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 is 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, is 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 September 27, 2013:
Current assets:
Cash and cash equivalents	$	—	$	154	$	1	$	244	$	(22	)	$	377
Billed receivables, net		—		381		480		223		—			1,084
Contracts in process		—		1,053		1,260		378		—			2,691
Other current assets		—		291		149		205		—			645

Total current assets		—		1,879		1,890		1,050		(22	)		4,797
Goodwill		—		2,290		4,285		1,182		—			7,757
Other assets		—		797		517		207		—			1,521
Investment in and amounts due from consolidated subsidiaries		6,444		7,075		3,584		—		(17,103	)		—

Total assets	$	6,444	$	12,041	$	10,276	$	2,439	$	(17,125	)	$	14,075

Current liabilities	$	—	$	852	$	1,038	$	635	$	(22	)	$	2,503
Amounts due to consolidated subsidiaries		—		—		—		310		(310	)		—
Other long-term liabilities		—		1,804		193		115		—			2,112
Long-term debt		689		3,630		—		—		(689	)		3,630

Total liabilities		689		6,286		1,231		1,060		(1,021	)		8,245

L-3 shareholders’ equity		5,755		5,755		9,045		1,379		(16,179	)		5,755
Noncontrolling interests		—		—		—		—		75			75

Total equity		5,755		5,755		9,045		1,379		(16,104	)		5,830

Total liabilities and equity	$	6,444	$	12,041	$	10,276	$	2,439	$	(17,125	)	$	14,075

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		340		—			2,636
Other current assets		—		248		163		191		—			602

Total current assets		—		1,729		1,955		1,010		(139	)		4,555
Goodwill		—		1,993		4,586		1,197		—			7,776
Other assets		—		734		565		211		—			1,510
Investment in and amounts due from consolidated subsidiaries		6,156		7,208		3,326		43		(16,733	)		—

Total assets	$	6,156	$	11,664	$	10,432	$	2,461	$	(16,872	)	$	13,841

Current liabilities	$	—	$	823	$	1,255	$	652	$	(139	)	$	2,591
Other long-term liabilities		—		1,745		210		123		—			2,078
Long-term debt		689		3,629		—		—		(689	)		3,629

Total liabilities		689		6,197		1,465		775		(828	)		8,298

L-3 shareholders’ equity		5,467		5,467		8,967		1,686		(16,120	)		5,467
Noncontrolling interests		—		—		—		—		76			76

Total equity		5,467		5,467		8,967		1,686		(16,044	)		5,543

Total liabilities and equity	$	6,156	$	11,664	$	10,432	$	2,461	$	(16,872	)	$	13,841


	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 September 27, 2013:
Total net sales	$	—		$	913		$	1,636		$	546		$	(99	)	$	2,996
Total cost of sales		(14	)		(855	)		(1,443	)		(483	)		113			(2,682	)

Operating (loss) income		(14	)		58			193			63			14			314
Interest expense		(5	)		(43	)		—			(1	)		5			(44	)
Interest and other income, net		—			2			1			—			—			3

(Loss) income before income taxes		(19	)		17			194			62			19			273
Benefit (provision) for income taxes		5			(3	)		(47	)		(15	)		(5	)		(65	)
Equity in net income of consolidated subsidiaries		218			190			—			—			(408	)		—

Net income		204			204			147			47			(394	)		208
Net income attributable to noncontrolling interests		—			—			—			—			(4	)		(4	)

Net income attributable to L-3	$	204		$	204		$	147		$	47		$	(398	)	$	204

Comprehensive income attributable to L-3	$	254		$	254		$	148		$	79		$	(481	)	$	254

For the quarter ended September 28, 2012:
Total net sales	$	—		$	892		$	1,929		$	550		$	(88	)	$	3,283
Total cost of sales		(15	)		(808	)		(1,743	)		(489	)		103			(2,952	)

Operating (loss) income		(15	)		84			186			61			15			331
Interest expense		(5	)		(48	)		—			—			5			(48	)
Interest and other income, net		—			3			(4	)		1			—			—
Debt retirement charge		—			(8	)		—			—			—			(8	)

(Loss) income from continuing operations before income taxes		(20	)		31			182			62			20			275
Benefit (provision) for income taxes		6			(9	)		(53	)		(18	)		(6	)		(80	)
Equity in net income of consolidated subsidiaries from continuing operations		206			171			—			—			(377	)		—

Income from continuing operations		192			193			129			44			(363	)		195
Loss from discontinued operations, net of income tax		—			(1	)		—			—			—			(1	)

Net income		192			192			129			44			(363	)		194
Net income attributable to noncontrolling interests		—			—			—			—			(2	)		(2	)

Net income attributable to L-3	$	192		$	192		$	129		$	44		$	(365	)	$	192

Comprehensive income attributable to L-3	$	249		$	249		$	129		$	92		$	(470	)	$	249


	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 year-to-date ended September 27, 2013:
Total net sales	$	—		$	2,841		$	5,089		$	1,711		$	(268	)	$	9,373
Total cost of sales		(42	)		(2,630	)		(4,550	)		(1,527	)		310			(8,439	)

