10-K

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2015

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                 to

Commission file numbers 001-14141 and 333-46983

L-3 COMMUNICATIONS HOLDINGS, INC.

L-3 COMMUNICATIONS CORPORATION

(Exact names of registrants as specified in their charters)

Delaware	13-3937434 and 13-3937436
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification Nos.)
600 Third Avenue, New York, NY	10016
(Address of principal executive offices)	(Zip Code)

(212) 697-1111

(Telephone number)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered:
L-3 Communications Holdings, Inc.     common stock, par value $0.01 per share	New York Stock Exchange

Securities registered pursuant to Section 12(g) of the Act:

None.

Indicate by check mark if the registrants are well-known seasoned issuers, as defined in Rule 405 of the Securities Act.	x  Yes ¨ No
Indicate by check mark if the registrants are not required to file reports pursuant to Section 13 or Section 15(d) of the Act.	¨  Yes x No

Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. x Yes ¨ No

Indicate by check mark whether the registrants have submitted electronically and posted on their corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrants were required to submit and post such files). x Yes ¨ No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrants’ knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. x

Indicate by check mark whether the registrant L-3 Communications Holdings, Inc. is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer x	Accelerated filer ¨	Non-accelerated filer ¨			Smaller reporting company ¨
			(Do not check if a smaller reporting company	)

Indicate by check mark whether the registrant L-3 Communications Corporation is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of ‘large accelerated filer,’ ‘accelerated filer’ and ‘smaller reporting company’ in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer ¨	Accelerated filer ¨	Non-accelerated filer x			Smaller reporting company ¨
			(Do not check if a smaller reporting company	)

Indicate by check mark whether the registrants are shell companies (as defined in Rule 12b-2 of the Act).  ¨  Yes  x  No

The aggregate market value of the L-3 Communications Holdings, Inc. voting stock held by non-affiliates of the Registrants as of June 26, 2015 was approximately $9.2 billion. For purposes of this calculation, the Registrants have assumed that their directors and executive officers are affiliates.

There were 77,818,517 shares of L-3 Communications Holdings, Inc. common stock with a par value of $0.01 outstanding as of the close of business on February 19, 2016.

As of June 26, 2015 and February 19, 2016, L-3 Communications Holdings, Inc. held all 100 shares of L-3 Communications Corporation common stock.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the definitive proxy statement to be filed with the Securities and Exchange Commission (“SEC”) pursuant to Regulation 14A relating to the Registrants’ Annual Meeting of Shareholders, to be held on May 2, 2016, will be incorporated by reference in this Form 10-K in response to Items 10, 11, 12, 13 and 14 of Part III. The definitive proxy statement will be filed with the SEC no later than 120 days after the registrants’ fiscal year ended December 31, 2015.

L-3 COMMUNICATIONS HOLDINGS, INC.

L-3 COMMUNICATIONS CORPORATION

INDEX TO ANNUAL REPORT ON FORM 10-K

For the Year Ended December 31, 2015

PART I
Item 1:	Business	1
Item 1A:	Risk Factors	19
Item 1B:	Unresolved Staff Comments	27
Item 2:	Properties	28
Item 3:	Legal Proceedings	28
Item 4:	Mine Safety Disclosures	28
PART II
Item 5:	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	29
Item 6:	Selected Financial Data	31
Item 7:	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32
Item 7A:	Quantitative and Qualitative Disclosures About Market Risk	71
Item 8:	Financial Statements and Supplementary Data	71
Item 9:	Changes in and Disagreements With Accountants on Accounting and Financial Disclosure	71
Item 9A:	Controls and Procedures	72
Item 9B:	Other Information	73
PART III
Item 10:	Directors, Executive Officers and Corporate Governance	74
Item 11:	Executive Compensation	74
Item 12:	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	74
Item 13:	Certain Relationships and Related Transactions, and Director Independence	74
Item 14:	Principal Accountant Fees and Services	74
PART IV
Item 15:	Exhibits, Financial Statement Schedules	75
Signatures		82

PART I

For convenience purposes in this filing on Form 10-K, “L-3 Holdings” refers to L-3 Communications Holdings, Inc., and “L-3 Communications” refers to L-3 Communications Corporation, a wholly-owned operating subsidiary of L-3 Holdings. “L-3”, “Company”, “we”, “us” and “our” refer to L-3 Holdings and its subsidiaries, including L-3 Communications.

Item 1. Business

Overview

L-3 Holdings, a Delaware corporation organized in April 1997, derives all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications. L-3 Communications, a Delaware corporation, is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment, and security and detection systems. L-3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. Our customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

On December 8, 2015, we entered into a definitive agreement to sell our National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS, which provides cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments, has historically been reported as a reportable segment. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to L-3’s continuing operations, unless specifically noted. NSS had sales of $1,088 million, $1,138 million and $1,202 million for the years ended December 31, 2015, 2014 and 2013, respectively.

We have the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Financial information for our segments, including sales by geographic area, is included in “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” and in Note 21 to our audited consolidated financial statements.

For the year ended December 31, 2015, we generated sales of $10,466 million, consolidated operating income of $475 million, segment operating income of $890 million and net cash from operating activities from continuing operations of $1,042 million. The table below presents a summary of our 2015 sales by major category of end customer. For a more detailed presentation of our sales by end customer, see “Major Customers” within this Business section.

	2015 Sales	% of Total Sales
	(in millions)
DoD	$                 6,973	67%
Other U.S. Government	318	3
Total U.S. Government	$                 7,291	70%
International (foreign governments)	1,799	17
Commercial — international	759	7
Commercial — domestic	617	6
Total sales	$                10,466	100%

1

Business Strategy

The goal of our strategy is to build and sustain strong businesses with durable competitive discriminators and number one or number two market positions. Our business strategy is customer-focused and aims to increase shareholder value by expanding our strong positions in aerospace systems, electronic systems and communication systems by leveraging our customer relationships and pursuing adjacent market opportunities. We intend to gain market share with innovative and affordable solutions, collaboration across L-3’s business units and demonstrated past performance that address customer imperatives. We expect that we will continue to shift our business portfolio to emphasize products and systems in our core defense electronics, ISR and Communication businesses. Financially, our emphasis is on growing earnings per share and cash flow. Our strategy involves a flexible and balanced combination of organic growth, cost reductions, and select business acquisitions and divestitures, enabling us to grow the company and also return cash to our shareholders in a balanced and disciplined manner. Our strategy includes the elements discussed below.

Maintain an Agile, Accountable, Ethical and Results-Driven Culture. A key part of L-3’s strategy is our agile, accountable, and results-driven culture that focuses on meeting our customers’ needs and on achieving L-3’s strategic goals and growth objectives. L-3’s culture is made up of diverse people providing creative, innovative and affordable solutions and ideas in an environment that fosters teamwork and collaboration across our business units. Operating with integrity and a commitment to the highest standards of ethical conduct and maintaining strong internal controls are foundational elements of our strategy to build and maintain the trust of our customers, shareholders, employees, suppliers and communities where we live and work.

Strengthen and Expand Our Market Positions. We intend to use our existing prime contractor and supplier positions and internal investments to increase our market share, grow our sales organically and continue to build strong businesses with durable discriminators that have a number one or number two market position. We intend to expand our prime contractor roles in select business areas where we have domain expertise, including special operations forces and U.S. Government classified business. We expect to benefit from and expand our supplier positions to multiple bidders by leveraging our customer relationships, pursuing adjacent market opportunities and expand our content on Original Equipment Manufacturers (OEMs) platforms. As an independent supplier of a broad range of products, subsystems and systems in several key business areas, our growth will partially be driven by expanding our share of existing programs and participating in new programs. Teaming arrangements with other prime contractors and platform original equipment manufacturers is one way we intend to pursue select new business opportunities and expand our content on select platforms. We plan to maintain our diversified and broad business mix with limited reliance on any single contract, follow-on or new business opportunity. While sales to the U.S. Government, especially the DoD, will remain an integral part of L-3’s business, we also intend to continue to increase our sales to foreign governments and domestic and international commercial businesses. We expect to continue to supplement our organic sales growth by acquiring, on a select basis, businesses that provide attractive returns on investment and add new products, technologies, programs and contracts, or provide access to select DoD, other U.S. Government, international and/or commercial customers.

Collaborate to Increase Growth Opportunities. We intend to deepen the collaboration among our diversified businesses to develop new business opportunities, combine our leading technologies and deliver the right solutions to our customers quickly. We expect that our core strengths of agility, responsiveness and cost-effectiveness will allow us to continue to provide exceptional performance to our customers.

Leverage Our Excellent Customer Relationships. We intend to maintain and expand our excellent customer relationships. We also intend to continue to leverage our customer relationships and our capabilities, including proprietary technologies, to expand the scope of our products to existing and new customers. We also intend to continue to align our products, services, investments in research and development and business acquisitions to proactively address customer priorities and requirements and invest in growth areas such as aerospace systems, sensor systems and special operations.

2

Increase Margins by Proactively Managing Our Cost Structure and Optimizing Our Business Portfolio. We intend to increase our operating margin by improving productivity and reducing direct contract costs and overhead costs, including general and administrative costs. Our effective management of labor, material, subcontractor and other direct costs is also an important element of cost control and favorable contract performance. We believe that proactively re-sizing our businesses to their anticipated sales, combined with continuous cost improvement will enable us to increase our cost competitiveness and operating margin, and to also selectively invest in new product development, business acquisitions, bids and proposals and other business development activities to win new business. We intend to continue to evaluate our portfolio of businesses to address the needs of a dynamic and demanding market place and to strengthen our core business through select business acquisitions or divestitures.

Achieve Outstanding Program Performance. We believe that outstanding performance on our existing programs and contracts in terms of on-budget, on-schedule and satisfying and exceeding technical and other contractual performance requirements, is the foundation for expanding L-3’s prime contractor and supplier positions and winning new business. We believe that a prerequisite for growing and winning new business is to retain our existing business by successfully meeting the performance criteria included in our contracts. We will continue to focus on delivering superior contract performance with affordable prices to our customers in order to maintain our reputation as an agile and responsive contractor and to differentiate ourselves from our competitors.

Attract and Retain Skilled Personnel. The success of our businesses is, to a large extent, dependent upon the knowledge and skills of our employees. We intend to continue to attract and retain employees who have management, contracting, engineering and technical skills and who have U.S. Government security clearances, particularly those with clearances of top-secret and above.

Business Acquisitions and Divestitures

During the years ended December 31, 2015, 2014 and 2013, we used net cash of $320 million, $57 million and $62 million for business acquisitions, respectively. On May 29, 2015, we completed the sale of our Marine Systems International (MSI) business to Wärtsilä Corporation for a preliminary sale price of €295 million (approximately $318 million) in cash. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Business Acquisitions and Divestitures” for additional information regarding our business acquisitions and divestitures, including the sale of NSS on February 1, 2016 for a base sale price of $550 million, subject to customary adjustments for net working capital.

Products and Services

Our three reportable segments provide a wide range of products and services to various customers and are described below. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Results of Operations — Reportable Segment Results of Operations” and Note 21 to our audited consolidated financial statements for financial information about each segment.

3

Electronic Systems Reportable Segment

In 2015, Electronic Systems had net sales of $4,269 million, representing 41% of our total net sales. The businesses in this reportable segment provide a broad range of products and services, including components, products, subsystems, systems and related services to military and commercial customers in several niche markets. The table below provides a summary of the segment’s business areas and the percentage that each contributed to Electronic Systems’ net sales in 2015.

Business Area	% of 2015         Segment Sales
Precision Engagement & Training		25%
Power & Propulsion Systems		20
Aviation Products & Security		20
Sensor Systems		18
Warrior Systems		10
Marine Systems International (divested on May 29, 2015)		4
Advanced Programs		3
Total Electronic Systems		100%

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Electronic Systems reportable segment.

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
Precision Engagement & Training
•       Military and commercial aircraft flight simulators, reconfigurable training devices, distributed mission training suites	•       Advanced simulation technologies and training for pilots, navigators, flight engineers, gunners and operators	•       Fixed and rotary winged aircraft and ground vehicles for U.S. Air Force (USAF), U.S. Navy (USN), U.S. Army, foreign militaries, commercial airlines and aircraft OEMs
•       Training services, courseware integrated logistics support and maintenance	•       Systems management, operations, and maintenance	•       Various DoD and foreign military customers
•       Fuzing and ordnance systems	•       Precision munitions, fuzes, and electronic and electro safety arming devices (ESADs)	•       Various DoD and foreign military customers
•       Unmanned systems and components	•       Tactical unmanned air systems (UAS), medium altitude long endurance (MALE) UAS, small expendable UAS, flight controls, sensors and remote viewing systems	•       U.S. DoD and foreign ministries of defense
•       Radar-based sensors and systems	•       Electronic warfare, unmanned systems, ISR and precision-guided munitions	•       U.S. DoD and DHS

4

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
•       Global Positioning System (GPS) receivers	•       Location tracking	•       Guided projectiles and precision munitions
•       Global airline pilot training and crew resourcing	•       Commercial flight training for pilots	•       Commercial airlines and flight training companies
•       Navigation systems and positioning navigation units	•       Satellite launch and orbiting navigation and navigation for ground vehicles and fire control systems	•       USAF, U.S. Army, USMC and National Aeronautics Space Administration (NASA)
Power & Propulsion Systems
•       Naval power delivery, conversion and switching products, and hybrid electric drives	•       Switching, distribution and protection, frequency and voltage conversion, propulsion motors and drive units	•       Naval submarines, surface ships and aircraft carriers
•       Heavy fuel engines, cross drive variable transmissions, turret drive systems, vehicle suspension, advanced drive systems and auxiliary power generators	•       Power trains and suspension systems for military vehicles, power and energy management for military hybrid electric vehicles, non-portable and under armor auxiliary power units, and heavy fueled engines for unmanned systems	•       U.S. Army, USMC and foreign ministries of defense, manned/unmanned military platforms
•       Airborne dipping sonars, submarine and surface ship towed arrays	•       Submarine and surface ship detection and localization	•       USN and foreign navies
•       Underwater sensor ranges	•       Monitor nuclear testing, track submarines and surface vessels	•       U.S. and foreign military and commercial customers
•       Service life extensions	•       Landing craft air cushion amphibious vehicle	•       USN
•       In-service engineering, ship repair, overhaul, upgrades and maintenance, and battle force tactical training	•       Embedded shipboard training systems, towed arrays, navigation systems, radar systems and electronic warfare systems	•       USN, U.S. Coast Guard (USCG), U.S. Army and commercial shipowners
•       Power plant simulation, modeling, computer systems, and training services	•       Submarines, nuclear and other power plants	•       Foreign navies, nuclear and other power plant companies

5

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
•       Automation, navigation, communications, and sensors and integrated Command, Control, Communications, Computers and Navigation (C4N) solutions	•       Vessel bridge and machinery plant platform management systems, and C4N systems	•       USN and foreign navies
•       High power microwave sources, systems & effects, pulse power systems and electromagnetics hardened construction	•       Forensic analysis of weapons of mass destruction, and active detection of special nuclear material.	•       U.K. MoD, U.S. Defense Threat Reduction Agency, U.S. Army and USAF
•       Ballistic missile targets	•       Targets for ground based ballistic missile intercept systems	•       U.S. Missile Defense Agency (MDA)
Aviation Products & Security
•       Cockpit and mission displays	•       High performance, ruggedized flat panel and cathode ray tube displays and processors	•       Various military aircraft
•       Airborne traffic and collision avoidance systems, terrain awareness warning systems	•       Reduce the potential for midair aircraft collisions and crashes into terrain by providing visual and audible warnings and maneuvering instructions to pilots	•       Commercial transport, business, regional and military aircraft
•       Advanced cockpit avionics	•       Pilot safety, navigation and situation awareness products	•       Commercial transport, business, regional and military aircraft
•       Solid state crash protected cockpit voice and flight data recorders	•       Aircraft voice and flight data recorders that continuously record voice and sounds from cockpit and aircraft intercommunications	•       Commercial transport, business, regional and military aircraft
•       Airport security systems, explosives detection systems and whole body imaging systems	•       Rapid scanning of passenger checked baggage and carry-on luggage, scanning of large cargo containers	•       DHS, including the U.S. Transportation Security Administration (TSA), domestic and international airports and state and local governments
•       Non-invasive security systems and portals, and sophisticated sensors with threat detection capabilities	•       Aviation, rail and border crossing security	•       TSA, U.S. Customs and Border Protection agency, various regulatory authorities and private security companies

6

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
Sensor Systems
•       Targeted stabilized camera systems with integrated sensors and wireless communication systems	•       Intelligence data collection and surveillance and reconnaissance	•       DoD, foreign ministries of defense, intelligence and security agencies, law enforcement, manned/unmanned platforms
•       Airborne and ground based high energy laser beam directors, laser designators and high tracking rate telescopes	•       Directed energy systems, space surveillance, satellite laser ranging and laser communications, airborne and ground target designation/illumination	•       USAF and NASA
•       Submarine photonic systems and periscopes	•       Virginia class submarines	•       USN
•       Force protection, electronic warfare and satellite monitoring	•       Counter IED systems, jamming and satellite monitoring	•       U.K. MoD and other foreign security agencies and ministries of defense
•       ISR mission management software and geospatial application technology programs	•       Cueing system software, hardware and video algorithms and wide-area sensor integration solutions and software	•       USAF, USSOCOM, Naval Surface Warfare Center and various other DoD agencies
Warrior Systems
•       Enhanced vision and weapon sights products	•       Image intensified night vision goggles/sights, holographic weapon sights, thermal sights and images, and driver viewers for special forces, pilots and aircrews, soldiers, marines, sailors and law enforcement personnel	•       U.S. Army, USN, USMC, DHS, foreign militaries and law enforcement agencies
•       Laser designation and range finder systems	•       Airborne and ground target designation/illumination	•       DoD, law enforcement and foreign customers
Advanced Programs
•       Optics, telescopes and precision optical subsystems	•       Airborne pointing and scanning stabilized mirrors and stabilized lightweight multi-spectral telescopes	•       NASA, DoD and National Reconnaissance Office

7

Aerospace Systems Reportable Segment

In 2015, Aerospace Systems had net sales of $4,156 million, representing 40% of our total net sales. The businesses in this reportable segment provide products and services for the global ISR market, specializing in signals intelligence (SIGINT) and multi-intelligence platforms, to include full motion video, electro-optical, infrared, and synthetic aperture radars, along with other types of information gathering systems. These products and services provide the warfighter with the ability to collect and analyze data from command centers, communication nodes and air defense systems for real-time situational awareness and response. The businesses in this reportable segment provide select Command, Control and Communications (C³) systems products for military and other U.S. Government and select foreign government intelligence, reconnaissance and surveillance applications. We believe that these products and services are critical elements for a substantial number of major command, control and communication and intelligence gathering systems. The businesses in this reportable segment also provide modernization, upgrades and sustainment, maintenance and logistics support solutions for military and various government aircraft and other platforms. We sell these services primarily to the DoD and select foreign governments. Major products and services for this reportable segment include:

• highly specialized fleet management sustainment and support services, including procurement, systems integration, sensor development, modifications and periodic depot maintenance for ISR and special mission aircraft and airborne systems;

• strategic and tactical SIGINT systems that detect, collect, identify, analyze and disseminate information;

• engineering, modification, maintenance, logistics and upgrades for aircraft, ground vehicles and personnel equipment;

• turnkey aviation life cycle management services that integrate custom developed and commercial off-the-shelf products for various military fixed and rotary wing aircraft, including heavy maintenance and structural modifications and interior modifications; and

• aerospace and other technical services related to large fleet support, such as aircraft and vehicle modernization, maintenance, repair and overhaul, logistics, support and supply chain management, primarily for military training, tactical, transport cargo and utility aircraft.

The table below provides a summary of the segment’s business areas and the percentage that each contributed to Aerospace Systems’ net sales in 2015.

Business Area	% of 2015             Segment Sales
ISR Systems	52%
Logistics Solutions	30
Aircraft Systems	18
Total Aerospace Systems	100%

8

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Aerospace Systems reportable segment.

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
ISR Systems
•       Prime mission systems integration, sensor development and operations and support	•       Signal processing, airborne SIGINT applications, antenna technology, real-time process control and software development	•       DoD, USAF, U.K. MoD, and other select foreign military ISR aircraft platforms and ground systems
•       Fleet management of special mission aircraft, including avionics and mission system upgrades and logistics support	•       Measurement collection and signal intelligence, special missions	•       DoD and classified customers within the U.S. Government
•       ISR operations and support	•       Data link support and services, special applications, classified projects, spares and repairs	•       USAF and U.S. Army ISR aircraft platforms and ground systems
Logistics Solutions
•       Logistics support and maintenance	•       Aircraft maintenance and repair, flight operations support for training, transport/cargo and special mission aircraft	•       U.S. Army, USAF, USN and select foreign militaries
•       Contract Field Teams (CFT)	•       Deployment of highly mobile, quick response field teams to customer locations to supplement the customer’s resources for various ground vehicles and aircraft	•       U.S. Army, USAF, USN and USMC
•       Contractor Operated and Managed Base Supply (COMBS)	•       Inventory management activities relating to flight support and maintenance, including procurement and field distribution	•       Military training and transport/cargo aircraft for USN, USAF and U.S. Army
Aircraft Systems
•       Modernization and life extension maintenance upgrades and support	•       Aircraft structural modifications and inspections, installation of mission equipment, navigation and avionics products and interior modifications	•       USN, USAF, select foreign governments, OEMs, VIP and Head-of-State (HOS) aircraft, and various military fixed and rotary wing aircraft

9

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
•       Fabrication and assembly of fixed and rotary wing aerostructures	•       Rotary wing cabin assemblies, new and modified wings and subassemblies, structure and parts fabrication for OEMs	•       U.S. Army, USN, USMC and OEMs

Communication Systems Reportable Segment

In 2015, Communication Systems had net sales of $2,041 million, representing 19% of our total net sales. The businesses in this reportable segment provide network and communication systems, secure communications products, radio frequency components, satellite communication terminals, and space, microwave and telemetry products. These products are used to connect a variety of space, airborne, ground and sea-based communication systems and are used in the transmission, processing, recording, monitoring, and dissemination functions of these communication systems. Major products and services for this reportable segment include:

• secure data links that enable real-time information collection and dissemination to users of networked communications for airborne, satellite, ground and sea-based remote platforms, both manned and unmanned;

• microwave products, including passive and active microwave components and subsystems, radar antennas and radomes, power devices and mobile and ground-based satellite communications systems;

• secure terminal and communication network equipment and encryption management; and

• communication systems for surface and undersea vessels and manned space flights.

The table below provides a summary of the segment’s business areas and the percentage that each contributed to Communication Systems’ net sales in 2015.

Business Area	% of 2015         Segment Sales
Broadband Communication Systems		50%
Advanced Communications		21
Space & Power Systems		19
Tactical Satellite Communication Products		10
Total Communication Systems		100%

10

The table below provides additional information for the systems, products and services; selected applications; and selected platforms or end users of our Communication Systems reportable segment.

Systems/Products/Services	Selected Applications	Selected Platforms/End Users
Broadband Communication Systems
•       Airborne, space and surface data link terminals, ground stations, and transportable tactical satellite communications (SATCOM) systems	•       High performance, wideband secure communication links for relaying of intelligence and reconnaissance information	•       Manned aircraft, unmanned aerial vehicles (UAVs), naval ships, ground vehicles and satellites for the DoD
•       Multi-band Manpack Receivers	•       Portable, ruggedized terminals used for receiving reconnaissance video and sensor data from multiple airborne platforms	•       U.S. Special Operations Command (USSOCOM), USAF and other DoD customers
•       Multi-frequency time division multiple access modems and high dynamic small aperture band terminals that support SATCOM on the move using X, Ku, and Ka bands	•       On the move SATCOM and other tactical communications systems utilizing small aperture terminals; off road use on military vehicles, watercraft, and airborne platforms to provide two-way broadband connectivity while on the move	•       U.S. Army, USMC, and select foreign allies
•       Tactical ground based signal intercept and direction finding systems	•       Man portable and military vehicle mounted tactical signal intercept/exploitation and direction finding systems	•       U.S. Army and other DoD/U.S. intelligence agencies
Advanced Communications
•       Passive and active microwave components and subsystems and non-ionizing radiation monitoring equipment	•       Radio transmission, switching and conditioning, transponder control, channel and frequency separation, ground vehicles, aircraft and satellites	•       DoD and OEMs, SATCOM for DoD and various government agencies
•       Secure communications terminals and equipment, and secure network encryption products	•       Secure and non-secure voice, data and video communication for office, battlefield and secure internet protocol (IP) network applications	•       DoD and U.S. Government intelligence agencies
•       Ground-based satellite communications terminals and payloads	•       Interoperable, transportable ground terminals	•       DoD and U.S. Government intelligence agencies

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Systems/Products/Services	Selected Applications	Selected Platforms/End Users
•       Shipboard communications systems	•       Internal and external communications (radio rooms and workstations)	•       USN, USCG and foreign navies
•       Ultra-wide frequency and advanced radar antennas and radomes	•       Surveillance and radar detection	•       Military fixed and rotary winged aircraft, SATCOM
•       Low-power SATCOM products	•       Low-noise and low-power amplifiers, solid-state switch assemblies, uplink power control products and frequency converters	•       U.S. Army, other government agencies and commercial customers
Space & Power Systems
•       Traveling wave tube amplifiers (TWTA’s), power modules, klystrons and digital broadcast	•       Microwave vacuum electron devices and power modules	•       DoD and foreign military manned/unmanned platforms, including satellites, radar systems, communication systems, UAVs, missile defense systems, various missile programs and commercial broadcast
•       Telemetry and instrumentation systems	•       Spacecraft telemetry tracking and control, encryption and high data rate transmitters, satellite command and control software, airborne and ground test telemetry systems, and tactical intelligence receivers	•       Aircraft, missiles and satellites
Tactical Satellite Communications Products
•       Quick-deploy flyaway very small aperture terminals (VSAT) and vehicular satellite systems	•       Satellite communications	•       U.S. Army, USAF, USSOCOM and other DoD agencies, and commercial customers
•       Managed communications security (COMSEC) satellite networks and integrated remote VSAT satellite systems	•       Deployment and support of global communication networks for tactical and enterprise applications	•       U.S. Army, DoD/U.S. intelligence agencies, allied forces and commercial contractors

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Funded Backlog and Orders

We define funded backlog as the value of funded orders received from customers, less the cumulative amount of sales recognized on such orders. We define funded orders as the value of contract awards received from the U.S. Government, for which the U.S. Government has appropriated funds, plus the value of contract awards and orders received from customers other than the U.S. Government. The table below presents our funded backlog, percentage of funded backlog at December 31, 2015 expected to be recorded as sales in 2016 and funded orders for each of our reportable segments and on a consolidated basis.

	Funded Backlog at December 31,				Percentage of Funded Backlog at December 31, 2015 Expected to be Recorded as Sales  in 2016		Funded Orders
	2015		2014				2015		2014
	(in millions)						(in millions)
Reportable Segment:
Electronic Systems	$	3,688	$	4,494		64%	$	4,137	$	4,811
Aerospace Systems		2,741		3,341		63%		3,569		4,178
Communication Systems		1,994		1,850		66%		2,156		1,985
Consolidated	$	8,423	$	9,685		64%	$	9,862	$	10,974

Our funded backlog does not include the full potential value of our contract awards, including those pertaining to multi-year, cost-plus type contracts, which are generally funded on an annual basis. Funded backlog also excludes the potential future orders and related sales from unexercised priced contract options that may be exercised by customers under existing contracts and the potential future orders and related sales of purchase orders that we may receive in the future under indefinite quantity contracts or basic ordering agreements during the term of such agreements.

Major Customers

The table below presents a summary of our sales by end customer and the percent contributed by each to our total sales. For additional information regarding domestic and international sales, see Note 21 to our audited consolidated financial statements.

	2015				2014
	Sales		% of     Total Sales		Sales		% of     Total Sales
	(in millions)				(in millions)
Air Force	$	3,166		30%	$	3,075		28%
Army		1,715		17		1,897		17
Navy/Marines		1,447		14		1,524		14
Other Defense		645		6		648		6
Total DoD	$	6,973		67%	$	7,144		65%
Other U.S. Government		318		3		320		3
Total U.S. Government	$	7,291		70%	$	7,464		68%
International (foreign governments)		1,799		17		1,866		17
Commercial — international		759		7		1,069		10
Commercial — domestic		617		6		587		5
Total sales	$	10,466		100%	$	10,986		100%

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Direct sales to the end customer represented approximately 66% of our consolidated 2015 sales, and sales as a subcontractor or supplier represented the remaining 34%. Additionally, approximately 68% of our DoD sales for 2015 were direct to the customer, and approximately 32% were indirect through other prime system contractors and subcontractors of the DoD.

Our sales are predominantly derived from contracts with agencies of, and prime system contractors to, the U.S. Government. Various U.S. Government agencies and contracting entities exercise independent and individual purchasing decisions, subject to annual appropriations by the U.S. Congress. For the year ended December 31, 2015, our five largest contracts (revenue arrangements) generated 14% of our consolidated sales and our largest contract (revenue arrangement) in terms of annual sales was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment. Under this contract, which generated approximately 4.3% of our 2015 sales, we provide maintenance, logistics and other related sustainment support services for rotary wing aircraft assigned to Fort Rucker and satellite units in Alabama. Our period of performance under this contract, including unexercised annual options, continues through September 30, 2017.

Research and Development

We conduct research and development activities that consist of projects involving applied research, new product and systems development and select concept studies. We employ scientific, engineering and other personnel to improve our existing product lines and systems and develop new products, technologies, and systems. As of December 31, 2015, we employed approximately 7,000 engineers, substantially all of whom hold advanced degrees, who work on company-sponsored research and development efforts and customer funded research and development contracts.

Company-sponsored (Independent) research and development costs for our businesses that are U.S. Government contractors are allocated to U.S. Government contracts and are charged to cost of sales when the related sales are recognized as revenue. Research and development costs for our commercial businesses are expensed as incurred and are also charged to cost of sales. The table below presents company-sponsored (Independent) research and development expenses incurred for our U.S. Government businesses and our commercial businesses.

	Year  Ended December 31,
	2015		2014		2013
	(in millions)
Company-Sponsored Research and Development Costs:
U.S. Government Contractor Businesses	$	172	$	162	$	182
Commercial Businesses		56		67		76
Total	$	228	$	229	$	258

Customer-funded research and development costs pursuant to contracts (revenue arrangements) are not included in the table above because they are direct contract costs and are charged to cost of sales when the corresponding revenue is recognized. See Note 2 to our audited consolidated financial statements for additional information regarding research and development.

Competition

Our businesses generally encounter significant competition. We believe that we are a major provider for many of the products and services we offer to our DoD, government and commercial customers.

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Our ability to compete for existing and new business depends on a variety of factors, including:

• the effectiveness and innovation of our technologies, systems and research and development programs;

• our ability to offer superior program performance at an affordable and competitive cost;

• historical, technical, cost and schedule performance;

• our ability to attain supplier positions on contracts;

• our ability to maintain an effective supplier and vendor base;

• our ability to retain our employees and hire new ones, particularly those who have U.S. Government security clearances;

• the capabilities of our facilities, equipment and personnel to undertake the business for which we compete; and

• our ability to quickly and flexibly meet customer requirements and priorities.

L-3 is an aerospace and defense contractor with a broad and diverse portfolio of products and services. We have prime contractor and subcontractor positions. We supply our products and services to other prime system contractors. However, we also compete directly with other large prime system contractors for: (1) certain products, subsystems and systems, where they have vertically integrated businesses and (2) niche areas where we are a prime contractor. We also compete with numerous other aerospace and defense contractors, which generally provide similar products, subsystems, systems or services.

In addition, our ability to compete for select contracts may require us to “team” with one or more of the other prime system contractors that bid and compete for major platform programs, and our ability to “team” with them is often dependent upon the outcome of a competition for subcontracts they award.

Patents and Licenses

Generally, we do not believe that our patents, trademarks and licenses are material to our operations. Furthermore, most of our U.S. Government contracts generally permit us to use patents owned by other U.S. Government contractors. Similar provisions in U.S. Government contracts awarded to other companies make it impossible for us to prevent the use of our patents in most DoD work performed by other companies for the U.S. Government.

Raw Materials

Although we generated 63% of our 2015 sales from products and systems, our businesses are generally engaged in limited manufacturing activities and have minimal exposure to fluctuations in the supply of raw materials. For those businesses that manufacture and sell products and systems, most of the value that we provide is labor oriented, such as design, engineering, assembly and test activities. In manufacturing our products, we use our own production capabilities as well as a diverse base of third party suppliers and subcontractors. Although certain aspects of our manufacturing activities require relatively scarce raw materials, we have not experienced difficulty in our ability to procure raw materials, components, sub-assemblies and other supplies required in our manufacturing processes.

