24. 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 June 28, 2013:
Current assets:
Cash and cash equivalents	$	—	$	120	$	—	$	236	$	(28	)	$	328
Billed receivables, net		—		358		464		216		—			1,038
Contracts in process		—		994		1,288		382		—			2,664
Other current assets		—		278		137		184		—			599

Total current assets		—		1,750		1,889		1,018		(28	)		4,629
Goodwill		—		2,290		4,285		1,127		—			7,702
Other assets		—		805		517		209		—			1,531
Investment in and amounts due from consolidated subsidiaries		6,289		7,059		3,383		—		(16,731	)		—

Total assets	$	6,289	$	11,904	$	10,074	$	2,354	$	(16,759	)	$	13,862

Current liabilities	$	—	$	892	$	974	$	629	$	(28	)	$	2,467
Amounts due to consolidated subsidiaries		—		—		—		290		(290	)		—
Other long-term liabilities		—		1,782		203		106		—			2,091
Long-term debt		689		3,630		—		—		(689	)		3,630

Total liabilities		689		6,304		1,177		1,025		(1,007	)		8,188

L-3 shareholders’ equity		5,600		5,600		8,897		1,329		(15,826	)		5,600
Noncontrolling interests		—		—		—		—		74			74

Total equity		5,600		5,600		8,897		1,329		(15,752	)		5,674

Total liabilities and equity	$	6,289	$	11,904	$	10,074	$	2,354	$	(16,759	)	$	13,862

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 June 28, 2013:
Total net sales	$	—		$	993		$	1,721	$	574		$	(96	)	$	3,192
Total cost of sales		14			912			1,555		514			(110	)		2,885

Operating (loss) income		(14	)		81			166		60			14			307
Interest expense		(5	)		(44	)		—		—			5			(44	)
Interest and other income, net		—			2			—		3			—			5

(Loss) income before income taxes		(19	)		39			166		63			19			268
(Benefit) provision for income taxes		(6	)		15			48		19			6			82
Equity in net income of consolidated subsidiaries		198			161			—		—			(359	)		—

Net income		185			185			118		44			(346	)		186
Less: Net income attributable to noncontrolling interests		—			—			—		—			1			1

Net income attributable to L-3	$	185		$	185		$	118	$	44		$	(347	)	$	185

Comprehensive income attributable to L-3	$	180		$	180		$	117	$	27		$	(324	)	$	180


For the quarter ended June 29, 2012:
Total net sales	$	—		$	921		$	1,777	$	535		$	(90	)	$	3,143
Total cost of sales		16			837			1,593		472			(106	)		2,812

Operating (loss) income		(16	)		84			184		63			16			331
Interest expense		(5	)		(45	)		—		—			5			(45	)
Interest and other income, net		—			2			—		1			—			3

(Loss) income from continuing operations before income taxes		(21	)		41			184		64			21			289
(Benefit) provision for income taxes		(7	)		13			63		22			7			98
Equity in net income of consolidated subsidiaries from continuing operations		219			160			—		—			(379	)		—

Income from continuing operations		205			188			121		42			(365	)		191
Income from discontinued operations, net of income taxes		—			17			—		—			—			17

Net income		205			205			121		42			(365	)		208
Less: Net income attributable to noncontrolling interests		—			—			—		—			3			3

Net income attributable to L-3	$	205		$	205		$	121	$	42		$	(368	)	$	205

Comprehensive income attributable to L-3	$	168		$	168		$	121	$	(7	)	$	(282	)	$	168


	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 first half ended June 28, 2013:
Total net sales	$	—		$	1,928		$	3,453	$	1,165	$	(169	)	$	6,377
Total cost of sales		28			1,775			3,107		1,044		(197	)		5,757

Operating (loss) income		(28	)		153			346		121		28			620
Interest expense		(10	)		(87	)		—		—		10			(87	)
Interest and other income, net		—			4			—		4		—			8

(Loss) income before income taxes		(38	)		70			346		125		38			541
(Benefit) provision for income taxes		(11	)		21			103		37		11			161
Equity in net income of consolidated subsidiaries		405			329			—		—		(734	)		—

