Revisions to Previously Issued Financial Statements (Tables)

3 Months Ended

Mar. 28, 2014

Accounting Changes and Error Corrections [Abstract]

Schedule of Nature of Adjustments, Applicable Segment, Amount of Increase (or Decrease) to Sales and Operating Income, Period Recorded and Correct Period

With respect to each of these immaterial out of period amounts included in the Company’s previously issued financial statements, the table below presents the: (1) nature of the adjustments, (2) applicable segment and (3) amount of increase (or decrease) to sales and operating income for the quarters ended December 31, September 27, June 28, and March 29, 2013.

		December 31, 2013				September 27, 2013						June 28, 2013					March 29, 2013
Nature of Adjustment	Applicable Segment	Sales		Operating Income		Sales			Operating Income			Sales		Operating Income			Sales			Operating Income
		($ in millions)
Higher development and material costs for networked communications systems	Communication Systems	$	—	$	—	$	—		$	—		$	—	$	—		$	10		$	10
Sub-contractor subscription deposit	Aerospace Systems		5		—		7			1			7		1			7			1
Costs accruals for goods/services received	Aerospace Systems		—		—		—			—			—		—			5			1
Unrecorded liabilities	Aerospace Systems		—		—		—			—			—		—			(2	)		—
Accrued vacation	Aerospace Systems		—		6		—			(2	)		—		(2	)		—			(2	)
Overstated revenue	Aerospace Systems		4		—		(4	)		—			—		—			—			—
Warranty reserve	Electronic Systems		—		—		—			—			—		—			—			—
Total		$	9	$	6	$	3		$	(1	)	$	7	$	(1	)	$	20		$	10

Schedule of Impact on Sales and Pre-tax Income

The table below presents the impact of the matters discussed above on sales and pre-tax income for the years ended December 31, 2013, 2012 and 2011, and for the years ended prior to December 31, 2011.

	2013						2012						2011						Prior to 2011
	Sales			Pre-tax Income			Sales			Pre-tax Income			Sales			Pre-tax Income			Sales			Pre-tax Income
	(in millions)
Army C-12 Contract	$	(25	)	$	(35	)	$	(3	)	$	(16	)	$	(1	)	$	(3	)	$	—		$	—
Other Logistics Support Contracts		(2	)		(11	)		(2	)		(11	)		—			(2	)		(1	)		(4	)
Logistics Solutions	$	(27	)	$	(46	)	$	(5	)	$	(27	)	$	(1	)	$	(5	)	$	(1	)	$	(4	)
Platform Systems		(12	)		(14	)		3			2			—			—			—			—
Total Internal Review of Aerospace Systems Segment	$	(39	)	$	(60	)	$	(2	)	$	(25	)	$	(1	)	$	(5	)	$	(1	)	$	(4	)
Sales-Type Lease Transaction		(7	)		5			—			3			—			3			—			17
Out of Period Amounts		39			14			(36	)		(18	)		(3	)		4			—			—
Total Revisions	$	(7	)	$	(41	)	$	(38	)	$	(40	)	$	(4	)	$	2		$	(1	)	$	13

The table below presents the impact of the matters discussed above on sales and pre-tax income for the quarters ended March 28, 2014, December 31, September 27, June 28, and March 29, 2013.

	March 28, 2014						December 31, 2013						September 27, 2013						June 28, 2013						March 29, 2013
	Sales			Pre-tax Income			Sales			Pre-tax Income			Sales			Pre-tax Income			Sales			Pre-tax Income			Sales			Pre-tax Income
	(in millions)
Army C-12 Contract	$	(2	)	$	(4	)	$	(24	)	$	(20	)	$	3		$	(2	)	$	(3	)	$	(7	)	$	(1	)	$	(6	)
Other Logistics Support Contracts		—			(5	)		(1	)		(2	)		(1	)		(5	)		—			(2	)		—			(2	)
Logistics Solutions		(2	)		(9	)		(25	)		(22	)		2			(7	)		(3	)		(9	)		(1	)		(8	)
Platform Systems		(6	)		(11	)		(2	)		(2	)		1			—			(6	)		(6	)		(5	)		(6	)
Total Internal Review of Aerospace Systems Segment		(8	)		(20	)		(27	)		(24	)		3			(7	)		(9	)		(15	)		(6	)		(14	)
Sales-Type Lease Transaction		(5	)		—			(3	)		1			(1	)		2			(1	)		1			(2	)		1
Out of Period Amounts		—			—			9			6			3			(1	)		7			(1	)		20			10
Total Revisions	$	(13	)	$	(20	)	$	(21	)	$	(17	)	$	5		$	(6	)	$	(3	)	$	(15	)	$	12		$	(3	)

Schedule of As Previously Reported, Adjustments and As Currently Reported Financial Statements

The tables below present the Company’s: (1) As Previously Reported, (2) Adjustments, and (3) As Currently Reported Condensed Consolidated Balance Sheets as of March 28, 2014, Statements of Operations for the quarterly periods ended March 28, 2014 and March 29, 2013 and the Operating Activities for the Statement of Cash Flows for the period ended March 29, 2013. The Adjustments correct for: (1) the results of the Aerospace Systems internal review, (2) the accounting related to a sales-type lease transaction within the Company’s Electronic Systems segment and (3) immaterial out of period amounts previously recorded in the Company’s financial statements but not recorded in the appropriate period to reflect them in the appropriate period.

