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 September 26, 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 September 26, 2014:
Current assets:
Cash and cash equivalents	$	—		$	330		$	1		$	239		$	(62	)	$	508
Billed receivables, net		—			296			348			227			—			871
Contracts in process		—			994			1,165			387			—			2,546
Other current assets		—			410			145			176			—			731

Total current assets		—			2,030			1,659			1,029			(62	)		4,656
Goodwill		—			2,324			4,320			1,140			—			7,784
Other assets		—			800			568			233			—			1,601
Investment in and amounts due from consolidated subsidiaries		5,903			6,993			4,049			—			(16,945	)		—

Total assets	$	5,903		$	12,147		$	10,596		$	2,402		$	(17,007	)	$	14,041

Current liabilities	$	—		$	872		$	999		$	583		$	(62	)	$	2,392
Amounts due to consolidated subsidiaries		—			—			—			366			(366	)		—
Other long-term liabilities		—			1,434			187			111			—			1,732
Long-term debt		—			3,938			—			—			—			3,938

Total liabilities		—			6,244			1,186			1,060			(428	)		8,062

L-3 shareholders’ equity		5,903			5,903			9,410			1,342			(16,655	)		5,903
Noncontrolling interests		—			—			—			—			76			76

Total equity		5,903			5,903			9,410			1,342			(16,579	)		5,979

Total liabilities and equity	$	5,903		$	12,147		$	10,596		$	2,402		$	(17,007	)	$	14,041

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		—			2,324			4,320			1,152			—			7,796
Other assets		—			838			532			228			—			1,598
Investment in and amounts due from consolidated subsidiaries		6,670			6,923			3,750			—			(17,343	)		—

Total assets	$	6,670		$	11,976		$	10,314		$	2,390		$	(17,362	)	$	13,988

Current liabilities	$	—		$	914		$	1,011		$	628		$	(19	)	$	2,534
Amounts due to consolidated subsidiaries		—			—			—			259			(259	)		—
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			1,011			(967	)		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		$	2,390		$	(17,362	)	$	13,988


Condensed Combining Statements of Operations:
For the quarter ended September 26, 2014:
Total net sales	$	—		$	860		$	1,628		$	525		$	(73	)	$	2,940
Total cost of sales		(10	)		(787	)		(1,500	)		(469	)		83			(2,683	)

Operating (loss) income		(10	)		73			128			56			10			257
Interest expense		—			(46	)		(2	)		1			—			(47	)
Interest and other income, net		—			4			—			1			—			5

(Loss) income before income taxes		(10	)		31			126			58			10			215
Benefit (provision) for income taxes		3			(8	)		(34	)		(16	)		(3	)		(58	)
Equity in net income of consolidated subsidiaries		161			131			—			—			(292	)		—

Net income		154			154			92			42			(285	)		157
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)

Net income attributable to L-3	$	154		$	154		$	92		$	42		$	(288	)	$	154

Comprehensive income attributable to L-3	$	90		$	90		$	89		$	(22	)	$	(157	)	$	90

For the quarter ended September 27, 2013:
Total net sales	$	—		$	912		$	1,646		$	543		$	(99	)	$	3,002
Total cost of sales		(14	)		(854	)		(1,458	)		(483	)		113			(2,696	)

Operating (loss) income		(14	)		58			188			60			14			306
Interest expense		(5	)		(43	)		—			(1	)		5			(44	)
Interest and other income, net		—			3			1			—			—			4

(Loss) income before income taxes		(19	)		18			189			59			19			266
Benefit (provision) for income taxes		5			(3	)		(45	)		(14	)		(5	)		(62	)
Equity in net income of consolidated subsidiaries		214			185			—			—			(399	)		—

Net income		200			200			144			45			(385	)		204
Net income attributable to noncontrolling interests		—			—			—			—			(4	)		(4	)