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Contracts

Generally, the sales price arrangements for our contracts are either fixed-price, cost-plus or time-and-material type. Generally, a fixed-price type contract offers higher profit margin potential than a cost-plus type or time-and-material type contract due to the greater levels of risk we assume on a fixed-price type contract.

On a fixed-price type contract (revenue arrangement), we agree to perform the contractual statement of work for a predetermined sales price. Although a fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract. Accounting for the sales on a fixed-price type contract that is covered by contract accounting standards requires the preparation of estimates for: (1) the total contract revenue, (2) the total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work, and (3) the measurement of progress towards completion. Adjustments to original estimates for a contract’s revenue, estimated costs at completion and estimated total profit or loss are often required as work progresses under a contract, as experience is gained and as more information is obtained, even though the scope of work required under the contract may not change.

On a cost-plus type contract (revenue arrangement), we are paid our allowable incurred costs plus a profit which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels determined by our customers. Cost-plus type contracts with award and incentive fee provisions are our primary variable contract fee arrangement. Award fees provide for a fee based on actual performance relative to contractually specified performance criteria. Incentive fees provide for a fee based on the relationship which total allowable costs bear to target cost. Award and incentive fees earned were not material to our results of operations for 2015, 2014 and 2013.

On a time-and-material type contract (revenue arrangement), we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. Therefore, on cost-plus type and time-and-material type contracts we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.

Substantially all of our cost-plus type contracts and time-and-material type contracts are with U.S. Government customers while sales to commercial customers are transacted under fixed-price sales arrangements and are included in our fixed-price contract type sales. The table below presents the percentage of our total sales generated from each contract type.

	Year Ended December 31,
Contract Type	2015		2014		2013
Fixed-price(1)		74%		76%		76%
Cost-plus fixed fee		14%		12%		12%
Cost-plus award fee		2%		2%		3%
Cost-plus incentive fee		5%		5%		5%
Time-and-material		5%		5%		4%
Total sales		100%		100%		100%

⁽¹⁾  Includes fixed-price incentive fee type contracts contributing approximately 1% of our total sales for the years ended December 31, 2015, 2014 and 2013.

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Regulatory Environment

Most of our revenue arrangements with agencies of the U.S. Government, including the DoD, are subject to unique procurement and administrative rules. These rules are based on both laws and regulations, including the U.S. Federal Acquisition Regulation, that: (1) impose various profit and cost controls, (2) regulate the allocations of costs, both direct and indirect, to contracts and (3) provide for the non-reimbursement of unallowable costs. Unallowable costs include, but are not limited to, lobbying expenses, interest expenses and certain costs related to business acquisitions, including, for example, the incremental depreciation and amortization expenses arising from fair value increases to the historical carrying values of acquired assets. Our contract administration and cost accounting policies and practices are also subject to oversight by government inspectors, technical specialists and auditors. See “Part I — Item 1A — Risk Factors” for a discussion of certain additional business risks specific to our government contracts.

Our U.S. Government contracts are subject to extensive legal and regulatory requirements and, from time to time, agencies of the U.S. Government investigate whether our operations are being conducted in accordance with these requirements. Investigations could result in administrative, civil, or criminal liabilities, including repayments, disallowance of certain costs, or fines and penalties. As is common in the U.S. defense industry, we are subject to business risks, including changes in the U.S. Government’s procurement policies (such as greater emphasis on competitive procurement), governmental appropriations, national defense policies or regulations, service modernization plans, and availability of funds. A reduction in expenditures by the U.S. Government for products and services of the type we manufacture and provide, lower margins resulting from increasingly competitive procurement policies, a reduction in the volume of contracts or subcontracts awarded to us or the incurrence of substantial contract cost overruns could materially adversely affect our business.

In 2015, sales under foreign military sales (FMS) agreements, which are included in the international (foreign governments) category in the “Major Customers” table above, were $644 million, or 6% of our total consolidated sales. FMS agreements are made directly between the U.S. Government and foreign governments. In such cases, because we serve only as the supplier, we do not have unilateral control over the terms of the agreements. Certain of our sales are direct commercial sales to foreign governments. These sales are subject to U.S. Government approval and licensing under the Arms Export Control Act. Legal restrictions on sales of sensitive U.S. technology also limit the extent to which we can sell our products to foreign governments or private parties.

All of our U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. Our contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.

Environmental Matters

Our operations are subject to various environmental laws and regulations relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations. We continually assess our obligations and compliance with respect to these requirements.

We have also assessed the risk of environmental contamination for our various manufacturing facilities, including our acquired businesses and, where appropriate, have obtained indemnification, either from the sellers of those acquired businesses or through pollution liability insurance. We believe that our current operations are in substantial compliance with all existing applicable environmental laws and permits. We believe our current expenditures will allow us to continue to be in compliance with applicable environmental laws and regulations. While it is difficult to determine the timing and ultimate cost to be incurred in order to comply with these laws,

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based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe there are no environmental loss contingencies that, individually or in the aggregate, would be material to our consolidated results of operations, financial position or cash flows.

Employees

As of December 31, 2015, we employed approximately 38,000 full-time and part-time employees, 86% of whom were located in the United States. Of these employees, approximately 22% are covered by approximately 148 separate collective bargaining agreements with various labor unions. The success of our business is, to a large extent, dependent upon the knowledge of our employees and on the management, contracting, engineering and technical skills of our employees. In addition, our ability to grow our businesses, obtain additional orders for our products and services and to satisfy contractual obligations under certain of our existing revenue arrangements is largely dependent upon our ability to attract and retain employees who have U.S. Government security clearances, particularly those with clearances of top-secret and above. Historically, we have renegotiated labor agreements without significant disruptions to operating activities, and we believe that relations with our employees are positive.

L-3 Holdings Obligations

The only obligations of L-3 Holdings at December 31, 2015 were: (1) its guarantee of borrowings under the revolving credit facility of L-3 Communications, and (2) its guarantee of other contractual obligations of L-3 Communications and its subsidiaries. In order to generate the funds necessary to repurchase its common stock and pay dividends declared and principal and interest on its outstanding indebtedness, if any, L-3 Holdings relies on dividends and other payments from its subsidiaries.

Available Information

We are subject to the informational requirements of the Securities Exchange Act of 1934 and, in accordance therewith, file reports, including annual, quarterly and current reports, proxy statements and other information with the Securities and Exchange Commission the (“SEC”). Such reports and other information can be inspected and copied at the Public Reference Room of the SEC located at 100 F Street, NE, Washington, DC 20549. Copies of such material can be obtained from the Public Reference Room of the SEC at prescribed rates. You may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. Such material may also be accessed electronically by means of the SEC’s home page on the Internet at http://www.sec.gov.

You may also obtain a free copy of our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and proxy statement for the annual shareholders’ meeting, as well as any amendments to those reports as soon as reasonably practicable after electronic filing with the SEC through our website on the Internet at http://www.L-3com.com.

We also have a Corporate Governance webpage. You can access our Corporate Governance Guidelines and charters for the audit, compensation and nominating/corporate governance committees of our Board of Directors through our website, http://www.L-3com.com, by clicking on the “Corporate Governance” link under the heading “Investor Relations.” You can access our Code of Ethics and Business Conduct by clicking on the “Code of Ethics and Business Conduct” link under the heading “Code of Ethics.” Our Code of Ethics and Business Conduct applies to all directors, officers and employees, including our chairman and chief executive officer, our senior vice president and chief financial officer, and our vice president, controller and principal accounting officer. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the New York Stock Exchange, Inc. (NYSE), on our website within the required periods. The information on or accessible through our website is not incorporated by reference into this report.

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To learn more about L-3, please visit our website at http://www.L-3com.com. From time to time we use our website as a channel of distribution of material company information. Financial and other material information regarding L-3 is routinely posted on our website and is readily accessible.

Item 1A. Risk Factors

You should carefully consider the following risk factors and other information contained in this Form 10-K, including “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Any of these risks could materially affect our business and our financial condition, results of operations and cash flows, which could in turn materially affect the price of our common stock.

Our contracts (revenue arrangements) with U.S. Government customers entail certain risks.

A decline in or a redirection of the U.S. defense budget could result in a material decrease in our sales, results of operations and cash flows.

Our government contracts and sales are highly correlated and dependent upon the U.S. defense budget which is subject to the congressional budget authorization and appropriations process. Congress usually appropriates funds for a given program on a September 30 fiscal year basis, even though contract periods of performance may extend over many years. Consequently, at the beginning of a major program, the contract is usually partially funded, and additional monies are normally committed to the contract by the procuring agency only as appropriations are made by Congress in future fiscal years. DoD budgets are determined by factors beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, changing national security and defense requirements, geopolitical developments and actual fiscal year congressional appropriations for defense budgets. Any of these factors could result in a significant decline in, or redirection of, current and future DoD budgets and impact our future results of operations, including our sales and operating income growth rates.

The DoD budget peaked in the fiscal year ended September 30, 2010 (FY 2010) at $690 billion and declined through FY 2015. The total budget for FY 2015 was $560 billion, a 4% decline as compared to the FY 2014 budget due to a decrease in the Overseas Contingency Operations (OCO) budget. The FY 2015 base budget (total budget less OCO) remained substantially unchanged from FY 2014 at $497 billion while the OCO budget decreased by $22 million. The total DoD budget for FY 2016 is $581 billion, an increase of 4% compared to FY 2015. The increase is due to a higher base budget of $25 billion. The FY 2016 DoD OCO budget declined slightly to $59 billion compared to $63 billion for FY 2015.

In addition, the U.S. defense budget has been affected by the U.S. Government’s overall fiscal challenges in recent years. On November 2, 2015, the President signed the Bipartisan Budget Act of 2015 (BBA), a bipartisan two-year budget and debt ceiling agreement that provides a level of stability in the U.S. Government budget process over the next two years. The BBA suspends the debt ceiling through March 15, 2017 and raises spending caps previously enacted by Congress under the Budget Control Act of 2011, as amended by The American Taxpayer Relief Act and Bipartisan Budget Act of 2013 (BCA). The spending caps on defense programs were raised by $25 billion to $548 billion for FY 2016 and by $15 billion to $551 billion for FY 2017. The BBA also sets a target for OCO funding for the DoD at $59 billion for each of FY 2016 and FY 2017, subject to the Congressional appropriation process. The BBA, however, does not change the BCA budget sequestration cuts after FY 2017. Consequently, while the BBA provides a level of stability, future DoD budgets and spending levels are difficult to predict. A significant decline in or redirection of U.S. military expenditures in the future, or the loss or significant reduction in U.S. Government funding of a large program in which we participate could have a material adverse effect on our financial position, results of operations and cash flows.

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We rely predominantly on sales to U.S. Government entities, and the loss or delay of a significant number of our contracts would have a material adverse effect on our results of operations and cash flows.

Our sales are predominantly derived from contracts (revenue arrangements) with agencies of, and prime system contractors to, the U.S. Government. The loss or delay of all or a substantial portion of our sales to the U.S. Government would have a material adverse effect on our results of operations and cash flows. Approximately 70%, or $7.3 billion, of our sales for the year ended December 31, 2015 were made directly or indirectly to U.S. Government agencies, including 67% to the DoD. Aggregate sales for our five largest contracts (revenue arrangements) amounted to approximately $1.4 billion, or 14% of our consolidated sales for the year ended December 31, 2015. Our largest contract (revenue arrangement) in terms of annual sales for the year ended December 31, 2015 was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment and generated approximately 4.3% of our 2015 sales. Our period of performance under this contract, including unexercised annual options, continues through September 30, 2017.

A substantial majority of our total sales are for products and services under contracts with various agencies and procurement offices of the DoD or with prime contractors to the DoD. Although these various agencies, procurement offices and prime contractors are subject to common budgetary pressures and other factors, our customers exercise independent purchasing decisions. Because of this concentration of contracts, if a significant number of our DoD contracts and subcontracts are simultaneously delayed or cancelled for budgetary, performance or other reasons, it would have a material adverse effect on our results of operations and cash flows.

In addition to contract cancellations and declines in agency budgets, our backlog and future financial results may be adversely affected by:

• curtailment of the U.S. Government’s use of technology or other services and product providers, including curtailment due to government budget reductions and related fiscal matters;

• geopolitical developments that affect demand for our products and services;

• our ability to hire and retain personnel to meet demand for our services; and

• technological developments that impact purchasing decisions or our competitive position.

The DoD’s wide-ranging efficiency and better buying power initiatives, which target affordability and cost growth, could have a material effect on the procurement process and may adversely affect our existing contracts and the award of new contracts.

Since 2010, the DoD has implemented best practices to the procurement process that are intended to control cost growth throughout the acquisition cycle by developing a competitive strategy for each program. As a result, we have and continue to engage in more frequent negotiations and re-competitions on a cost or price analysis basis with every competitive bid in which we participate. In April 2015, the DoD introduced Better Buying Power 3.0 (BBP), which focuses on technology innovation, incentive-based cost-plus and fixed-price contracts and Company sponsored Independent research and development efforts. The BBP initiative significantly changed the way the U.S. Government solicits, negotiates and manages its contracts and could result in a reduction in expenditures for the type of products we manufacture for, and services we provide to, the U.S. Government, which could have a material negative impact on our future sales, earnings and cash flows. These initiatives primarily affect our businesses within the Logistics Solutions sector within the Aerospace Systems reportable segment, and could result in the loss of certain of our existing contracts (revenue arrangements) depending on how the DoD implements this initiative.

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Our government contracts contain unfavorable termination provisions and are subject to audit and modification. If a termination right is exercised by the government, it could have a material adverse effect on our business, financial condition, results of operations and cash flows.

Companies engaged primarily in supplying defense-related equipment and services to U.S. Government agencies are subject to certain business risks peculiar to the defense industry. These risks include the ability of the U.S. Government to unilaterally:

• suspend us from receiving new contracts pending resolution of alleged violations of procurement laws or regulations;

• terminate existing contracts;

• reduce the value of existing contracts; and

• audit our contract-related costs and fees, including allocated indirect costs.

All of our U.S. Government contracts can be terminated by the U.S. Government either for its convenience or if we default by failing to perform under the contract. Termination for convenience provisions provide only for our recovery of costs incurred or committed settlement expenses and profit on the work completed prior to termination. Termination for default provisions provide for the contractor to be liable for excess costs incurred by the U.S. Government in procuring undelivered items from another source. Our contracts with foreign governments generally contain similar provisions relating to termination at the convenience of the customer.

U.S. Government agencies, including the Defense Contract Audit Agency and various agency Inspectors General, routinely audit and investigate our costs and performance on contracts, as well as our accounting and general business practices. Based on the results of such audits, the U.S. Government have adjusted, and may in the future adjust, our contract related costs and fees, including allocated indirect costs. In addition, under U.S. Government purchasing regulations, some of our costs, including certain business acquisition costs, most financing costs, portions of research and development costs, and certain marketing expenses may not be reimbursable under U.S. Government contracts.

As of December 31, 2015, we had a backlog of funded orders, primarily under contracts with the U.S. Government totaling $8,423 million. As described above, the U.S. Government may unilaterally modify or terminate its contracts with us. Accordingly, most of our backlog could be modified or terminated by the U.S. Government, which would have a material adverse effect on our future sales, results of operations and cash flows.

We may not be able to win competitively awarded contracts or receive required licenses to export our products, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

Our government contracts are subject to competitive bidding. We obtain many of our U.S. Government contracts through a competitive bidding process. We may not be able to continue to win competitively awarded contracts. In addition, awarded contracts may not generate sales sufficient to result in our profitability. We are also subject to risks associated with the following:

• the frequent need to bid on programs in advance of the completion of their design, which may result in unforeseen technological difficulties and/or cost overruns;

• the substantial time, effort and experience required to prepare bids and proposals for competitively awarded contracts that may not be awarded to us;

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• design complexity and rapid technological obsolescence; and

• the constant need for design improvement.

In addition to these risks, we are not permitted to export some of our products, and we are required to obtain licenses from U.S. Government agencies to export many of our other products and systems. Failure to receive required licenses would eliminate our ability to sell our products and systems outside the United States.

Intense competition and bid protests may adversely affect our sales, results of operations and cash flows.

The defense and commercial industries in which our businesses operate are highly competitive. We expect that the DoD’s increased use of commercial off-the-shelf products and components in military equipment will continue to encourage new competitors to enter the market. We also expect increased competition for our products and services from other providers due to the uncertainty of future U.S. defense budgets. Furthermore, the current competitive environment has resulted in an increase of bid protests from unsuccessful bidders, which typically extends the time until work on a contract can begin. For more information concerning the factors that affect our ability to compete, see “Part I — Item 1 — Business — Competition.”

We are subject to government investigations, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

U.S. Government contracts are subject to extensive legal and regulatory requirements, and from time to time agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. As discussed in Note 18 to our audited consolidated financial statements, we are currently cooperating with the U.S. Government on several investigations, including the matters which were the subject of the internal review at our Aerospace Systems segment. Under U.S. Government regulations, an indictment of L-3 by a federal grand jury, or an administrative finding against us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in us being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges, which could have a material adverse effect on our results of operations and cash flows. A conviction, or an administrative finding against us that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specific term, which could have a material adverse effect on our results of operations and cash flows.

We are subject to the risks of legal proceedings, which could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects, as well as the risk that we may need to record an adjustment to our product returns reserve in connection with our voluntary return program for EoTech holographic weapons sight products in future periods.

At any given time, we are a defendant in various material legal proceedings and litigation matters arising in the ordinary course of business, including litigation, claims and assessments that have been asserted against acquired businesses, which we have assumed. Although we maintain insurance policies, these policies may not be adequate to protect us from all material judgments and expenses related to current or future claims and may not cover the conduct that is the subject of the litigation. Desired levels of insurance may not be available in the future at economical prices or at all. In addition, we believe that while we have valid defenses with respect to legal matters pending against us, the results of litigation can be difficult to predict, including those involving jury trials. Accordingly, our current judgment as to the likelihood of our loss (or our current estimate as to the potential range of loss, if applicable) with respect to any particular litigation matter may be wrong. A significant judgment against us, arising out of any of our current or future legal proceedings and litigation, including in connection with three putative class action lawsuits filed against us regarding the EoTech holographic weapons sights, could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects. For a discussion of material litigation to which we are currently a party, see

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Note 18 to our audited consolidated financial statements. Furthermore, we continue to evaluate the amount of our product returns reserve in connection with the voluntary return program that we commenced in November 2015 for various EoTech holographic weapons sight products that may have been affected by certain performance issues. The amount of the liability will ultimately depend on our actual experience with the return program. Our continuing evaluation of the product returns reserve may lead us to record an adjustment to the product returns reserve in future periods. Any such adjustment may be material.

If we are unable to keep pace with rapidly evolving products and service offerings and technological change, there could be a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

The rapid change of technology is a key feature of most of the markets in which our products, services and systems oriented businesses operate. To succeed in the future, we will need to continue to design, develop, manufacture, assemble, test, market and support new products and enhancements on a timely and cost-effective basis. Historically, our technology has been developed through customer-funded and internally funded research and development and through certain business acquisitions. We may not be able to continue to maintain comparable levels of research and development or successfully complete such acquisitions. In the past, we have allocated substantial funds to capital expenditures, programs and other investments. This practice will continue to be required in the future. Even so, we may not be able to successfully identify new opportunities and may not have the necessary financial resources to develop new products and systems in a timely or cost-effective manner. At the same time, products and technologies developed by others may render our products, services and systems obsolete or non-competitive.

Goodwill represents a significant asset on our balance sheet and may become impaired.

Goodwill represents the largest asset on our balance sheet, with an aggregate balance of $6,281 million at December 31, 2015. We review goodwill and intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable, and also review goodwill annually in accordance with the accounting standards for goodwill and intangible assets. The annual impairment test requires us to determine the fair value of our reporting units in comparison to their carrying values. A decline in the estimated fair value of a reporting unit could result in a goodwill impairment, and a related non-cash impairment charge against earnings, if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill.

We recorded aggregate non-cash goodwill impairment charges of $955 million ($384 million in continuing operations and $571 million in discontinued operations) in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Logistics Solutions business as a result of a decline in their projected future cash flows. Additionally, the fair value of two of our other reporting units exceeded the carrying value of the net assets of those reporting units by less than 20% at November 30, 2015, the date of our most recent annual impairment assessment. These two reporting units had aggregate goodwill of approximately $1,524 million. A decline in the estimated fair value of one or more of our reporting units could potentially trigger goodwill impairment charges and a material adverse effect on our results of operations. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Goodwill and Identifiable Intangible Assets” for further discussion.

Our results of operations and cash flows are substantially affected by our mix of fixed-price, cost-plus and time-and-material type contracts.

Our sales are transacted using written revenue arrangements, or contracts, which are generally fixed-price, cost-plus or time-and-material. For a description of our revenue recognition policies, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies.” For information on the percentage of our total sales generated from each contract type, see “Item 1 —Business — Contracts.”

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Substantially all of our cost-plus and time-and-material type contracts are with the U.S. Government, primarily the DoD. Substantially all of our sales to commercial customers are transacted under fixed-price sales arrangements and are included in our fixed-price type contract sales.

On a fixed-price type contract (revenue arrangement), we agree to perform the contractual statement of work for a predetermined sales price. Although a fixed-price type contract generally permits us to retain profits if the total actual contract costs are less than the estimated contract costs, we bear the risk that increased or unexpected costs may reduce our profit or cause us to sustain losses on the contract.

On a cost-plus type contract (revenue arrangement), we are paid our allowable incurred costs plus a profit, which can be fixed or variable depending on the contract’s fee arrangement up to predetermined funding levels established by our customers. On a time-and-material type contract (revenue arrangement), we are paid on the basis of direct labor hours expended at specified fixed-price hourly rates (that include wages, overhead, allowable general and administrative expenses and profit) and materials at cost. Therefore, on cost-plus and time-and-material type contracts, we do not bear the risks of unexpected cost overruns, provided that we do not incur costs that exceed the predetermined funded amounts.

Additionally, the impact of revisions in profit or loss estimates for all types of contracts subject to percentage of completion accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. Provisions for anticipated losses on contracts are recorded in the period in which they become evident. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as reduce the valuations of receivables and inventories; and in some cases, result in liabilities to complete contracts in a loss position.

Pension expense and funding may fluctuate significantly because of changes in key estimates and assumptions, including discount rates and the assumed long-term rate of return on plan assets, as well as our actual investment returns and regulatory actions, which could negatively impact our results of operations, cash flows and financial condition.

Determining our pension expense requires significant judgment, particularly with respect to our discount rates, the assumed long-term rate of return on plan assets and other actuarial assumptions. If our assumptions change significantly due to changes in economic, legislative, demographic experience and/or circumstances, our pension expense, the funded status of our plans and our cash contributions to such plans would be impacted, which could negatively affect our results of operations, cash flows and financial condition. In addition, differences between our actual investment returns and our assumed long-term rate of return on plan assets could also impact our pension expense, the funded status of our plans and our required cash contributions to the plans. Further, our pension expense and the funded status of our plans, including required cash contributions to the plans, may be impacted by regulatory actions in any given year.

Additionally, pension plan cost recoveries under Cost Accounting Standards (CAS) for our U.S. Government contracts occur in different periods from when pension expense is recognized under accounting principles generally accepted in the U.S. or when cash contributions are made. Although CAS has been revised to better align the minimum required contributions under the Employee Retirement Income Security Act of 1974 (ERISA), as amended by the Pension Protection Act of 2006, with pension plan cost recoveries under CAS, timing differences could have a material adverse effect on our cash flow.

Our business could be negatively impacted by cybersecurity threats and other disruptions.

As a U.S. defense contractor, we faced, and continue to face, various security threats, including, but not limited to, threats to the physical security of our facilities and employees, cybersecurity threats to our information technology infrastructure and attempts to gain access to our proprietary or classified information as well as the proprietary or classified information of our customers.

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Although we utilize various procedures and controls to monitor, deter and mitigate these threats, these procedures and controls may not be sufficient to prevent disruptions in mission critical systems, the unauthorized release of confidential, sensitive or classified information and the corruption of data, systems or networks. Any significant operational delays, or any destruction, manipulation or improper use of our or our customers’ data, information systems or networks could materially and adversely affect our financial results, damage the reputation of our products and services and require significant management attention and expense. In addition, our insurance coverage and/or indemnification arrangements that we enter into, if any, may not be adequate to cover all of the costs related to cybersecurity attacks or disruptions resulting from such events.

To date, cyber attacks directed at us have not had a material impact on our financial results. Due to the evolving nature and increased frequency of security threats, however, the impact of any future incident cannot be predicted. The threats we face vary from those common to most industries to more advanced and persistent, highly organized adversaries who target us because we operate in the defense industry and protect national security information. If we are unable to protect sensitive information, our customers or governmental authorities could question the adequacy of our threat mitigation and detection processes and procedures, which could result in us having to spend a significant amount of money to upgrade our networks and systems and could otherwise have a material adverse effect on our business, financial condition, results of operations and cash flows.

In the current environment, there are also numerous and evolving risks to cybersecurity and privacy, including the use of viruses, worms or other malicious software programs and threats involving criminal hackers, state-sponsored intrusions, terrorist attacks, industrial espionage, employee malfeasance, and human or technological error. As these risks develop and these attacks become more frequent and sophisticated, we may find it necessary to make significant further investments to protect data and infrastructure from cyber and other security attacks.

We must also rely on the safeguards put in place by customers, suppliers, vendors, subcontractors, venture partners or other third parties to minimize the impact of cyber threats, other security threats or business disruptions. These third parties may have varying levels of cybersecurity expertise and safeguards and their relationships with government contractors, such as L-3, may increase the likelihood that they are targeted by the same cyber threats we face. In the event of a breach affecting these third parties, our business and financial results could suffer materially. With respect to our commercial arrangements with these third parties, we have processes designed to require that the third parties and their employees and agents agree to maintain certain standards for the storage, protection and transfer of confidential, personal and proprietary information. However, we remain at risk of a data breach due to the intentional or unintentional non-compliance by a third party’s employee or agent, the breakdown of a third party’s data protection processes, which may not be as sophisticated as ours, or a cyber attack on a third party’s information network and systems.

Our sales to certain international customers expose us to risks associated with operating internationally.

For the year ended December 31, 2015, sales to international customers, excluding our international sales made under FMS agreements directly between the U.S. Government and foreign governments, represented approximately 18% of our consolidated sales. Consequently, our businesses are subject to a variety of risks that are specific to international operations, including the following:

• export regulations that could erode profit margins or restrict exports;

• compliance with the U.S. Foreign Corrupt Practices Act and similar non-U.S. regulations;

• the burden and cost of compliance with foreign laws, treaties and technical standards and changes in those regulations;

• contract award and funding delays;

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• potential restrictions on transfers of funds;

• currency fluctuations;

• import and export duties and value added taxes;

• transportation delays and interruptions;

• uncertainties arising from international local business practices and cultural considerations;

• sovereign government credit risk; and

• potential military conflicts and political risks.

Our international contracts may include industrial cooperation agreements requiring specific local purchases, manufacturing agreements or financial support obligations, known as offset obligations, and provide for penalties if we fail to meet such requirements. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Contractual Obligations” for further discussion. While we have and will continue to adopt measures to reduce the potential impact of losses resulting from the risks of our international business, these measures may not be adequate.

If we are unable to attract and retain key management and personnel, we may become unable to operate our business effectively.

Our future success depends to a significant degree upon the continued contributions of our management, and our ability to attract and retain highly qualified management and technical personnel, including employees who have U.S. Government security clearances, particularly clearances of top-secret and above. We do not maintain any key person life insurance policies for members of our management. We face competition for management and technical personnel from other companies and organizations. Failure to attract and retain such personnel would damage our future prospects.

Environmental laws and regulations may subject us to significant liability.

Our operations are subject to various U.S. federal, state and local as well as certain foreign environmental laws and regulations within the countries in which we operate relating to the discharge, storage, treatment, handling, disposal and remediation of certain materials, substances and wastes used in our operations.

New laws and regulations, stricter enforcement of existing laws and regulations, the discovery of previously unknown contamination or the imposition of new clean-up requirements may require us to incur a significant amount of additional costs in the future and could decrease the amount of cash flow available to us for other purposes, including capital expenditures, research and development and other investments and could have a material adverse effect on our business, financial condition, results of operations, cash flows and future prospects.

Our business acquisition strategy involves risks, and we may not successfully implement our strategy.

We opportunistically seek to acquire businesses that enhance our capabilities and add new technologies, products, services, programs, contracts, and customers to our existing businesses. We may not be able to continue to identify acquisition candidates on commercially reasonable terms or at all. If we make additional business acquisitions, we may not realize the benefits anticipated from these acquisitions, including sales growth, cost synergies and improving margins. Furthermore, we may not be able to obtain additional financing for business acquisitions, since such additional financing could be restricted or limited by the terms of our debt agreements or due to unfavorable capital market conditions.

The process of integrating the operations of acquired businesses into our existing operations may result in unforeseen difficulties and may require significant financial and managerial resources that would otherwise be available for the ongoing development or expansion of our existing operations. Possible future business acquisitions could result in the incurrence of additional debt and related interest expense and contingent

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liabilities, each of which could result in an increase to our already significant level of outstanding debt, as well as more restrictive covenants. Furthermore, in certain of our business acquisitions we have assumed all claims against and liabilities of the acquired business, including both asserted and unasserted claims and liabilities.

Our spin-off of Engility could result in substantial tax liability to us and our shareholders.

We received an Internal Revenue Service (IRS) Ruling stating that L-3 and its shareholders would not recognize any taxable income, gain or loss for U.S. federal income tax purposes as a result of the spin-off of Engility in 2012. In addition, we received an opinion of counsel that the spin-off satisfies certain requirements for tax-free treatment that are not covered in the IRS Ruling; however, an opinion of counsel is not binding on the IRS. Accordingly, the IRS or the courts may reach conclusions with respect to the spin-off that are different from the conclusions reached in the opinion of counsel. Moreover, both the IRS Ruling and the opinion of counsel are based on certain factual statements and representations made by us, which, if incomplete or untrue in any material respect, could invalidate the IRS Ruling or opinion of counsel.

If, notwithstanding receipt of the IRS Ruling and opinion of counsel, the spin-off and certain related transactions were determined to be taxable, then we would be subject to a substantial tax liability. In addition, if the spin-off were taxable, each holder of our common stock who received shares of Engility would generally be treated as having received a taxable distribution of property in an amount equal to the fair market value of the shares of Engility received.

Item 1B. Unresolved Staff Comments

None.

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Item 2. Properties

At December 31, 2015, we operated in 263 locations consisting of manufacturing facilities, administration, research and development and other properties throughout the United States and internationally. Of these, we owned 32 locations consisting of approximately 5.2 million square feet and leased space at 231 locations consisting of approximately 9.5 million square feet. Additionally, our Aerospace Systems segment utilized a facility consisting of approximately 3.3 million square feet through a land lease expiring in 2031 with the city of Greenville, Texas.

A summary of square footage by reportable segment as of December 31, 2015 is presented below.

	Leased		Owned		Government- Owned		Total
	(Square feet in millions)
Electronic Systems		5.1		3.0		—		8.1
Aerospace Systems		1.3		1.6		3.3		6.2
Communication Systems		2.9		0.6		—		3.5
Total		9.3		5.2		3.3		17.8

Our reportable segments have major operations at the following locations:

• Electronic Systems — Phoenix and Tempe, Arizona; Anaheim, San Diego, San Leandro and Sylmar, California; Orlando, Sarasota and St. Petersburg, Florida; Northampton and Wilmington, Massachusetts; Grand Rapids and Muskegon, Michigan; Londonderry, New Hampshire; Mount Olive, New Jersey; Albuquerque, New Mexico; Kirkwood, New York; Cincinnati and Mason, Ohio; Tulsa, Oklahoma; Philadelphia and Pittsburgh, Pennsylvania; Arlington, Garland, Grand Prairie and Plano, Texas; Ontario, Canada; Bologna, Italy; Hamilton, New Zealand; and Crawley and Tewkesbury, U.K.

• Aerospace Systems — Huntsville, Alabama; Crestview, Florida; Madison, Mississippi; Greenville, Rockwall and Waco, Texas; and Quebec, Canada.

• Communication Systems — San Carlos, San Diego, Simi Valley and Torrance, California; Ayer, Massachusetts; Camden, New Jersey; Hauppauge, New York; Williamsport, Pennsylvania; and Salt Lake City, Utah.