				Adjustments for:
	As Previously Reported			Aerospace Systems Segment Internal Review			Sales-Type Lease Transaction			Out of Period Amounts			As Revised
	(in millions)
Unaudited Condensed Consolidated Balance Sheet as of March 28, 2014:
ASSETS
Current Assets:
Cash and cash equivalents	$	227		$	—		$	—		$	—		$	227
Billed receivables, net of allowances of $24 in 2014		1,093			(25	)		—			—			1,068
Contracts in process		2,763			(82	)		(33	)		—			2,648
Inventories		375			—			—			—			375
Deferred income taxes		118			26			—			—			144
Other current assets		126			8			30			(4	)		160
Total current assets		4,702			(73	)		(3	)		(4	)		4,622
Property, plant and equipment, net		1,028			5			—			—			1,033
Goodwill		7,821			—			—			—			7,821
Identifiable intangible assets		283			—			—			—			283
Deferred debt issue costs		23			—			—			—			23
Other assets		208			—			37			—			245
Total assets	$	14,065		$	(68	)	$	34		$	(4	)	$	14,027
LIABILITIES AND EQUITY
Current Liabilities:
Accounts payable, trade	$	590		$	—		$	—		$	—		$	590
Accrued employment costs		538			5			—			—			543
Accrued expenses		403			1			—			—			404
Advance payments and billings in excess of costs incurred		523			1			5			—			529
Income taxes		22			(10	)		—			17			29
Other current liabilities		380			2			—			—			382
Total current liabilities		2,456			(1	)		5			17			2,477
Pension and postretirement benefits		729			—			—			—			729
Deferred income taxes		679			3			—			(21	)		661
Other liabilities		382			—			12			—			394
Long-term debt		3,631			—			—			—			3,631
Total liabilities		7,877			2			17			(4	)		7,892
Equity:
L-3 shareholders’ equity:
L-3 Communications Holdings, Inc.’s common stock		5,767			—			—			—			5,767
L-3 Communications Holdings, Inc.’s treasury stock at cost		(5,421	)		—			—			—			(5,421	)
Retained earnings		5,895			(73	)		18			2			5,842
Accumulated other comprehensive loss		(128	)		—			—			—			(128	)
Total L-3 shareholders’ equity		6,113			(73	)		18			2			6,060
Noncontrolling interests		75			—			—			—			75
Total equity		6,188			(73	)		18			2			6,135
Total liabilities and equity	$	14,065		$	(71	)	$	35		$	(2	)	$	14,027

	As Previously Reported			Adjustments for:									As Revised
				Aerospace Systems Segment Internal Review			Sales-Type Lease Transaction			Out of Period Amounts
	(in millions, except per share data)
Unaudited Condensed Consolidated Statement of Operations, for the quarter ended March 28, 2014:
Net sales:
Products	$	1,661		$	(7	)	$	(5	)	$	—		$	1,649
Services		1,310			(2	)		—			—			1,308
Total net sales		2,971			(9	)		(5	)		—			2,957
Cost of sales:
Products		(1,467	)		(4	)		5			—			(1,466	)
Services		(1,197	)		(7	)		—			(1	)		(1,205	)
Total cost of sales		(2,664	)		(11	)		5			(1	)		(2,671	)
Operating income		307			(20	)		—			(1	)		286
Interest expense		(43	)		—			—			—			(43	)
Interest and other income, net		3			—			2			—			5
Income before income taxes		267			(20	)		2			(1	)		248
Provision for income taxes		(85	)		9			—			—			(76	)
Net income	$	182		$	(11	)	$	2		$	(1	)	$	172
Net income attributable to noncontrolling interests		(2	)		—			—			—			(2	)
Net income attributable to L-3	$	180		$	(11	)	$	2		$	(1	)	$	170
Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	2.09		$	(0.13	)	$	0.02		$	(0.01	)	$	1.97
Diluted	$	2.01		$	(0.12	)	$	0.02		$	(0.01	)	$	1.90
Cash dividends paid per common share	$	0.60		$	—		$	—		$	—		$	0.60
L-3 Holdings’ weighted average common shares outstanding:
Basic		86.1			—			—			—			86.1
Diluted		89.4			—			—			—			89.4

