476			(19	)		—			—		3,457
Total current assets		5,237			(434	)		(262	)		335		4,876
Property, plant and equipment, net		948			(12	)		—			—		936
Goodwill		8,859			(429	)		(796	)[G]		—		7,634
Other assets		655			(20	)		(99	)[F][G]		—		536
Total assets	$	15,699		$	(895	)	$	(1,157	)	$	335	$	13,982
Liabilities and Equity
Current liabilities:
Accounts payable, trade	$	550		$	(42	)	$	—		$	—	$	508
Other current liabilities		2,218			(183	)		(21	)[F]		—		2,014
Total current liabilities		2,768			(225	)		(21	)		—		2,522
Other liabilities		1,968			(24	)		(76	)[G]		—		1,868
Long-term debt		4,126			—			(249	)[F]		—		3,877
Total liabilities		8,862			(249	)		(346	)		—		8,267
Equity:
L-3 shareholder’s equity		7,160			(635	)		(811	)[F][G]		335		6,049
Accumulated other comprehensive loss		(411	)		—			—			—		(411	)
Total L-3 shareholders’ equity		6,749			(635	)		(811	)		335		5,638
Noncontrolling interests		88			(11	)		—			—		77
Total equity		6,837			(646	)		(811	)		335		5,715
Total liabilities and equity	$	15,699		$	(895	)	$	(1,157	)	$	335	$	13,982

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(Unaudited)

Statements of Operations and Balance Sheet

A. The adjustments remove the assets, liabilities, equity and results of operations of the SETA, training and operational support services businesses that comprise Engility. The adjustments to results of operations (1) include sales made by Engility businesses to other L-3 businesses that were eliminated in L-3’s consolidated historical results and (2) exclude certain general corporate overhead expenses that are not specifically related to the Engility businesses and do not meet the requirements to be presented as a component of discontinued operations.

Statements of Operations

B. Sales made by Engility businesses to other L-3 businesses are included as part of the adjustment to remove Engility from L-3’s historical results of operations in Note A above. This pro forma adjustment to sales adjusts for the effect of the removal of these intercompany sales not included in L-3’s historical results of operations as they were eliminated in consolidation.

C. The adjustment to cost of sales adjusts for: (1) the assignment to Engility of non-recurring transaction costs incurred by L-3 in connection with the spin-off, (2) the effect of the removal of intercompany cost of sales associated with intercompany sales described in Notes A and B above, and (3) intangible asset amortization expense related primarily to Engility customer relationship intangible assets, which have historically been managed and recorded by L-3. The components of the adjustment to cost of sales for each period presented are listed below.

$ in millions	March 30, 2012			April 1, 2011			December 31,
							2011			2010			2009
Non-recurring spin-off transaction costs	$	(6	)	$	—		$	(9	)	$	—		$	—
Intercompany cost of sales		49			10			168			46			55
Intangible asset amortization expense		(3	)		(3	)		(10	)		(11	)		(9	)
Total cost of sales adjustment	$	40		$	7		$	149		$	35		$	46

D. The adjustment to interest and other expense reflects: (1) the allocation of interest expense for debt not directly attributable or related to L-3’s other operations, allocated based on the ratio of: (x) Engility net assets to (y) the sum of total L-3 consolidated net assets plus L-3 consolidated total debt, and (2) estimated debt retirement charge and interest expense savings in connection with the planned redemption of $250 million of aggregate principal amount of L-3’s 6 ³/₈% Senior Subordinated Notes due in 2015 (2015 Notes), which is further described in Note F below. The debt retirement charge and interest expense savings assume that the redemption of the 2015 Notes occurred on January 1, 2011. The components of the adjustment to interest and other expense for each period presented are listed below.

$ in millions	March 30, 2012			April 1, 2011			December 31,
							2011			2010			2009
Allocated historical interest expense	$	(7	)	$	(8	)	$	(31	)	$	(33	)	$	(34	)
Debt retirement charge		—			8			8			—			—
Interest savings on 2015 Notes		(4	)		(4	)		(16	)		—			—
Total interest and other expense adjustment	$	(11	)	$	(4	)	$	(39	)	$	(33	)	$	(34	)

E. Federal income taxes have not been historically allocated to Engility as they were recorded by L-3. The pro forma adjustments were tax effected using an estimated effective tax rate of 38.8% in 2011, 38.8% in 2010, 39.6% in 2009, 38.0% in the 2012 first quarter, and 39.6% in the 2011 first quarter applied to income before income taxes for Engility plus the other pro forma adjustments.

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO PRO FORMA CONDENSED CONSOLIDATED FINANCIAL INFORMATION

(Unaudited)

Balance Sheet

F. L-3 intends to use a portion of the cash distribution from Engility to redeem $250 million aggregate principal amount of the 2015 Notes on or about July 26, 2012 (the “Redemption Date”) at a redemption price of 102.125% of the principal amount thereof, plus accrued and unpaid interest, up to but not including the Redemption Date.

The adjustments assume a March 30, 2012 redemption date and reflect a reduction in: (1) cash of $262 million, which is comprised of $250 million aggregate principal amount, $7 million of accrued and unpaid interest and a $5 million redemption premium, (2) other assets of $2 million to write-off unamortized debt issuance costs, (3) other current liabilities of $7 million for the payment of accrued and unpaid interest at March 30, 2012, (4) debt of $249 million comprised of $250 million aggregate principal amount and $1 million of unamortized discount, and (5) other current liabilities of $14 million to record current deferred income tax liabilities.

G. The adjustment reflects the allocation of certain amounts that were historically managed and recorded by L-3 including: (1) noncurrent income tax payables of $52 million and deferred income tax liabilities of $22 million associated with the Engility tax provision, (2) goodwill of $796 million allocated to Engility based on the relative fair value of Engility and L-3’s National Security Solutions business, (3) identifiable long lived intangible assets of $97 million, and (4) deferred compensation plan liabilities of $2 million.