Additionally, our Corporate staff occupies a total of 0.2 million square feet of office space in New York, New York and Arlington, Virginia. Management believes all of our properties have been well maintained, are in good condition and are adequate and suitable for our business as presently conducted.

Item 3. Legal Proceedings

The information required with respect to this item can be found in Note 18 to our audited consolidated financial statements and is incorporated by reference into this Item 3.

Item 4. Mine Safety Disclosures

None.

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PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

The common stock of L-3 Holdings is traded on the New York Stock Exchange (NYSE) under the symbol “LLL.” On February 19, 2016, the number of holders of L-3 Holdings’ common stock was 26,848. On February 19, 2016 the closing price, as reported by the NYSE, was $117.56 per share.

The table below sets forth the amount of dividends paid per share and the high and low closing price of L-3 Holdings’ common stock as reported on the NYSE during the past two calendar years.

	Dividends Paid				Closing Price (High-Low)
	2015		2014		2015		2014
Common Stock — Dividends Paid and Market Prices
First Quarter	$	0.65	$	0.60		$  132.87 — $  123.06		$  117.70 — $  103.71
Second Quarter		0.65		0.60		126.69 —     113.38		126.76 —     113.38
Third Quarter		0.65		0.60		124.04 —     103.07		122.85 —     101.39
Fourth Quarter		0.65		0.60		128.40 —     101.90		128.34 —     108.11
Year Ended December 31	$	2.60	$	2.40		$  132.87 — $  101.90		$  128.34 — $  101.39

On February 9, 2016, L-3 Holdings announced that its Board of Directors increased L-3 Holdings’ regular quarterly cash dividend by 8% to $0.70 per share, payable on March 15, 2016, to shareholders of record at the close of business on March 1, 2016. L-3 Holdings relies on dividends received from L-3 Communications to generate the funds necessary to pay dividends on L-3 Holdings’ common stock.

Issuer Purchases of Equity Securities

The following table provides information about repurchases of L-3 Holdings’ common stock made in the quarterly period ended December 31, 2015. Repurchases are made from time to time at management’s discretion in accordance with applicable federal securities laws. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares.

Period	Total Number of Shares Purchased		Average Price Paid per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximate Dollar Value) of Shares that May Yet Be Purchased Under the Plan or Program(1)
								(in millions	)
September 26 — October 31, 2015		702,650	$	106.70		702,650	$	865
November 1 — 30, 2015		96,700		123.88		96,700	$	853
December 1 — 31, 2015		397,914		119.54		397,914	$	806
Total		1,197,264	$	112.35		1,197,264

⁽¹⁾  The share repurchases described in the table above were made pursuant to the $1.5 billion share repurchase program authorized by L-3 Holdings’ Board of Directors on December 4, 2014, which authorization expires on June 30, 2017.

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L-3 Holdings repurchased 1,133,885 shares of its common stock at an average price of $114.60 per share for an aggregate amount of approximately $130 million from January 1, 2016 through February 19, 2016.

The graph below compares the cumulative total returns of our common stock with the cumulative total return of the Standard & Poor’s 500 Composite Stock Index and the Standard & Poor’s 1500 Aerospace & Defense Index, for the period from December 31, 2010 to December 31, 2015. These figures assume that all dividends paid over the performance period were reinvested. On July 17, 2012, we completed the Engility spin-off. Our shareholders received one share of Engility common stock for every six shares of our common stock held on the record date (July 16, 2012). The effect of the spin-off is reflected in the cumulative total return as a reinvested dividend for the year ended December 31, 2012. The figures also assume that the starting value of each index and the investment in our common stock was $100 on December 31, 2010.

We are one of the companies included in the Standard & Poor’s 1500 Aerospace & Defense Index and the Standard & Poor’s 500 Composite Stock Index. The starting point for the measurement of our common stock cumulative total return was our closing stock price of $70.49 per share on December 31, 2010. The graph is not, and is not intended to be, indicative of future performance of our common stock.

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Item 6. Selected Financial Data

The selected financial data presented below is derived from our audited consolidated financial statements and has been adjusted to reflect the divestiture of NSS and the spin-off of Engility in 2012 and related classification of their assets, liabilities, results of operations and cash flows as discontinued operations.

	Year Ended December 31,
	2015(1)		2014(2)		2013		2012		2011(3)
	(in millions, except per share data)
Statement of Operations Data:
Net sales	$	10,466	$	10,986	$	11,420	$	11,802	$	11,636
Operating income	$	475	$	1,012	$	1,117	$	1,219	$	1,288
Loss related to business divestitures		31		—		—		—		—
Goodwill impairment charges		384		—		—		—		43
Segment operating income	$	890	$	1,012	$	1,117	$	1,219	$	1,331
Operating margin		4.5%		9.2%		9.8%		10.3%		11.1%
Segment operating margin		8.5%		9.2%		9.8%		10.3%		11.4%
Interest and other, net	$	(153)	$	(140)	$	(137)	$	(166)	$	(233)
Income from continuing operations before income taxes	$	322	$	872	$	980	$	1,053	$	1,055
Provision for income taxes		(25)		(227)		(264)		(333)		(252)
Income from continuing operations		297		645		716		720		803
Income from continuing operations attributable to noncontrolling interests		(15)		(13)		(9)		(6)		(9)
Income from continuing operations attributable to L-3	$	282	$	632	$	707	$	714	$	794
Earnings per share from continuing operations allocable to L-3 Holdings’ common shareholders:
Basic	$	3.49	$	7.40	$	7.91	$	7.41	$	7.59
Diluted	$	3.44	$	7.20	$	7.76	$	7.32	$	7.50
L-3 Holdings’ weighted average common shares outstanding:
Basic		80.7		85.4		89.4		96.3		104.4
Diluted		81.9		87.8		91.1		97.6		105.6
Cash dividends declared per common share	$	2.60	$	2.40	$	2.20	$	2.00	$	1.80

⁽¹⁾  Income from continuing operations for the year ended December 31, 2015 includes: (1) non-cash goodwill impairment charges of $384 million ($264 million after income taxes), or $3.22 per diluted share, including $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, and $46 million related to a business retained by L-3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit during 2015 and (ii) $9 million related to the re-allocation of goodwill, and (2) a pre-tax loss of $31 million ($20 million after income taxes), or $0.25 per diluted share, related to business divestitures.

⁽²⁾  The year ended December 31, 2014 includes a charge of $18 million ($15 million after income taxes, or $0.17 per diluted share) due to a product specifications matter recorded in the Electronic Systems segment.

⁽³⁾  The year ended December 31, 2011 includes: (1) a tax benefit of $78 million, or $0.74 per diluted share, related to a net reversal of amounts previously accrued for tax years for which the statutes of limitations have expired, (2) a non-cash goodwill impairment charge of $43 million ($42 million after income taxes, or $0.40 per diluted share), due to a decline in the estimated fair value of our Marine Services business, and (3) $14 million ($8 million after income taxes, or $0.08 per diluted share), related to an impairment charge for long-lived assets at an equity method investment. The goodwill impairment charge, related to our Marine Services business, is included in consolidated operating income, but excluded from segment operating income because the charge was excluded by management for purposes of assessing segment operating performance.

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	Year Ended December 31,
	2015			2014			2013			2012			2011
							(in millions)
Balance Sheet Data (at year end):
Working capital(1)	$	909		$	1,689		$	1,853		$	1,735		$	2,127
Total assets		12,085			13,715			13,868			13,687			15,387
Long-term debt, including current portion		3,642			3,939			3,630			3,629			4,125
Equity		4,429			5,360			6,056			5,527			6,733
Cash Flow Data:
Net cash from operating activities from continuing operations	$	1,042		$	1,071		$	1,156		$	1,064		$	1,057
Net cash used in investing activities from continuing operations		(192	)		(221	)		(256	)		(198	)		(195	)
Net cash used in financing activities from continuing operations		(1,178	)		(876	)		(849	)		(1,527	)		(1,119	)

⁽¹⁾  Based on continuing operations and excludes net assets held for sale.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview and Outlook

L-3’s Business

L-3 is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment and security and detection systems. L-3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. Our customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

On December 8, 2015, we entered into a definitive agreement to sell our National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS, which provides cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments, has historically been reported as a reportable segment. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to L-3’s continuing operations, unless specifically noted.

We have the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Financial information for our segments is included in Note 21 to our audited consolidated financial statements. Electronic Systems provides a broad range of components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical airborne, space, ground and sea-based communication systems.

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We generated sales of $10,466 million and $10,986 million for the years ended December 31, 2015 and 2014, respectively, and our primary customer was the DoD. The table below presents a summary of our sales by end customer and the percent contributed by each to our total sales.

	2015				2014
	Sales		% of         Total Sales		Sales		% of Total Sales
	(in millions)				(in millions)
Air Force	$	3,166		30%	$	3,075		28%
Army		1,715		17		1,897		17
Navy/Marines		1,447		14		1,524		14
Other Defense		645		6		648		6
Total DoD	$	6,973		67%	$	7,144		65%
Other U.S. Government		318		3		320		3
Total U.S. Government	$	7,291		70%	$	7,464		68%
International (foreign governments)		1,799		17		1,866		17
Commercial — international		759		7		1,069		10
Commercial — domestic		617		6		587		5
Total sales	$	10,466		100%	$	10,986		100%

Most of our contracts (revenue arrangements) with the U.S. Government are subject to U.S. Defense Contract Audit Agency audits and various cost and pricing regulations, and include standard provisions for termination for the convenience of the U.S. Government. Multiyear U.S. Government contracts and related orders are subject to cancellation if funds for contract performance for any subsequent year become unavailable. Foreign government contracts generally include comparable provisions relating to termination for the convenience of the relevant foreign government.

Business Environment

U.S. Government Markets. Sales to U.S. Government customers represented 70% of our 2015 sales, and were primarily to DoD customers, which comprised 67% of our sales. Therefore, our annual sales are generally highly correlated to changes in U.S. Government spending levels, especially DoD budget levels.

The DoD budget peaked in the fiscal year ended September 30, 2010 (FY 2010) at $690 billion and declined through FY 2015. The total budget for FY 2015 was $560 billion, a decline of 4% as compared to the FY 2014 budget due to a decrease in the Overseas Contingency Operations (OCO) budget. The FY 2015 base budget remained substantially unchanged from FY 2014 at $497 billion while the OCO budget decreased by $22 million. The total DoD budget for FY 2016 is $581 billion, an increase of 4% compared to FY 2015. The increase is due to a higher base budget of $25 billion. The FY 2016 DoD OCO budget declined slightly to $59 billion compared to $63 billion for FY 2015.

On November 2, 2015, the President signed the Bipartisan Budget Act of 2015 (BBA), a bipartisan two-year budget and debt ceiling agreement that provides a level of stability in the U.S. Government budget process over the next two years. The BBA suspends the debt ceiling through March 15, 2017 and raises spending caps previously enacted by Congress under the Budget Control Act of 2011, as amended by The American Taxpayer Relief Act and Bipartisan Budget Act of 2013 (BCA). The spending caps on defense programs were raised by $25 billion to $548 billion for FY 2016 and by $15 billion to $551 billion for FY 2017. The BBA also sets a target for OCO funding for the DoD at $59 billion for each of FY 2016 and FY 2017, subject to the Congressional appropriation process. The BBA, however, does not change the BCA budget sequestration cuts after FY 2017.

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On February 9, 2016, the Administration submitted its FY 2017 DoD Proposed Budget Request (PBR). The total FY 2017 DoD budget request is $583 billion ($524 million base budget, $59 million OCO), which is substantially unchanged compared to the appropriated FY 2016 DoD budget. The FY 2017 PBR complies with the BBA. The table below presents the FY 2011 through FY 2016 enacted budgets and the President’s DoD budget projections for FY 2017 to FY 2021, as provided in the FY 2017 PBR.

	DoD Budget						Annual Total Budget Change(1)
Fiscal Year (Ending September 30)	Base		OCO		Total
	(in billions)
2011	$	528	$	159	$	687		0%
2012	$	530	$	115	$	645		-6%
2013	$	496	$	82	$	578		-10%
2014	$	496	$	85	$	581		+1%
2015	$	497	$	63	$	560		-4%
2016	$	522	$	59	$	581		+4%
2017	$	524	$	59	$	583		0%
2018	$	557		(2)				+6%
2019	$	565		(2)				+1%
2020	$	570		(2)				+1%
2021	$	585		(2)				+3%

Source: United States Department of Defense fiscal year 2017 budget request.

⁽¹⁾  The annual budget change for FY 2018 to FY 2021 are calculated on only the base budgets. The base budget cumulative average growth rate over the five year period from FY 2016 to FY 2021 is approximately 2%.

⁽²⁾  The FY 2017 PBR did not include a budget amount for OCO appropriations after FY 2017, which will be addressed by the next President’s administration.

While the BBA provides a level of stability, future DoD budgets and spending levels are determined by a number of factors beyond our control, including changes to U.S. procurement policies, current and future domestic and international budget conditions, presidential administration priorities and changing national security and defense requirements. Furthermore, while members of Congress and the Administration continue to discuss various options to address the U.S. Government’s overall fiscal challenges, we cannot predict the outcome of these efforts. We believe that L-3 will benefit from several of the DoD’s focus areas such as ISR, unmanned systems, undersea warfare, precision strike, secure communications, missile defense and space programs, electronic warfare, aircraft readiness and the ability to project power in denied environments. Uncertainties continue to exist regarding how sequestration cuts, which are scheduled to resume in FY 2018, will be implemented in DoD budgets and how they will affect L-3’s DoD business. For more information on the risks and uncertainties related to our U.S. Government contracts, see “Part I — Item 1A — Risk Factors” in this Annual Report on Form 10-K.

International and Commercial Markets

Sales to end customers other than the U.S. Government represented 30% of our 2015 sales, including 2% of our consolidated sales related to Marine Systems International (MSI), which we divested on May 29, 2015. We expect sales to international and commercial customers to represent 29% of our consolidated 2016 sales. These sales are generally affected by international government security and military priorities, as well as the fiscal situations of our international government end customers, global economic conditions for our commercial end markets and our competitive success in winning new business and increasing market share.

Key Performance Measures

The primary financial performance measures that we use to manage our businesses and monitor results of operations are (i) sales, (ii) operating income, and (iii) net cash from operating activities (“Operating Cash Flow”). Management believes that these financial performance measures are the primary growth drivers for our earnings per share and cash flow per common share. Generally, in evaluating our businesses and contract performance, we focus on net sales, operating income, operating margin, which we define as operating income as a percentage of sales, and Operating Cash Flow, and not the type or amount of operating costs.

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One of our primary business objectives is to increase sales organically and through select business acquisitions. We define organic sales growth as the increase or decrease in sales for the current period compared to the prior period, excluding sales in the: (1) current period from business acquisitions that are included in our actual results of operations for less than twelve months, and (2) prior period from business divestitures that are included in our actual results of operations for the twelve-month period prior to the divestiture date. We expect to supplement, strengthen and enhance our existing businesses by selectively acquiring businesses that: (1) add important new technologies and products, (2) provide access to select customers, programs and contracts and (3) provide attractive returns on investment. Another important financial performance measure that we use is operating margin, because sales growth combined with operating margin levels determine our operating income levels. Operating Cash Flow is also an important financial performance measure because Operating Cash Flow measures our ability to convert operating income into cash after paying income taxes and interest expenses and investing in working capital.

Sales Trends. For the year ended December 31, 2015, consolidated net sales of $10,466 million declined by 5%, compared to the year ended December 31, 2014, due to a decrease in organic sales of $269 million, or 2.4%, and a decrease of $354 million, or 3.2%, related to business divestitures. These decreases were partially offset by net sales from business acquisitions of $103 million, or 0.9%. Our average annual sales declined for the five years ended December 31, 2015 by 2% as average annual organic sales declined by approximately 3% and average annual sales growth from business acquisitions, net of divestitures, was approximately 1%. See “Results of Operations,” including segment results below for a further discussion of sales.

For the years ended December 31, 2015, 2014 and 2013, our largest contract (revenue arrangement) in terms of annual sales was the Fort Rucker Maintenance Support contract with the U.S. Army Aviation and Missile Life Cycle Management Command (AMCOM), which is included in our Aerospace Systems segment. Under this contract, which generated approximately 4% of our 2015, 2014 and 2013 sales, we provide maintenance, logistics and other related sustainment support services for rotary wing aircraft assigned to Fort Rucker and satellite units in Alabama. Our period of performance, including unexercised annual options, continues through September 30, 2017.

We derived approximately 67% of our 2015 sales from DoD customers and, as a result, our sales are highly correlated to DoD budget levels. DoD budgets are a function of several factors and uncertainties beyond our control, including, but not limited to, changes in U.S. procurement policies, budget considerations, current and future economic conditions, presidential administration priorities, U.S. military engagements, changing national security and defense requirements, geo-political developments, actual fiscal year congressional appropriations for defense budgets, and sequestration and other DoD budget reductions. Any of these factors could result in a significant increase, decrease or redirection of DoD budgets and impact L-3’s future results of operations, including our sales and operating income growth rates. Additionally, L-3’s future results of operations will be affected by our ability to retain our existing business, including our revenue arrangements with DoD customers, and to successfully re-compete for existing business and compete for new business, which largely depends on: (1) our successful performance on existing contracts, (2) the effectiveness and innovation of our technologies and research and development activities, (3) our ability to offer better program performance than our competitors at an affordable cost, and (4) our ability to retain our employees and hire new ones, particularly those employees who have U.S. Government security clearances. We expect our 2016 consolidated sales to decline by approximately 4% compared to 2015, including an organic sales decline of 2.5%. We expect organic international sales to decline by approximately 14% due to the completion of certain contracts with foreign governments, and organic sales to the DoD and U.S. Government to decline by approximately 2% due to the final phase of the U.S. military drawdown from Afghanistan. We expect organic commercial sales to increase by approximately 8% primarily for commercial aviation products. See “Other Events” for information related to the MSI divestiture, which contributed approximately 2% of our consolidated sales in 2015.

Operating Income Trends. For the year ended December 31, 2015, our consolidated operating income was $475 million and our consolidated operating margin was 4.5%. Our consolidated operating income and consolidated operating margin for the year ended December 31, 2015 were reduced by goodwill impairment

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charges of $384 million and a loss of $31 million related to business divestitures, each of which are further discussed below. The goodwill impairment charges and losses related to business divestitures are excluded from segment operating income, because they are excluded by management for purposes of assessing segment operating performance. Our segment operating income was $890 million for the year ended December 31, 2015, a decrease of 12% from $1,012 million for the year ended December 31, 2014, and our segment operating income as a percentage of sales (segment operating margin) was 8.5% for the year ended December 31, 2015, a decrease of 70 basis points from 9.2% for the year ended December 31, 2014. See “Results of Operations”, including segment results below for a further discussion of operating margin.

Results for the year ended December 31, 2015 were impacted by contract cost growth charges of $101 million at the Platform Integration division in the Aerospace Systems segment on the international head-of-state aircraft modification contracts. The losses on international head-of-state contracts resulted from higher estimated engineering, production and support labor, and material costs. The increased costs are primarily driven by additional delays in aircraft delivery caused by rework identified during the year as a result of internal program reviews, customer inspections, functional check flights and internal design reviews. During the year actions were taken to: (i) provide increased program management resources, (ii) improve engineering practices, (iii) in-source certain work previously expected to be performed by subcontractors to reduce future rework and help us manage to the updated schedule, (iv) improve assembly processes and (v) improve quality assurance processes.

Our effective management of labor, material, subcontractor and other direct costs is an important element of cost control and favorable contract performance. We believe that proactively re-sizing our businesses to their anticipated sales, combined with continuous cost improvement will enable us to increase our cost competitiveness. While we continue to undertake cost management actions, such as reducing our indirect costs, resizing select business units, and improving our productivity and contract performance in an effort to maintain or even increase operating margin, these efforts may not be successful and may be partially or fully offset by other cost increases. Although we expect our 2016 annual consolidated and segment operating margin to increase as compared to 2015, changes in the competitive environment and DoD procurement practices, lower consolidated sales and changes in annual pension expense, including related assumptions such as the benefit obligation discount rates, among other factors, could result in lower operating margin. Furthermore, select business acquisitions and new business, including contract renewals and new contracts, could have lower future operating margins compared to L-3’s operating margins on existing contracts, and could reduce future consolidated and segment operating margins.

Operating Cash Flow Trends. For the year ended December 31, 2015, Operating Cash Flow was $1,042 million, a decline of 3%, compared to the year ended December 31, 2014. The decrease is primarily due to lower operating income, partially offset by less cash used for working capital, primarily trade accounts payable and accrued expenses.

Other Events

Discontinued Operations. On December 8, 2015, we entered into a definitive agreement to sell our NSS business to CACI International Inc. The transaction was completed on February 1, 2016 for a preliminary sale price of $561 million, subject to finalization based on customary adjustments for closing date net working capital.

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The table below presents statement of operations data for NSS, which has been classified as discontinued operations and includes allocated interest expense for debt not directly attributable or related to L-3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L-3 consolidated net assets and (2) L-3 consolidated total debt. See Note 3 to the audited consolidated financial statements for additional information.

	Year Ended December 31,
	2015			2014			2013
	(in millions)
Product and service revenues	$	1,088		$	1,138		$	1,202
Operating (loss) income from discontinued operations(1)		(523	)		73			95
Interest expense allocated to discontinued operations		(20	)		(20	)		(20)
(Loss) income from discontinued operations before income taxes(1)	$	(543	)	$	53		$	75
Income tax benefit (expense)		21			(21	)		(31)
(Loss) income from discontinued operations, net of income taxes(1)	$	(522	)	$	32		$	44

⁽¹⁾  The year ended December 31, 2015, includes a goodwill impairment charge of $571 million ($537 million after income taxes).

Goodwill Impairment Charges and Loss Related to Business Divestitures. Our 2015 results from continuing operations were impacted by the items discussed below, which decreased consolidated operating income by $415 million, net income from continuing operations attributable to L-3 by $284 million and diluted earnings per share from continuing operations by $3.47:

• Non-cash goodwill impairment charges of $384 million ($264 million after income taxes), or $3.22 per diluted share, including: (i) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit as a result of a decline in its projected future cash flows, and (ii) $46 million related to a business retained by L-3 in connection with the sale of the NSS business, comprised of $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit during 2015, and $9 million relating to the re-allocation of goodwill; and

• A pre-tax loss of $31 million ($20 million after income taxes) or $0.25 per diluted share, related to business divestitures.

Our 2015 results from discontinued operations were impacted by goodwill impairment charges of $571 million ($537 million after income taxes), or $6.56 per diluted share, relating to the NSS business. During the third quarter of 2015, a decline in the projected future cash flows of NSS indicated that the carrying amount of the goodwill for the NSS business may not be recoverable. Accordingly, we performed an impairment test for the NSS business, determined that the implied goodwill was lower than the carrying amount, and recorded a non-cash impairment charge of $491 million, of which $456 million is included in discontinued operations, for the resulting impairment of goodwill. In connection with L-3’s annual goodwill impairment test, we determined that the implied goodwill of NSS was lower than the carrying amount and recorded an additional non-cash impairment charge of $117 million, of which $115 million is included in discontinued operations, for the impairment of goodwill of the NSS reporting unit.

In summary, we recorded total impairment charges relating to the NSS business aggregating $608 million during the year ended December 31, 2015, including $117 million during the fourth quarter of 2015 and $491 million during the third quarter of 2015. The NSS goodwill impairment charges were allocated between income from continuing operations and income from discontinued operations based on the relative fair values of the NSS business retained by L-3, and the NSS business sold at each goodwill impairment test date. This resulted in $37 million classified in income from continuing operations and the remaining $571 million classified in income from discontinued operations.

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Debt Repurchases, Issuances and Redemptions. On December 7, 2015, L-3 Communications commenced a cash tender offer for up to $300 million aggregate principal amount of its 3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 with an early tender date of December 18, 2015. On December 18, 2015, L-3 determined and announced the pricing terms of this cash tender offer, including total consideration of $986.57 per $1,000 principal amount of 3.95% Notes due 2024. On December 22, 2015, $300 million of 3.95% Notes due 2024, accepted by L-3 in connection with the early tender date, were settled for $296 million in cash, plus accrued and unpaid interest, up to but not including the repurchase date. In connection with the repurchase of the $300 million of 3.95% Notes due 2024, we recorded a debt retirement charge of approximately $1 million.

On May 28, 2014, L-3 Communications issued $350 million in principal amount of 1.50% Senior Notes that mature on May 28, 2017 (2017 Senior Notes) and $650 million in principal amount of 3.95% Senior Notes that mature on May 28, 2024 (2024 Senior Notes). The 2017 Senior Notes and 2024 Senior Notes (together referred to as the “Senior Notes”) were issued at a bond discount of $1 million and $3 million, respectively. The net cash proceeds of $988 million from this Senior Notes offering were used primarily to fund the retirement of our 3% Convertible Contingent Debt Securities (CODES) as discussed below. The remaining net proceeds were used for general corporate purposes.

On May 13, 2014, L-3 Holdings called for the redemption of all of its outstanding CODES effective on June 2, 2014. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L-3 Holdings settled the entire conversion value with respect to converted CODES in cash. As of June 20, 2014, the CODES have been retired. As a result of the conversion, we recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability.

Business Acquisitions and Divestitures

As discussed above, one aspect of our strategy is to selectively acquire businesses that add new products and technologies, or provide access to select customers, programs and contracts. We intend to continue acquiring select businesses for reasonable valuations that will provide attractive returns to L-3. Our business acquisitions, depending on their contract-type, sales mix or other factors, could reduce L-3’s consolidated operating margin while still increasing L-3’s operating income, earnings per share, and net cash from operating activities. In addition, we may also dispose of certain businesses if we determine that they no longer fit into L-3’s overall business strategy and we are able to receive an attractive price.

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Acquisitions. The table below summarizes the acquisitions that we have completed during the years ended December 31, 2013, 2014, and 2015 referred to herein as business acquisitions. See Note 3 to our audited consolidated financial statements for further information regarding our business acquisitions. During the year ended December 31, 2015, we used net cash of $320 million for business acquisitions.

Business Acquisitions	Date Acquired		Segment		Purchase Price(1)
					(in millions)
2013
Mustang Technology Group, L.P. (Mustang)		December 19, 2013		Electronic Systems	$	54
Total 2013					$	54
2014
Data Tactics Corporation (L-3 Data Tactics)		March 4, 2014		Discontinued Operations	$	57
Total 2014					$	57
2015
MITEQ, Inc.		January 21, 2015		Communication Systems	$	41
CTC Aviation Group (L-3 CTC)		May 27, 2015		Electronic Systems		236
ForceX, Inc. (L-3 ForceX)		October 13, 2015		Electronic Systems		61
Total 2015					$	338

⁽¹⁾  The purchase price represents the contractual consideration for the acquired business, excluding adjustments for net cash acquired and acquisition transaction costs.

All of our business acquisitions are included in our consolidated results of operations from their dates of acquisition. We regularly evaluate potential business acquisitions. On January 22, 2016, we acquired the assets of Advanced Technical Materials, Inc. (ATM) for a purchase price of $27 million (subject to customary adjustments), which was financed with cash on hand. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components.

Business Divestitures. We regularly evaluate potential business divestitures. During the year ended December 31, 2015, we completed the sales of MSI, Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments we recorded related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received and net sales included in continuing operations related to our business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture		Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17)	$	318	$	185
BSI divestiture		(4)		26		7
Tinsley Product Line divestiture		(8)		4		9
Klein divestiture		(2)		10		8
Total	$	(31)	$	358	$	209

MSI Divestiture. On May 29, 2015, we completed the sale of our MSI business to Wärtsilä Corporation for a preliminary sale price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sale price is subject to finalization based on customary adjustments for closing date net working capital. MSI was a sector within our Electronic Systems segment, primarily selling to the commercial shipbuilding industry. In accordance

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with ASU 2014-08, MSI’s assets and liabilities are classified as held for sale in our audited consolidated balance sheet at December 31, 2014 and MSI’s results of operations are included in income from continuing operations for all periods presented. See Note 3 to our audited consolidated financial statements for the major assets and liabilities included in held for sale relating to MSI at December 31, 2014. During the year ended December 31, 2015, we recorded a pre-tax loss of $17 million ($6 million after income taxes, or $0.07 per diluted share) related to the divestiture of MSI. The loss is comprised of: (1) $17 million for a non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI, each of which is discussed below.

The accounting standards for long-lived assets to be disposed of by sale require us to measure assets and liabilities of a disposal group, classified as held for sale, at the lower of its carrying amount or fair value less costs to sell, at the end of each reporting period. As a result of the decline in the estimated U.S. dollar equivalent divestiture proceeds due to the weakening of the Euro against the U.S. dollar, the carrying value of the MSI disposal group exceeded its fair value at March 27, 2015. Accordingly, a pre-tax non-cash impairment charge of $17 million ($12 million after income taxes, or $0.15 per diluted share) was recorded during the quarterly period ended March 27, 2015.

In March 2015, we entered into a forward contract to sell €285 million of the proceeds obtained from the divestiture of MSI at a rate of $1.0782. We accounted for this contract as an economic hedge and recorded a mark to market adjustment to earnings based on the fair value of the forward contract at March 27, 2015. Accordingly, we recorded an unrealized pre-tax loss of $5 million ($3 million after income taxes, or $0.03 per diluted share) during the quarterly period ended March 27, 2015. On May 29, 2015, upon settlement of the contract, we realized $4 million of the $5 million previously recorded pre-tax loss and recorded a $1 million pre-tax gain ($1 million after income taxes, or $0.01 per diluted share) in the quarterly period ended June 26, 2015.

During the quarterly period ended June 26, 2015, we realized a pre-tax gain of $4 million ($8 million after income tax benefits, or $0.10 per diluted share), based on the proceeds received on the date of sale.

BSI Divestiture. On April 24, 2015, we divested our BSI business for a sale price of $26 million. BSI is a provider of wireless technology and communications systems services for use in the field of sports television broadcasting, and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $4 million ($6 million after income taxes, or $0.08 per diluted share) during the year ended December 31, 2015. In accordance with ASU 2014-08, BSI’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Tinsley Product Line Divestiture. On July 27, 2015, we divested our Tinsley Product Line for a sale price of $4 million. Tinsley is a provider of optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes, or $0.08 per diluted share) during the 2015 Third Quarter. In accordance with ASU 2014-08, Tinsley’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Klein Divestiture. On December 31, 2015, we divested our Klein business for a sale price of $10 million. Klein is a provider of side scan sonar equipment and waterside security and surveillance systems, and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes, or $0.02 per diluted share) during the quarterly period ended December 31, 2015. In accordance with ASU 2014-08, Klein’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

NSS Divestiture. On December 8, 2015, we entered into a definitive agreement to sell our NSS business to CACI International Inc. See “Other Events – Discontinued Operations” above for further discussion of the divestiture and impact on our audited consolidated financial statements.

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Critical Accounting Policies

Our significant accounting policies are described in Note 2 to our audited consolidated financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and cost of sales during the reporting period. The most significant of these estimates and assumptions relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapon sights products, and the recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the period during which they become known. Actual amounts will differ from these estimates and could differ materially. We believe that our critical accounting estimates have the following attributes: (1) we are required to make assumptions about matters that are uncertain and require judgment at the time of the estimate, (2) use of reasonably different assumptions could have changed our estimates, particularly with respect to estimates of contract revenues and costs, and recoverability of assets, and (3) changes in the estimate could have a material effect on our financial condition or results of operations. We believe the following critical accounting policies contain the more significant judgments and estimates used in the preparation of our financial statements.

Contract Revenue Recognition and Contract Estimates. Approximately 49% of our consolidated net sales are generated from contracts (revenue arrangements) that require us to design, develop, manufacture, modify, upgrade, test and integrate complex aerospace and electronic equipment, and to provide related engineering and technical services according to the buyer’s specifications. These revenue arrangements or contracts are generally fixed-price, cost-plus, or time-and-material type and are covered by accounting standards for construction-type and production-type contracts and federal government contractors. Substantially all of our cost-plus type and time-and-material type contracts are with the U.S. Government, primarily the DoD. Certain of our contracts with the U.S. Government are multi-year contracts that are funded annually by the customer, and sales on these multi-year contracts are based on amounts appropriated (funded) by the U.S. Government. Our remaining sales are accounted for in accordance with accounting standards for revenue arrangements with commercial customers.

