Revisions to Previously Issued Financial Statements (Tables)

6 Months Ended

Jun. 27, 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 in total, for the six month period ended June 27, 2014, years ended December 31, 2013, 2012, and 2011, and for the years ended prior to December 31, 2011.

	Total						Six Months 2014						2013						2012						2011						Prior to 2011
	Sales			Pre-tax Income			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	$	(32	)	$	(69	)	$	(3	)	$	(15	)	$	(25	)	$	(35	)	$	(3	)	$	(16	)	$	(1	)	$	(3	)	$	—		$	—
Other Logistics Support Contracts		(5	)		(48	)		—			(20	)		(2	)		(11	)		(2	)		(11	)		—			(2	)		(1	)		(4	)
Logistics Solutions		(37	)		(117	)		(3	)		(35	)		(27	)		(46	)		(5	)		(27	)		(1	)		(5	)		(1	)		(4	)
Platform Systems		(21	)		(52	)		(12	)		(40	)		(12	)		(14	)		3			2			—			—			—			—
Total Internal Review of Aerospace Systems Segment		(58	)		(169	)		(15	)		(75	)		(39	)		(60	)		(2	)		(25	)		(1	)		(5	)		(1	)		(4	)
Sales-Type Lease Transaction		(15	)		29			(8	)		1			(7	)		5			—			3			—			3			—			17
Out of Period Amounts		—			—			—			—			39			14			(36	)		(18	)		(3	)		4			—			—
Total Revisions	$	(73	)	$	(140	)	$	(23	)	$	(74	)	$	(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 June 27 and March 28, 2014, December 31, September 27, June 28, 2013 and March 29, 2013.

	June 27, 2014						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			Sales			Pre-tax Income
	(in millions)
Army C-12 Contract	$	(1	)	$	(11	)	$	(2	)	$	(4	)	$	(24	)	$	(20	)	$	3		$	(2	)	$	(3	)	$	(7	)	$	(1	)	$	(6	)
Other Logistics Support Contracts		—			(15	)		—			(5	)		(1	)		(2	)		(1	)		(5	)		—			(2	)		—			(2	)
Logistics Solutions		(1	)		(26	)		(2	)		(9	)		(25	)		(22	)		2			(7	)		(3	)		(9	)		(1	)		(8	)
Platform Systems		(6	)		(29	)		(6	)		(11	)		(2	)		(2	)		1			—			(6	)		(6	)		(5	)		(6	)
Total Internal Review of Aerospace Systems Segment		(7	)		(55	)		(8	)		(20	)		(27	)		(24	)		3			(7	)		(9	)		(15	)		(6	)		(14	)
Sales-Type Lease Transaction		(3	)		1			(5	)		—			(3	)		1			(1	)		2			(1	)		1			(2	)		1
Out of Period Amounts		—			—			—			—			9			6			3			(1	)		7			(1	)		20			10
Total Revisions	$	(10	)	$	(54	)	$	(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 Statements of Operations for the quarterly and first half periods ended June 28, 2013 and the Operating Activities for the Statement of Cash Flows for the first half period ended June 28, 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, except per share data)
Unaudited Condensed Consolidated Statement of Operations, for the second quarter ended June 28, 2013:
Net sales:
Products	$	1,810		$	(6	)	$	(1	)	$	—		$	1,803
Services		1,382			(3	)		—			7			1,386
Total net sales		3,192			(9	)		(1	)		7			3,189
Cost of sales:
Products		(1,623	)		(1	)		2			(1	)		(1,623	)
Services		(1,262	)		(6	)		—			(8	)		(1,276	)
Total cost of sales		(2,885	)		(7	)		2			(9	)		(2,899	)
Operating income		307			(16	)		1			(2	)(1)		290
Interest expense		(44	)		—			—			—			(44	)
Interest and other income, net		5			—			1			1			7
Income before income taxes		268			(16	)		2			(1	)		253
Provision for income taxes		(82	)		6			(1	)		—			(77	)
Net income	$	186		$	(10	)	$	1		$	(1	)	$	176
Net income attributable to noncontrolling interests		(1	)		—			—			—			(1	)
Net income attributable to L-3	$	185		$	(10	)	$	1		$	(1	)	$	175
Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	2.06		$	(0.11	)	$	0.01		$	(0.01	)	$	1.95
Diluted	$	2.03		$	(0.11	)	$	0.01		$	(0.01	)	$	1.92
Cash dividends paid per common share	$	0.55		$	—		$	—		$	—		$	0.55
L-3 Holdings’ weighted average common shares outstanding:
Basic		89.9			—			—			—			89.9
Diluted		91.1			—			—			—			91.1

