Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries (Tables)

9 Months Ended

Sep. 26, 2014

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

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

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