Sales and profits on fixed-price type contracts that are covered by accounting standards for construction-type and production-type contracts and federal government contractors are substantially recognized using percentage-of-completion (POC) methods of accounting. Sales on such contracts represent approximately 41% of our consolidated net sales. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to total estimated costs at completion of the contract multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year.

Accounting for the sales on these fixed-price contracts requires the preparation of estimates of: (1) total contract revenue, (2) total costs at completion, which is equal to the sum of the actual incurred costs to date on the contract and the estimated costs to complete the contract’s statement of work, and (3) measurement of progress towards completion. The estimated profit or loss at completion on a contract is equal to the difference between the total estimated contract revenue and the total estimated cost at completion. Under the units-of-delivery method, sales on a fixed-price type contract are recorded as the units are delivered during the period based on their contractual selling prices. Under the cost-to-cost method, sales on a fixed-price type contract are

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recorded at amounts equal to the ratio of actual cumulative costs incurred divided by total estimated costs at completion, multiplied by (i) the total estimated contract revenue, less (ii) the cumulative sales recognized in prior periods. The profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to (i) the current estimated total profit margin multiplied by the cumulative sales recognized, less (ii) the amount of cumulative profit previously recorded for the contract. In the case of a contract for which the total estimated costs exceed the total estimated revenues, a loss arises, and a provision for the entire loss is recorded in the period that the loss becomes evident. The unrecoverable costs on a loss contract that are expected to be incurred in future periods are recorded as a component of other current liabilities entitled “Estimated cost in excess of estimated contract value to complete contracts in process in a loss position.”

Adjustments to estimates for a contract’s revenue, estimated costs at completion and estimated profit or loss are often required as work progresses under a contract, as experience is gained and more information is obtained, even though the scope of work required under the contract may not change, or if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to percentage-of-completion accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. Amounts representing contract change orders or claims are included in sales only when they can be reliably estimated and their realization is reasonably assured. The revisions in contract estimates, if significant, can materially affect our results of operations and cash flows, as well as reduce the valuations of receivables and inventories, and, in some cases, result in liabilities to complete contracts in a loss position. Aggregate net changes in contract estimates amounted to increases of $49 million, or 10% of consolidated operating income (6% of segment operating income) for the year ended December 31, 2015, increases of $72 million, or 7% of consolidated operating income for the year ended December 31, 2014, and $106 million, or 9% of consolidated operating income for the year ended December 31, 2013.

Sales and profits on cost-plus type contracts that are covered by accounting standards for government contractors are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. Sales on such contracts represent approximately 8% of our consolidated net sales. The estimated profit on a cost-plus contract is fixed or variable based on the contractual fee arrangement. Incentive and award fees are our primary variable fee contractual arrangement. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and recorded to sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and we are able to make reasonably dependable estimates for them. Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of material and other direct non-labor costs. On a time-and-material type contract, the fixed hourly rates include amounts for the cost of direct labor, indirect contract costs and profit. Cost-plus type or time-and-material type contracts generally contain less estimation risks than fixed-price type contracts.

Sales on arrangements for (1) fixed-price type contracts that require us to perform services that are not related to production of tangible assets (Fixed-Price Service Contracts), and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for our businesses whose customers are primarily commercial business enterprises are substantially generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts within the scope of revenue recognition accounting standards for revenue arrangements with commercial customers are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

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For contracts with multiple deliverables, we apply the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case we apply the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. We recognize revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until the contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Goodwill and Identifiable Intangible Assets. In accordance with the accounting standards for business combinations, we record the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). Identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, we do not recognize separate intangible assets for the assembled workforces of our business acquisitions.

Generally, the largest separately identifiable intangible asset from the businesses that we acquire is the value of their assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of our businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of our employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of our businesses, our ability to attract and retain employees who have U.S. Government security clearances, particularly those with top-secret and above clearances, is critical to our success, and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for our acquired businesses. Furthermore, our U.S. Government contracts (revenue arrangements) generally permit other companies to use our patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill, the substantial majority of the intangible assets for our acquired business acquisitions are recognized as goodwill. Additionally, the value assigned to goodwill for our business acquisitions also includes the value that we expect to realize from cost reduction measures that we implement for our acquired businesses. Goodwill equals the amount of the purchase price of the business acquired in excess of the sum of the fair value of identifiable acquired assets, both tangible and intangible, less the fair value of liabilities assumed. At December 31, 2015, we had goodwill of $6,281 million and identifiable intangible assets of $199 million.

The most significant identifiable intangible asset that is separately recognized in accordance with U.S. GAAP for our business acquisitions is customer contractual relationships. All of our customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows from working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory asset charge, all of which is discounted to present value. All identifiable intangible assets are amortized over their estimated useful lives as the economic benefits are consumed. We review customer contractual relationships for impairment whenever events or changes in circumstances indicate that the carrying amount may not be recoverable in accordance with the accounting standards for long-lived assets. If any

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such event or change in circumstances occurs, and, if our revised estimates of future after-tax cash flows are significantly lower than our estimates at the date we acquired the customer contractual relationships, we may be required to record an impairment charge to write-down these intangible assets to their realizable values. We also review and update our estimates of the duration of our customer contractual relationships, at least annually. If such estimates indicate that the duration of our customer contractual relationships has decreased compared to the estimates made as of the date we acquired these intangible assets, then we accelerate the amortization period for our customer contractual relationships over their remaining useful lives.

We review goodwill for impairment annually as of November 30 and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors, such as macroeconomic conditions, industry and market conditions and entity relevant events or circumstances to determine whether it is more likely or not that the fair value of a reporting unit is less than its carrying amount. L-3 did not utilize a qualitative assessment approach for the November 30, 2015 goodwill impairment test, as we chose instead to complete the quantitative two-step testing process for each reporting unit.

A reporting unit is an operating segment, as defined by the segment reporting accounting standards, or a component of an operating segment. A component of an operating segment is a reporting unit if the component constitutes a business for which discrete financial information is available and is reviewed by operating segment management. Two or more components of an operating segment may be aggregated and deemed a single reporting unit for goodwill impairment testing purposes if the components have similar economic characteristics.

L-3 had 10 reporting units at December 31, 2015 (and 11 reporting units at November 30, 2015 when our annual goodwill impairment assessment was completed) compared to 12 reporting units at December 31, 2014. The reduction in the number of our reporting units was due to the divesture of the MSI reporting unit, and the reclassification of the NSS reporting unit into discontinued operations due to the sale of NSS. The Aviation Products and Security & Detection Systems reporting units were consolidated, and the Advanced Programs reporting unit was separated from the Sensor Systems reporting unit. The reporting units that were consolidated had fair values in excess of their carrying values at the time of the realignments and the related goodwill for each was reassigned to the current reporting unit.

L-3’s aggregate balance of goodwill from continuing operations decreased by $231 million to $6,281 million at December 31, 2015 from $6,512 million at December 31, 2014 due to goodwill impairment charges of $384 million, $99 million for foreign currency translation adjustments and $20 million related to business dispositions, partially offset by an increase of $244 million for business acquisitions and $28 million for reclassifications from discontinued operations related to the business retained from the NSS divestiture. L-3’s aggregate balance of goodwill from discontinued operations decreased by $599 million to $390 million at December 31, 2015 from $989 million at December 31, 2014 due to $571 million of goodwill impairment charges and $28 million for reclassifications to continuing operations related to the business retained from the NSS divestiture. The table below presents the number of reporting units and the associated goodwill at December 31, 2015 for each of our reportable segments.

Reportable Segment	Number of     Reporting Units		Aggregate  Goodwill
			(in millions)
Electronic Systems		6	$	3,925
Aerospace Systems		2		1,353
Communication Systems		2		1,003
Total from continuing operations		10	$	6,281
Total from discontinued operations		1	$	390

The first step in the process of testing goodwill for potential impairment is to compare the carrying value of the reporting unit to its fair value. If a potential impairment is identified, the second step is to measure the

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impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. Our methodology for determining the fair value of a reporting unit is estimated using a discounted cash flow (DCF) valuation approach, and is dependent on estimates for future sales, operating income, depreciation and amortization, income tax payments, working capital changes, and capital expenditures, as well as expected long-term growth rates for cash flows. All of these factors are affected by economic conditions related to the industries in which we operate (predominantly the U.S. defense industry), as well as, conditions in the U.S. capital markets.

We recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Logistics Solutions business as a result of the decline in their projected future cash flows. The adjustments we recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations, and are summarized and further discussed below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L-3 Consolidated
			(in millions)
Logistics Solutions reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Based on our annual impairment test as of November 30, 2015, we recorded non-cash impairment charges of $455 million for the impairment of goodwill during the fourth quarter of 2015. The goodwill impairment charges were comprised of: (1) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, which is part of the Aerospace Systems segment, as a result of a decline in its projected future cash flows and (2) $117 million, of which $115 million is included in discontinued operations, related to a decline in the estimated fair value of the NSS reporting unit based on the purchase price indicated in the definitive agreement entered into on December 8, 2015 to sell the NSS business. The decline in projected future cash flows for Logistics Solutions was caused by projected future year lower sales volumes and operating margins. Logistics Solutions did not achieve its 2015 annual plan for orders due to an inability to win new business, in part due to delays of certain contract competitions, as well as certain contract recompetition losses. Additionally, Logistics Solutions did not achieve its 2015 annual plan for sales and operating income primarily due to reduced flight hours and competitive pricing pressures on logistics and maintenance contracts. We determined, during the preparation of our 2016 financial plan and three year forecast (2016-2018), that these factors will continue to affect the future sales and operating income performance of the Logistics Solutions reporting unit.

In connection with the sale of the NSS business, we recorded a non-cash impairment charge of $9 million during the fourth quarter of 2015 related to the re-allocation of goodwill to a business retained by L-3.

During the third quarter of 2015, a decline in the projected future cash flows of NSS indicated that the carrying amount of the goodwill for the NSS business may not be recoverable. Accordingly, we performed an impairment test for the NSS business, determined that the implied goodwill was lower than the carrying amount, and recorded a non-cash impairment charge of $491 million, of which $456 million is included in discontinued operations, for the impairment of goodwill. The goodwill impairment charge was due to a decline in the estimated fair value of the NSS business as a result of a decline in the projected future cash flows of NSS caused by NSS’s inability to achieve its planned 2015 orders, sales and operating income, primarily due to lower than expected new commercial and international business awards, and a reduced outlook for operating margin and international sales.

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The more significant assumptions used in our DCF valuations to determine the fair values of our reporting units in connection with the goodwill valuation assessment at November 30, 2015 were: (1) detailed three-year cash flow projections for each of our reporting units, (2) the expected long-term cash flow growth rates for each of our reporting units (commonly known as Terminal Growth Rates), which approximate the expected long-term nominal growth rate for the U.S. DoD budget, the U.S. economy and the respective industries in which the reporting units operate, expected inflation rates, and specific circumstances for each reporting unit, including contracts or programs ending and expected new business, and (3) risk adjusted discount rates, which represent the weighted average cost of capital (WACC) for each reporting unit and include the estimated risk-free rate of return that is used to discount future cash flow projections to their present values. There were no changes to the underlying methods used in 2015 as compared to the prior year DCF valuations of our reporting units.

Each reporting unit WACC was comprised of: (1) an estimated required rate of return on equity, based on publicly traded companies with business and economic risk characteristics comparable to each of L-3’s reporting units (Market Participants), including a risk free rate of return of 2.63% on the 20 year U.S. Treasury Bond as of November 30, 2015 (2.62% as of November 30, 2014) and an equity risk premium of 6% (unchanged compared to November 30, 2014), and (2) an after-tax rate of return on Market Participants’ debt, which was derived from a selected Corporate bond index having a Baa debt rating, consistent with the credit rating of the Market Participants. Each of the estimated required rate of return on equity and the after-tax rate of return on Market Participants’ debt is weighted by the relative market value percentages of the Market Participants’ equity and debt. The WACC assumptions for each reporting unit are based on a number of market inputs that are outside of our control and are updated annually to reflect changes to such market inputs as of the date of our annual goodwill impairment assessments, including changes to: (1) the estimated required rate of return on equity based on historical returns on common stock securities of Market Participants and the Standard & Poor’s 500 Index over the prior five-year period, (2) the risk free rate of return based on the prevailing market yield on the 20 year U.S. Treasury Bond, (3) the rate of return on Corporate bonds having a debt rating consistent with the credit rating of the Market Participants, and (4) the relative market value percentages of Market Participants’ equity and debt.

The table below presents the weighted average risk adjusted discount rate assumptions in WACC, used in our DCF valuation for each of our reportable segments for our goodwill impairment assessments at November 30, 2015 and 2014.

	WACC
Reportable Segments	2015	2014
Electronic Systems(1)	7.28%	7.01%
Aerospace Systems(2)	7.11%	6.83%
Communication Systems(3)	7.36%	6.90%

⁽¹⁾  The weighted average risk adjusted discount rate in WACC for the Electronic Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 7.00% to 8.12% for 2015 and 6.71% to 8.37% for 2014.

⁽²⁾  The weighted average risk adjusted discount rate in WACC for the Aerospace Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 7.00% to 8.41% for 2015 and 6.71% to 7.35% for 2014.

⁽³⁾  The weighted average risk adjusted discount rate in WACC for the Communication Systems reportable segment is comprised of separate discount rates for each reporting unit within the segment that range from 7.00% to 8.12% for 2015 and 6.71% to 6.93% for 2014.

As presented in the table below, L-3’s historical three-year average annual cash flow growth rates for 2015, 2014 and 2013 for our reportable segments ranged from a negative 18% to a positive 21%. The annual cash flows generated by each of our reporting units vary from year to year, and, therefore, the annual cash flow growth rates do not result in linear trends, due to a number of factors, including, but not limited to: (1) variability of annual sales volume and sales growth rates, (2) increases and decreases in working capital, including customer advance payments and billings on multi-year contracts (revenue arrangements) with long-term performance periods (exceeding one year), (3) the timing of invoicing and cash collections between fiscal years from receivables due from customers on multi-year contracts (revenue arrangements), (4) the timing of increases and decreases of

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select inventories procured and produced in anticipation of future product sales, which frequently overlap the ending and beginning of fiscal years, (5) the timing of the receipt of award fee and incentive fee payments from customers on contracts (revenue arrangements), (6) variability in annual cash outlays for research and development costs, (7) changes in cash outlays for capital expenditures for property, plant and equipment, and (8) increases in annual sales and costs and expense volumes of a reporting unit resulting from business acquisitions. As a result of the factors discussed above and the varying sizes of our reporting units, the annual cash flow levels and growth rates at the reporting unit level tend to fluctuate significantly from year to year.

The 2015 cash flow amount and the cash flow growth rate for each of the last three years for each of our segments are presented in the following table.

Reportable Segment	Estimated 2015      Cash Flow(1)	Estimated Average Annual Cash Flow Growth Rate(1)
	(in millions)	2015	2014	2013	3 Yr. Average
Electronic Systems(2)	$            415	(7)%	10 %	(6)%	(1) %
Aerospace Systems(3)	$            196	(24)%	(38)%	8 %	(18) %
Communication Systems(4)	$            287	(2)%	75 %	(9)%	21 %

⁽¹⁾  Reportable segment estimated cash flow excludes interest payments on debt and other corporate cash flows.

⁽²⁾  The decrease in 2015 cash flows for Electronic Systems was primarily related to Warrior Systems which was negatively impacted by costs related to alleged performance issues with EoTech’s holographic weapons sight (HWS) products and working capital reductions for night vision products in 2014 that did not recur in 2015, partially offset by increased cash flow at Aviation Products & Security due to increases in working capital during 2014 that did not recur in 2015. The increase in 2014 cash flows was primarily a result of a lower effective tax rate, as well as lower working capital requirements at Warrior Systems, partially offset by an increase in working capital for MSI. The decrease in 2013 cash flows was due to lower operating income compared to 2012 and liquidation of advance payments for Sensor Systems.

⁽³⁾  The decrease in 2015 cash flows for Aerospace Systems was due to lower operating income compared to 2014 at Aircraft Systems due to cost growth on international head-of-state aircraft modification contracts and higher working capital requirements at ISR Systems. The decrease in 2014 cash flows for Aerospace Systems was due to lower operating income compared to 2013 at Logistics Solutions and Aircraft Systems, partially offset by a decrease in tax payments as a result of a lower effective tax rate. The increase in 2013 cash flows was due to small ISR aircraft sales to the DoD.

⁽⁴⁾  The decrease in 2015 cash flows for Communication Systems was due to an increase in capital expenditures. The increase in 2014 cash flows for Communication Systems was due to lower working capital requirements and capital expenditures, as well as higher operating income and a decrease in tax payments as a result of a lower effective income tax rate. The decrease in 2013 cash flows was due to lower operating income, partially offset by lower capital expenditures.

We consistently consider several factors to determine expected future annual cash flows for our reporting units, including, historical multi-year average cash flow trends by reporting unit and the expected future cash flow growth rates for each of our reporting units primarily based on our estimates of future sales, operating income, and working capital changes. Furthermore, the substantial majority of our reporting units are primarily dependent upon the DoD budget and spending. Sales from DoD customers generate a significant portion of our annual sales and have historically represented approximately 65% or more of our total sales. Accordingly, to determine expected future annual cash flows for our reporting units we also consider: (1) the DoD budget and spending priorities, (2) expansion into new markets, (3) changing conditions in existing markets for our products, systems and services, (4) possible termination of certain government contracts, (5) expected success in new business competitions and re-competitions on existing business, and (6) anticipated operating margins and working capital requirements, which vary significantly depending on the stage of completion (early, mature, ending) of contracts (revenue arrangements). We closely monitor changes in these factors and their impact on the expected cash flow of our reporting units. In addition to these factors that were relevant and specific to each of our reporting units, our goodwill impairment assessments as of November 30, 2015 assumed 2% nominal growth in the base budget beginning with FY 2017, consistent with the base budget cumulative average growth rate during the five year period from FY 2016 to FY 2021, as shown in the DoD budget table presented with our discussion of the business environment on page 34.

Additionally, our actual cash flows may be higher than our projections and the DCF valuation does not reflect actions that we may take to increase the profitability and cash flows of our reporting units, including our two reporting units with fair value cushions of less than 20% in the second table below. Actions we may take

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include consolidating and streamlining select business operations, creating future synergies with other L-3 businesses, or pursuing incremental targeted growth opportunities. Additionally, the DCF valuations do not assume future business acquisitions or divestitures.

The table below presents the estimated: (1) 2016 cash flow amount, (2) average annual cash flow growth rates for 2016 – 2018, and (3) weighted average annual cash flow growth rates after 2018 for each of our reportable segments.

Reportable Segment	Estimated 2016 Cash Flow(1)		Estimated Average Annual Cash Flow Growth Rates(1)
	(in millions)		3 Yr. Average 2016 – 2018		2019-2020		After 2020 Terminal Growth Rate
Electronic Systems(2)	$	313(2)		(0)%		2%		2%
Aerospace Systems(3)	$	163(3)		14 %		2%		2%
Communications Systems(4)	$	139(4)		(16)%		2%		2%

⁽¹⁾  Reportable segment estimated cash flow excludes interest payments on debt and other corporate cash flows.

⁽²⁾  Electronic Systems projected cash flow is expected to decrease by $102 million from $415 million in 2015 to $313 million in 2016. The decrease is primarily due to an increase in forecasted tax payments as a result of a higher effective tax rate in 2016, higher working capital requirements at Power & Propulsion Systems and Aviation Products & Security, and higher capital expenditures at Precision Engagement & Training. Electronic Systems projected cash flow levels are expected to increase to $411 million by 2018, compared to $313 million in 2016 primarily due to forecasted annual sales growth of approximately 3% in 2017 and 2018, and an improvement in forecasted operating margins of approximately 100 basis points from 2016 to 2018. The improvement in forecasted operating margins from 2016 to 2018 is primarily due to higher expected sales volumes for the segment and a reduced level of new business investments for the Advanced Programs business forecasted in 2018. Additionally, cash flows are expected to improve by 2018 due to increased cash receipts on a large engines production contract for a foreign government.

⁽³⁾  Aerospace Systems projected cash flow is expected to decrease by $33 million from $196 million in 2015 to $163 million in 2016. The decrease is primarily due to costs in excess of contract value related to performance on the international head-of-state contracts at Aircraft Systems and an increase in forecasted tax payments as a result of a higher effective tax rate, partially offset by higher expected operating income in 2016 at Aircraft Systems and Logistics Solutions. Aerospace Systems projected cash flow levels are expected to increase to $215 million by 2018, compared to $163 million in 2016 primarily due to costs in excess of contract value related to performance on the international head-of-state contracts at Aircraft Systems, which are negatively impacting 2016 cash flows, and not expected to recur in 2018.

⁽⁴⁾  Communications Systems projected cash flow is expected to decrease by $148 million from $287 million in 2015 to $139 million in 2016. The decrease is primarily due to a reduction in working capital requirements at Broadband Communication Systems during 2015 that is not expected to recur in 2016, and higher forecasted tax payments as a result of a higher effective tax rate. Communication Systems projected cash flow levels are expected to increase to $142 million by 2018, compared to $139 million in 2016 primarily due to forecasted average annual sales growth of approximately 2.5% during 2017 and 2018, and an improvement in forecasted operating margins of approximately 40 basis points from 2016 to 2018 primarily related to the Space & Power Systems business for higher expected demand of power devices for commercial satellites, partially offset by expected growth in working capital during 2017 and 2018 to support the forecasted increase in sales.

A decline in the estimated fair value of a reporting unit could result in a goodwill impairment, and a related non-cash impairment charge against earnings, if the estimated fair value for the reporting unit is less than the carrying value of the net assets of the reporting unit, including its goodwill. A large decline in estimated fair value of a reporting unit could result in an adverse effect on our financial condition and results of operations.

As discussed above, the more significant assumptions used in our DCF valuations for each of our reporting units were detailed three-year undiscounted cash flow projections, risk adjusted discount rates, or WACC, used to discount the cash flow projections to their present value and expected Terminal Growth Rates. The current year (2016-2018) consolidated three-year undiscounted cash flow projections declined 6% compared to the prior year (2015-2017), with the changes by each reporting unit ranging from a decline of 100% to an increase of 12%. The risk adjusted discount rate, or WACC, increased by an average of 36 basis points compared to the prior year valuations primarily due to a 50 basis point increase in the weighted average after-tax cost of debt. The expected Terminal Growth Rates utilized in the current year valuations were consistent with those utilized in the prior year valuations, including 3% for the Aviation Products & Security reporting unit due to higher expected growth in the commercial aviation market, and 2% for all other reporting units due to a continued improved outlook for DoD budgets and a 2% cumulative average annual growth rate for the DoD base budget during the five year period from FY 2016 to FY 2021.

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As part of our annual impairment test, we evaluated the sensitivity of the DCF fair value estimates for each reporting unit, which were used for our goodwill impairment assessment, by separately assessing the impact on the estimated fair value of each reporting unit by: (1) increasing the risk adjusted discount rate (WACC) by 50 basis points, or (2) reducing the Terminal Growth Rate by 50 basis points, compared to those used in our estimated fair value calculations, while holding all other assumptions unchanged. All of our reporting units would have had a fair value in excess of their carrying value under both scenarios. In addition, we applied hypothetical decreases to the estimated fair values of each of our reporting units. We determined that a decrease in fair value of at least 20% would be required before any reporting unit, with the exception of two reporting units presented in the table below, would have a carrying value in excess of its fair value. The table below presents the: (1) risk adjusted discount rates, (2) annual cash flow and three-year average growth rate, (3) 2015 cash flow, (4) goodwill balance, and (5) excess fair value percentage and dollar amount, for each of these two reporting units.

Reporting Unit	Risk Adjusted   Discount Rates			Estimated Annual Cash Flow Growth Rate(1)									Estimated 2015 Cash Flows(1)		Goodwill Balance(2)		Excess Fair Value(3)
				2015		2014		2013		3-Year Average
($ in millions)
Warrior Systems(4)		7.08	%		(88)%		90%		(29)%		(9	)%	$	7	$	604		9%	$	79
Power & Propulsion Systems(5)		7.00	%		7%		20%		54 %		27	%	$	83	$	920		18%	$	202

⁽¹⁾  Reporting unit cash flow excludes interest payments on debt and other corporate cash flows.

⁽²⁾  The goodwill balance is as of November 30, 2015, our goodwill impairment testing date.

⁽³⁾  The excess fair value represents the percentage and dollar amount by which the fair value of a reporting unit must decline before a potential impairment is identified and would require the second step of the goodwill impairment assessment to be performed.

⁽⁴⁾  Our DCF valuation for the Warrior Systems reporting unit assumed higher projected cash flow of approximately 73% in 2016 compared to 2015 due to higher operating income in 2016 as a result of costs incurred in 2015 related to alleged performance issues with HWS products that are not expected to recur in 2016. In addition, our DCF valuation assumed that projected cash flow in 2017 will grow 7% primarily due to increased sales and remain flat in 2018. Projected cash flows are expected to grow 2% annually beginning in 2019.

⁽⁵⁾  Our DCF valuation for the Power & Propulsion Systems reporting unit assumed projected cash flow of approximately $30 million in 2016 compared to cash flows of $83 million in 2015 due to expected lower operating income, increased working capital needs and liquidation of advance balances in 2016, as well as an increase in forecasted tax payments as a result of a higher effective income tax rate. In 2017, cash flows are assumed to increase to $63 million primarily due to cash receipts on a large engines production contract for a foreign government. In 2018, cash flows are assumed to increase to $72 million due to increasing sales and operating income, as well as increased cash receipts on a large engines production contract for a foreign government. Projected cash flows are expected to grow 2% annually beginning in 2019.

As discussed previously, in addition to the annual goodwill impairment assessment, we review goodwill for impairment whenever events or changes in circumstances indicate that the carrying amount of a reporting unit’s goodwill may not be recoverable. As such, listed below are certain circumstances, depending on their outcomes, that may require us to review goodwill for impairment for one or more of the two reporting units in the table above prior to the next annual assessment (November 30, 2016):

• lower than expected annual sales from our contracts with the DoD, arising from unanticipated changes or reductions to future DoD budgets;

• the ability of the reporting units, in particular Warrior Systems to achieve 2016 projected sales, operating income and cash flow; and

• the effect of our voluntary return program for various EoTech holographic weapons sight products that commenced in November 2015 on Warrior Systems expected sales, operating income and cash flow.

Pension Plan and Postretirement Benefit Plan Obligations. The obligations for our pension plans and postretirement benefit plans and the related annual costs of employee benefits are calculated based on several long-term assumptions, including discount rates and expected mortality for employee benefit liabilities, and rates of return on plan assets, and expected annual rates for salary increases for employee participants in the case of

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pension plans, and expected annual increases in the costs of medical and other health care benefits in the case of postretirement benefit obligations. These long-term assumptions are subject to revision based on changes in interest rates, financial market conditions, expected versus actual returns on plan assets, expected participant mortality and other actuarial assumptions, including future rates of salary increases, benefit formulas and levels, and rates of increase in the costs of benefits. Changes in the assumptions, if significant, could materially affect the amount of annual net periodic benefit costs recognized in our results of operations from one year to the next, the liabilities for the pension plans and postretirement benefit plans, and our annual cash requirements to fund these plans. Our pension expense for 2016 is expected to decrease by $43 million to $96 million from $139 million in 2015. Our discount rate assumption increased from a weighted average rate of 4.14% at December 31, 2014 to 4.63% at December 31, 2015. The expected decrease in our 2016 pension expense is primarily due to the increase in the weighted average discount rate and a change in the approach to measure service and interest costs, partially offset by the impact of lower plan assets resulting from lower than expected actual pension asset returns during 2015.

In 2016, we will change the approach utilized to estimate the service and interest cost components of expense for all of our pension and postretirement benefit plans. Historically, we estimated the service and interest cost components using a single weighted average discount rate derived from the yield curve used to measure the benefit obligation at the beginning of the period. We will elect to use a spot rate approach for our plans in the estimation of the components of benefit cost by applying specific spot rates along the yield curve to the relevant projected cash flows, as we believe this provides a more precise estimate of service and interest costs. This is a change in estimate and we will account for it prospectively beginning in 2016. This change does not affect the measurement of our total benefit obligation. The estimated weighted average discount rates used to measure 2016 pension service and interest costs are 4.93% and 3.98%, respectively. The previous method would have used a weighted average discount rate for both pension service and interest costs of 4.63%, which represents the weighted average discount rate used to determine our benefit obligation at December 31, 2015. We expect this change to result in a reduction to pension expense of approximately $25 million compared to the prior approach. We do not expect this change will result in a material impact to postretirement medical expense. See “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Pension Plans” for a further discussion of our estimated 2016 pension expense.

Discount rates are used to determine the present value of our pension obligations and also affect the amount of pension expense in any given period. The discount rate assumptions used to determine our pension and postretirement benefit obligations at December 31, 2015 and 2014 were based on a hypothetical AA yield curve represented by a series of annualized individual discount rates. Each bond issue underlying the yield curve is required to have a rating of AA or better by Moody’s Investors Service, Inc. and/or Standard & Poor’s. The resulting discount rate reflects the matching of plan liability cash flows to the yield curve. For a sensitivity analysis projecting the impact of a change in the discount rate on our projected benefit obligation and pension expense, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Pension Plans.”

Valuation of Deferred Income Tax Assets and Liabilities. At December 31, 2015, we had deferred tax assets of $654 million, deferred tax liabilities of $861 million and a valuation allowance of $9 million. The deferred tax assets included $12 million for loss carryforwards and $6 million for tax credit carryforwards which are subject to various limitations and will expire if unused within their respective carryforward periods. Deferred income taxes are determined separately for each of our tax-paying entities in each tax jurisdiction. The future realization of our deferred income tax assets ultimately depends on our ability to generate sufficient taxable income of the appropriate character (for example, ordinary income or capital gains) within the carryback and carryforward periods available under the tax law and, to a lesser extent, our ability to execute successful tax planning strategies. Based on our estimates of the amounts and timing of future taxable income and tax planning strategies, we believe that we will be able to realize our deferred tax assets, except for capital losses and certain U.S. Federal, foreign and state net operating losses. A change in the ability of our operations to continue to generate future taxable income, or our ability to implement desired tax planning strategies, could affect our

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ability to realize the future tax deductions underlying our deferred tax assets, and require us to provide a valuation allowance against our deferred tax assets. The recognition of a valuation allowance would result in a reduction to net income and, if significant, could have a material impact on our effective tax rate, results of operations and financial position in any given period.

Liabilities for Pending and Threatened Litigation. We are subject to litigation, government investigations, proceedings, claims or assessments and various contingent liabilities incidental to our business or assumed in connection with certain business acquisitions. In accordance with the accounting standards for contingencies, we accrue a charge for a loss contingency when we believe it is both probable that a liability has been incurred, and the amount of the loss can be reasonably estimated. If the loss is within a range of specified amounts, the most likely amount is accrued, and we accrue the minimum amount in the range if no amount within the range represents a better estimate. Generally, we record the loss contingency at the amount we expect to pay to resolve the contingency and the amount is generally not discounted to the present value. Amounts recoverable under insurance contracts are recorded as assets when recovery is deemed probable. Contingencies that might result in a gain are not recognized until realizable. Changes to the amount of the estimated loss, or resolution of one or more contingencies could have a material impact on our results of operations, financial position and cash flows. See Note 18 to our audited consolidated financial statements for further discussion of our litigation matters.

Valuation of Long-Lived Assets. In addition to goodwill and identifiable intangible assets recognized in connection with our business acquisitions, our long-lived assets also include property, plant and equipment, capitalized software development costs for software to be sold, leased or otherwise marketed, and certain long-term investments. As of December 31, 2015, the consolidated carrying values of our property, plant and equipment were $1,097 million, capitalized software development costs were $61 million and certain long-term investments were $11 million. As of December 31, 2015, the carrying value of our property, plant and equipment represented 9% of total assets and the carrying value of our capitalized software development costs and certain long-term investments each represented less than 1% of total assets. We review the valuation of our long-lived assets whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. An impairment loss is recognized when the carrying amount of a long-lived asset exceeds its fair value or net realizable value expected to result from the asset’s use and eventual disposition. We use a variety of factors to assess valuation, depending upon the asset. Long-lived assets are evaluated based upon the expected period the asset will be utilized, and other factors depending on the asset, including estimated future sales, profits and related cash flows, estimated product acceptance and product life cycles, changes in technology and customer demand, and the performance of invested companies and joint ventures. Changes in estimates and judgments on any of these factors could have a material impact on our results of operations and financial position.