	As Previously Reported			Adjustments for:									As Revised
				Aerospace Systems Segment Internal Review			Sales-Type Lease Transaction			Out of Period Amounts
	(in millions, except per share data)
Unaudited Condensed Consolidated Statement of Operations, for the quarter ended March 29, 2013:
Net sales:
Products	$	1,813		$	(4	)	$	(2	)	$	14		$	1,821
Services		1,372			(1	)		—			5			1,376
Total net sales		3,185			(5	)		(2	)		19	(1)		3,197
Cost of sales:
Products		(1,620	)		(1	)		2			(3	)		(1,622	)
Services		(1,252	)		(7	)		—			(6	)		(1,265	)
Total cost of sales		(2,872	)		(8	)		2			(9	)		(2,887	)
Operating income		313			(13	)		—			10			310
Interest expense		(43	)		—			—			—			(43	)
Interest and other income, net		3			—			1			(1	)		3
Income before income taxes		273			(13	)		1			9			270
Provision for income taxes		(79	)		4			—			(3	)		(78	)
Net income	$	194		$	(9	)	$	1		$	6		$	192
Net income attributable to noncontrolling interests		(1	)		—			—			—			(1	)
Net income attributable to L-3	$	193		$	(9	)	$	1		$	6		$	191
Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	2.14		$	(0.10	)	$	0.01		$	0.07		$	2.12
Diluted	$	2.11		$	(0.10	)	$	0.01		$	0.07		$	2.09
Cash dividends paid per common share	$	0.55		$	—		$	—		$	—		$	0.55
L-3 Holdings’ weighted average common shares outstanding:
Basic		90.3			—			—			—			90.3
Diluted		91.5			—			—			—			91.5

⁽¹⁾  Includes rounding of $1 million.

	As Previously Reported			Net Adjustments			As Revised
	(in millions)
Unaudited Condensed Consolidated Statement of Cash Flows for the quarter ended March 28, 2014:
Operating activities:
Net income	$	182		$	(10	)	$	172
Depreciation of property, plant and equipment		42			—			42
Amortization of intangibles and other assets		12			—			12
Deferred income tax provision		22			1			23
Stock-based employee compensation expense		15			—			15
Contributions to employee savings plans in L-3 Holdings’ common stock		44			—			44
Amortization of pension and postretirement benefit plans net loss and prior service cost		4			—			4
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		2			—			2
Other non-cash items		1			—			1
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures:
Billed receivables		(74	)		1			(73	)
Contracts in process		(236	)		22			(214	)
Inventories		(16	)		—			(16	)
Other assets		(4	)		(6	)		(10	)
Accounts payable, trade		49			—			49
Accrued employment costs		(12	)		2			(10	)
Accrued expenses		(49	)		(2	)		(51	)
Advance payments and billings in excess of costs incurred		(46	)		—			(46	)
Income taxes		38			(10	)		28
Excess income tax benefits related to share-based payment arrangements		(14	)		—			(14	)
Other current liabilities		(8	)		2			(6	)
Pension and postretirement benefits		(2	)		—			(2	)
All other operating activities		(12	)		—			(12	)
Net cash (used in) from operating activities	$	(62	)	$	—		$	(62	)

	As Previously Reported			Net Adjustments			As Revised
	(in millions)
Unaudited Condensed Consolidated Statement of Cash Flows for the quarter ended March 29, 2013:
Operating activities:
Net income	$	194		$	(2	)	$	192
Depreciation of property, plant and equipment		42			—			42
Amortization of intangibles and other assets		12			—			12
Deferred income tax provision		19			(1	)		18
Stock-based employee compensation expense		14			—			14
Contributions to employee savings plans in L-3 Holdings’ common stock		32			—			32
Amortization of pension and postretirement benefit plans net loss and prior service cost		22			—			22
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		2			—			2
Other non-cash items		3			—			3
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures:
Billed receivables		(146	)		—			(146	)
Contracts in process		(145	)		20			(125	)
Inventories		8			—			8
Other assets		49			(2	)		47
Accounts payable, trade		105			(11	)		94
Accrued employment costs		13			4			17
Accrued expenses		(41	)		—			(41	)
Advance payments and billings in excess of costs incurred		(37	)		—			(37	)
Income taxes		51			—			51
Excess income tax benefits related to share-based payment arrangements		(2	)		—			(2	)
Other current liabilities		4			—			4
Pension and postretirement benefits		4			—			4
All other operating activities		(57	)		(8	)		(65	)
Net cash (used in) from operating activities	$	146		$	—		$	146