Net income attributable to L-3	$	200		$	200		$	144		$	45		$	(389	)	$	200

Comprehensive income attributable to L-3	$	250		$	250		$	145		$	77		$	(472	)	$	250

Condensed Combining Statements of Operations:
For the Year-to-Date Period Ended September 26, 2014:
Total net sales	$	—		$	2,606		$	4,908		$	1,623		$	(221	)	$	8,916
Total cost of sales		(39	)		(2,354	)		(4,533	)		(1,468	)		260			(8,134	)

Operating (loss) income		(39	)		252			375			155			39			782
Interest expense		(2	)		(127	)		(2	)		—			2			(129	)
Interest and other income, net		—			12			—			2			—			14

(Loss) income before income taxes		(41	)		137			373			157			41			667
Benefit (provision) for income taxes		12			(41	)		(110	)		(46	)		(12	)		(197	)
Equity in net income of consolidated subsidiaries		490			365			—			—			(855	)		—

Net income		461			461			263			111			(826	)		470
Net income attributable to noncontrolling interests		—			—			—			—			(9	)		(9	)

Net income attributable to L-3	$	461		$	461		$	263		$	111		$	(835	)	$	461

Comprehensive income attributable to L-3	$	411		$	411		$	264		$	53		$	(728	)	$	411

For the Year-to-Date Period Ended September 27, 2013:
Total net sales	$	—		$	2,847		$	5,104		$	1,705		$	(268	)	$	9,388
Total cost of sales		(42	)		(2,625	)		(4,598	)		(1,527	)		310			(8,482	)

Operating (loss) income		(42	)		222			506			178			42			906
Interest expense		(15	)		(130	)		—			(1	)		15			(131	)
Interest and other income, net		—			9			1			4			—			14

(Loss) income before income taxes		(57	)		101			507			181			57			789
Benefit (provision) for income taxes		16			(28	)		(139	)		(50	)		(16	)		(217	)
Equity in net income of consolidated subsidiaries		607			493			—			—			(1,100	)		—

Net income		566			566			368			131			(1,059	)		572
Net income attributable to noncontrolling interests		—			—			—			—			(6	)		(6	)

Net income attributable to L-3	$	566		$	566		$	368		$	131		$	(1,065	)	$	566

Comprehensive income attributable to L-3	$	587		$	587		$	369		$	108		$	(1,064	)	$	587

Condensed Combining Statements of Cash Flows:
For the Year-to-Date Period Ended September 26, 2014:
Operating activities:
Net cash from operating activities	$	1,506		$	201		$	382		$	69		$	(1,553	)	$	605

Investing activities:
Business acquisitions, net of cash acquired		—			(57	)		—			—			—			(57	)
Investments in L-3 Communications		(87	)		—			—			—			87			—
Other investing activities		—			(37	)		(52	)		(16	)		—			(105	)

Net cash used in investing activities		(87	)		(94	)		(52	)		(16	)		87			(162	)

Financing activities:
Proceeds from sale of senior notes		—			996			—			—			—			996
Retirement of CODES		(935	)		—			—			—			—			(935	)
Common stock repurchased		(413	)		—			—			—			—			(413	)
Dividends paid on L-3 Holdings common stock		(158	)		—			—			—			—			(158	)
Dividends paid to L-3 Holdings		—			(1,506	)		—			—			1,506			—
Investments from L-3 Holdings		—			87			—			—			(87	)		—
Other financing activities		87			388			(329	)		(66	)		4			84

Net cash used in financing activities		(1,419	)		(35	)		(329	)		(66	)		1,423			(426	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(9	)		—			(9	)

Net increase (decrease) in cash		—			72			1			(22	)		(43	)		8
Cash and cash equivalents, beginning of the period		—			258			—			261			(19	)		500

Cash and cash equivalents, end of the period	$	—		$	330		$	1		$	239		$	(62	)	$	508

For the Year-to-Date Period Ended September 27, 2013:
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