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Results of Operations

The following information should be read in conjunction with our audited consolidated financial statements. The following information has been adjusted to reflect the divestiture of NSS and related classification of its results of operations and cash flows as discontinued operations. Also, our results of operations for the periods presented are affected by our business acquisitions. See Note 3 to our audited consolidated financial statements for a discussion of our business acquisitions and dispositions.

Consolidated Results of Operations

The table below provides selected financial data, excluding discontinued operations, for the years ended December 31, 2015, 2014 and 2013.

	Year Ended December 31,				Increase/     (decrease)		Year Ended December 31,				Decrease
(in millions, except per share data)	2015		2014				2014		2013
Net sales	$	10,466	$	10,986		(5)%	$	10,986	$	11,420		(4)%
Operating income	$	475	$	1,012		(53)%	$	1,012	$	1,117		(9)%
Loss related to business divestitures		31		—		nm		—		—		nm
Goodwill impairment charges		384		—		nm		—		—		nm
Segment operating income	$	890	$	1,012		(12)%	$	1,012	$	1,117		(9)%
Operating margin		4.5%		9.2%		(470) bpts		9.2%		9.8%		(60) bpts
Segment operating margin		8.5%		9.2%		(70) bpts		9.2%		9.8%		(60) bpts
Interest expense	$	169	$	158		7%	$	158	$	157		—
Interest and other income, net	$	17	$	18		(6)%	$	18	$	20		(10)%
Debt retirement charge	$	1	$	—		nm	$	—	$	—		—
Effective income tax rate	$	nm	$	26.0%		nm	$	26.0%		26.9%		(90) bpts
Net income from continuing operations attributable to L-3	$	282	$	632		(55)%	$	632	$	707		(11)%
Adjusted net income from continuing operations attributable to L-3(1)	$	566	$	632		(10)%	$	632	$	707		(11)%
Diluted earnings per share from continuing operations	$	3.44	$	7.20		(52)%	$	7.20	$	7.76		(7)%
Adjusted diluted earnings per share from continuing operations(1)	$	6.91	$	7.20		(4)%	$	7.20	$	7.76		(7)%
Diluted weighted average common shares outstanding		81.9		87.8		(7)%		87.8		91.1		(4)%
nm – not meaningful   (1)   Non-GAAP metric that excludes the goodwill impairment charge and the aggregate loss related to business divestitures. See the table on page 56 for a reconciliation of this measure.

2015 Compared with 2014

Net Sales: For the year ended December 31, 2015, consolidated net sales of $10.5 billion decreased $520 million, or 5%, compared to the year ended December 31, 2014. Organic sales for the year ended December 31, 2015 declined $269 million, or 3%. Organic sales exclude $354 million related to business divestitures and $103 million from business acquisitions. Sales to the U.S. Government declined 2%, or $173 million, to $7,291 million in the year ended December 31, 2015 compared to $7,464 million in the year ended December 31, 2014, driven primarily by U.S. defense budget constraints and reductions from sequestration, and by the U.S. military drawdown in Afghanistan. Sales to international and commercial customers declined 10%, or $347 million, to $3,175 million in the year ended December 31, 2015, compared to $3,522 million in the year ended December 31, 2014. Organic sales to international and commercial customers decreased $92 million, or 3%, driven by foreign currency exchange rate changes.

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Sales from products decreased by $250 million to $6,589 million for the year ended December 31, 2015, compared to $6,839 million for the year ended December 31, 2014. Product sales represented 63% and 62% of consolidated net sales for each of the years ended December 31, 2015 and 2014, respectively. Sales from products declined by: (1) $260 million related to the divestiture of MSI, (2) $113 million for Aircraft Systems due to unfavorable contract performance adjustments on international head-of-state aircraft modification contracts and lower volume to the United States Air Force (USAF) from the DoD’s planned reduction of the Compass Call aircraft and the DoD’s retirement of the Joint Cargo Aircraft (JCA), (3) $79 million related to foreign currency exchange rate changes, (4) $49 million for reduced sales at Warrior Systems driven by lower volume for night vision goggles and the holographic weapons sight voluntary return program at EoTech and (5) $37 million for Space & Power Systems primarily due to lower volume for satellite command and control software for U.S. Government agencies and high frequency radios for a foreign government. These decreases were partially offset by an increase of: (1) $130 million primarily for large ISR aircraft systems for U.S. Government customers and small ISR aircraft systems to the DoD and a foreign government, (2) $100 million primarily due to a higher mix of product sales for Broadband Communication Systems and (3) $58 million primarily for Aviation Products & Security Systems due to deliveries of cockpit avionics products to commercial and DoD customers and airport security systems products to international customers.

Sales from services decreased by $270 million to $3,877 million for the year ended December 31, 2015, compared to $4,147 million for the year ended December 31, 2014. Service sales represented 37% and 38% of consolidated net sales for each of the years ended December 31, 2015 and 2014, respectively. Sales from services declined by: (1) $81 million due to a lower mix of services sales for Broadband Communication Systems, (2) $72 million primarily related to lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan, (3) $72 million related to the MSI and BSI business divestitures, (4) $63 million related to lower volume for field maintenance and sustainment services, primarily for U.S. Army and U.S. Navy aircraft due to the completion of contracts and lower demand and lower prices due to competitive pressures and (5) $29 million related to foreign currency exchange rate changes. These decreases were partially offset by an increase of $47 million primarily due to a higher mix of services sales for Aircraft Systems. See the reportable segment results below for additional discussion of our segment sales trends.

Operating income and operating margin: Consolidated operating income for the year ended December 31, 2015 decreased by $537 million to $475 million, compared to the year ended December 31, 2014. Segment operating income for the year ended December 31, 2015 decreased by $122 million, or 12%, compared to the year ended December 31, 2014. Segment operating margin decreased by 70 basis points to 8.5% for the year ended December 31, 2015 compared to 9.2% for the year ended December 31, 2014. This decrease was driven by higher pension expense of $61 million and unfavorable contract performance adjustments at the Aerospace Systems segment, partially offset by outside accounting and legal advisory expenses incurred in 2014 for the Internal Review completed in October 2014. See the reportable segment results below for additional discussion of sales and operating margin trends.

Interest expense: Interest expense for the year ended December 31, 2015 increased by $11 million compared to the year ended December 31, 2014 due to the issuance of $1 billion in new debt on May 28, 2014, partially offset by the redemption of our 3% Convertible Contingent Debt securities in June 2014.

Interest and other income: Interest and other income, net, for the year ended December 31, 2015 decreased primarily due to lower interest income for a benefit plan trust and lower interest income accretion related to the net investment in sales-type leases of flight simulator systems during the year ended December 31, 2015, partially offset by a loss recorded on the sale of a business within the Warrior Systems sector of the Electronic Systems segment during the year ended December 31, 2014.

Effective income tax rate: The effective income tax rate for the year ended December 31, 2015 is not meaningful due to the goodwill impairment charges taken during 2015. Excluding the goodwill impairment charges and related income tax benefit, the effective income tax rate for 2015 would have decreased to 20.5% from 26.0% in

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2014. The decrease was primarily due to: (1) $17 million of foreign tax benefits related to a legal restructuring of our foreign entities and (2) an increased benefit from the Federal Research and Experimentation Tax Credit.

Net income from continuing operations attributable to L-3 and diluted earnings per share (EPS) from continuing operations: Net income from continuing operations attributable to L-3 in the year ended December 31, 2015 decreased to $282 million, compared to $632 million in the year ended December 31, 2014. Diluted EPS from continuing operations decreased 52% to $3.44 from $7.20 in the year ended December 31, 2014.

Adjusted net income from continuing operations attributable to L-3 and adjusted diluted EPS from continuing operations: Adjusted net income from continuing operations attributable to L-3 decreased 10% to $566 million compared to the year ended December 31, 2014, and adjusted diluted EPS from continuing operations decreased 4% to $6.91.

Diluted weighted average common shares outstanding: Diluted weighted average common shares outstanding for the year ended December 31, 2015 declined by 7% compared to the year ended December 31, 2014 due to repurchases of L-3 common stock in connection with our share repurchase programs authorized by our Board of Directors, partially offset by additional shares issued in connection with various employee stock-based compensation programs and contributions to employee savings plans made in common stock.

2014 Compared with 2013

Net Sales: For the year ended December 31, 2014, consolidated net sales of $11 billion decreased $434 million, or 4%, compared to the year ended December 31, 2013, as lower sales to the DoD caused by sequestration cuts and the continuing U.S. military drawdown from Afghanistan impacted each segment. Net sales to the U.S. Government, including sales from acquired businesses of $41 million, declined 7%, or $544 million, to $7,464 million in the year ended December 31, 2014, compared to $8,008 million in the year ended December 31, 2013. This decrease was partially offset by an increase in net sales to international and commercial customers of 3%, or $110 million, to $3,522 million in the year ended December 31, 2014, compared to $3,412 million in the year ended December 31, 2013. Net sales to international and commercial customers, as a percentage of consolidated net sales, increased to 32% for the year ended December 31, 2014, as compared to 30% for the year ended December 31, 2013.

Sales from products decreased by $290 million to $6,839 million for the year ended December 31, 2014, compared to $7,129 million for the year ended December 31, 2013. Product sales represented 62% of consolidated net sales for each of the years ended December 31, 2014 and 2013. Sales of products declined: (1) $222 million for Broadband Communication Systems, primarily due to lower U.S. Army demand for remote video terminals driven by the U.S. military drawdown from Afghanistan, and lower volume for airborne and ground-based networked communication systems as contracts near completion and due to declining demand related to DoD budget reductions, (2) $124 million for Aircraft Systems due to reduced deliveries of aircraft cabin assemblies and subassemblies based on contractual delivery schedules, lower volume for the Canadian DND and commercial contracts nearing completion, and lower volume to the USAF from the DoD’s planned reduction in the Compass Call aircraft fleet, partially offset by increased volume for the Australia C-27J aircraft, (3) $55 million for Sensor Systems due to declining demand primarily for airborne EO/IR turrets to the U.S. military related to the drawdown from Afghanistan and the completion of a contract for force protection products for a foreign ministry of defense, (4) $32 million primarily for Tactical Satellite Communications due to lower demand and timing of deliveries of mobile and ground-based satellite communication systems for the U.S. military and (5) $14 million for Precision Engagement & Training primarily due to reduced deliveries of U.S. Army, rotary wing training systems for the Flight School XXI program based on contractual delivery schedules, lower volume for upgrades for F/A-18 flight simulator trainers and completed contracts for guidance products for the U.S. Army. These decreases were partially offset by organic sales growth of: (1) $42 million for Space & Power Systems due to increased deliveries of power devices for commercial satellites, (2) $42 million for Aviation Products & Security Systems due to increased demand for airport security system products from

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international customers and the Transportation Security Administration (TSA) and (3) $32 million for MSI due to timing of deliveries of shipbuilding products to a foreign navy and commercial customers. The Mustang Technology Group acquisition increased sales by $41 million.

Sales from services decreased by $144 million to $4,147 million for the year ended December 31, 2014, compared to $4,291 million for the year ended December 31, 2013. Service sales represented 38% of consolidated net sales for each of the years ended December 31, 2014 and 2013. Sales from services decreased: (1) $72 million due to lower volume for Aircraft Systems to the USAF from the DoD’s retirement of the JCA, (2) $46 million due to lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan, (3) $19 million due to a lower mix of services sales primarily for Tactical Satellite Communications and (4) $7 million due to lower demand for field maintenance and sustainment services for USAF training aircraft. See the reportable segment results for additional discussion of our segment sales trends.

Operating income and operating margin: Operating income for the year ended December 31, 2014 of $1,012 million decreased $105 million, or 9%, compared to the year ended December 31, 2013. Operating margin decreased by 60 basis points to 9.2% for the year ended December 31, 2014, compared to 9.8% for the year ended December 31, 2013. Operating margin decreased by: (1) 130 basis points due to lower sales and mix changes and unfavorable contract performance adjustments in the Aerospace Systems segment and $25 million of outside accounting and legal advisory costs incurred in connection with the internal review of the Aerospace Systems segment and (2) 20 basis points due to a charge of $18 million in the Electronic Systems segment related to a product specifications matter. These decreases were partially offset by lower pension expense of $94 million ($59 million after income taxes, or $0.67 per diluted share), which increased operating margin by 90 basis points. See the reportable segment results below for additional discussion of segment operating margin trends.

Interest expense: Interest expense for the year ended December 31, 2014 increased by $1 million compared to the year ended December 31, 2013, primarily due to higher amortization of bond discounts and debt issuance costs relating to new debt that was issued during the year ended December 31, 2014.

Interest and other income: Interest and other income, net, for the year ended December 31, 2014 decreased due to a loss recorded on the sale of a business within the Warrior Systems sector of the Electronic Systems segment of $3 million.

Effective income tax rate: The effective tax rate for the year ended December 31, 2014 decreased to 26.0% from 26.9% primarily due to a lower effective tax rate on foreign earnings.

Net income from continuing operations attributable to L-3 and diluted EPS from continuing operations: Net income from continuing operations attributable to L-3 in the year ended December 31, 2014 decreased 11% to $632 million compared to the year ended December 31, 2013, and diluted EPS from continuing operations decreased 7% to $7.20 from $7.76.

Diluted weighted average common shares outstanding: Diluted weighted average common shares outstanding for the year ended December 31, 2014 declined by 4% compared to the year ended December 31, 2013 due to repurchases of L-3 common stock in connection with our share repurchase programs authorized by our Board of Directors, partially offset by additional shares issued in connection with various employee stock-based compensation programs and contributions to employee savings plans made in common stock.

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The table below presents a reconciliation of net income from continuing operations attributable to L-3 to adjusted net income from continuing operations attributable to L-3 and diluted EPS from continuing operations to adjusted diluted EPS from continuing operations.

	Year Ended December 31,
	2015			2014		2013
	(in millions, except per share data)
Net income from continuing operations attributable to L-3	$	282		$	632	$	707
Loss on business divestitures		20			—		—
Goodwill impairment charges		264			—		—
Adjusted net income from continuing operations attributable to L-3(1)	$	566		$	632	$	707
Diluted EPS from continuing operations attributable to L-3 Holdings’ common stockholders	$	3.44		$	7.20	$	7.76
EPS impact of loss on business divestitures(A)		0.25			—		—
EPS impact of the goodwill impairment charges(B)		3.22			—		—
Adjusted diluted EPS from continuing operations(1)	$	6.91		$	7.20	$	7.76
(A)         Loss on business divestitures	$	(31	)	$	—	$	—
Tax benefit		11			—		—
After-tax impact		(20	)		—		—
Diluted weighted average common shares outstanding		81.9			—		—
Per share impact(2)	$	(0.25	)	$	—	$	—
(B)         Goodwill impairment charges	$	(384	)	$	—	$	—
Tax benefit		120			—		—
After-tax impact		(264	)		—		—
Diluted weighted average common shares outstanding		81.9			—		—
Per share impact	$	(3.22	)	$	—	$	—

⁽¹⁾  Adjusted diluted EPS is diluted EPS attributable to L-3 Holdings’ common stockholders, excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges. Adjusted net income attributable to L-3 is net income attributable to L-3, excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges. These amounts are not calculated in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). We believe that the charges or credits relating to business divestitures and non-cash goodwill impairment charges affect the comparability of the results of operations for 2015 to the results of operations for 2014. We also believe that disclosing net income and diluted EPS excluding the charges or credits relating to business divestitures and non-cash goodwill impairment charges will allow investors to more easily compare the 2015 results to the 2014 results. However, these measures may not be defined or calculated by other companies in the same manner.

⁽²⁾  Amounts may not recalculate directly due to rounding.

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Reportable Segment Results of Operations. The table below presents selected data by reportable segment reconciled to consolidated totals. The results of operations of the NSS business sold to CACI International Inc. are classified as discontinued operations for all periods presented. Accordingly, the NSS business is no longer a reportable segment. See Note 21 to our audited consolidated financial statements for additional reportable segment data.

	Year Ended December 31,
	2015			2014		2013
	(dollars in millions)
Net sales:(1)
Electronic Systems	$	4,269		$	4,645	$	4,639
Aerospace Systems		4,156			4,321		4,551
Communication Systems		2,041			2,020		2,230
Consolidated net sales	$	10,466		$	10,986	$	11,420
Operating income:
Electronic Systems	$	489		$	533	$	529
Aerospace Systems		205			283		421
Communication Systems		196			196		167
Total segment operating income		890			1,012		1,117
Loss related to business divestitures		(31	)		—		—
Goodwill impairment charges		(384	)		—		—
Consolidated operating income	$	475		$	1,012	$	1,117
Operating margin:
Electronic Systems		11.5	%		11.5%		11.4%
Aerospace Systems		4.9	%		6.5%		9.3%
Communication Systems		9.6	%		9.7%		7.5%
Total segment operating margin		8.5	%		9.2%		9.8%
Loss related to business divestitures		(0.3	)%		—		—
Goodwill impairment charges		(3.7	)%		—		—
Consolidated operating margin		4.5	%		9.2%		9.8%

⁽¹⁾  Net sales are after intercompany eliminations.

Electronic Systems

	Year Ended December 31,				Decrease		Year Ended December 31,				Increase
	2015		2014				2014		2013
	(dollars in millions)
Net sales	$	4,269	$	4,645		(8.1)%	$	4,645	$	4,639		0.1%
Operating income		489		533		(8.3)%		533		529		0.8%
Operating margin		11.5%		11.5%		—  bpts		11.5%		11.4%		10   bpts

2015 Compared with 2014

Electronic Systems net sales for the year ended December 31, 2015 decreased by $376 million, or 8%, compared to the year ended December 31, 2014. Excluding $354 million related to the divestitures of MSI, BSI, and the Tinsley Product Line, and $49 million for the CTC and ForceX acquisitions, organic sales declined $71 million, or 2%. The decrease was due to: (1) $85 million related to foreign currency exchange rate changes and (2) $24 million related to reduced sales at Warrior Systems driven by lower volume for night vision goggles and $20 million related to the holographic weapons sight voluntary return program at EoTech, further discussed

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below. These decreases were partially offset by $58 million, primarily for Aviation Products & Security Systems, due to deliveries of cockpit avionics products to commercial and DoD customers and airport security systems products to international customers.

Electronic Systems operating income for the year ended December 31, 2015 decreased by $44 million, or 8%, compared to the year ended December 31, 2014. Operating margin remained at 11.5% compared to the year ended December 31, 2014. Operating margin increased by: (1) 50 basis points due to acquisitions and divestitures, (2) 40 basis points for favorable contract performance adjustments and (3) 20 basis points due to lower severance expense of $8 million. These increases were offset by decreases of: (1) 80 basis points primarily due to lower volume for Sensor Systems and sales mix changes for Aviation Products & Security and (2) 30 basis points due to higher pension expense of $13 million.

In November 2015, we commenced a voluntary return program and began accepting customer returns for various EoTech holographic weapons sight (HWS) products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for the purchase price, including shipping costs. We recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the 2015 fourth quarter associated with establishing a product returns reserve to reflect the estimated cost of the return program. Our estimated product returns reserve is based on several factors, including the number of HWS units that we anticipate purchasers will return. Our product returns reserve estimate is based on: (1) our analysis of various factors, including an assumed product return rate consistent with claim rates in other circumstances, (2) our experience to date with the voluntary return program, and among other things, an assumption that only a very small percentage of the total number of HWS products sold by us and eligible for the voluntary return program will be returned, and (3) an assumed average unit purchase price of approximately $500. The voluntary return program is in the early stages of implementation, and we will continue to evaluate the amount of the product returns reserve in connection with the return program. Our evaluation, including as a result of our actual experience with the voluntary return program, may lead us to record an adjustment to the product returns reserve in future periods. Any such adjustment could be material.

2014 Compared with 2013

Electronic Systems net sales for the year ended December 31, 2014 increased by $6 million, or less than 1%, compared to the year ended December 31, 2013. Sales increased: (1) $37 million for Aviation Products & Security Systems due to increased volume for airport security system products from international customers and the TSA, (2) $28 million for MSI due to timing of deliveries of shipbuilding products to a foreign navy and commercial customers, (3) $25 million for Power & Propulsion Systems primarily due to increased volume on certain contracts including an engine production contract to a foreign military and missile targets to the Missile Defense Agency (MDA), partially offset by lower volume on undersea warfare products, and (4) $16 million primarily for Warrior Systems due to increased deliveries of night vision goggles to foreign militaries and the U.S. Army, partially offset by lower demand for holographic weapons sights for the commercial sporting and recreational markets. The Mustang Technology Group business acquisition increased sales by $41 million. These increases were partially offset by sales decreases of: (1) $71 million for Precision Engagement and Training due to reduced deliveries of U.S. Army rotary wing training systems for the Flight School XXI program, lower volume for upgrades for F/A-18 flight simulator trainers and completed contracts for guidance products for the U.S. Army, and (2) $70 million primarily for Sensor Systems primarily due to lower volume for airborne EO/IR turrets to the U.S. military due to the drawdown from Afghanistan, and the completion of a contract for force protection products for a foreign ministry of defense.

Electronic Systems operating income for the year ended December 31, 2014 increased by $4 million, or 1%, compared to the year ended December 31, 2013. Operating margin increased by 10 basis points to 11.5%. Operating margin increased by 70 basis points due to lower pension expense of $31 million and 30 basis points primarily due to improved contract performance, primarily for Power & Propulsion Systems, Precision Engagement and Training and Warrior Systems. These increases were offset by decreases of: (1) 50 basis points primarily due to lower sales for Sensor Systems, and (2) 40 basis points due to a charge of $18 million related to a product specifications matter.

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Aerospace Systems

	Year Ended December 31,				Decrease		Year Ended December 31,				Decrease
	2015		2014				2014		2013
	(dollars in millions)
Net sales	$	4,156	$	4,321		(3.8)%	$	4,321	$	4,551		(5.1)%
Operating income		205		283		(27.6)%		283		421		(32.8)%
Operating margin		4.9%		6.5%		(160) bpts		6.5%		9.3%		(280) bpts

2015 Compared with 2014

Aerospace Systems net sales for the year ended December 31, 2015 decreased by $165 million, or 4%, compared to the year ended December 31, 2014. Sales decreased $159 million for Aircraft Systems and $63 million for Logistics Solutions. Sales for ISR Systems increased by $57 million. Sales decreased for Aircraft Systems due to lower volume of: (1) $74 million primarily on the USAF Compass Call aircraft and the DoD’s retirement of the JCA, (2) $39 million on international head-of-state aircraft modification contracts primarily due to unfavorable contract performance adjustments, (3) $28 million for modification contracts primarily for the U.S. Navy maritime patrol aircraft and (4) $18 million primarily for aircraft cabin assemblies and subassemblies. The decrease in sales for Logistics Solutions was due to lower volume for field maintenance and sustainment services, primarily for U.S. Army and U.S. Navy aircraft due to the completion of contracts and lower demand and lower prices due to competitive pressures. The increase in ISR Systems was due to an increase in sales of $182 million primarily for large ISR aircraft systems for U.S. Government customers and small ISR aircraft systems to the DoD and a foreign government, partially offset by $125 million of lower sales for small ISR aircraft fleet management services to the DoD due to the U.S. military drawdown in Afghanistan.

Aerospace Systems operating income for the year ended December 31, 2015 decreased by $78 million, or 28%, compared to the year ended December 31, 2014. Operating margin decreased by 160 basis points to 4.9%. Operating margin decreased by: (1) 250 basis points due to contract performance adjustments at Aircraft Systems, which included $101 million of cost growth on international head-of-state aircraft modification contracts, compared to $15 million of cost growth on the same contracts in the year ended December 31, 2014, (2) 100 basis points primarily due to reduced flight hours and lower pricing due to competitive pressures on logistics and maintenance contracts, including the U.S. Navy T-45 contract and (3) 70 basis points due to higher pension expense of $28 million. These decreases were partially offset by: (1) 110 basis points due to favorable contract performance adjustments at ISR Systems, (2) 70 basis points for improved performance on the Army C-12 contract due to better terms on the new contract and $18 million due to a partial recovery of cost overruns recognized in prior periods on the previous contract, (3) 40 basis points due to a $17 million increase in reserves for excess and obsolete inventory at Logistics Solutions recorded during the year ended December 31, 2014 and (4) 40 basis points due to $25 million of outside accounting and legal advisory expenses incurred for the Internal Review completed in October 2014.

2014 Compared with 2013

Aerospace Systems net sales for the year ended December 31, 2014 decreased by $230 million, or 5%, compared to the year ended December 31, 2013. Sales decreased $198 million for Aircraft Systems, $25 million for ISR Systems and $7 million for Logistics Solutions. Aircraft Systems sales decreased: (1) $89 million due to lower volume to the USAF from the DoD’s retirement of the JCA and the DoD’s planned reduction in the Compass Call aircraft fleet, (2) $89 million due to lower volume for aircraft modifications for the U.S. Navy maritime patrol aircraft due to the transition to a new aircraft platform and international head-of-state aircraft, (3) $59 million primarily due to lower volume for the Canadian DND and commercial contracts nearing completion and (4) $48 million due to reduced deliveries of aircraft cabin assemblies and subassemblies. These decreases were partially offset by a sales increase of $55 million for the Australia C-27J aircraft and $32 million

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primarily due to higher volume for foreign military aircraft modification contracts. ISR Systems sales declined primarily due to lower sales and volume for small ISR aircraft and aircraft systems due to the U.S. military drawdown in Afghanistan. Logistics Solutions sales declined due to decreased volume for field maintenance and sustainment services for USAF training aircraft.

Aerospace Systems operating income for the year ended December 31, 2014 decreased by $138 million, or 33%, compared to the year ended December 31, 2013. Operating margin declined by 280 basis points to 6.5%. Operating margin declined by: (1) 180 basis points primarily due to lower sales and mix changes, (2) 80 basis points due to unfavorable contract performance adjustments on modification contracts for international head-of-state and search and rescue aircraft, (3) 60 basis points due to $25 million of charges for outside accounting and legal advisory costs incurred in connection with the internal review of the Aerospace Systems segment, and (4) 40 basis points primarily due to unfavorable contract performance adjustments on a number of contracts for aircraft cabin assemblies. These decreases were partially offset by 80 basis points due to lower pension expense of $35 million.

Communication Systems

	Year Ended December 31,				Increase/ (decrease)		Year Ended December 31,				Increase/ (decrease)
	2015		2014				2014		2013
					(dollars in millions)
Net sales	$	2,041	$	2,020		1.0%	$	2,020	$	2,230		(9.4)%
Operating income		196		196		—		196		167		17.4%
Operating margin		9.6%		9.7%		(10) bpts		9.7%		7.5%		220 bpts

2015 Compared with 2014

Communication Systems net sales for the year ended December 31, 2015 increased by $21 million, or 1%, compared to the year ended December 31, 2014. Excluding $55 million related to the Miteq acquisition, organic sales declined by $34 million, or 2%. The decrease was due to: (1) $37 million for Space & Power Systems, primarily satellite command and control software for U.S. Government agencies and high frequency radios for a foreign government and (2) $20 million for Advanced Communications products, primarily secure data recorders and communications equipment for the U.S. military as contracts near completion. These decreases were offset by $23 million for Broadband Communication Systems, primarily due to increased volume for development and production of secure networked communication systems for the U.S. military. For Tactical Satellite Communications products, lower sales of mobile and ground based satellite communication systems for the U.S. military were offset by sales on a new contract for the Australian Defence Force.

Communication Systems operating income for the year ended December 31, 2015 remained the same at $196 million compared to the year ended December 31, 2014. Operating margin decreased by 10 basis points to 9.6%. Operating margin decreased by 100 basis points due to higher pension expense of $20 million. Improved contract performance and sales and mix changes, partially offset by lower margins from the Miteq acquisition, increased operating margin by 90 basis points.

2014 Compared with 2013

Communication Systems net sales for the year ended December 31, 2014 decreased by $210 million, or 9%, compared to the year ended December 31, 2013. Sales decreased $194 million for Broadband Communication Systems primarily due to: (1) lower volume for airborne and ground-based networked communication systems as contracts near completion and demand declines due to DoD budget reductions, (2) lower U.S. Army demand for remote video terminals and ISR support services driven by the U.S. military drawdown from Afghanistan, and (3) the completion of a specialty radio frequency (RF) contract for the U.S. Army. Sales also decreased $62 million for Tactical Satellite Communications products primarily due to lower demand and timing of deliveries

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of mobile and ground-based satellite communication systems for the U.S. military. These decreases were partially offset by an increase of $46 million primarily for Space & Power Systems due to increased deliveries of power devices for commercial satellites.

Communication Systems operating income for the year ended December 31, 2014 increased by $29 million, or 17%, compared to the year ended December 31, 2013. Operating margin increased by 220 basis points to 9.7%. Operating margin increased by: (1) 140 basis points due to lower pension expense of $28 million, (2) 50 basis points due to improved productivity, and (3) 30 basis points primarily due to lower development and production costs for Broadband Communication Systems.

Liquidity and Capital Resources

Anticipated Sources and Uses of Cash Flow

At December 31, 2015, we had total cash and cash equivalents of $207 million. While no amounts of the cash and cash equivalents are considered restricted, $153 million was held by the Company’s foreign subsidiaries. The repatriation of cash held in non-U.S. jurisdictions is subject to local capital requirements, as well as income tax considerations. Our primary source of liquidity is cash flow generated from operations and our cash on hand. We generated $1,042 million of net cash from operating activities from continuing operations during the year ended December 31, 2015. Significant cash uses during the year ended December 31, 2015 included $740 million to repurchase shares of our common stock, $320 million related to business acquisitions, $296 million to repurchase $300 million aggregate principal amount of our 3.95% Notes due 2024, $214 million related to dividends and $197 million related to capital expenditures. Additionally, L-3 received net cash proceeds of $318 million for the MSI, BSI, Tinsley Product Line and Klein divestitures.

As of December 31, 2015, we had the full availability of our $1 billion Amended and Restated Revolving Credit Facility (Credit Facility), which expires on February 3, 2017. We currently believe that our cash from operating activities together with our cash on hand and available borrowings under our Credit Facility will be adequate for the foreseeable future to meet our anticipated requirements for working capital, capital expenditures, defined benefit plan contributions, commitments, contingencies, research and development expenditures, select business acquisitions (depending on the size), program and other discretionary investments, interest payments, income tax payments, L-3 Holdings’ dividends and share repurchases. Additionally, we expect to retire approximately $300 million of aggregate principal amount of debt in 2016, using a portion of the proceeds received from the divestiture of NSS, which was completed on February 1, 2016.

Balance Sheet

Billed receivables decreased by $57 million to $746 million at December 31, 2015 from $803 million at December 31, 2014 primarily due to: (1) the timing of billings and collections for Precision Engagement & Training, (2) $16 million for foreign currency translation adjustments, and (3) $12 million from the MSI, BSI, Tinsley Product Line, and Klein business divestitures. These decreases were partially offset by an increase of $21 million from the L-3 CTC, Miteq, and L-3 ForceX business acquisitions.

Contracts in process decreased by $67 million to $2,081 million at December 31, 2015 from $2,148 million at December 31, 2014. During the year ended December 31, 2015, contracts in process decreased: (1) $25 million for foreign currency translation adjustments, (2) $10 million primarily for the MSI, BSI, Tinsley Product Line and Klein business divestitures, and (3) $32 million comprised of:

• decreases of $8 million in unbilled contract receivables primarily due to shipments for Broadband Communication Systems, partially offset by sales exceeding billings for Precision Engagement & Training and

• decreases of $24 million in inventoried contract costs, comprised of decreases for Sensor Systems and Aircraft Systems, partially offset by increases for Broadband Communication Systems due to the timing of deliveries.

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L-3’s receivables days sales outstanding (DSO) was 70 at December 31, 2015, compared with 72 at December 31, 2014. We calculate our DSO by dividing: (1) our aggregate end of period billed receivables and net unbilled contract receivables, by (2) our trailing 12 month sales adjusted, on a pro forma basis, to include sales from business acquisitions and exclude sales from business divestitures that we completed as of the end of the period and discontinued operations, multiplied by the number of calendar days in the trailing 12 month period (365 days at December 31, 2015 and 2014). Our trailing 12 month pro forma sales were $10,314 million at December 31, 2015 and $10,460 million at December 31, 2014. The decrease in DSO during 2015 was primarily due to a decrease in net billed and unbilled contract receivables, which is discussed above.

Inventories increased by $45 million to $333 million at December 31, 2015 from $288 million at December 31, 2014, primarily due to $16 million of acquired inventories from the Miteq business acquisition and for Aviation Products & Security Systems and Space & Power Systems to support customer demand.

The decrease in assets and liabilities held for sale was due to the divestiture of MSI on May 29, 2015.

