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

3 Months Ended

Mar. 27, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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

23.  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 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 Credit Facility, by L-3 Holdings. See Note 10 to the audited consolidated financial statements for the year ended December 31, 2014, included in the Company’s Annual Report on Form 10-K for additional information. 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.

	L-3 Holdings (Parent)			L-3 Communications			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Balance Sheets:
At March 27, 2015:
Current assets:
Cash and cash equivalents	$	—		$	210		$	2		$	116		$	(11	)	$	317
Billed receivables, net		—			294			327			215			—			836
Contracts in process		—			909			1,191			302			—			2,402
Other current assets		—			405			150			106			—			661
Assets held for sale		—			—			51			445			—			496
Total current assets		—			1,818			1,721			1,184			(11	)		4,712
Goodwill		—			2,360			4,246			856			—			7,462
Other assets		—			837			568			203			—			1,608
Investment in and amounts due from consolidated subsidiaries		5,228			6,846			4,174			—			(16,248	)		—
Total assets	$	5,228		$	11,861		$	10,709		$	2,243		$	(16,259	)	$	13,782
Current liabilities	$	—		$	905		$	965		$	441		$	(11	)	$	2,300
Liabilities held for sale		—			—			9			216			—			225
Amounts due to consolidated subsidiaries		—			—			—			355			(355	)		—
Other long-term liabilities		—			1,789			199			28			—			2,016
Long-term debt		—			3,939			—			—			—			3,939
Total liabilities		—			6,633			1,173			1,040			(366	)		8,480
L-3 shareholders’ equity		5,228			5,228			9,536			1,203			(15,967	)		5,228
Noncontrolling interests		—			—			—			—			74			74
Total equity		5,228			5,228			9,536			1,203			(15,893	)		5,302
Total liabilities and equity	$	5,228		$	11,861		$	10,709		$	2,243		$	(16,259	)	$	13,782
At December 31, 2014:
Current assets:
Cash and cash equivalents	$	—		$	361		$	1		$	142		$	(62	)	$	442
Billed receivables, net		—			320			329			203			—			852
Contracts in process		—			867			1,144			284			—			2,295
Other current assets		—			365			141			95			—			601
Assets held for sale		—			—			52			495			—			547
Total current assets		—			1,913			1,667			1,219			(62	)		4,737
Goodwill		—			2,350			4,246			905			—			7,501
Other assets		—			817			576			205			—			1,598
Investment in and amounts due from consolidated subsidiaries		5,285			6,813			4,191			—			(16,289	)		—
Total assets	$	5,285		$	11,893		$	10,680		$	2,329		$	(16,351	)	$	13,836
Current liabilities	$	—		$	878		$	1,017		$	455		$	(62	)	$	2,288
Liabilities held for sale		—			—			10			227			—			237
Amounts due to consolidated subsidiaries		—			—			—			325			(325	)		—
Other long-term liabilities		—			1,791			190			31			—			2,012
Long-term debt		—			3,939			—			—			—			3,939
Total liabilities		—			6,608			1,217			1,038			(387	)		8,476
L-3 shareholders’ equity		5,285			5,285			9,463			1,291			(16,039	)		5,285
Noncontrolling interests		—			—			—			—			75			75
Total equity		5,285			5,285			9,463			1,291			(15,964	)		5,360
Total liabilities and equity	$	5,285		$	11,893		$	10,680		$	2,329		$	(16,351	)	$	13,836
Condensed Combining Statements of Operations:
For the quarter ended March 27, 2015:
Total net sales	$	—		$	788		$	1,500		$	492		$	(67	)	$	2,713
Total cost of sales		(13	)		(718	)		(1,388	)		(452	)		80			(2,491	)
Loss related to business divestiture		—			—			(3	)		(19	)		—			(22	)
Operating (loss) income		(13	)		70			109			21			13			200
Interest expense		—			(44	)		—			—			—			(44	)
Interest and other income, net		—			3			—			—			—			3
(Loss) income before income taxes		(13	)		29			109			21			13			159