Net income		378			378			243		88		(707	)		380
Less: Net income attributable to noncontrolling interests		—			—			—		—		2			2

Net income attributable to L-3	$	378		$	378		$	243	$	88	$	(709	)	$	378

Comprehensive income attributable to L-3	$	349		$	349		$	243	$	33	$	(625	)	$	349


For the first half ended June 29, 2012:
Total net sales	$	—		$	1,825		$	3,547	$	1,101	$	(170	)	$	6,303
Total cost of sales		29			1,667			3,194		956		(199	)		5,647

Operating (loss) income		(29	)		158			353		145		29			656
Interest expense		(10	)		(90	)		—		—		10			(90	)
Interest and other income, net		—			5			—		1		—			6

(Loss) income from continuing operations before income taxes		(39	)		73			353		146		39			572
(Benefit) provision for income taxes		(13	)		24			120		50		13			194
Equity in net income of consolidated subsidiaries from continuing operations		432			324			—		—		(756	)		—

Income from continuing operations		406			373			233		96		(730	)		378
Income from discontinued operations, net of income tax		—			33			—		—		—			33

Net income		406			406			233		96		(730	)		411
Less: Net income attributable to noncontrolling interests		—			—			—		—		5			5

Net income attributable to L-3	$	406		$	406		$	233	$	96	$	(735	)	$	406

Comprehensive income attributable to L-3	$	412		$	412		$	236	$	77	$	(725	)	$	412


	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 first half ended June 28, 2013:
Operating activities:
Net cash from operating activities	$	349		$	146		$	254		$	64		$	(417	)	$	396

Investing activities:
Business acquisitions, net of cash acquired		—			(1	)		—			—			—			(1	)
Investments in L-3 Communications		(37	)		—			—			—			37			—
Other investing activities		—			(53	)		(39	)		(11	)		—			(103	)

Net cash used in investing activities		(37	)		(54	)		(39	)		(11	)		37			(104	)

Financing activities:
Common stock repurchased		(248	)		—			—			—			—			(248	)
Dividends paid on L-3 Holdings’ common stock		(101	)		—			—			—			—			(101	)
Dividends paid to L-3 Holdings		—			(349	)		—			—			349			—
Investments from L-3 Holdings		—			37			—			—			(37	)		—
Other financing activities		37			94			(215	)		(50	)		179			45

Net cash used in financing activities		(312	)		(218	)		(215	)		(50	)		491			(304	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(9	)		—			(9	)

Net (decrease) increase in cash		—			(126	)		—			(6	)		111			(21	)
Cash and cash equivalents, beginning of the period		—			246			—			242			(139	)		349

Cash and cash equivalents, end of the period	$	—		$	120		$	—		$	236		$	(28	)	$	328

For the first half ended June 29, 2012:
Operating activities:
Net cash from operating activities from continuing operations	$	413		$	80		$	236		$	91		$	(483	)	$	337

Investing activities:
Business acquisitions, net of cash acquired		—			(216	)		—			—			—			(216	)
Investments in L-3 Communications		(25	)		—			—			—			25			—
Other investing activities		—			(45	)		(29	)		(5	)		—			(79	)

Net cash used in investing activities from continuing operations		(25	)		(261	)		(29	)		(5	)		25			(295	)

Financing activities:
Common stock repurchased		(315	)		—			—			—			—			(315	)
Dividends paid on L-3 Holdings’ common stock		(98	)		—			—			—			—			(98	)
Dividends paid to L-3 Holdings		—			(413	)		—			—			413			—
Investments from L-3 Holdings		—			25			—			—			(25	)		—
Other financing activities		25			109			(201	)		(72	)		160			21

Net cash used in financing activities from continuing operations		(388	)		(279	)		(201	)		(72	)		548			(392	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(3	)		—			(3	)
Net increase in cash and cash equivalents of discontinued operations		—			70			—			—			—			70

Net (decrease) increase in cash		—			(390	)		6			11			90			(283	)
Cash and cash equivalents, beginning of the period		—			644			—			222			(102	)		764

Cash and cash equivalents, end of the period	$	—		$	254		$	6		$	233		$	(12	)	$	481