The decrease in assets of discontinued operations was primarily due to $571 million of goodwill impairment charges relating to the NSS business.

The increase in PP&E was primarily due to capital expenditures exceeding depreciation expense during 2015.

Goodwill decreased by $231 million to $6,281 million at December 31, 2015 from $6,512 million at December 31, 2014. The table below presents the changes in goodwill by segment.

	Electronic     Systems		Aerospace     Systems		Communication Systems		Consolidated  Total
	(in millions)
Balance at December 31, 2014	$	3,773	$	1,730	$	1,009	$	6,512
Business acquisitions(1)		233		—		11		244
Business divestitures(2)		(20)		—		—		(20)
Impairment charges(3)		(26)		(338)		(20)		(384)
Business retained from NSS divestiture		26		—		2		28
Foreign currency translation adjustments(4)		(61)		(39)		1		(99)
Balance at December 31, 2015	$	3,925	$	1,353	$	1,003	$	6,281

⁽¹⁾  The increase in goodwill for the Electronic Systems segment was due to the L-3 CTC and L-3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition.

⁽²⁾  The decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽³⁾  See “Other Events” for a discussion of goodwill impairment charges recorded during 2015.

⁽⁴⁾  The decrease in goodwill presented in the Electronic Systems segment was primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro during 2015. The decrease in goodwill presented in the Aerospace Systems segment was due to the strengthening of the U.S. dollar against the Canadian dollar during 2015.

The increase in identifiable intangible assets was primarily due to $39 million of intangible assets recognized for the L-3 CTC, L-3 ForceX and Miteq business acquisitions, partially offset by amortization expense.

The fluctuations in accounts payable and accrued expenses were primarily due to the timing of when invoices for purchases from third party vendors and subcontractors were received and payments were made, and $11 million of acquired balances from the L-3 CTC, Miteq, and L-3 ForceX business acquisitions.

Accrued employment costs increased primarily due to an increase in accrued salaries and wages due to the timing of payroll dates at the end of 2015 compared to the end of 2014.

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Pension Plans

L-3 maintains defined benefit pension plans covering approximately 29% of its employees. At December 31, 2015, L-3’s projected benefit obligation (PBO), which includes accumulated benefits plus the incremental benefits attributable to projected future salary increases for covered employees, was $3,448 million and exceeded the fair value of L-3’s pension plan assets of $2,552 million by $896 million. At December 31, 2014, L-3’s PBO was $3,663 million and exceeded the fair value of L-3’s pension plan assets of $2,570 million by $1,093 million. The $197 million decrease in our unfunded status was primarily due to the increase in our weighted average discount rate from 4.14% at December 31, 2014 to 4.63% at December 31, 2015 and the divestiture of MSI on May 29, 2015, which included the assumption by Wärtsilä Corporation of MSI’s pension liabilities.

The expected long-term return on plan assets assumption represents the average rate that we expect to earn over the long-term on the assets of our benefit plans, including those from dividends, interest income and capital appreciation. We utilize a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical and forward looking rates of return for each individual asset class. With respect to the determination of our expected long-term return on plan assets assumption for the year ended December 31, 2015, we considered: (1) a 20 year forward looking return on plan assets as developed by our third-party consultant, which is currently 7.99% for our U.S. plans and 7.25% for our Canadian plans and (2) our historical returns. While we review historical rates of return on our plan assets, the substantial volatility in any one year can result in historical data that is less indicative of future returns. Accordingly, we give greater consideration toward forward looking returns in developing our expected long-term return on plan assets assumption. In reviewing our historical returns, we noted that the average annual return on our U.S. pension plan assets over the period since L-3’s formation in 1997 through 2014, net of investment management fees and administrative costs, determined on an arithmetic basis, was 7.73%. Arithmetic annual averages represent the simple average returns over independent annual periods. In addition, the actual annual returns have exceeded our long-term return on plan assets assumption in 11 of the past 18 years since L-3’s formation. Since we have not had a significant change in investment strategy, and based on the forward looking and historical returns on our plan assets discussed above and an allotment for active management, we believe our existing weighted average long-term return on plan assets assumption of 8.13% is within a reasonable range, and determined that our weighted average long-term return on plan assets assumption in 2015 was 8.14%, which has increased slightly due to the effects of weighting the component assumptions for our U.S. and Canadian plan assets.

We recorded net actuarial gains of $132 million in the year ended December 31, 2015 primarily due to the increase in our weighted average discount rate, partially offset by lower than expected actual pension asset returns during 2015 as noted above, which is reflected in accumulated other comprehensive loss. Actuarial gains and losses in a period represent the difference between actual and actuarially assumed experience, primarily due to discount rates and pension plan asset returns. Actuarial gains and losses that our pension plans experience are not recognized in pension expense in the year incurred, but rather are recorded as a component of accumulated other comprehensive income (loss). The accumulated gains and losses in excess of a corridor, defined as the greater of 10% of the fair value of a plan’s assets and 10% of its projected benefit obligation, are generally amortized to pension expense in future periods over the estimated average remaining service periods of the covered employees. See Note 19 to our audited consolidated financial statements for additional information regarding our pension plans.

Our pension expense for 2015 was $139 million. We currently expect pension expense for 2016 to decrease $43 million to approximately $96 million primarily due to the increase in our weighted average discount rates and a change in the approach to measure service and interest costs, partially offset by the impact of lower plan assets resulting from lower than expected actual pension asset returns during 2015.

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Our pension expense for 2016 may be different from our current expectations when finalized due to a number of factors, including the effect of any future business acquisitions and divestitures for which we assume liabilities for pension benefits, changes in headcount at our businesses that sponsor pension plans, actual pension plan contributions and changes (if any) to our pension assumptions for 2016, including the discount rate, mortality rates, expected long-term return on plan assets and salary increases.

Our cash pension contributions for 2015 were $97 million and we currently expect to contribute approximately $100 million to our pension plans in 2016. Actual 2016 pension contributions could be affected by changes in the funded status of our pension plans during 2016. A substantial portion of our pension plan contributions for L-3’s businesses that are U.S. Government contractors are recoverable as allowable indirect contract costs at amounts generally equal to the annual pension contributions.

Our projected benefit obligation and annual pension expense are significantly affected by, holding all other assumptions constant, certain actuarial assumptions. The following table illustrates the sensitivity of a change in certain assumptions for our pension plans and resulting increase (decrease) to the 2016 expected pension expense and PBO at December 31, 2015.

	Effect on 2016 Pension     Expense				Effect on     December 31, 2015     PBO
	(in millions)
25 basis point decrease in discount rate		$	13			$	120
25 basis point increase in discount rate			(13	)			(113	)
25 basis point decrease in expected return on assets			6				N/A
25 basis point increase in expected return on assets			(6	)			N/A

Statement of Cash Flows

The table below provides a summary of our cash flows from (used in) operating, investing, and financing activities for the periods indicated.

	Year Ended December 31,
	2015			2014			2013
	(in millions)
Net cash from operating activities from continuing operations		$      1,042			$      1,071			$      1,156
Net cash used in investing activities from continuing operations		(192	)		(221	)		(256	)
Net cash used in financing activities from continuing operations		(1,178	)		(876	)		(849	)

Operating Activities — Continuing Operations

2015 Compared with 2014. We generated $1,042 million of cash from operating activities during the year ended December 31, 2015, a decrease of $29 million compared with $1,071 million generated during the year ended December 31, 2014. The decrease was due to $348 million of lower income from continuing operations. This decrease was partially offset by increases of: (1) $260 million for higher non-cash expenses related to goodwill impairment charges, net of related tax benefits and (2) $59 million of less cash used for changes in operating assets and liabilities primarily related to trade accounts payable and accrued expenses. The net cash from changes in operating assets and liabilities is further discussed above under “Liquidity and Capital Resources — Balance Sheet.”

2014 Compared with 2013. We generated $1,071 million of cash from operating activities during the year ended December 31, 2014, a decrease of $85 million compared with $1,156 million generated during the year ended December 31, 2013. The decrease was due to $71 million of lower income from continuing operations and

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$28 million of more cash used for changes in operating assets and liabilities primarily related to trade accounts payable. This decrease was partially offset by an increase of $14 million, primarily for higher non-cash expenses related to deferred income taxes, consistent with lower payments for income taxes in 2014 compared to 2013.

Interest Payments. Our cash from operating activities included interest payments on debt of $182 million for the year ended December 31, 2015, $176 million for the year ended December 31, 2014, and $171 million for the year ended December 31, 2013. Our interest expense also included amortization of deferred debt issuance costs and bond discounts, which are non-cash items.

Investing Activities — Continuing Operations

During 2015, we used $192 million of cash primarily to: (1) acquire three businesses discussed under “Business Acquisitions and Divestitures” for $320 million and (2) pay $197 million for capital expenditures. These cash outflows were partially offset by net proceeds received of $318 million from the MSI, BSI, Tinsley Product Line and Klein divestitures.

During 2014, we used $221 million of cash primarily to: (1) acquire L-3 Data Tactics and (2) pay $174 million for capital expenditures.

During 2013, we used $256 million of cash primarily to: (1) acquire the Mustang business and (2) pay $204 million for capital expenditures. These cash outflows were partially offset by proceeds of $12 million from dispositions of property, plant and equipment.

Financing Activities — Continuing Operations

Debt

At December 31, 2015, total outstanding debt was $3,642 million, all of which was senior debt compared to $3,939 million at December 31, 2014. The decrease is primarily due to the repurchase of $300 million of our 3.95% Notes due 2024 on December 22, 2015. We anticipate retiring an additional $300 million of aggregate principal amount of debt in 2016. At December 31, 2015, there were no borrowings or letters of credit outstanding under our $1 billion Credit Facility. Accordingly, we had the full availability of our $1 billion facility for future borrowings. We also had $425 million of outstanding standby letters of credit with financial institutions covering performance and financial guarantees per contractual requirements with certain customers at December 31, 2015. These standby letters of credit may be drawn upon in the event that we do not perform on certain of our contractual requirements. At December 31, 2015, our outstanding debt matures between November 15, 2016 and May 28, 2024. See Note 9 to our audited consolidated financial statements for the components of our debt at December 31, 2015.

On February 24, 2015, Moody’s changed our rating outlook to negative from stable and affirmed our Baa3 senior unsecured rating. On April 29, 2015, Standard and Poor’s also changed our rating outlook to negative from stable and affirmed our BBB- senior unsecured rating. On December 11, 2015, Fitch affirmed our stable outlook and BBB- senior unsecured rating. We consider our credit rating as an important element of our capital allocation strategy and, while no assurances can be given, we intend to maintain our investment grade credit rating.

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Debt Issuances

The terms of each of the outstanding Senior Notes issued by L-3 Communications during the year ended December 31, 2014 are presented in the table below. There were no debt issuances during the years ended December 31, 2015 and 2013. See Note 9 to our audited consolidated financial statements for additional information on the redemption provisions of our outstanding Senior Notes.

Note	Date of Issuance	Amount   Issued		Bond   Discount		Net Cash   Proceeds		Effective Interest Rate	Redemption at Treasury Rate+
		(in millions)
1.50% Senior Notes due May 28, 2017	May 28, 2014	$	350	$	1	$	347	1.55%		10 bps
3.95% Senior Notes due May 28, 2024	May 28, 2014	$	650	$	3	$	641	4.02%		20 bps

Debt Repayments

On December 7, 2015, L-3 Communications commenced a cash tender offer for up to $300 million aggregate principal amount of its 3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 with an early tender date of December 18, 2015. On December 18, 2015, L-3 determined and announced the pricing terms of this cash tender offer, including total consideration of $986.57 per $1,000 principal amount of 3.95% Notes due 2024. On December 22, 2015, $300 million of 3.95% Notes due 2024, accepted by L-3 in connection with the early tender date, were settled for $296 million in cash, plus accrued and unpaid interest, up to but not including the repurchase date. In connection with the repurchase of $300 million of the 3.95% Notes due 2024, we recorded a debt retirement charge of approximately $1 million.

On May 13, 2014, L-3 Holdings called for the redemption of all of its outstanding CODES effective on June 2, 2014 (the Redemption Date). The redemption price for the CODES was $1,000 per $1,000 principal amount of the CODES, plus accrued and unpaid interest to, but excluding, the Redemption Date. Holders of the CODES were entitled to convert all or a portion thereof (in integral multiples of $1,000) at any time prior to the close of business on the business day immediately preceding the Redemption Date. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L-3 Holdings settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, we recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability.

Debt Covenants and Other Provisions. The Credit Facility and Senior Notes contain financial and/or other restrictive covenants. See Note 9 to our audited consolidated financial statements for a description of our debt and related financial covenants and cross default provisions. We were in compliance with our financial and other restrictive covenants at December 31, 2015.

Guarantees. The borrowings under the Credit Facility are fully and unconditionally guaranteed by L-3 Holdings and by substantially all of the material 100% owned domestic subsidiaries of L-3 Communications on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L-3 Communications’ material 100% owned domestic subsidiaries that guarantee any of its other indebtedness. The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

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Equity

During 2015 and 2014, L-3 Holdings’ Board of Directors authorized the following quarterly cash dividends:

Date Declared	Record Date	Cash Dividend Per Share		Total Cash Dividends Declared	Date Paid
				(in millions)
2015
February 10	March 2	$	0.65	$    55(1)	March 16
May 5	May 18	$	0.65	$    54(1)	June 15
June 10	August 17	$	0.65	$    53(1)	September 15
October 20	November 16	$	0.65	$    51(1)	December 15
2014
February 11	March 3	$	0.60	$    53(2)	March 17
May 6	May 19	$	0.60	$    53(2)	June 16
June 24	August 18	$	0.60	$    52(2)	September 15
October 20	November 17	$	0.60	$    51(2)	December 15

⁽¹⁾  During the year ended December 31, 2015, we paid $214 million of cash dividends, including a $1 million net reduction of accrued dividends for employee held stock rewards.

⁽²⁾  During the year ended December 31, 2014, we paid $208 million of cash dividends, including a $1 million net increase of accrued dividends for employee held stock awards.

L-3 Holdings repurchased $740 million, or 6.4 million shares, of its common stock during the year ended December 31, 2015 compared to $823 million, or 6.9 million shares, of its common stock during the year ended December 31, 2014.

L-3 Holdings announced, on February 9, 2016, that its Board of Directors had increased L-3 Holdings’ regular quarterly cash dividend by 8% to $0.70 per share, payable on March 15, 2016, to shareholders of record at the close of business on March 1, 2016.

The number of holders of L-3 Holdings’ common stock, on February 19, 2016, was 26,848. On February 19, 2016, the closing price of L-3 Holdings’ common stock, as reported by the NYSE, was $117.56 per share.

Contractual Obligations

The table below presents our estimated total contractual obligations from our continuing operations at December 31, 2015, including the amounts expected to be paid or settled for each of the periods indicated below.

			Payments due by Period
	Total		Less than 1 year			1 – 3 years		3 – 5 years			More than 5 years
			(in millions)
Contractual Obligations
Debt, including current portion(1)	$	3,650		$       500		$	350	$	1,800		$	1,000
Interest payments(2)		720		161			275		220			64
Non-cancelable operating leases(3)		527		80			149		137	(4)		161
Notes payable and capital lease obligations		10		—			2		1			7
Purchase obligations(5)		1,874		1,640			202		9			23
Other long-term liabilities(6)		246		114	(7)		85		12			35
Total(8)	$	7,027	$	2,495		$	1,063	$	2,179		$	1,290

⁽¹⁾  Represents principal amount of debt and only includes scheduled principal payments.

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⁽²⁾  Represents expected interest payments on L-3’s debt balance as of December 31, 2015 using the stated interest rate on our fixed rate debt, assuming that current borrowings remain outstanding to the contractual maturity date.

⁽³⁾  Non-cancelable operating leases are presented net of estimated sublease rental income.

⁽⁴⁾  Includes the residual value guarantee for three real estate lease agreements, expiring on August 31, 2020, that are accounted for as operating leases. We have the right to exercise options under the lease agreements to renew the leases, to purchase the properties for $45 million or sell the properties on behalf of the lessor. If we elect to sell the properties, we must pay the lessor a residual value guarantee of $39 million. See Note 18 to our audited consolidated financial statements for a further description of these leases.

⁽⁵⁾  Represents open purchase orders at December 31, 2015 for amounts expected to be paid for goods or services that are legally binding.

⁽⁶⁾  Other long-term liabilities primarily consist of workers compensation and deferred compensation for the years ending December 31, 2017 and thereafter and also include pension and postretirement benefit plan contributions that we expect to pay in 2016.

⁽⁷⁾  Our pension and postretirement benefit plan funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. For 2016, we expect to contribute approximately $100 million to our pension plans and approximately $10 million to our postretirement benefit plans. Due to the current uncertainty of the amounts used to compute our expected pension and postretirement benefit plan funding, we believe it is not practicable to reasonably estimate such future funding for periods in excess of one year and we may decide or be required to contribute more than we expect to our pension and postretirement benefit plans.

⁽⁸⁾  Excludes all income tax obligations, a portion of which represents unrecognized tax benefits in connection with uncertain tax positions taken, or expected to be taken on our income tax returns as of December 31, 2015 since we cannot determine the time period of future tax consequences. For additional information regarding income taxes, see Note 16 to our audited consolidated financial statements.

We also may enter into industrial cooperation agreements, sometimes referred to as offset agreements, as a condition to obtaining orders for our products and services from certain customers in foreign countries. These agreements are designed to enhance the social and economic environment of the foreign country by requiring the contractor to promote investment in the country. Offset agreements may be satisfied through activities that do not require us to use cash, including transferring technology, providing manufacturing and other consulting support to in-country projects and the purchase by third parties of supplies from in-country vendors. These agreements also may be satisfied through our use of cash for such activities as purchasing supplies from in-country vendors, providing financial support for in-country projects, establishment of ventures with local companies and building or leasing facilities for in-country operations. We typically do not commit to offset agreements until orders for our products or services are definitive. The amounts ultimately applied against our offset agreements are based on negotiations with the customer and typically require cash outlays that represent only a fraction of the original amount in the offset agreement. The costs to satisfy our offset obligations are included in the estimates of our total costs to complete the contract and may impact our profitability and cash flows. The ability to recover investments that we make are generally dependent upon the successful operation of ventures that we do not control and may involve products and services that are dissimilar to our business activities. At December 31, 2015, the remaining obligations under our outstanding offset agreements totaled $1.5 billion, which primarily relate to our Aerospace Systems and Electronic Systems segments, some of which extend through 2028. To the extent we have entered into purchase obligations at December 31, 2015 that also satisfy offset agreements, those amounts are included in the preceding table. Offset programs usually extend over several years and may provide for penalties, estimated at approximately $104 million at December 31, 2015, in the event we fail to perform in accordance with offset requirements. While historically we have not been required to pay material penalties, resolution of offset requirements are often the result of negotiations and subjective judgments.

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Off Balance Sheet Arrangements

The table below presents our estimated total contingent commitments and other guarantees at December 31, 2015, including the amounts expected to be paid or settled for each of the periods indicated below.

	Total		Commitment Expiration by Period
			2016		2017-2018		2019-2020		2021 and     thereafter
	(in millions)
Contingent Commitments
Other standby letters of credit(1)	$	425	$	289	$	93	$	42		$    1
Other guarantees(2)		7		—		7		—		—
Total(3)	$	432	$	289	$	100	$	42		$    1

⁽¹⁾  Represents outstanding letters of credit with financial institutions covering performance and financial guarantees per contractual requirements with certain customers. These letters of credit may be drawn upon in the event of L-3’s nonperformance.

⁽²⁾  Represents the minimum guarantees made by L-3 or the lessee under the purchase option for certain operating leases in which the lease renewal is not exercised (see Note 18 to our audited consolidated financial statements for a description of these guarantees).

⁽³⁾  The total amount does not include residual value guarantees for two real estate lease agreements, expiring on August 31, 2020, that are accounted for as operating leases. We have the right to exercise options under the lease agreements to purchase both properties for $45 million on or before August 31, 2020. See Note 18 to our audited consolidated financial statements for a further description of these leases.

Legal Proceedings and Contingencies

We are engaged in providing products and services under contracts with the U.S. Government and, to a lesser degree, under foreign government contracts, some of which are funded by the U.S. Government. All such contracts are subject to extensive legal and regulatory requirements, and, periodically, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. Under U.S. Government procurement regulations, an indictment by a federal grand jury, or an administrative finding against us as to our present responsibility to be a U.S. Government contractor or subcontractor, could result in the suspension for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges, and could have a material adverse effect on our results of operations and cash flows. A conviction, or an administrative finding that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term and could have a material adverse effect on our results of operations and cash flows. We are currently cooperating with the U.S. Government on several investigations, none of which we anticipate will have a material adverse effect on our results of operations or cash flows. Also, we have been periodically subject to litigation, government investigations, proceedings, claims or assessments and various contingent liabilities incidental to our business. We accrue for these contingencies when it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated. For a description of our legal proceedings and contingencies, see Note 18 to our audited consolidated financial statements.

We continually assess our obligations with respect to applicable environmental protection laws. While it is difficult to determine the timing and ultimate cost that we will incur to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which we are aware, we believe that even without considering potential insurance recoveries, if any, there are no environmental loss contingencies that, in the aggregate, would be material to our consolidated financial position, results of operations or cash flows.

Derivative Financial Instruments and Other Market Risk

Included in our derivative financial instruments are foreign currency forward contracts. All of our derivative financial instruments that are sensitive to market risk are entered into for purposes other than trading.

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Interest Rate Risk. Our Credit Facility is subject to variable interest and is therefore sensitive to changes in interest rates. The interest rates on the Senior Notes are fixed-rate and are not affected by changes in interest rates. Additional data on our debt obligations and our applicable borrowing spreads included in the interest rates we would pay on borrowings under the Credit Facility, if any, are provided in Note 9 to our audited consolidated financial statements.

Foreign Currency Exchange Risk. Our U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, we enter into foreign currency forward contracts, which are generally designated and accounted for as cash flow hedges. At December 31, 2015, our foreign currency forward contracts had maturities ranging through 2020, a notional value of $265 million and a corresponding net fair value that was a liability of $14 million.

Accounting Standards Issued and Not Yet Implemented

For a discussion of accounting standards issued and not yet implemented, see Note 2 to our audited consolidated financial statements.

Inflation

The effect of inflation on our sales and earnings has not been significant. Although a majority of our sales are made under long-term contracts (revenue arrangements), the selling prices of such contracts, established for deliveries in the future, generally reflect estimated costs to be incurred in these future periods. In addition, some of our contracts provide for price adjustments through cost escalation clauses.

Forward-Looking Statements

Certain of the matters discussed concerning our operations, cash flows, financial position, economic performance and financial condition, including in particular, the likelihood of our success in developing and expanding our business and the realization of sales from backlog, include forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act.

All statements other than historical facts may be forward-looking statements, such as “may,” “will,” “should,” “likely,” “projects,” “expects,” “anticipates,” “intends,” “plans,” “believes,” “estimates,” and similar expressions are used to identify forward-looking statements. We caution investors that these statements are subject to risks and uncertainties many of which are difficult to predict and generally beyond our control that could cause actual results to differ materially from those expressed in, or implied or projected by, the forward-looking information and statements. Some of the factors that could cause actual results to differ include, but are not limited to, the following: our dependence on the defense industry; backlog processing and program slips resulting from delayed awards and/or funding from the DoD and other major customers; the U.S. Government fiscal situation; changes in DoD budget levels and spending priorities; U.S. Government failure to raise the debt ceiling; our reliance on contracts with a limited number of customers and the possibility of termination of government contracts by unilateral government action or for failure to perform; the extensive legal and regulatory requirements surrounding many of our contracts; our ability to retain our existing business and related contracts; our ability to successfully compete for and win new business; or, identify, acquire and integrate additional businesses; our ability to maintain and improve our operating margin; the availability of government funding and changes in customer requirements for our products and services; our significant amount of debt and the restrictions contained in our debt agreements and actions taken by rating agencies that could result in a downgrade of our debt; our ability to continue to recruit, retain and train our employees; actual future interest rates, volatility and other assumptions used in the determination of pension benefits and equity based compensation, as well as the market performance of benefit plan assets; our collective bargaining agreements, our ability to successfully negotiate contracts with labor unions and our ability to favorably resolve labor disputes

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should they arise; the business, economic and political conditions in the markets in which we operate; global economic uncertainty; the DoD’s Better Buying Power and other efficiency initiatives; events beyond our control such as acts of terrorism; our ability to perform contracts on schedule; our international operations including currency risks and compliance with foreign laws; our extensive use of fixed-price type revenue arrangements; the rapid change of technology and high level of competition in which our businesses participate; risks relating to technology and data security; our introduction of new products into commercial markets or our investments in civil and commercial products or companies; the outcome of litigation matters; results of audits by U.S. Government agencies and of ongoing governmental investigations, including the Aerospace Systems segment; our ability to predict the level of participation in, and the related costs of, our voluntary return program for certain EoTech holographic weapons sight products, and our ability to change and terminate the voluntary return program at our discretion; the impact on our business of improper conduct by our employees, agents or business partners; goodwill impairments and the fair values of our assets; and the ultimate resolution of contingent matters, claims and investigations relating to acquired businesses, and the impact on the final purchase price allocations.

In addition, for a discussion of other risks and uncertainties that could impair our results of operations or financial condition, see “Part I — Item 1A — Risk Factors” and Note 18 to our audited consolidated financial statements, in each case included in this Annual Report on Form 10-K for the year ended December 31, 2015 and any material updates to these factors contained in any of our future filings.

Readers of this document are cautioned that our forward-looking statements are not guarantees of future performance and the actual results or developments may differ materially from the expectations expressed in the forward-looking statements.

As for the forward-looking statements that relate to future financial results and other projections, actual results will be different due to the inherent uncertainties of estimates, forecasts and projections and may be better or worse than projected and such differences could be material. Given these uncertainties, you should not place any reliance on these forward-looking statements. These forward-looking statements also represent our estimates and assumptions only as of the date that they were made. We expressly disclaim a duty to provide updates to these forward-looking statements, and the estimates and assumptions associated with them, after the date of this filing, to reflect events or changes in circumstances or changes in expectations or the occurrence of anticipated events.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

For data regarding quantitative and qualitative disclosures related to our market risk sensitive financial instruments, see “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources — Derivative Financial Instruments and Other Market Risk” and Note 13 to our audited consolidated financial statements. See Notes 12 and 14 to our audited consolidated financial statements for the aggregate fair values and notional amounts of our foreign currency forward contracts at December 31, 2015.

Item 8. Financial Statements and Supplementary Data

See our audited consolidated financial statements beginning on page F-1.

Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

None.

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Item 9A. Controls and Procedures

Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to provide reasonable assurance that information required to be disclosed in our reports that we file or submit under the Securities Exchange Act of 1934 related to L-3 Holdings and L-3 Communications is recorded, processed, summarized and reported within the time periods specified in the SEC rules and forms, and that such information is accumulated and communicated to our management, including our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, to allow timely decisions regarding required disclosures. Any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. Our management, with the participation of our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer, has evaluated the effectiveness of the design and operation of our disclosure controls and procedures as of December 31, 2015. Based upon that evaluation, our Chairman and Chief Executive Officer and our Senior Vice President and Chief Financial Officer concluded that, as of December 31, 2015, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

Management’s Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our consolidated financial statements for external purposes in accordance with generally accepted accounting principles. Our internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of L-3 Holdings and L-3 Communications, (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of consolidated financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the consolidated financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements in our consolidated financial statements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the effectiveness of L-3 Holdings’ and L-3 Communications’ internal control over financial reporting as of December 31, 2015. In making these assessments, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control —Integrated Framework, issued in 2013. Based on our assessments and those criteria, management determined that L-3 Holdings and L-3 Communications maintained effective internal control over financial reporting as of December 31, 2015.

The effectiveness of the Company’s internal control over financial reporting as of December 31, 2015 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, as stated in their report. See page F-2 to our audited consolidated financial statements for their report.

Remediation of Material Weaknesses in Internal Control Over Financial Reporting

As previously disclosed in Management’s Report on Internal Control Over Financial Reporting included in the company’s Annual Report on Form 10-K for the year ended December 31, 2014, our management previously

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identified two material weaknesses: (1) ineffective control environment at its Aerospace Systems segment and (2) insufficient and ineffective review of certain employee concerns regarding violations of the company’s accounting policies and internal controls over financial reporting by company personnel. To remediate these material weaknesses, the company: (1) terminated and replaced certain senior level employees at the Aerospace Systems segment, Logistics Solutions sector, Platform Integration division and Army Sustainment division, (2) expanded the financial reporting leadership team at the Aerospace Systems segment by establishing and filling a controller position, (3) provided additional training for financial management personnel at the Aerospace Systems segment and its divisions with regard to the company’s accounting policies and internal controls over financial reporting, (4) strengthened procedures for the review of employee concerns by designating senior level employees to oversee and manage the investigations of alleged violations of the Company’s accounting policies and internal controls over financial reporting and (5) appointed a new vice president and corporate ethics officer.

The Company tested the controls and found them to be effective. As a result, the Company has concluded that, as of December 31, 2015, these two material weaknesses have been remediated.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the quarter ended December 31, 2015 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

Item 9B. Other Information

None.

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PART III

Item 10. Directors, Executive Officers and Corporate Governance

The Company posts its Code of Ethics and Business Conduct on the Corporate Governance webpage of its website at http://www.L-3com.com under the link “Code of Ethics and Business Conduct.” The Company’s Code of Ethics and Business Conduct applies to all directors, officers and employees, including our chairman and chief executive officer, our senior vice president and chief financial officer, and our corporate controller and principal accounting officer. We will post any amendments to the Code of Ethics and Business Conduct, and any waivers that are required to be disclosed by the rules of either the SEC or the NYSE, on our website within the required periods.

The remaining information called for by Item 10 will be included in the sections captioned “Proposal 1. Election of Directors,” “Continuing Members of the Board of Directors,” “Executives and Certain Other Officers of the Company,” “Section 16(A) Beneficial Ownership Reporting Compliance” and “The Board of Directors and Certain Governance Matters” in the definitive proxy statement (the “Company’s Proxy Statement”) relating to the Company’s 2016 Annual Meeting of Shareholders, to be held on May 2, 2016, and is incorporated herein by reference. L-3 Holdings will file its proxy statement with the SEC pursuant to Regulation 14A within 120 days after the end of its 2015 fiscal year covered by this Form 10-K.

Item 11. Executive Compensation

The “Compensation Discussion and Analysis,” “Compensation Committee Report,” “Tabular Executive Compensation Disclosure,” “Compensation of Directors” and “Compensation Committee Interlocks and Insider Participation” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The “Security Ownership of Certain Beneficial Owners,” “Security Ownership of Management” and “Equity Compensation Plan Information” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 13. Certain Relationships and Related Transactions, and Director Independence

The “Certain Relationships and Related Transactions” and “The Board of Directors and Certain Governance Matters” sections of the Company’s Proxy Statement are incorporated herein by reference.

Item 14. Principal Accountant Fees and Services

The “Independent Registered Public Accounting Firm Fees” section of the Company’s Proxy Statement is incorporated herein by reference.

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PART IV

Item 15. Exhibits, Financial Statement Schedules

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than with respect to the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by us in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs as of the date they were made or at any other time.

(a)(1) Financial statements filed as part of this report:

	Page         Number
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014		F-3
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013		F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013		F-5
Consolidated Statements of Equity for the years ended December 31, 2015, 2014 and 2013		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013		F-7
Notes to Consolidated Financial Statements		F-8

(a)(2) Financial Statement Schedules

Financial statement schedules are omitted since the required information is either not applicable or is included in our audited consolidated financial statements.

