23. Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries

L-3 Communications is a wholly-owned subsidiary of L-3 Holdings. The debt of L-3 Communications, including the Senior Notes and borrowings under amounts drawn against the Amended and Restated Revolving Credit Facility are guaranteed, on a joint and several, full and unconditional basis, by certain of its domestic subsidiaries (the “Guarantor Subsidiaries”) and, in the case of the Amended and Restated Revolving Credit Facility, by L-3 Holdings. The debt of L-3 Holdings, including the CODES, are guaranteed on a joint and several, full and unconditional basis, by L-3 Communications and the Guarantor Subsidiaries. See Note 10 to the audited consolidated financial statements for the year ended December 31, 2012, included in the Company’s Annual Report on Form 10-K. The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the “Non-Guarantor Subsidiaries”) do not guarantee the debt of L-3 Communications or L-3 Holdings. None of the debt of L-3 Communications has been issued by its subsidiaries. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L-3 Communications or from L-3 Communications to L-3 Holdings.

Prior to the spin-off of Engility on July 17, 2012, Engility Holdings, Inc., Engility Corporation, International Resources Group Ltd. and LinCom Wireless, Inc. were guarantor subsidiaries. As a result of the spin-off, these entities no longer guarantee the debt of L-3 Communications or L-3 Holdings. Therefore, the results of operations and cash flows of the Engility businesses have been reclassified from guarantor subsidiaries to L-3 Communications as discontinued operations in the following condensed combining financial information.

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 L-3 Communications Corporation, or (2) upon the determination that such guarantor is no longer a “domestic subsidiary”. Under the terms of the indenture governing the CODES, the guarantees of the CODES will be automatically and unconditionally released and discharged: (1) upon the release of guarantees of all other outstanding indebtedness of L-3 Holdings and its subsidiaries (other than a foreign subsidiary) or (2) upon the designation of such guarantor as an “excluded subsidiary.” In addition, the guarantees of the Senior Notes and the CODES will unconditionally be 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 or other disposition of all of the capital stock of such guarantor.

The following unaudited condensed combining financial information presents the results of operations, financial position and cash flows of: (1) L-3 Holdings, excluding L-3 Communications and its consolidated subsidiaries (the “Parent”), (2) L-3 Communications, excluding its consolidated subsidiaries, (3) the Guarantor Subsidiaries, (4) the Non-Guarantor Subsidiaries, and (5) the eliminations to arrive at the information for L-3 on a consolidated basis.


	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Balance Sheets:
At March 29, 2013:
Current assets:
Cash and cash equivalents	$	—	$	66	$	—	$	223	$	(13	)	$	276
Billed receivables, net		—		383		508		217		—			1,108
Contracts in process		—		1,031		1,320		397		—			2,748
Other current assets		—		258		118		182		—			558

Total current assets		—		1,738		1,946		1,019		(13	)		4,690
Goodwill		—		2,246		4,333		1,141		—			7,720
Other assets		—		754		523		193		—			1,470
Investment in and amounts due from consolidated subsidiaries		6,202		7,107		3,463		—		(16,772	)		—

Total assets	$	6,202	$	11,845	$	10,265	$	2,353	$	(16,785	)	$	13,880

Current liabilities	$	—	$	916	$	1,019	$	645	$	(13	)	$	2,567
Amounts due to consolidated subsidiaries		—		—		—		268		(268	)		—
Other long-term liabilities		—		1,787		206		103		—			2,096
Long-term debt		689		3,629		—		—		(689	)		3,629

Total liabilities		689		6,332		1,225		1,016		(970	)		8,292

L-3 shareholders’ equity		5,513		5,513		9,040		1,337		(15,890	)		5,513
Noncontrolling interests		—		—		—		—		75			75

Total equity		5,513		5,513		9,040		1,337		(15,815	)		5,588

Total liabilities and equity	$	6,202	$	11,845	$	10,265	$	2,353	$	(16,785	)	$	13,880

At December 31, 2012:
Current assets:
Cash and cash equivalents	$	—	$	246	$	—	$	242	$	(139	)	$	349
Billed receivables, net		—		290		441		237		—			968
Contracts in process		—		945		1,351		356		—			2,652
Other current assets		—		248		163		191		—			602

Total current assets		—		1,729		1,955		1,026		(139	)		4,571
Goodwill		—		1,993		4,586		1,165		—			7,744
Other assets		—		734		565		212		—			1,511
Investment in and amounts due from consolidated subsidiaries		6,152		7,204		3,326		43		(16,725	)		—

Total assets	$	6,152	$	11,660	$	10,432	$	2,446	$	(16,864	)	$	13,826

Current liabilities	$	—	$	823	$	1,255	$	658	$	(139	)	$	2,597
Other long-term liabilities		—		1,745		210		106		—			2,061
Long-term debt		689		3,629		—		—		(689	)		3,629

Total liabilities		689		6,197		1,465		764		(828	)		8,287

L-3 shareholders’ equity		5,463		5,463		8,967		1,682		(16,112	)		5,463
Noncontrolling interests		—		—		—		—		76			76

