Revisions to Previously Issued Financial Statements (Tables)

9 Months Ended

Sep. 26, 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	)		—			—		—			—			—

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 Revised Financial Statements

The tables below present the Company’s: (1) As Previously Reported, (2) Adjustments, and (3) As Revised Condensed Consolidated Statements of Operations for the quarterly and year-to-date periods ended September 27, 2013 and the Operating Activities for the Statement of Cash Flows for the year-to-date period ended September 27, 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 third quarter ended September 27, 2013:
Net sales:
Products	$	1,696		$	2		$	(1	)	$	—		$	1,697
Services		1,300			2			—			3			1,305

Total net sales		2,996			4	⁽¹⁾		(1	)		3			3,002

Cost of sales:
Products		(1,486	)		(2	)		1			—			(1,487	)
Services		(1,196	)		(9	)		—			(4	)		(1,209	)

Total cost of sales		(2,682	)		(11	)		1			(4	)		(2,696	)

Operating income		314			(7	)		—			(1	)		306
Interest expense		(44	)		—			—			—			(44	)
Interest and other income, net		3			—			1			—			4

Income before income taxes		273			(7	)		1	⁽¹⁾		(1	)		266
Provision for income taxes		(65	)		3			—			—			(62	)

Net income	$	208		$	(4	)	$	1		$	(1	)	$	204
Net income attributable to noncontrolling interests		(4	)		—			—			—			(4	)

Net income attributable to L-3	$	204		$	(4	)	$	1		$	(1	)	$	200

Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	2.28		$	(0.05	)	$	0.01		$	(0.01	)	$	2.23

Diluted	$	2.23		$	(0.04	)	$	0.01		$	(0.01	)	$	2.19

Cash dividends paid per common share	$	0.55		$	—		$	—		$	—		$	0.55

L-3 Holdings’ weighted average common shares outstanding:
Basic		89.6			—			—			—			89.6

Diluted		91.3			—			—			—			91.3

⁽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 Year-to-Date Period Ended September 27, 2013:
Net sales:
Products	$	5,319		$	(9	)	$	(4	)	$	15		$	5,321
Services		4,054			(2	)		—			15			4,067

Total net sales		9,373			(11	)⁽¹⁾		(4	)		30			9,388

Cost of sales:
Products		(4,729	)		(3	)		5			(5	)		(4,732	)
Services		(3,710	)		(22	)		—			(18	)		(3,750	)

Total cost of sales		(8,439	)		(25	)		5			(23	)		(8,482	)

Operating income		934			(36	)		1			7	⁽¹⁾		906
Interest expense		(131	)		—			—			—			(131	)
Interest and other income, net		11			—			3			—			14

Income before income taxes		814			(36	)		4			7			789
Provision for income taxes		(226	)		13			(1	)		(3	)		(217	)

Net income	$	588		$	(23	)	$	3		$	4		$	572
Net income attributable to noncontrolling interests		(6	)		—			—			—			(6	)

Net income attributable to L-3	$	582		$	(23	)	$	3		$	4		$	566

Earnings per share attributable to L-3 Holdings’ common shareholders:
Basic	$	6.47		$	(0.25	)	$	0.04		$	0.04		$	6.30

Diluted	$	6.37		$	(0.25	)	$	0.04		$	0.04		$	6.20

Cash dividends paid per common share	$	1.65		$	—		$	—		$	—		$	1.65

L-3 Holdings’ weighted average common shares outstanding:
Basic		89.9			—			—			—			89.9

Diluted		91.3			—			—			—			91.3

⁽¹⁾	Includes rounding of $1 million.


	As Previously Reported			Net Adjustments			As Revised
	(in millions)
Unaudited Consolidated Statement of Cash Flows for the Year-to-Date Period Ended September 27, 2013:

Operating activities:
Net income	$	588		$	(16	)	$	572
Depreciation of property, plant and equipment		122			—			122
Amortization of intangibles and other assets		36			—			36
Deferred income tax provision		45			(7	)		38
Stock-based employee compensation expense		42			—			42
Contributions to employee savings plans in L-3 Holdings’ common stock		90			—			90
Amortization of pension and postretirement benefit plans net loss and prior service cost		63			—			63
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		5			—			5
Other non-cash items		1			—			1
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures:
Billed receivables		(117	)		—			(117	)
Contracts in process		(36	)		(34	)		(70	)
Inventories		(55	)		(5	)		(60	)
Other assets		(45	)		(3	)		(48	)
Accounts payable, trade		65			(11	)		54
Accrued employment costs		27			10			37
Accrued expenses		(41	)		(4	)		(45	)
Advance payments and billings in excess of costs incurred		(109	)		48			(61	)
Income taxes		32			(1	)		31
Excess income tax benefits related to share-based payment arrangements		(3	)		—			(3	)
Other current liabilities		(8	)		3			(5	)
Pension and postretirement benefits		(23	)		—			(23	)
All other operating activities		(62	)		20			(42	)

Net cash from operating activities	$	617		$	—		$	617

- Definition

Tabular disclosure of prior period adjustments to previously issued financial statements including (1) the effect of the correction on each financial statement line item and any per-share amounts affected for each prior period presented (2) the cumulative effect of the change on retained earnings or other appropriate components of equity or net assets in the statement of financial position, as of the beginning of the earliest period presented, and (3) the effect of the prior period adjustments (both gross and net of applicable income tax) on the net income of each prior period presented in the entity's annual report for the year in which the adjustments are made.

+ References+ Details