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Exhibits

Exhibit                      No.	Description of Exhibits
2.1	Distribution Agreement between L-3 Communications Holdings, Inc. and Engility Holdings, Inc. dated as of July 16, 2012 (incorporated by reference to Exhibit 2.1 to the Registrants’ Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File Nos. 001-14141 and 333-46983)).
2.2	Stock Purchase Agreement, dated as of December 7, 2015, by and among L-3 Communications Corporation, CACI International Inc and CACI, Inc.-Federal (incorporated by reference to Exhibit 2.1 to the Registrants’ Current Report on Form 8-K filed on December 11, 2015 (File Nos. 001-14141 and 333-46983)).
3.1	Amended and Restated Certificate of Incorporation of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 3.1 to the Registrants’ Current Report on Form 8-K filed on May 2, 2013 (File Nos. 001-14141 and 333-46983)).
*3.2	Amended and Restated By-Laws of L-3 Communications Holdings, Inc.
3.3	Certificate of Incorporation of L-3 Communications Corporation (incorporated by reference to Exhibit 3.1 to L-3 Communications Corporation’s Registration Statement on Form S-4/A filed on September 12, 1997 (File No. 333-31649)).
3.4	Amended and Restated By-laws of L-3 Communications Corporation (incorporated by reference to Exhibit 3.2 to the Registrants’ Current Report on Form 8-K filed on December 17, 2007 (File Nos. 001-14141 and 333-46983)).
4.1	Form of Common Stock Certificate of L-3 Communications Holdings, Inc. (incorporated by reference to Exhibit 4.1 to the Registrants’ Quarterly Report on Form 10-Q for the quarter ended June 25, 2010 (File Nos. 001-14141 and 333-46983)).
4.2	Indenture dated as of October 2, 2009 among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.15 to the Registrants’ Quarterly Report on Form 10-Q for the quarter ended September 25, 2009 (File Nos. 001-14141 and 333-46983)).
4.3	Supplemental Indenture dated as of February 3, 2012 among L-3 Communications Corporation, The Bank of New York Mellon, as Trustee, and the guarantors named therein to the Indenture dated as of October 2, 2009 among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon, as Trustee (incorporated by reference to Exhibit 4.7 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2011 (File Nos. 001-14141 and 333-46983)).
4.4	Indenture, dated as of May 21, 2010, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.1 to the Registrants’ Current Report on Form 8-K dated May 24, 2010 (File Nos. 001-14141 and 333-46983)).
4.5	First Supplemental Indenture, dated as of May 21, 2010, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Registrants’ Current Report on Form 8-K dated May 24, 2010 (File Nos. 001-14141 and 333-46983)).
4.6	Second Supplemental Indenture, dated as of February 7, 2011, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A., as Trustee (incorporated by reference to Exhibit 4.2 to the Registrants’ Current Report on Form 8-K dated February 8, 2011 (File Nos. 001-14141 and 333-46983)).
4.7	Third Supplemental Indenture, dated as of November 22, 2011, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrants’ Current Report on Form 8-K dated November 22, 2011 (File Nos. 001-14141 and 333-46983)).

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Exhibit                      No.	Description of Exhibits
4.8	Fourth Supplemental Indenture, dated as of February 3, 2012, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.12 to the Registrants’ Annual Report on Form 10-K for the fiscal year ended December 31, 2011 (File Nos. 001-14141 and 333-46983)).
4.9	Fifth Supplemental Indenture, dated as of May 28, 2014, among L-3 Communications Corporation, the guarantors named therein and The Bank of New York Mellon Trust Company, N.A, as Trustee (incorporated by reference to Exhibit 4.2 to the Registrants’ Current Report on Form 8-K dated May 28, 2014 (File Nos. 001-14141 and 333-46983)).
10.1	Amended and Restated Credit Agreement, dated as of February 3, 2012, among L-3 Communications Corporation, L-3 Communications Holdings, Inc. and certain subsidiaries of the Registrants from time to time party thereto as guarantors, certain lenders from time to time party thereto, and Bank of America, N.A., as administrative agent (incorporated by reference to Exhibit 10.1 to the Registrants’ Current Report on Form 8-K dated February 3, 2012 (File Nos. 001-14141 and 333-46983)).
†10.2	L-3 Communications Holdings, Inc. Amended and Restated 1998 Directors Stock Option Plan for Non-Employee Directors (incorporated by reference to Exhibit 10.16 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2006 (File Nos. 001-14141 and 333-46983)).
†10.3	Form of L-3 Communications Holdings, Inc. 1998 Directors Stock Option Plan Nonqualified Stock Option Agreement (incorporated by reference to Exhibit 10.96 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2004 (File Nos. 001-14141 and 333-46983)).
†10.4	Form of L-3 Communications Holdings, Inc. 1998 Directors Stock Option Plan Nonqualified Stock Option Agreement (2007 Version) (incorporated by reference to Exhibit 10.3 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2007 (File Nos. 001-14141 and 333-46983)).
†10.5	L-3 Communications Holdings, Inc. Amended and Restated 1999 Long Term Performance Plan (Conformed copy reflecting all amendments through February 11, 2008) (incorporated by reference to Exhibit 10.4 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2007 (File Nos. 001-14141 and 333-46983)).
†10.6	Form of L-3 Communications Holdings, Inc. 1999 Long Term Performance Plan Nonqualified Stock Option Agreement (2006 Version) (incorporated by reference to Exhibit 10.64 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2006 (File Nos. 001-14141 and 333-46983)).
†10.7	L-3 Communications Holdings, Inc. 2008 Amended and Restated Long Term Performance Plan (incorporated by reference to Exhibit 10.10 to the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2013 (File Nos. 001-14141 and 333-46983)).
†10.8	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2008 Version) (incorporated by reference to Exhibit 10.2 of the Registrants’ Quarterly Report on Form 10-Q for the period ended June 27, 2008 (File Nos. 001-14141 and 333-46983)).
†10.9	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2009 Version) (incorporated by reference to Exhibit 10.1 of the Registrants’ Quarterly Report on Form 10-Q for the period ended June 26, 2009 (File Nos. 001-14141 and 333-46983)).
†10.10	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2011 Version) (incorporated by reference to Exhibit 10.12 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2010 (file Nos. 001-14141 and 333-46983)).

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Exhibit                      No.	Description of Exhibits
†10.11	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2014 Version) (incorporated by reference to Exhibit 10.3 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.12	Form of Amended and Restated L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2011 and 2012 CEO Version) (incorporated by reference to Exhibit 10.14 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2012 (File Nos. 001-14141 and 333-46983)).
†10.13	Form of Amended and Restated L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2013 CEO Version) (incorporated by reference to Exhibit 10.4 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.14	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2014 CEO Version) (incorporated by reference to Exhibit 10.3 of the Registrants’ Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File Nos. 001-14141 and 333-46983)).
†10.15	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Nonqualified Stock Option Agreement (2015 CEO Version) (incorporated by reference to Exhibit 10.1 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File Nos. 001-14141 and 333-46983)).
†10.16	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2009 Version) (incorporated by reference to Exhibit 10.17 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2008 (File Nos. 001-14141 and 333-46983)).
†10.17	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Version) (incorporated by reference to Exhibit 10.5 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.18	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2013 CEO Version) (incorporated by reference to Exhibit 10.5 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.19	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 CEO Version) (incorporated by reference to Exhibit 10.6 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.20	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2013 Senior Executive Version) (incorporated by reference to Exhibit 10.6 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.21	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Senior Executive Version) (incorporated by reference to Exhibit 10.7 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.22	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2013 Non-Employee Directors Version) (incorporated by reference to Exhibit 10.7 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.23	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Non-Employee Directors Annual Equity Award Version) (incorporated by reference to Exhibit 10.4 of the Registrants’ Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File Nos. 001-14141 and 333-46983)).

78

Exhibit                      No.	Description of Exhibits
†10.24	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Restricted Stock Unit Agreement (2014 Non-Employee Directors Deferred Compensation Version) (incorporated by reference to Exhibit 10.5 of the Registrants’ Quarterly Report on Form 10-Q for the period ended June 27, 2014 (File Nos. 001-14141 and 333-46983)).
†10.25	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Agreement (2012 Version) (incorporated by reference to Exhibit 10.18 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2011 (File Nos. 001-14141 and 333-46983)).
†10.26	Form of Amended and Restated L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2013 Version) (incorporated by reference to Exhibit 10.8 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.27	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Agreement (2014 Version) (incorporated by reference to Exhibit 10.8 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.28	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2014 Version) (incorporated by reference to Exhibit 10.9 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.29	Form of L-3 Communications Holdings, Inc. 2008 Long Term Performance Plan Performance Unit Award Notice (2015 Version) (incorporated by reference to Exhibit 10.2 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File Nos. 001-14141 and 333-46983)).
†10.30	L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan (incorporated by reference to Exhibit 10.1 to the Registrants’ Quarterly Report on Form 10-Q for the period ended March 30, 2012 (File Nos. 001-14141 and 333-46983)).
†10.31	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Agreement (2012 version) (incorporated by reference to Exhibit 10.2 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 30, 2012 (File Nos. 001-14141 and 333-46983)).
†10.32	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2013 Version) (incorporated by reference to Exhibit 10.9 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.33	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Agreement (2014 Version) (incorporated by reference to Exhibit 10.10 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.34	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2014 Version) (incorporated by reference to Exhibit 10.11 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 28, 2014 (File Nos. 001-14141 and 333-46983)).
†10.35	Form of L-3 Communications Holdings, Inc. 2012 Cash Incentive Plan Performance Cash Award Notice (2015 Version) (incorporated by reference to Exhibit 10.3 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 27, 2015 (File Nos. 001-14141 and 333-46983)).
†10.36	L-3 Communications Holdings, Inc. Amended and Restated 2008 Directors Stock Incentive Plan (incorporated by reference to Exhibit 10.24 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2012 (File Nos. 001-14141 and 333-46983)).

79

Exhibit                      No.	Description of Exhibits
†10.37	Form of L-3 Communications Holdings, Inc. 2008 Directors Stock Incentive Plan Restricted Stock Unit Agreement (incorporated by reference to Exhibit 10.2 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 27, 2009 (File Nos. 001-14141 and 333-46983)).
†10.38	Global Spin-Off Amendment to Equity Award Agreements dated as of July 18, 2012 (incorporated by reference to Exhibit 10.26 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2012 (File Nos. 001-14141 and 333-46983)).
†10.39	Global Amendment to Non-Employee Director RSU Agreements dated as of April 30, 2013 (incorporated by reference to Exhibit 10.10 of the Registrants’ Quarterly Report on Form 10-Q for the period ended March 29, 2013 (File Nos. 001-14141 and 333-46983)).
†10.40	L-3 Communications Holdings, Inc. Amended and Restated Change in Control Severance Plan (incorporated by reference to Exhibit 10.21 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2008 (File Nos. 001-14141 and 333-46983)).
†10.41	L-3 Communications Corporation Amended and Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.22 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2008 (File Nos. 001-14141 and 333-46983)).
†10.42	Amendment 2012-2 to the L-3 Communications Corporation Amended and Restated Supplemental Executive Retirement Plan (incorporated by reference to Exhibit 10.29 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2012 (File Nos. 001-14141 and 333-46983)).
*†10.43	Amendment 2015-1 to the L-3 Communications Corporation Amended and Restated Supplemental Executive Retirement Plan.
†10.44	L-3 Communications Corporation Deferred Compensation Plan I (incorporated by reference to Exhibit 10.15 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2007 (File Nos. 001-14141 and 333-46983)).
†10.45	Amendment No. 1 to the L-3 Communications Corporation Deferred Compensation Plan I (incorporated by reference to Exhibit 10.16 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2007 (File Nos. 001-14141 and 333-46983)).
†10.46	L-3 Communications Corporation Deferred Compensation Plan II (incorporated by reference to Exhibit 10.25 of the Registrants’ Annual Report on Form 10-K for the year ended December 31, 2008 (File Nos. 001-14141 and 333-46983)).
10.47	Tax Matters Agreement between L-3 Communications Holdings, Inc. and Engility Holdings, Inc. dated as of July 16, 2012 (incorporated by reference to Exhibit 10.2 to the Registrants’ Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File Nos. 001-14141 and 333-46983)).
+10.48	Master Supply Agreement between L-3 Communications Corporation (as Seller) and Engility Corporation (as Buyer) dated as of July 16, 2012 (incorporated by reference to Exhibit 10.4 to the Registrants’ Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File Nos. 001-14141 and 333-46983)).
+10.49	Master Supply Agreement between L-3 Communications Corporation (as Buyer) and Engility Corporation (as Seller) dated as of July 16, 2012 (incorporated by reference to Exhibit 10.5 to the Registrants’ Quarterly Report on Form 10-Q for the period ended September 28, 2012 (File Nos. 001-14141 and 333-46983)).
**11	L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Common Share.
*21	Subsidiaries of the Registrant.
*23	Consent of PricewaterhouseCoopers LLP.
*31.1	Certification of Chairman and Chief Executive Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.

80

Exhibit                      No.	Description of Exhibits
*31.2	Certification of Senior Vice President and Chief Financial Officer pursuant to Rule 13a-14(a) and Rule 15d-14(a) of the Securities Exchange Act of 1934, as amended.
*32	Section 1350 Certification.
***101.INS	XBRL Instance Document
***101.SCH	XBRL Taxonomy Extension Schema Document
***101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
***101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
***101.LAB	XBRL Taxonomy Extension Label Linkbase Document
***101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

* Filed herewith.

** The information required in this exhibit is presented in Note 15 to the consolidated financial statements as of December 31, 2015 in accordance with the provisions of ASC 260, Earnings Per Share.

*** Filed electronically with this report.

† Represents management contract, compensatory plan or arrangement in which directors and/or executive officers are entitled to participate.

+ Pursuant to a request for confidential treatment, portions of these exhibits have been redacted from the publicly filed document and have been furnished separately to the Securities and Exchange Commission as required by Rule 24b-2 under the Securities Exchange Act of 1934, as amended.

The agreements and other documents filed as exhibits to this report are not intended to provide factual information or other disclosure other than the terms of the agreements or other documents themselves, and you should not rely on them for that purpose. In particular, any representations and warranties made by the Company in these agreements or other documents were made solely within the specific context of the relevant agreement or document and may not describe the actual state of affairs at the date they were made or at any other time.

81

Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrants have duly caused this report to be signed on their behalf by the undersigned, thereunto duly authorized.

L-3 COMMUNICATIONS HOLDINGS, INC.

L-3 COMMUNICATIONS CORPORATION

By: /s/ RALPH G. D’AMBROSIO

Title: Senior Vice President and Chief Financial Officer

Date: February 26, 2016

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrants in the capacities indicated on February 26, 2016.

Signature	Title
/S/ MICHAEL T. STRIANESE	Chairman and Chief Executive Officer
Michael T. Strianese	(Principal Executive Officer) and Director
/S/ RALPH G. D’AMBROSIO	Senior Vice President and Chief Financial Officer
Ralph G. D’Ambrosio	(Principal Financial Officer)
/S/ DAN AZMON	Vice President, Controller and Principal Accounting Officer
Dan Azmon
/S/ ROBERT B. MILLARD	Lead Director
Robert B. Millard
/S/ CLAUDE R. CANIZARES	Director
Claude R. Canizares
/S/ THOMAS A. CORCORAN	Director
Thomas A. Corcoran
/S/ ANN E. DUNWOODY	Director
Ann E. Dunwoody
/S/ LEWIS KRAMER	Director
Lewis Kramer
/S/ LLOYD W. NEWTON	Director
Lloyd W. Newton
/S/ VINCENT PAGANO, JR.	Director
Vincent Pagano, Jr.
/S/ H. HUGH SHELTON	Director
H. Hugh Shelton
/S/ ARTHUR L. SIMON	Director
Arthur L. Simon

82

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Financial Statements as of December 31, 2015 and 2014 and for the years ended December 31, 2015, 2014 and 2013.

	Page         No.
Report of Independent Registered Public Accounting Firm		F-2
Consolidated Balance Sheets as of December 31, 2015 and December 31, 2014		F-3
Consolidated Statements of Operations for the years ended December 31, 2015, 2014 and 2013		F-4
Consolidated Statements of Comprehensive Income for the years ended December 31, 2015, 2014 and 2013		F-5
Consolidated Statements of Equity for the years ended December 31, 2015, 2014 and 2013		F-6
Consolidated Statements of Cash Flows for the years ended December 31, 2015, 2014 and 2013		F-7
Notes to Consolidated Financial Statements		F-8

F-1

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of L-3 Communications Holdings, Inc. and L-3 Communications Corporation:

In our opinion, the accompanying (1) consolidated balance sheets of L-3 Communications Holdings, Inc., and the related consolidated statements of operations, comprehensive income, equity, and cash flows, and (2) consolidated balance sheets of L-3 Communications Corporation, and the related consolidated statements of operations, comprehensive income, equity, and cash flows present fairly, in all material respects, the financial positions of (1) L-3 Communications Holdings, Inc. and its subsidiaries and (2) L-3 Communications Corporation and its subsidiaries as of December 31, 2015 and 2014, and the results of the operations and the cash flows of (1) L-3 Communications Holdings, Inc. and its subsidiaries and (2) L-3 Communications Corporation and its subsidiaries for each of the three years in the period ended December 31, 2015 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, L-3 Communications Holdings, Inc. and L-3 Communications Corporation maintained, in all material respects, effective internal control over financial reporting as of December 31, 2015, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). The management of L-3 Communications Holdings, Inc. and L-3 Communications Corporation are responsible for these financial statements, for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in Management’s Report on Internal Control over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on these financial statements and on the internal control over financial reporting of L-3 Communications Holdings, Inc. and of L-3 Communications Corporation based on our integrated audits. We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the financial statements included examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

As discussed in Notes 2 and 19 to the consolidated financial statements, L-3 Communications Holdings, Inc. and L-3 Communications Corporation changed the manner in which they classify and present deferred income taxes and the manner in which they present the leveling classification of pension assets in 2015.

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

/s/ PricewaterhouseCoopers LLP

New York, New York

February 26, 2016

F-2

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	December 31,
	2015		2014
ASSETS
Current assets:
Cash and cash equivalents	$	207	$	442
Billed receivables, net of allowances of $15 in 2015 and $13 in 2014		746		803
Contracts in process		2,081		2,148
Inventories		333		288
Other current assets		201		175
Assets held for sale		—		547
Assets of discontinued operations		664		1,262
Total current assets		4,232		5,665
Property, plant and equipment, net		1,097		1,061
Goodwill		6,281		6,512
Identifiable intangible assets		199		195
Deferred debt issue costs		18		27
Deferred income taxes		3		15
Other assets		255		240
Total assets	$	12,085	$	13,715
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	499	$	—
Accounts payable, trade		297		346
Accrued employment costs		504		474
Accrued expenses		390		370
Advance payments and billings in excess of costs incurred		562		565
Income taxes		13		23
Other current liabilities		394		389
Liabilities held for sale		—		237
Liabilities of discontinued operations		220		230
Total current liabilities		2,879		2,634
Pension and postretirement benefits		1,047		1,187
Deferred income taxes		219		235
Other liabilities		368		360
Long-term debt		3,143		3,939
Total liabilities		7,656		8,355
Commitments and contingencies (see Note 18)
Equity:
L-3 shareholders’ equity:
L-3   Communications Holdings, Inc.’s common stock: $.01 par value; 300,000,000 shares authorized, 78,133,763 shares outstanding at December 31, 2015 and 82,040,525 shares outstanding at December 31, 2014 (L-3 Communications Corporation’s common stock: $.01 par value, 100 shares authorized, issued and outstanding)		6,052		5,799
L-3   Communications Holdings, Inc.’s treasury stock (at cost), 79,375,063 shares at December 31, 2015 and 73,005,891 shares at December 31, 2014		(6,851)		(6,111)
Retained earnings		5,728		6,181
Accumulated other comprehensive loss		(574)		(584)
Total L-3 shareholders’ equity		4,355		5,285
Noncontrolling interests		74		75
Total equity		4,429		5,360
Total liabilities and equity	$	12,085	$	13,715

See notes to consolidated financial statements.

F-3

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year Ended December 31,
	2015		2014		2013
Net sales:
Products	$	6,589	$	6,839	$	7,129
Services		3,877		4,147		4,291
Total net sales		10,466		10,986		11,420
Cost of sales:
Products		(6,007)		(6,161)		(6,366)
Services		(3,569)		(3,813)		(3,937)
Total cost of sales		(9,576)		(9,974)		(10,303)
Loss related to business divestitures		(31)		—		—
Impairment charges		(384)		—		—
Operating income		475		1,012		1,117
Interest expense		(169)		(158)		(157)
Interest and other income, net		17		18		20
Debt retirement charge		(1)		—		—
Income from continuing operations before income taxes		322		872		980
Provision for income taxes		(25)		(227)		(264)
Income from continuing operations		297		645		716
(Loss) income from discontinued operations, net of income taxes		(522)		32		44
Net (loss) income	$	(225)	$	677	$	760
Net income from continuing operations attributable to noncontrolling interests		(15)		(13)		(9)
Net (loss) income attributable to L-3	$	(240)	$	664	$	751
Basic earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	3.49	$	7.40	$	7.91
Discontinued operations		(6.46)		0.38		0.49
Basic (loss) earnings per share	$	(2.97)	$	7.78	$	8.40
Diluted earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	3.44	$	7.20	$	7.76
Discontinued operations		(6.37)		0.36		0.48
Diluted (loss) earnings per share	$	(2.93)	$	7.56	$	8.24
Cash dividends declared per common share	$	2.60	$	2.40	$	2.20
L-3 Holdings’ weighted average common shares outstanding:
Basic		80.7		85.4		89.4
Diluted		81.9		87.8		91.1

See notes to consolidated financial statements.

F-4

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Year Ended December 31,
	2015		2014		2013
Net (loss) income	$	(225)	$	677	$	760
Other comprehensive (loss) income:
Foreign currency translation adjustments		(120)		(123)		(25)
Unrealized losses on hedging instruments(1)		(3)		(6)		(2)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized(2)		43		9		53
Net prior service costs arising during the period(3)		—		—		(9)
Net gain (loss) arising during the period(4)		90		(354)		423
Net change in pension and postretirement benefit plans		133		(345)		467
Total other comprehensive income (loss)		10		(474)		440
Comprehensive (loss) income		(215)		203		1,200
Comprehensive income attributable to noncontrolling interests		(15)		(13)		(9)
Comprehensive (loss) income attributable to L-3	$	(230)	$	190	$	1,191

⁽¹⁾  Net of income tax benefits of $2 million in 2015, $1 million in 2014 and $3 million in 2013.

⁽²⁾  Net of income taxes of $24 million in 2015, $6 million in 2014 and $30 million in 2013.

⁽³⁾  Net of an income tax benefit of $5 million in 2013.

⁽⁴⁾  Net of income taxes of $49 million in 2015, an income tax benefit of $211 million in 2014 and income taxes of $243 million in 2013. The 2015 amount includes $9 million (net of income taxes of $5 million) for the reclassification of actuarial losses into net income related to the Marine Systems International business divestiture in accordance with Accounting Standards Codification 715 Defined Benefit Plans – Pension.

See notes to consolidated financial statements.

F-5

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per share data)

	L-3 Holdings’ Common Stock					Additional Paid-in Capital			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Loss	Noncontrolling Interests			Total Equity
	Shares Outstanding			Par Value
Balance at December 31, 2012		90.4		$	1	$	5,313		$	(4,488	)	$	5,175		$    (550)	$	76		$	5,527
Net income													751				9			760
Other comprehensive income															440					440
Distributions to noncontrolling interests																	(10	)		(10	)
Cash dividends declared ($2.20 per share)													(201	)						(201	)
Shares issued:
Employee savings plans		1.5					121													121
Exercise of stock options		1.8					128													128
Employee stock purchase plan		0.5					36													36
Vesting of restricted stock and performance units		0.5
Employee restricted stock units surrendered in lieu of income tax withholding		(0.2	)				(15	)												(15	)
Stock-based compensation expense							59													59
Treasury stock purchased		(8.7	)							(800	)									(800	)
Other							10						1							11
Balance at December 31, 2013		85.8			1		5,652			(5,288	)		5,726		(110)		75			6,056
Net income													664				13			677
Other comprehensive loss															(474)					(474	)
Distributions to noncontrolling interests																	(13	)		(13	)
Cash dividends declared ($2.40 per share)													(209	)						(209	)
Shares issued:
Employee savings plans		1.2					130													130
Exercise of stock options		1.2					109													109
Employee stock purchase plan		0.3					35													35
Vesting of restricted stock and performance units		0.6
Employee restricted stock units surrendered in lieu of income tax withholding		(0.2	)				(27	)												(27	)
Stock-based compensation expense							52													52
Treasury stock purchased		(6.9	)							(823	)									(823	)
Retirement of Convertible Contingent Debt Securities							(161	)												(161	)
Other							8													8
Balance at December 31, 2014		82.0			1		5,798			(6,111	)		6,181		(584)		75			5,360
Net (loss) income													(240	)			15			(225	)
Other comprehensive income															10					10
Distributions to noncontrolling interests																	(16	)		(16	)
Cash dividends declared ($2.60 per share)													(213	)						(213	)
Shares issued:
Employee savings plans		1.1					120													120
Exercise of stock options		0.7					74													74
Employee stock purchase plan		0.3					34													34
Vesting of restricted stock and performance units		0.7
Employee restricted stock units surrendered in lieu of income tax withholding		(0.3	)				(33	)												(33	)
Stock-based compensation expense							49													49
Treasury stock purchased		(6.4	)							(740	)									(740	)
Other							9													9
Balance at December 31, 2015		78.1		$	1	$	6,051		$	(6,851	)	$	5,728		$    (574)	$	74		$	4,429

See notes to consolidated financial statements.

F-6

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year Ended December 31,
	2015		2014		2013
Operating activities:
Net (loss) income	$	(225)	$	677	$	760
Less: Loss (income) from discontinued operations, net of tax		522		(32)		(44)
Income from continuing operations		297		645		716
Depreciation of property, plant and equipment		166		165		159
Amortization of intangibles and other assets		44		49		43
Deferred income tax (benefit) provision		(66)		113		37
Stock-based employee compensation expense		46		50		56
Excess income tax benefits related to share-based payment arrangements		(26)		(17)		(4)
Contributions to employee savings plans in L-3 Holdings’ common stock		110		119		104
Impairment charges		384		—		—
Amortization of pension and postretirement benefit plans net loss and prior service cost		67		15		83
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		8		7		6
Loss related to business divestitures		31		—		—
Other non-cash items		(3)		—		3
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures, and discontinued operations:
Billed receivables		50		39		(16)
Contracts in process		32		7		76
Inventories		(38)		—		1
Other assets		(27)		(17)		(88)
Accounts payable, trade		(32)		(80)		8
Accrued employment costs		34		(5)		(4)
Accrued expenses		14		(14)		13
Advance payments and billings in excess of costs incurred		(6)		65		(42)
Income taxes		(33)		(7)		5
Other current liabilities		(3)		6		15
Pension and postretirement benefits		(8)		(44)		14
All other operating activities		1		(25)		(29)
Net cash from operating activities from continuing operations		1,042		1,071		1,156
Investing activities:
Business acquisitions, net of cash acquired		(320)		(57)		(62)
Proceeds from sale of businesses, net of closing date cash balances		318		1		4
Capital expenditures		(197)		(174)		(204)
Dispositions of property, plant and equipment		3		4		12
Other investing activities		4		5		(6)
Net cash used in investing activities from continuing operations		(192)		(221)		(256)
Financing activities:
Proceeds from sale of senior notes		—		996		—
Redemption of CODES		—		(935)		—
Repurchases of senior notes		(296)		—		—
Borrowings under revolving credit facility		1,194		1,367		1,893
Repayment of borrowings under revolving credit facility		(1,194)		(1,367)		(1,893)
Common stock repurchased		(740)		(823)		(800)
Dividends paid on L-3 Holdings’ common stock		(214)		(208)		(199)
Proceeds from exercise of stock options		48		93		128
Proceeds from employee stock purchase plan		34		35		36
Excess income tax benefits related to share-based payment arrangements		26		17		4
Debt issue costs		—		(8)		—
Employee restricted stock units surrendered in lieu of income tax withholding		(33)		(27)		(15)
Other financing activities		(3)		(16)		(3)
Net cash used in financing activities from continuing operations		(1,178)		(876)		(849)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(19)		(17)		(2)
Cash from (used in) discontinued operations:
Operating activities		56		54		107
Investing activities		(5)		(8)		(5)
Cash from discontinued operations		51		46		102
Change in cash balance in assets held for sale		61		(61)		—
Net (decrease) increase in cash and cash equivalents		(235)		(58)		151
Cash and cash equivalents, beginning of the year		442		500		349
Cash and cash equivalents, end of the year	$	207	$	442	$	500

See notes to consolidated financial statements.

F-7

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Description of Business

L-3 Communications Holdings, Inc. derives all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications Corporation (L-3 Communications). L-3 Communications Holdings, Inc. (L-3 Holdings and, together with its subsidiaries, referred to herein as L-3 or the Company) is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment, and security and detection systems. L-3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. The Company’s customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

On December 8, 2015, the Company entered into a definitive agreement to sell its National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS, which provides cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments, has historically been reported as a reportable segment. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to the Company’s continuing operations, unless specifically noted. See Note 3 for additional information.

The Company has the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Electronic Systems provides a broad range of components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical airborne, space, ground and sea-based communication systems. Financial information with respect to each of our segments is included in Note 21.

2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying financial statements comprise the consolidated financial statements of L-3 Holdings and L-3 Communications. L-3 Holdings’ only asset is its investment in the common stock of L-3 Communications, its wholly-owned subsidiary, and its only obligations are: (1) its guarantee of borrowings under the Amended and Restated Revolving Credit Facility (“Credit Facility”) of L-3 Communications and (2) its guarantee of other contractual obligations of L-3 Communications and its subsidiaries. All issuances of and conversions into L-3 Holdings’ equity securities, including grants of stock options, restricted stock units and performance units by L-3 Holdings to employees and directors of L-3 Communications and its subsidiaries, have been reflected in the consolidated financial statements of L-3 Communications. As a result, the consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. See Note 24 for additional information regarding the audited financial information of L-3 Communications and its subsidiaries.

F-8

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapon sight products, and recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will differ from these estimates and could differ materially.

Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Principles of Consolidation: The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method.

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 49% of the Company’s 2015 sales were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 8% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a Percentage-of-Completion (POC) method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts). Aggregate net changes in contract estimates amounted to increases of $49 million, or 10% of consolidated operating income (6% of segment operating income) for the year ended December 31, 2015, increases of $72 million, or 7% of consolidated operating income for the year ended December 31, 2014, and increases of $106 million, or 9% of consolidated operating income for the year ended December 31, 2013.

Sales and profits on fixed-price type contracts covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become evident. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

F-9

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Sales and profits on cost-plus type contracts covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement. Incentive and award fees are the primary variable fee contractual arrangements. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require us to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts to perform services are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the

F-10

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2015		2014
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	93	$	99
Acquisitions during this period		1		—
Accruals for product warranties issued during the period		75		71
Changes to accruals for product warranties existing before January 1		2		1
Foreign currency translation adjustments		(2)		(2)
Settlements made during the period		(64)		(67)
Liabilities held for sale(2)		—		(9)
Balance at December 31	$	105	$	93

⁽¹⁾  Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

⁽²⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method.

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L-3 Holdings common stock instead of settling such obligations with cash payments.

F-11

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Compensation expense for all restricted stock unit and stock option awards is recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L-3 Holdings common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period.

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This update is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted, and may be applied retrospectively or prospectively. The Company has elected to early adopt this standard retrospectively, as reflected in the accompanying audited consolidated balance sheets.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such

F-12

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range substantially from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill: The carrying value of goodwill and indefinite lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely or not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2015 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flows valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2014 and 2013. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If such estimates indicate that the duration of the Company’s customer contractual relationships have decreased compared to the estimates made as of the date the Company acquired these intangible assets, then the Company accelerates the amortization period for its customer contractual relationships over their remaining useful economic life.

F-13

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the Canadian dollar, the U.S. dollar, the Euro and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2015, 2014 and 2013 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated other comprehensive income (loss) and are only recognized in income when a foreign subsidiary is divested.

Accounting Standards Issued and Not Yet Implemented: In February 2016, the FASB issued ASU 2016-02, Leases, which will update the existing guidance on accounting for leases and require new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from that applied under previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that the Company may elect to apply. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-3, to simplify the presentation of debt issuance costs. This update requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the required presentation for debt discounts. This update is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. The adoption of this standard will change the Company’s current practice of presenting debt issuance costs as an asset

F-14

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

and will result in a reduction of total assets and total liabilities in an amount equal to the balance of unamortized debt issuance costs at each balance sheet date. The Company has not elected to early adopt this standard and debt issuance costs amounted to $18 million at December 31, 2015 and $27 million at December 31, 2014.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provide companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expand the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early application permitted beginning on January 1, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures and the transition alternatives available. As the new standard will supersede substantially all existing revenue guidance, it could impact revenue and cost recognition on substantially all of the Company’s contracts, in addition to the Company’s business processes and our information technology systems. As a result, the Company’s evaluation of the impact of the standard will extend over future periods.

Other accounting standard updates effective for interim and annual periods beginning after December 15, 2015 are not expected to have an impact on the Company’s financial position, results of operations or cash flows.