Operating (loss) income		(42	)		211			539			184			42			934
Interest expense		(15	)		(130	)		—			(1	)		15			(131	)
Interest and other income, net		—			6			1			4			—			11

(Loss) income from continuing operations before income taxes		(57	)		87			540			187			57			814
Benefit (provision) for income taxes		16			(24	)		(150	)		(52	)		(16	)		(226	)
Equity in net income of consolidated subsidiaries		623			519			—			—			(1,142	)		—

Net income		582			582			390			135			(1,101	)		588
Net income attributable to noncontrolling interests		—			—			—			—			(6	)		(6	)

Net income attributable to L-3	$	582		$	582		$	390		$	135		$	(1,107	)	$	582

Comprehensive income attributable to L-3	$	603		$	603		$	391		$	112		$	(1,106	)	$	603

For the year-to-date ended September 28, 2012:
Total net sales	$	—		$	2,715		$	5,476		$	1,648		$	(253	)	$	9,586
Total cost of sales		(44	)		(2,475	)		(4,936	)		(1,441	)		297			(8,599	)

Operating (loss) income		(44	)		240			540			207			44			987
Interest expense		(15	)		(138	)		—			—			15			(138	)
Interest and other income, net		—			8			(4	)		2			—			6
Debt retirement charge		—			(8	)		—			—			—			(8	)

(Loss) income from continuing operations before income taxes		(59	)		102			536			209			59			847
Benefit (provision) for income taxes		19			(32	)		(173	)		(69	)		(19	)		(274	)
Equity in net income of consolidated subsidiaries from continuing operations		638			496			—			—			(1,134	)		—

Income from continuing operations		598			566			363			140			(1,094	)		573
Income from discontinued operations, net of income tax		—			32			—			—			—			32

Net income		598			598			363			140			(1,094	)		605
Net income attributable to noncontrolling interests		—			—			—			—			(7	)		(7	)

Net income attributable to L-3	$	598		$	598		$	363		$	140		$	(1,101	)	$	598

Comprehensive income attributable to L-3	$	661		$	661		$	366		$	168		$	(1,195	)	$	661


	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 year-to-date ended September 27, 2013:
Operating activities:
Net cash from operating activities	$	555		$	86		$	523		$	101		$	(648	)	$	617

Investing activities:
Business acquisitions, net of cash acquired		—			(2	)		—			—			—			(2	)
Investments in L-3 Communications		(104	)		—			—			—			104			—
Other investing activities		—			(70	)		(53	)		(16	)		—			(139	)

Net cash used in investing activities		(104	)		(72	)		(53	)		(16	)		104			(141	)

Financing activities:
Common stock repurchased		(404	)		—			—			—			—			(404	)
Dividends paid on L-3 Holdings common stock		(151	)		—			—			—			—			(151	)
Dividends paid to L-3 Holdings		—			(555	)		—			—			555			—
Investments from L-3 Holdings		—			104			—			—			(104	)		—
Other financing activities		104			345			(469	)		(81	)		210			109

Net cash used in financing activities		(451	)		(106	)		(469	)		(81	)		661			(446	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(2	)		—			(2	)

Net (decrease) increase in cash		—			(92	)		1			2			117			28
Cash and cash equivalents, beginning of the period		—			246			—			242			(139	)		349

Cash and cash equivalents, end of the period	$	—		$	154		$	1		$	244		$	(22	)	$	377

For the year-to-date ended September 28, 2012:
Operating activities:
Net cash from operating activities from continuing operations	$	653		$	83		$	527		$	182		$	(753	)	$	692

Investing activities:
Business acquisitions, net of cash acquired		—			(349	)		—			—			—			(349	)
Investments in L-3 Communications		(27	)		—			—			—			27			—
Other investing activities		—			262			(41	)		(9	)		—			212

Net cash used in investing activities from continuing operations		(27	)		(87	)		(41	)		(9	)		27			(137	)

Financing activities:
Redemption of senior subordinated notes		—			(250	)		—			—			—			(250	)
Common stock repurchased		(504	)		—			—			—			—			(504	)
Dividends paid on L-3 Holdings common stock		(149	)		—			—			—			—			(149	)
Dividends paid to L-3 Holdings		—			(653	)		—			—			653			—
Investments from L-3 Holdings		—			27			—			—			(27	)		—
Other financing activities		27			523			(485	)		(182	)		137			20

Net cash used in financing activities from continuing operations		(626	)		(353	)		(485	)		(182	)		763			(883	)

Effect of foreign currency exchange rate changes on cash		—			—			—			4			—			4
Net increase in cash and cash equivalents of discontinued operations		—			74			—			—			—			74

Net (decrease) increase in cash		—			(283	)		1			(5	)		37			(250	)
Cash and cash equivalents, beginning of the period		—			644			—			222			(102	)		764

Cash and cash equivalents, end of the period	$	—		$	361		$	1		$	217		$	(65	)	$	514