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 CODES, prior to the CODES Retirement, were 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 Form 10-K/A. 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.” In addition, the guarantees of the Senior Notes will be automatically and unconditionally 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 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 June 27, 2014 of $28 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 June 27, 2014:
Current assets:
Cash and cash equivalents	$	—		$	92		$	2		$	213		$	(8	)	$	299
Billed receivables, net		—			333			443			283			—			1,059
Contracts in process		—			998			1,237			398			—			2,633
Other current assets		—			383			156			175			—			714

Total current assets		—			1,806			1,838			1,069			(8	)		4,705
Goodwill		—			2,307			4,327			1,204			—			7,838
Other assets		—			803			528			242			—			1,573
Investment in and amounts due from consolidated subsidiaries		5,904			7,215			3,808			—			(16,927	)		—

Total assets	$	5,904		$	12,131		$	10,501		$	2,515		$	(16,935	)	$	14,116

Current liabilities	$	—		$	894		$	979		$	629		$	(8	)	$	2,494
Amounts due to consolidated subsidiaries		—			—			—			387			(387	)		—
Other long-term liabilities		—			1,395			194			116			—			1,705
Long-term debt		—			3,938			—			—			—			3,938

Total liabilities		—			6,227			1,173			1,132			(395	)		8,137

L-3 shareholders’ equity		5,904			5,904			9,328			1,383			(16,615	)		5,904
Noncontrolling interests		—			—			—			—			75			75

Total equity		5,904			5,904			9,328			1,383			(16,540	)		5,979

Total liabilities and equity	$	5,904		$	12,131		$	10,501		$	2,515		$	(16,935	)	$	14,116

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


Condensed Combining Statements of Operations:
For the quarter ended June 27, 2014:
Total net sales	$	—		$	883		$	1,655		$	555		$	(74	)	$	3,019
Total cost of sales		(14	)		(798	)		(1,552	)		(504	)		88			(2,780	)

Operating (loss) income		(14	)		85			103			51			14			239
Interest expense		3			(38	)		—			(1	)		(3	)		(39	)
Interest and other income, net		—			3			—			1			—			4

(Loss) income before income taxes		(11	)		50			103			51			11			204
Benefit (provision) for income taxes		3			(18	)		(31	)		(14	)		(3	)		(63	)
Equity in net income of consolidated subsidiaries		145			105			—			—			(250	)		—

Net income		137			137			72			37			(242	)		141
Net income attributable to noncontrolling interests		—			—			—			—			(4	)		(4	)

Net income attributable to L-3	$	137		$	137		$	72		$	37		$	(246	)	$	137

Comprehensive income attributable to L-3	$	169		$	169		$	79		$	60		$	(308	)	$	169

For the quarter ended June 28, 2013:
Total net sales	$	—		$	992		$	1,721		$	572		$	(96	)	$	3,189
Total cost of sales		(14	)		(910	)		(1,571	)		(514	)		110			(2,899	)

Operating (loss) income		(14	)		82			150			58			14			290
Interest expense		(5	)		(44	)		—			—			5			(44	)
Interest and other income, net		—			3			1			3			—			7

(Loss) income before income taxes		(19	)		41			151			61			19			253
Benefit (provision) for income taxes		6			(16	)		(43	)		(18	)		(6	)		(77	)
Equity in net income of consolidated subsidiaries		188			150			—			—			(338	)		—

Net income		175			175			108			43			(325	)		176
Net income attributable to noncontrolling interests		—			—			—			—			(1	)		(1	)

Net income attributable to L-3	$	175		$	175		$	108		$	43		$	(326	)	$	175

Comprehensive income attributable to L-3	$	170		$	170		$	107		$	26		$	(303	)	$	170


	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 27, 2014:
Total net sales	$	—		$	1,746		$	3,280		$	1,098		$	(148	)	$	5,976
Total cost of sales		(29	)		(1,567	)		(3,033	)		(999	)		177			(5,451	)

Operating (loss) income		(29	)		179			247			99			29			525
Interest expense		(2	)		(81	)		—			(1	)		2			(82	)
Interest and other income, net		—			8			—			1			—			9

(Loss) income before income taxes		(31	)		106			247			99			31			452
Benefit (provision) for income taxes		9			(33	)		(76	)		(30	)		(9	)		(139	)
Equity in net income of consolidated subsidiaries		329			234			—			—			(563	)		—

Net income		307			307			171			69			(541	)		313
Net income attributable to noncontrolling interests		—			—			—			—			(6	)		(6	)

Net income attributable to L-3	$	307		$	307		$	171		$	69		$	(547	)	$	307

Comprehensive income attributable to L-3	$	321		$	321		$	175		$	75		$	(571	)	$	321

For the first half ended June 28, 2013:
Total net sales	$	—		$	1,935		$	3,458		$	1,162		$	(169	)	$	6,386
Total cost of sales		(28	)		(1,771	)		(3,140	)		(1,044	)		197			(5,786	)

Operating (loss) income		(28	)		164			318			118			28			600
Interest expense		(10	)		(87	)		—			—			10			(87	)
Interest and other income, net		—			6			—			4			—			10

(Loss) income before income taxes		(38	)		83			318			122			38			523
Benefit (provision) for income taxes		11			(25	)		(94	)		(36	)		(11	)		(155	)
Equity in net income of consolidated subsidiaries		393			308			—			—			(701	)		—

Net income		366			366			224			86			(674	)		368
Net income attributable to noncontrolling interests		—			—			—			—			(2	)		(2	)

Net income attributable to L-3	$	366		$	366		$	224		$	86		$	(676	)	$	366

Comprehensive income attributable to L-3	$	337		$	337		$	224		$	31		$	(592	)	$	337


	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 27, 2014:
Operating activities:
Net cash from (used in) operating activities	$	1,375		$	107		$	152		$	3		$	(1,422	)	$	215

Investing activities:
Business acquisitions, net of cash acquired		—			(57	)		—			—			—			(57	)
Investments in L-3 Communications		(77	)		—			—			—			77			—
Other investing activities		—			(25	)		(24	)		(11	)		—			(60	)

Net cash used in investing activities		(77	)		(82	)		(24	)		(11	)		77			(117	)

Financing activities:
Proceeds from sale of senior notes		—			996			—			—			—			996
Retirement of CODES		(935	)		—			—			—			—			(935	)
Common stock repurchased		(333	)		—			—			—			—			(333	)
Dividends paid on L-3 Holdings common stock		(107	)		—			—			—			—			(107	)
Dividends paid to L-3 Holdings		—			(1,375	)		—			—			1,375			—
Investments from L-3 Holdings		—			77			—			—			(77	)		—
Other financing activities		77			111			(126	)		(40	)		58			80

Net cash used in financing activities		(1,298	)		(191	)		(126	)		(40	)		1,356			(299	)

Net (decrease) increase in cash		—			(166	)		2			(48	)		11			(201	)
Cash and cash equivalents, beginning of the period		—			258			—			261			(19	)		500

Cash and cash equivalents, end of the period	$	—		$	92		$	2		$	213		$	(8	)	$	299

For the first half ended June 28, 2013:
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 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