Benefit (provision) for income taxes		4			(9	)		(34	)		(7	)		(4	)		(50	)
Equity in net income of consolidated subsidiaries		114			85			—			—			(199	)		—
Net income		105			105			75			14			(190	)		109
Net income attributable to noncontrolling interests		—			—			—			—			(4	)		(4	)
Net income attributable to L-3	$	105		$	105		$	75		$	14		$	(194	)	$	105
Comprehensive income attributable to L-3	$	26		$	26		$	72		$	(75	)	$	(23	)	$	26
For the quarter ended March 28, 2014:
Total net sales	$	—		$	863		$	1,625		$	543		$	(74	)	$	2,957
Total cost of sales		(15	)		(769	)		(1,481	)		(495	)		89			(2,671	)
Operating (loss) income		(15	)		94			144			48			15			286
Interest expense		(5	)		(43	)		—			—			5			(43	)
Interest and other income, net		—			5			—			—			—			5
(Loss) income before income taxes		(20	)		56			144			48			20			248
Benefit (provision) for income taxes		6			(15	)		(45	)		(16	)		(6	)		(76	)
Equity in net income of consolidated subsidiaries		184			129			—			—			(313	)		—
Net income		170			170			99			32			(299	)		172
Net income attributable to noncontrolling interests		—			—			—			—			(2	)		(2	)
Net income attributable to L-3	$	170		$	170		$	99		$	32		$	(301	)	$	170
Comprehensive income attributable to L-3	$	152		$	152		$	96		$	15		$	(263	)	$	152
Condensed Combining Statements of Cash Flows
For the quarter ended March 27, 2015:
Operating activities:
Net cash from (used in) operating activities	$	158		$	36		$	65		$	(14	)	$	(158	)	$	87
Investing activities:
Business acquisitions, net of cash acquired		—			(41	)		—			—			—			(41	)
Investments in L-3 Communications		(13	)		—			—			—			13			—
Other investing activities		—			(19	)		(5	)		(10	)		—			(34	)
Net cash used in investing activities		(13	)		(60	)		(5	)		(10	)		13			(75	)
Financing activities:
Common stock repurchased		(100	)		—			—			—			—			(100	)
Dividends paid on L-3 Holdings common stock		(58	)		—			—			—			—			(58	)
Dividends paid to L-3 Holdings		—			(158	)		—			—			158			—
Investments from L-3 Holdings		—			13			—			—			(13	)		—
Other financing activities		13			18			(60	)		9			51			31
Net cash (used in) from financing activities		(145	)		(127	)		(60	)		9			196			(127	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(11	)		—			(11	)
Change in cash balance in assets held for sale		—			—			1			—			—			1
Net (decrease) increase in cash		—			(151	)		1			(26	)		51			(125	)
Cash and cash equivalents, beginning of the period		—			361			1			142			(62	)		442
Cash and cash equivalents, end of the period	$	—		$	210		$	2		$	116		$	(11	)	$	317
For the quarter ended March 28, 2014:
Operating activities:
Net cash from (used in) operating activities	$	188		$	80		$	(61	)	$	(34	)	$	(235	)	$	(62	)
Investing activities:
Business acquisitions, net of cash acquired		—			(57	)		—			—			—			(57	)
Investments in L-3 Communications		(51	)		—			—			—			51			—
Other investing activities		—			(13	)		(15	)		(1	)		—			(29	)
Net cash used in investing activities		(51	)		(70	)		(15	)		(1	)		51			(86	)
Financing activities:
Common stock repurchased		(133	)		—			—			—			—			(133	)
Dividends paid on L-3 Holdings common stock		(55	)		—			—			—			—			(55	)
Dividends paid to L-3 Holdings		—			(188	)		—			—			188			—
Investments from L-3 Holdings		—			51			—			—			(51	)		—
Other financing activities		51			(74	)		76			(43	)		54			64
Net cash (used in) from financing activities		(137	)		(211	)		76			(43	)		191			(124	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(1	)		—			(1	)
Net decrease in cash		—			(201	)		—			(79	)		7			(273	)
Cash and cash equivalents, beginning of the period		—			258			—			261			(19	)		500
Cash and cash equivalents, end of the period	$	—		$	57		$	—		$	182		$	(12	)	$	227