Total equity		5,463		5,463		8,967		1,682		(16,036	)		5,539

Total liabilities and equity	$	6,152	$	11,660	$	10,432	$	2,446	$	(16,864	)	$	13,826


	L-3 Holdings (Parent)			L-3 Communications			Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Statements of Operations:
For the quarter ended March 29, 2013:
Total net sales	$	—		$	938		$	1,735	$	591	$	(79	)	$	3,185
Total cost of sales		14			866			1,554		531		(93	)		2,872

Operating (loss) income		(14	)		72			181		60		14			313
Interest expense		(5	)		(43	)		—		—		5			(43	)
Interest and other income, net		—			2			—		1		—			3

(Loss) income before income taxes		(19	)		31			181		61		19			273
(Benefit) provision for income taxes		(5	)		9			52		18		5			79
Equity in net income of consolidated subsidiaries		207			171			—		—		(378	)		—

Net income		193			193			129		43		(364	)		194
Net income attributable to noncontrolling interests		—			—			—		—		1			1

Net income attributable to L-3	$	193		$	193		$	129	$	43	$	(365	)	$	193

Comprehensive income attributable to L-3	$	169		$	169		$	129	$	6	$	(304	)	$	169


For the quarter ended March 30, 2012:
Total net sales	$	—		$	904		$	1,770	$	566	$	(80	)	$	3,160
Total cost of sales		13			830			1,601		484		(93	)		2,835

Operating (loss) income		(13	)		74			169		82		13			325
Interest expense		(5	)		(45	)		—		—		5			(45	)
Interest and other income, net		—			3			—		—		—			3

(Loss) income from continuing operations before income taxes		(18	)		32			169		82		18			283
(Benefit) provision for income taxes		(6	)		11			57		28		6			96
Equity in net income of consolidated subsidiaries from continuing operations		213			164			—		—		(377	)		—

Income from continuing operations		201			185			112		54		(365	)		187
Income from discontinued operations, net of income tax		—			16			—		—		—			16

Net income		201			201			112		54		(365	)		203
Net income attributable to noncontrolling interests		—			—			—		—		2			2

Net income attributable to L-3	$	201		$	201		$	112	$	54	$	(367	)	$	201

Comprehensive income attributable to L-3	$	244		$	244		$	115	$	84	$	(443	)	$	244


	L-3 Holdings (Parent)			L-3 Communications			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Statements of Cash Flows:

For the quarter ended March 29, 2013:
Operating activities:
Net cash from operating activities	$	174		$	92		$	73		$	24		$	(217	)	$	146

Investing activities:
Investments in L-3 Communications		(13	)		—			—			—			13			—
Other investing activities		—			(25	)		(25	)		(4	)		—			(54	)

Net cash used in investing activities		(13	)		(25	)		(25	)		(4	)		13			(54	)

Financing activities:
Common stock repurchased		(122	)		—			—			—			—			(122	)
Dividends paid on L-3 Holdings’ common stock		(52	)		—			—			—			—			(52	)
Dividends paid to L-3 Holdings		—			(174	)		—			—			174			—
Investments from L-3 Holdings		—			13			—			—			(13	)		—
Other financing activities		13			(86	)		(48	)		(32	)		169			16

Net cash used in financing activities		(161	)		(247	)		(48	)		(32	)		330			(158	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(7	)		—			(7	)

Net (decrease) increase in cash		—			(180	)		—			(19	)		126			(73	)
Cash and cash equivalents, beginning of the period		—			246			—			242			(139	)		349

Cash and cash equivalents, end of the period	$	—		$	66		$	—		$	223		$	(13	)	$	276


For the quarter ended March 30, 2012:
Operating activities:
Net cash from operating activities from continuing operations	$	187		$	75		$	44		$	41		$	(227	)	$	120

Investing activities:
Business acquisitions, net of cash acquired		—			(205	)		—			—			—			(205	)
Investments in L-3 Communications		(13	)		—			—			—			13			—
Other investing activities		—			(16	)		(10	)		(3	)		—			(29	)

Net cash used in investing activities from continuing operations		(13	)		(221	)		(10	)		(3	)		13			(234	)

Financing activities:
Common stock repurchased		(138	)		—			—			—			—			(138	)
Dividends paid on L-3 Holdings’ common stock		(49	)		—			—			—			—			(49	)
Dividends paid to L-3 Holdings		—			(187	)		—			—			187			—
Investments from L-3 Holdings		—			13			—			—			(13	)		—
Other financing activities		13			(51	)		(27	)		(52	)		125			8

Net cash used in financing activities from continuing operations		(174	)		(225	)		(27	)		(52	)		299			(179	)

Effect of foreign currency exchange rate changes on cash		—			—			—			5			—			5
Net increase in cash and cash equivalents of discontinued operations		—			17			—			—			—			17

Net (decrease) increase in cash		—			(354	)		7			(9	)		85			(271	)
Cash and cash equivalents, beginning of the period		—			644			—			222			(102	)		764

Cash and cash equivalents, end of the period	$	—		$	290		$	7		$	213		$	(17	)	$	493