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

L-3 Communications is a 100% 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 11 to the audited consolidated financial statements for the year ended December 31, 2013, included in the Company’s Annual Report on Form 10-K/A, filed on October 10, 2014, for the fiscal year ended December 31, 2013. 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.

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.

As discussed in Note 3, the Company is revising its previously issued financial statements. As part of that revision, the Company has revised the accompanying condensed combining financial statements contained herein. The adjustments related to the internal review of the Aerospace Systems segment, excluding certain adjustments related to the Platform Systems segment, were recorded as adjustments to the Guarantor Subsidiaries financial statement amounts. Adjustments from the internal review that related to a foreign subsidiary of the Platform Systems segment, with a cumulative operating impact through March 28, 2014 of $14 million, were recorded to the Non-Guarantor Subsidiaries financial statement amounts. The adjustments for the accounting related to a sales-type lease transaction for flight simulator systems within its Electronic Systems segment have been recorded as adjustments to the L-3 Communications financial statement amounts. The adjustments for the previously identified immaterial errors were recorded as adjustments to the Guarantor Subsidiaries financial statement amounts.


	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Balance Sheets:
At March 28, 2014:
Current assets:
Cash and cash equivalents	$	—	$	57	$	—	$	182	$	(12	)	$	227
Billed receivables, net		—		343		458		267		—			1,068
Contracts in process		—		996		1,260		392		—			2,648
Other current assets		—		357		147		175		—			679

Total current assets		—		1,753		1,865		1,016		(12	)		4,622
Goodwill		—		2,307		4,327		1,187		—			7,821
Other assets		—		821		522		241		—			1,584
Investment in and amounts due from consolidated subsidiaries		6,749		7,203		3,661		—		(17,613	)		—

Total assets	$	6,749	$	12,084	$	10,375	$	2,444	$	(17,625	)	$	14,027

Current liabilities	$	—	$	921	$	932	$	636	$	(12	)	$	2,477
Amounts due to consolidated subsidiaries		—		—		—		380		(380	)		—
Other long-term liabilities		—		1,472		191		121		—			1,784
Long-term debt		689		3,631		—		—		(689	)		3,631

Total liabilities		689		6,024		1,123		1,137		(1,081	)		7,892

L-3 shareholders’ equity		6,060		6,060		9,252		1,307		(16,619	)		6,060
Noncontrolling interests		—		—		—		—		75			75

Total equity		6,060		6,060		9,252		1,307		(16,544	)		6,135

Total liabilities and equity	$	6,749	$	12,084	$	10,375	$	2,444	$	(17,625	)	$	14,027

At December 31, 2013:
Current assets:
Cash and cash equivalents	$	—	$	258	$	—	$	261	$	(19	)	$	500
Billed receivables, net		—		364		401		226		—			991
Contracts in process		—		925		1,152		354		—			2,431
Other current assets		—		344		159		169		—			672

Total current assets		—		1,891		1,712		1,010		(19	)		4,594
Goodwill		—		2,307		4,326		1,163		—			7,796
Other assets		—		838		532		228		—			1,598
Investment in and amounts due from consolidated subsidiaries		6,670		6,940		3,744		—		(17,354	)		—

Total assets	$	6,670	$	11,976	$	10,314	$	2,401	$	(17,373	)	$	13,988

Current liabilities	$	—	$	914	$	1,011	$	628	$	(19	)	$	2,534
Amounts due to consolidated subsidiaries		—		—		—		270		(270	)		—
Other long-term liabilities		—		1,451		193		124		—			1,768
Long-term debt		689		3,630		—		—		(689	)		3,630

Total liabilities		689		5,995		1,204		1,022		(978	)		7,932

L-3 shareholders’ equity		5,981		5,981		9,110		1,379		(16,470	)		5,981
Noncontrolling interests		—		—		—		—		75			75

Total equity		5,981		5,981		9,110		1,379		(16,395	)		6,056

Total liabilities and equity	$	6,670	$	11,976	$	10,314	$	2,401	$	(17,373	)	$	13,988


	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 28, 2014:
Total net sales	$	—		$	863		$	1,625		$	543		$	(74	)	$	2,957
Total cost of sales		(15	)		(769	)		(1,481	)		(495	)		89			(2,671	)

Operating (loss) income		(15	)		94			144			48			15			286
Interest expense		(5	)		(43	)		—			—			5			(43	)
Interest and other income, net		—			5			—			—			—			5

(Loss) income before income taxes		(20	)		56			144			48			20			248
Benefit (provision) for income taxes		6			(15	)		(45	)		(16	)		(6	)		(76	)
Equity in net income of consolidated subsidiaries		184			129			—			—			(313	)		—

Net income		170			170			99			32			(299	)		172
Net income attributable to noncontrolling interests		—			—			—			—			(2	)		(2	)

Net income attributable to L-3	$	170		$	170		$	99		$	32		$	(301	)	$	170

Comprehensive income attributable to L-3	$	152		$	152		$	96		$	15		$	(263	)	$	152

For the quarter ended March 29, 2013:
Total net sales	$	—		$	946		$	1,740		$	590		$	(79	)	$	3,197
Total cost of sales		(14	)		(864	)		(1,571	)		(531	)		93			(2,887	)

Operating (loss) income		(14	)		82			169			59			14			310
Interest expense		(5	)		(43	)		—			—			5			(43	)
Interest and other income, net		—			3			(1	)		1			—			3

(Loss) income before income taxes		(19	)		42			168			60			19			270
Benefit (provision) for income taxes		5			(12	)		(48	)		(18	)		(5	)		(78	)
Equity in net income of consolidated subsidiaries		205			161			—			—			(366	)		—

Net income		191			191			120			42			(352	)		192
Net income attributable to noncontrolling interests		—			—			—			—			(1	)		(1	)

Net income attributable to L-3	$	191		$	191		$	120		$	42		$	(353	)	$	191

Comprehensive income attributable to L-3	$	167		$	167		$	120		$	5		$	(292	)	$	167


	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 28, 2014:
Operating activities:
Net cash from (used in) operating activities	$	188		$	80		$	(61	)	$	(34	)	$	(235	)	$	(62	)

Investing activities:
Business acquisitions, net of cash acquired		—			(57	)		—			—			—			(57	)
Investments in L-3 Communications		(51	)		—			—			—			51			—
Other investing activities		—			(13	)		(15	)		(1	)		—			(29	)

Net cash used in investing activities		(51	)		(70	)		(15	)		(1	)		51			(86	)

Financing activities:
Common stock repurchased		(133	)		—			—			—			—			(133	)
Dividends paid on L-3 Holdings common stock		(55	)		—			—			—			—			(55	)
Dividends paid to L-3 Holdings		—			(188	)		—			—			188			—
Investments from L-3 Holdings		—			51			—			—			(51	)		—
Other financing activities		51			(74	)		76			(43	)		54			64

Net cash (used in) from financing activities		(137	)		(211	)		76			(43	)		191			(124	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(1	)		—			(1	)

Net decrease in cash		—			(201	)		—			(79	)		7			(273	)
Cash and cash equivalents, beginning of the period		—			258			—			261			(19	)		500

Cash and cash equivalents, end of the period	$	—		$	57		$	—		$	182		$	(12	)	$	227

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 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