⁽¹⁾ Includes rounding of $1 million.

				Adjustments for:
	As Previously Reported			Aerospace Systems Segment Internal Review			Sales- Type Lease Transaction			Out of Period Amounts			As Revised
	(in millions, except per share data)
Unaudited Condensed Consolidated Statement of Operations, for the first half ended June 28, 2013:
Net sales:
Products	$	3,623		$	(10	)	$	(3	)	$	14		$	3,624
Services		2,754			(4	)		—			12			2,762
Total net sales		6,377			(14	)		(3	)		26			6,386
Cost of sales:
Products		(3,243	)		(2	)		4			(4	)		(3,245	)
Services		(2,514	)		(13	)		—			(14	)		(2,541	)
Total cost of sales		(5,757	)		(15	)		4			(18	)		(5,786	)
Operating income		620			(29	)		1			8			600
Interest expense		(87	)		—			—			—			(87	)
Interest and other income, net		8			—			2			—			10
Income before income taxes		541			(29	)		3			8			523
Provision for income taxes		(161	)		10			(1	)		(3	)		(155	)
Net income	$	380		$	(19	)	$	2		$	5		$	368
Net income attributable to noncontrolling interests		(2	)		—			—			—			(2	)
Net income attributable to L-3	$	378		$	(19	)	$	2		$	5		$	366
Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	4.20		$	(0.21	)	$	0.02		$	0.05		$	4.06
Diluted	$	4.14		$	(0.20	)	$	0.02		$	0.05		$	4.01
Cash dividends paid per common share	$	1.10		$	—		$	—		$	—		$	1.10
L-3 Holdings’ weighted average common shares outstanding:
Basic		90.1			—			—			—			90.1
Diluted		91.3			—			—			—			91.3

	As Previously Reported			Net Adjustments			As Revised
	(in millions)
Unaudited Consolidated Statement of Cash Flows for first half ended June 28, 2013:
Operating activities:
Net income	$	380		$	(12	)	$	368
Depreciation of property, plant and equipment		81			—			81
Amortization of intangibles and other assets		25			—			25
Deferred income tax provision		13			(5	)		8
Stock-based employee compensation expense		28			—			28
Contributions to employee savings plans in L-3 Holdings’ common stock		61			—			61
Amortization of pension and postretirement benefit plans net loss and prior service cost		43			—			43
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		3			—			3
Other non-cash items		—			—			—
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures:
Billed receivables		(76	)		—			(76	)
Contracts in process		(10	)		(41	)		(51	)
Inventories		(17	)		—			(17	)
Other assets		(44	)		(2	)		(46	)
Accounts payable, trade		50			(12	)		38
Accrued employment costs		20			7			27
Accrued expenses		(64	)		(6	)		(70	)
Advance payments and billings in excess of costs incurred		(89	)		48			(41	)
Income taxes		27			(2	)		25
Excess income tax benefits related to share-based payment arrangements		(2	)		—			(2	)
Other current liabilities		(3	)		3			—
Pension and postretirement benefits		3			—			3
All other operating activities		(33	)		22			(11	)
Net cash (used in) from operating activities	$	396		$	—		$	396