3. Divestitures and Acquisitions

Business Divestitures

Discontinued Operations

As discussed in Note 1, the Company entered into a definitive agreement to sell its NSS business to CACI International Inc. on December 8, 2015. The transaction was completed on February 1, 2016 for a preliminary sale price of $561 million, subject to finalization based on customary adjustments for closing date net working capital.

The table below presents statement of operations data for NSS, which has been classified as discontinued operations and includes allocated interest expense for debt not directly attributable or related to L-3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L-3 consolidated net assets and (2) L-3 consolidated total debt.

	Year Ended December 31,
	2015			2014			2013
	(in millions)
Product and service revenues	$	1,088		$	1,138		$	1,202
Operating (loss) income from discontinued operations(1)		(523	)		73			95
Interest expense allocated to discontinued operations		(20	)		(20	)		(20	)
(Loss) income from discontinued operations before income taxes(1)	$	(543	)	$	53		$	75
Income tax benefit (expense)		21			(21	)		(31	)
(Loss) income from discontinued operations, net of income taxes(1)	$	(522	)	$	32		$	44

⁽¹⁾ The year ended December 31, 2015, includes a goodwill impairment charge of $571 million ($537 million after income taxes).

F-15

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31,             2015		December 31,             2014
	(in millions)
Assets
Current assets	$	201	$	198
Property, plant and equipment, net		25		27
Goodwill(1)		390		989
Other assets		48		48
Total assets of discontinued operations	$	664	$	1,262
Liabilities
Accounts payable, trade	$	48	$	36
Other current liabilities		78		75
Current liabilities		126		111
Long-term liabilities		94		119
Total liabilities of discontinued operations	$	220	$	230

⁽¹⁾  The goodwill balance at December 31, 2014 is based on the total goodwill attributable to the NSS reporting unit, less the historical goodwill attributable to the business retained by L-3. The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L-3 and the NSS business sold.

2015 Business Divestitures

During the year ended December 31, 2015, the Company completed the sales of Marine Systems International (MSI), Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture		Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17)	$	318	$	185
BSI divestiture		(4)		26		7
Tinsley Product Line divestiture		(8)		4		9
Klein divestiture		(2)		10		8
Total	$	(31)	$	358	$	209

MSI Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a preliminary sale price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sale price is subject to finalization based on customary adjustments for closing date net working capital. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. In accordance with ASU 2014-08, MSI’s assets and liabilities are classified as held for sale in the Company’s audited consolidated balance sheet as of December 31, 2014 and MSI’s results of operations

F-16

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

are included in income from continuing operations for all periods presented. During the year ended December 31, 2015, the Company recorded a pre-tax loss of $17 million ($6 million after income taxes) related to the divestiture of MSI. The loss is comprised of: (1) $17 million for non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI, each of which is discussed below.

The accounting standards for long-lived assets to be disposed of by sale require the Company to measure assets and liabilities of a disposal group, classified as held for sale, at the lower of its carrying amount or fair value less costs to sell, at the end of each reporting period. As a result of the decline in the estimated U.S. dollar equivalent divestiture proceeds due to the weakening of the Euro against the U.S. dollar, the carrying value of the MSI disposal group exceeded its fair value at March 27, 2015. Accordingly, a pre-tax non-cash impairment charge of $17 million ($12 million after income taxes) was recorded during the quarterly period ended March 27, 2015.

In March 2015, L-3 entered into a forward contract to sell €285 million of the proceeds obtained from the divestiture of MSI at a rate of $1.0782. The Company accounted for this contract as an economic hedge and recorded a mark to market adjustment to earnings based on the fair value of the forward contract at March 27, 2015. Accordingly, the Company recorded an unrealized pre-tax loss of $5 million ($3 million after income taxes) during the quarterly period ended March 27, 2015. On May 29, 2015, upon settlement of the contract, the Company realized $4 million of the $5 million previously recorded pre-tax loss and recorded a $1 million pre-tax gain ($1 million after income taxes) in the quarterly period ended June 26, 2015.

During the quarterly period ended June 26, 2015, the Company realized a pre-tax gain of $4 million ($8 million after income tax benefits), based on the proceeds received on the date of sale.

The major classes of assets and liabilities included as held for sale related to MSI are presented in the table below.

	December 31,       2014
	(in millions)
Assets
Cash and cash equivalents	$	61
Billed receivables, net of allowances of $6		77
Contracts in process		70
Inventories		70
Other current assets		10
Total current assets		288
Goodwill		231
Other assets		28
Total assets classified as held for sale	$	547
Liabilities
Accounts payable, trade	$	31
Accrued employment costs		22
Accrued expenses		33
Advance payments and billings in excess of costs incurred		55
Other current liabilities		21
Total current liabilities		162
Pension and postretirement benefits		56
Other liabilities		19
Total liabilities classified as held for sale	$	237

F-17

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

BSI Divestiture. On April 24, 2015, the Company divested its BSI business for a sale price of $26 million. BSI is a provider of wireless technology and communications systems services for use in the field of sports television broadcasting, and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $4 million ($6 million after income taxes) during the year ended December 31, 2015. In accordance with ASU 2014-08, BSI’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sale price of $4 million. Tinsley is a provider of optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes) during the quarterly period ended September 25, 2015. In accordance with ASU 2014-08, Tinsley’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Klein Divestiture. On December 31, 2015, the Company divested its Klein business for a sale price of $10 million. Klein is a provider of side scan sonar equipment and waterside security and surveillance systems, and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes) during the quarterly period ended December 31, 2015. In accordance with ASU 2014-08, Klein’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L-3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December  31,
	2015		2014		2013
	(in millions)
Net sales	$	209	$	596	$	569
Income (loss) before income taxes	$	—	$	27	$	(3)

Business Acquisitions

The business acquisitions discussed below are included in the Company’s results of operations from their respective dates of acquisition.

2015 Business Acquisitions

ForceX, Inc. Acquisition. On October 13, 2015, the Company acquired ForceX, Inc., renamed L-3 ForceX, for a purchase price of $61 million, which was financed with cash on hand. L-3 ForceX specializes in ISR mission management software and geospatial application technology programs, offering an array of advanced products, including cueing system software, hardware and video algorithms, and wide-area sensor integration solutions and software. L-3 ForceX’s proprietary processing, exploitation and dissemination capability provides an integrated tactical operational picture, allowing users to make critical decisions in real time. L-3 ForceX also supports several key DoD ISR initiatives and classified programs. L-3 ForceX’s customer base includes the U.S. Air Force, U.S. Special Operations Command, the Naval Surface Warfare Center and a variety of DoD agencies. The aggregate goodwill recognized for this business was $48 million, which was assigned to the Electronic

F-18

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Systems reportable segment, of which $47 million is expected to be deductible for income tax purposes. The final purchase price allocation, which is expected to be completed in the first quarter of 2016, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position.

CTC Aviation Group Acquisition. On May 27, 2015, the Company acquired CTC Aviation Group, renamed L-3 CTC Ltd. (L-3 CTC), for a purchase price of £153 million (approximately $236 million), which was financed with cash on hand. L-3 CTC is a global airline pilot training and crew resourcing specialist, based in the United Kingdom, which offers customized and innovative solutions to major airlines and flight training customers globally. L-3 CTC expands L-3’s commercial aviation training business to encompass a growing portfolio of airline and third-party training company customers. The aggregate goodwill recognized for this business was $185 million, which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes. The final purchase price allocation, which is expected to be completed in the first quarter of 2016, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position.

MITEQ, Inc. Acquisition. On January 21, 2015, the Company acquired the assets of MITEQ, Inc. (Miteq) for a purchase price of $41 million, which was financed with cash on hand. The purchase price and purchase price allocation of Miteq was finalized as of September 25, 2015, with no significant changes to preliminary amounts. Miteq was combined with the Company’s Narda Microwave-East business and the new organization was re-named L-3 Narda-Miteq. Miteq offers a broad product line of active and passive radio frequency (RF) microwave components and low-power satellite communications (SATCOM) products for space and military applications that complement the existing Narda Microwave East product line. The combined L-3 Narda-Miteq business will provide products for the DoD, other U.S. Government agencies, prime contractors and commercial customers. The aggregate goodwill recognized for this business was $11 million, of which $4 million is expected to be deductible for income tax purposes. The goodwill was assigned to the Communication Systems reportable segment.

Net sales and income before income taxes for L-3 ForceX, L-3 CTC and Miteq, included in L-3’s consolidated statement of operations for the year ended December 31, 2015, are presented in the table below.

	Year Ended December 31, 2015
	(in millions)
Net sales	$	103
Income before income taxes	$	5

2014 Business Acquisition

Data Tactics Corporation Acquisition. On March 4, 2014, the Company acquired Data Tactics Corporation, renamed L-3 Data Tactics, for a purchase price of $57 million, which was financed with cash on hand. The purchase price and purchase price allocation for L-3 Data Tactics was finalized as of December 31, 2014, with no significant changes to preliminary amounts. L-3 Data Tactics is a specialized provider of large-scale data analytics, cybersecurity and cloud computing solution services, primarily to the DoD. Based on the final purchase price allocation, the aggregate goodwill recognized for this business was $39 million, substantially all of which is expected to be deductible for income tax purposes. The goodwill was assigned to the former NSS reportable segment.

F-19

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

2013 Business Acquisition

On December 19, 2013, the Company acquired Mustang Technology Group, L.P. (Mustang) business for a purchase price of $54 million, which was financed with cash on hand. The purchase price and purchase price allocation for Mustang was finalized as of June 27, 2014, with no significant changes from preliminary amounts. Mustang develops and manufactures radar-based sensors and systems used in precision-guided weapons, electronic warfare, unmanned systems and other military applications. Based on the final purchase price allocation, the aggregate goodwill recognized for this business was $41 million, substantially all of which is expected to be deductible for income tax purposes. The goodwill was assigned to the Electronic Systems reportable segment.

Business Acquisitions Completed After December 31, 2015

On January 22, 2016, the Company acquired the assets of Advanced Technical Materials, Inc. (ATM) for a purchase price of $27 million (subject to customary adjustments), which was financed with cash on hand. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components.

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data presents the combined results of the Company and its business acquisitions completed during the years ended December 31, 2015 and 2014 assuming that the business acquisitions completed during 2015 and 2014 had occurred on January 1, 2014.

	Year Ended December 31,
	2015		2014
	(in millions, except per share data)
Pro forma net sales	$	10,523	$	11,146
Pro forma income from continuing operations	$	302	$	657
Pro forma net (loss) income attributable to L-3	$	(235)	$	676
Pro forma diluted earnings per share from continuing operations	$	3.50	$	7.34
Pro forma diluted (loss) earnings per share	$	(2.87)	$	7.70

The unaudited pro forma results disclosed in the table above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed these acquisitions on the dates indicated above.

F-20

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

4. Contracts in Process

The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments principally relate to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government. In connection with contracts in process assumed by the Company in its business acquisitions, the underlying contractual customer relationships are separately recognized as identifiable intangible assets at the date of acquisition, and are discussed and presented in Note 6.

	December 31,
	2015		2014
	(in millions)
Unbilled contract receivables, gross	$	2,097	$	2,149
Unliquidated progress payments		(869)		(887)
Unbilled contract receivables, net		1,228		1,262
Inventoried contract costs, gross		975		981
Unliquidated progress payments		(122)		(95)
Inventoried contract costs, net		853		886
Total contracts in process	$	2,081	$	2,148

Unbilled Contract Receivables. Unbilled contract receivables represent accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as sales, but have not yet been billed to customers. Unbilled contract receivables arise from the cost-to-cost method of revenue recognition that is used to record sales on certain fixed-price contracts. Unbilled contract receivables from fixed-price type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. Unbilled contract receivables also arise from cost-plus type contracts, time-and-material type contracts and fixed-price service type contracts for revenue amounts that have not been billed by the end of the accounting period due to the timing of preparation of invoices to customers. The Company believes that approximately 92% of the unbilled contract receivables, net at December 31, 2015 will be billed and collected within one year.

Unliquidated Progress Payments. Unliquidated progress payments arise from fixed-price type contracts with the U.S. Government that contain progress payment clauses, and represent progress payments on invoices that have been collected in cash, but have not yet been liquidated. Progress payment invoices are billed to the customer as contract costs are incurred at an amount generally equal to 75% to 80% of incurred costs. Unliquidated progress payments are liquidated as deliveries or other contract performance milestones are completed, at an amount equal to a percentage of the contract sales price for the items delivered or work performed, based on a contractual liquidation rate. Therefore, unliquidated progress payments are a contra asset account, and are classified against unbilled contract receivables if revenue for the underlying contract is recorded using the cost-to-cost method, and against inventoried contract costs if revenue is recorded using the units-of-delivery method.

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their G&A, IRAD and B&P costs that are allowable and reimbursable indirect contract costs under U.S. Government procurement regulations on their U.S. Government contracts (revenue arrangements) as inventoried contract costs. G&A, IRAD and B&P costs

F-21

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

are allocated to contracts for which the U.S. Government is the end customer and are charged to costs of sales when sales on the related contracts are recognized. The Company’s U.S. Government contractor businesses record the unallowable portion of their G&A, IRAD and B&P costs to expense as incurred, and do not include them in inventoried contract costs.

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	135	$	133	$	104
Contract costs incurred:
IRAD and B&P		280		266		279
Other G&A		812		805		817
Total		1,092		1,071		1,096
Amounts charged to cost of sales		(1,065)		(1,069)		(1,067)
Amounts included in inventoried contract costs at end of the year	$	162	$	135	$	133

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the Consolidated Statements of Operations.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Selling, general and administrative expenses	$	259	$	295	$	310
Research and development expenses		56		67		76
Total	$	315	$	362	$	386

5. Inventories

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2015		2014
	(in millions)
Raw materials, components and sub-assemblies	$	164	$	127
Work in process		103		97
Finished goods		66		64
Total	$	333	$	288

F-22

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

6. Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). As part of the purchase price allocations for the Company’s business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, the Company does not recognize any intangible assets apart from goodwill for the assembled workforces of its business acquisitions. At December 31, 2015, the Company had approximately 38,000 employees, and the substantial majority of the sales generated by the Company’s businesses were from the productive labor efforts of its employees, as compared to selling manufactured products or right-to-use technology.

Generally, the largest intangible assets from the businesses that the Company acquires are the assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of the Company’s businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of its employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of its businesses, the Company’s ability to attract and retain employees who have U.S. Government security clearances, particularly those of top-secret and above, is critical to its success, and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for the Company’s acquired businesses. Furthermore, the Company’s U.S. Government contracts (revenue arrangements) generally permit other companies to use the Company’s patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill in accordance with the accounting standards for business combinations, the substantial majority of the intangible assets for the Company’s business acquisitions is recognized as goodwill. Additionally, the value assigned to goodwill for the Company’s business acquisitions also includes the value that the Company expects to realize from cost reduction measures that it implements for its acquired businesses.

F-23

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems		Aerospace Systems		Communication Systems		Consolidated Total
	(in millions)
Balance at December 31, 2013
Goodwill	$	4,128	$	1,751	$	1,025	$	6,904
Accumulated impairment losses		(43)		—		(15)		(58)
		4,085		1,751		1,010		6,846
Business acquisitions(1)		(3)		—		—		(3)
Business divestitures		(1)		—		—		(1)
Foreign currency translation adjustments(2)		(77)		(21)		(1)		(99)
Assets held for sale(3)		(231)		—		—		(231)
Balance at December 31, 2014
Goodwill		3,816		1,730		1,024		6,570
Accumulated impairment losses		(43)		—		(15)		(58)
		3,773		1,730		1,009		6,512
Business acquisitions(1)		233		—		11		244
Business divestitures(4)		(20)		—		—		(20)
Business retained from NSS divestiture		26		—		2		28
Impairment charges		(26)		(338)		(20)		(384)
Foreign currency translation adjustments(2)		(61)		(39)		1		(99)
Balance at December 31, 2015
Goodwill		3,994		1,691		1,038		6,723
Accumulated impairment losses(5)		(69)		(338)		(35)		(442)
	$	3,925	$	1,353	$	1,003	$	6,281

⁽¹⁾  For the year ended December 31, 2015, the increase in goodwill for the Electronic Systems segment was due to the L-3 CTC and L-3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition. For the year ended December 31, 2014, the decrease in goodwill for the Electronic Systems segment was due to the final purchase price allocation for the Mustang business acquisition.

⁽²⁾  During 2015 and 2014, the decreases in goodwill presented in the Electronic Systems segment were primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. During 2015 and 2014, the decreases in goodwill presented in the Aerospace Systems segment were due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽³⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

⁽⁴⁾  For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽⁵⁾  The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

F-24

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

As discussed in Note 2, the carrying value of goodwill is tested for impairment annually as of November 30 and on an interim basis, using a two-step process, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Logistics Solutions business as a result of the decline in their projected future cash flows. The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations, and are summarized and further discussed below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L-3 Consolidated
			(in millions)
Logistics Solutions reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Based on its annual impairment test as of November 30, 2015, the Company recorded non-cash impairment charges of $455 million for the impairment of goodwill during the fourth quarter of 2015. The goodwill impairment charges were comprised of: (1) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, which is part of the Aerospace Systems segment, as a result of a decline in its projected future cash flows and (2) $117 million, of which $115 million is included in discontinued operations, related to a decline in the estimated fair value of the NSS reporting unit based on the purchase price indicated in the definitive agreement entered into on December 8, 2015 to sell the NSS business. The decline in projected future cash flows for Logistics Solutions was caused by projected future year lower sales volumes and operating margins. Logistics Solutions did not achieve its 2015 annual plan for orders due to an inability to win new business, in part due to delays of certain contract competitions, as well as certain contract recompetition losses. Additionally, Logistics Solutions did not achieve its 2015 annual plan for sales and operating income primarily due to reduced flight hours and competitive pricing pressures on logistics and maintenance contracts. The Company determined, during the preparation of its 2016 financial plan and three year forecast (2016-2018), that these factors will continue to affect the future sales and operating income performance of the Logistics Solutions reporting unit.

In connection with the sale of NSS business, the Company recorded a non-cash impairment charge of $9 million during the fourth quarter of 2015 related to the re-allocation of goodwill to a business retained by L-3.

During the third quarter of 2015, a decline in the projected future cash flows of NSS indicated that the carrying amount of the goodwill for the NSS business may not be recoverable. Accordingly, the Company performed an impairment test for the NSS business, determined that the implied goodwill was lower than the carrying amount, and recorded a non-cash impairment charge of $491 million, of which $456 million is included in discontinued operations, for the impairment of goodwill. The goodwill impairment charge was due to a decline in the estimated fair value of the NSS business as a result of a decline in the projected future cash flows of NSS caused by NSS’s inability to achieve its planned 2015 orders, sales and operating income, primarily due to lower than expected new commercial and international business awards, and a reduced outlook for operating margin and international sales.

F-25

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

In summary, the Company recorded total impairment charges relating to the NSS business aggregating $608 million during the year ended December 31, 2015, including $117 million during the fourth quarter of 2015 and $491 million during the third quarter of 2015. The NSS goodwill impairment charges were allocated between income from continuing operations and income from discontinued operations based on the relative fair values of the NSS business retained by L-3, and the NSS business sold at each goodwill impairment test date. This resulted in $37 million classified in income from continuing operations and the remaining $571 million classified in income from discontinued operations.

Identifiable Intangible Assets. The most significant identifiable intangible asset that is separately recognized for the Company’s business acquisitions is customer contractual relationships. All of the Company’s customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from the customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2015								December 31, 2014
	Weighted Average Amortization     Period		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount
	(in years)		(in millions)
Customer contractual relationships		16	$	370	$	246	$	124	$	355	$	221	$	134
Technology		11		156		91		65		132		82		50
Other		18		21		11		10		21		10		11
Total		15	$	547	$	348	$	199	$	508	$	313	$	195

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amortization expense	$	35	$	39	$	35

Based on gross carrying amounts at December 31, 2015, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2016 through 2020 is presented in the table below.

	Year Ending December 31,
	2016		2017		2018		2019		2020
	(in millions)
Estimated amortization expense	$	33	$	31	$	26	$	23	$	20

F-26

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

7. Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2015		2014
	(in millions)
Other Current Liabilities:
Accruals for pending and threatened litigation (see Note 18)	$	6	$	36
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position		82		75
Accrued product warranty costs		70		59
Accrued interest		45		46
Deferred revenues		32		30
Other(1)		159		143
Total other current liabilities	$	394	$	389

⁽¹⁾  In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech holographic weapons sight (HWS) products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for the purchase price, including shipping costs. The Company recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the 2015 fourth quarter associated with establishing a product returns reserve to reflect the estimated cost of the return program. The Company’s estimated product returns reserve is based on several factors, including the number of HWS units that it anticipates purchasers will return. The Company’s product returns reserve estimate is based on: (1) its analysis of various factors, including an assumed product return rate consistent with claim rates in other circumstances, (2) its experience to date with the voluntary return program, and among other things, an assumption that only a very small percentage of the total number of HWS products sold by the Company and eligible for the voluntary return program will be returned and (3) an assumed average unit purchase price of approximately $500. The voluntary return program is in the early stages of implementation, and the Company will continue to evaluate the amount of the product returns reserve in connection with the voluntary return program. The Company’s evaluation, including as a result of its actual experience with the voluntary return program, may lead it to record an adjustment to the product returns reserve in future periods. Any such adjustment could be material.

The table below presents the components of other liabilities.

	December 31,
	2015		2014
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	161	$	185
Deferred compensation		45		41
Accrued workers’ compensation		38		38
Accrued product warranty costs		35		34
Notes payable and capital lease obligations		10		1
Other		79		61
Total other liabilities	$	368	$	360

F-27

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

8. Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2015		2014
	(in millions)
Land	$	60	$	62
Buildings and improvements		431		420
Machinery, equipment, furniture and fixtures		1,736		1,670
Leasehold improvements		343		309
Gross property, plant and equipment		2,570		2,461
Accumulated depreciation and amortization		(1,473)		(1,400)
Property, plant and equipment, net	$	1,097	$	1,061

9. Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2015		2014
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—	$	—
3.95% Senior Notes due 2016		500		500
1.50% Senior Notes due 2017		350		350
5.20% Senior Notes due 2019		1,000		1,000
4.75% Senior Notes due 2020		800		800
4.95% Senior Notes due 2021		650		650
3.95% Senior Notes due 2024		350		650
Subtotal		3,650		3,950
Principal amount of long-term debt		3,650		3,950
Unamortized discounts		(8)		(11)
Carrying amount of long-term debt	$	3,642	$	3,939
Current portion of long-term debt		(499)		—
Carrying amount of long-term debt, excluding current portion		3,143		3,939

⁽¹⁾  During 2015, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were $1,194 million. L-3 Communications had the full availability of its $1 billion Credit Facility at December 31, 2015 and December 31, 2014.

L-3 Communications Amended and Restated Revolving Credit Facility

On February 3, 2012, L-3 Communications amended and restated its $1 billion Revolving Credit Facility, which extended the expiration date to February 3, 2017. The terms of the Credit Facility are substantially consistent with the terms of this facility prior to its amendment and restatement except that: (1) provisions that previously limited the ability of L-3 Communications to pay dividends, repurchase L-3 Holdings’ common stock and make other distributions with respect to any capital stock were eliminated, (2) a provision that previously limited the ability of L-3 Communications to make investments in L-3 Holdings was made less restrictive and

F-28

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

(3) the cost of borrowings, loan commitment fees and letter of credit fees were reduced. In addition, the Credit Facility provides for uncommitted incremental revolving facilities and additional term loan facilities in an aggregate principal amount of up to $500 million. Borrowings under the Credit Facility bear interest, at L-3 Communications’ option, at either: (1) the “base rate” equal to the highest of (a) 0.50% per annum above the latest federal funds rate, (b) the Bank of America “prime rate” (as defined in the Credit Facility), and (c) 1.00% per annum above a “Eurodollar Rate” (as defined in the Credit Facility), plus a spread ranging from 0.25% to 1.00% per annum, or (2) a “Eurodollar Rate” (as defined in the Credit Facility) plus a spread ranging from 1.25% to 2.00% per annum. L-3 Communications pays: (1) commitment fees calculated on the daily amounts of the available unused commitments at a rate ranging from 0.15% to 0.325% per annum, (2) letter of credit fees ranging from 0.675% to 1.20% per annum for commercial and performance letters of credit and (3) letter of credit fees ranging from 1.25% to 2.00% for financial letters of credit. The interest rate spread and the commitment fee rate, in all cases, depend on L-3 Communications’ debt rating at the time of determination. The debt rating is based on the credit ratings as determined by Standard & Poor’s Rating Services, Moody’s Investors Service, Inc. and Fitch Ratings of L-3 Communications’ non-credit enhanced senior, unsecured long-term debt.

L-3 Communications Senior Notes

The Senior Notes are unsecured senior obligations of L-3 Communications. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance		Amount Issued		Discount(1)		Net Cash   Proceeds			Effective Interest   Rate		Redemption at Treasury   Rate(2)(3)
			(in millions)
3.95% Senior Notes due November 15, 2016		November 22, 2011	$	500	$	4	$	491			4.11%		50 bps
1.50% Senior Notes due May 28, 2017		May 28, 2014	$	350	$	1	$	347	(4)		1.55%		10 bps
5.20% Senior Notes due October 15, 2019		October 2, 2009	$	1,000	$	4	$	987			5.25%		30 bps
4.75% Senior Notes due July 15, 2020		May 21, 2010	$	800	$	3	$	790			4.79%		25 bps
4.95% Senior Notes due February 15, 2021		February 7, 2011	$	650	$	4	$	639			5.02%		25 bps
3.95% Senior Notes due May 28, 2024		May 28, 2014	$	650	$	3	$	641	(4)		4.02%		20 bps

⁽¹⁾  Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾  The Senior Notes maturing in 2016, 2017, 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 may be redeemed at any time prior to February 28, 2024 (three months prior to their maturity) at the option of L-3 Communications, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 are redeemed at any time on or after February 28, 2024, the redemption price would be equal to 100% of the principal amount.

⁽³⁾  Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L-3 Communications to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾  The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

F-29

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

On December 7, 2015, L-3 Communications commenced a cash tender offer for up to $300 million aggregate principal amount of its 3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 with an early tender date of December 18, 2015. On December 18, 2015, L-3 determined and announced the pricing terms of this cash tender offer, including total consideration of $986.57 per $1,000 principal amount of 3.95% Notes due 2024. On December 22, 2015, $300 million of 3.95% Notes due 2024, accepted by L-3 in connection with the early tender date, were settled for $296 million in cash, plus accrued and unpaid interest, up to but not including the repurchase date. In connection with the repurchase of $300 million of the 3.95% Notes due 2024, the Company recorded a debt retirement charge of approximately $1 million.

L-3 Holdings

In 2005, L-3 Holdings sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On May 13, 2014, L-3 Holdings called for the redemption of all of its outstanding CODES effective on June 2, 2014 (the Redemption Date). The redemption price for the CODES was $1,000 per $1,000 principal amount of the CODES, plus accrued and unpaid interest to, but excluding, the Redemption Date. Holders of the CODES were entitled to convert all or a portion thereof (in integral multiples of $1,000) at any time prior to the close of business on the business day immediately preceding the Redemption Date. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L-3 Holdings settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014 and $21 million for the year ended December 31, 2013.

Guarantees

The borrowings under the Credit Facility are fully and unconditionally guaranteed by L-3 Holdings and by substantially all of the material 100% owned domestic subsidiaries of L-3 Communications on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L-3 Communications’ material 100% owned domestic subsidiaries that guarantee any of its other indebtedness.

Subordination

The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

Covenants

Financial and other restrictive covenants. The Credit Facility contains financial and other restrictive covenants that limit, among other things, the ability of the subsidiaries of L-3 Communications to borrow additional funds, and the ability of L-3 Communications and its subsidiaries to incur liens, make investments, merge or consolidate or dispose of assets. The Company’s Credit Facility contains covenants that require that: (1) the Company’s consolidated leverage ratio be less than or equal to 4.0 to 1.0, (2) the Company’s consolidated interest coverage ratio be greater than or equal to 3.0 to 1.0, and (3) the Company’s consolidated senior leverage ratio be less than or equal to 3.5 to 1.0, in each case, as of the end of any fiscal quarter. Calculations of the financial covenants are to exclude, among other things, certain items such as impairment losses on goodwill or other intangible assets, non-cash gains or losses from discontinued operations, gains or losses in connection with asset dispositions, and gains or losses with respect to judgments or settlements in connection with litigation matters. As of December 31, 2015, the Company was in compliance with its financial and other restrictive covenants.

F-30

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The indentures governing the Senior Notes (Senior Indentures) contain covenants customary for investment grade notes, including covenants that restrict the ability of L-3 Communications and its 100% owned domestic subsidiaries to create, incur, assume or permit to exist any lien, except permitted liens (as defined in the Senior Indentures) and restrict the ability of L-3 Communications and its subsidiaries to enter into certain sale and leaseback transactions (as defined in the Senior Indentures).

Cross default provisions. The Credit Facility contains cross default provisions that are triggered when a payment default occurs or certain other defaults occur that would allow the acceleration of indebtedness, swap contracts or guarantees of L-3 Holdings, L-3 Communications or its subsidiaries, so long as the aggregate amount of such indebtedness, swap contracts or guarantees is at least $50 million and such defaults (other than payment defaults and defaults that have resulted in acceleration) have not been cured within 10 days. The Senior Notes indenture contains a cross acceleration provision that is triggered when a default or acceleration occurs under any indenture or instrument of L-3 Communications or its subsidiaries or the payment of which is guaranteed by L-3 Communications or its subsidiaries in an aggregate amount of at least $100 million.

10. Accumulated Other Comprehensive (Loss) Income (AOCI)

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency   translation		Unrealized gains (losses) on hedging   instruments		Unrecognized (losses) gains and prior service cost, net		Total accumulated other comprehensive (loss) income
	(in millions)
Balance at December 31, 2012	$	167	$	3	$	(720)	$	(550)
Other comprehensive (loss) income before reclassifications, net of tax		(25)		(1)		414		388
Amounts reclassified from AOCI, net of tax		—		(1)		53		52
Net current period other comprehensive (loss) income		(25)		(2)		467		440
Balance at December 31, 2013	$	142	$	1	$	(253)	$	(110)
Other comprehensive loss before reclassifications, net of tax		(123)		(13)		(354)		(490)
Amounts reclassified from AOCI, net of tax		—		7		9		16
Net current period other comprehensive (loss)		(123)		(6)		(345)		(474)
Balance at December 31, 2014	$	19	$	(5)	$	(598)	$	(584)
Other comprehensive (loss) income before reclassifications, net of tax		(161)		(15)		81		(95)
Amounts reclassified from AOCI, net of tax		41		12		52		105
Net current period other comprehensive (loss) income		(120)		(3)		133		10
Balance at December 31, 2015	$	(101)	$	(8)	$	(465)	$	(574)

F-31

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)
	Year Ended December 31,						Affected Line Item in the Audited Consolidated Statements of Operations
Details About AOCI Components	2015		2014		2013(b)
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	(41)	$	—	$	—	Loss related to business divestitures
		(41)		—		—	Income from continuing operations before income taxes
	$	(41)	$	—	$	—	Income from continuing operations
(Loss) gains on hedging instruments:
MSI divestiture	$	(2)	$	—	$	—	Loss related to business divestitures
Other		(16)		(8)		1	Cost of sales-products
		(18)		(8)		1	Income from continuing operations before income taxes
		6		1		—	Provision for income taxes
	$	(12)	$	(7)	$	1	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	(14)	$	—	$	—	Loss related to business divestitures
Net loss		(67)		(15)		(83)	(b)
		(81)		(15)		(83)	Income from continuing operations before income taxes
		29		6		30	Provision for income taxes
		$    (52)		$    (9)		$    (53)	Income from continuing operations
Total reclassification for the period	$	(105)	$	(16)	$	(52)	Income from continuing operations

^(a)  Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b)  Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

11. Equity

On February 5, 2013, L-3 Holdings’ Board of Directors approved a share repurchase program that authorizes L-3 Holdings to repurchase up to $1.5 billion of its common stock through June 30, 2015, which was fully utilized as of February 20, 2015. On December 4, 2014, L-3 Holdings’ Board of Directors approved a new share repurchase program that authorizes L-3 Holdings to repurchase up to an additional $1.5 billion of its common stock through June 30, 2017. Repurchases of L-3 Holdings’ common stock are made from time to time at management’s discretion in accordance with applicable U.S. Federal securities laws. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including, but not limited to, the Company’s financial position, earnings, legal requirements, other investment opportunities (including acquisitions) and market conditions. L-3 Holdings, repurchased 6.4 million shares of its common stock at an average price of $116.13 per

F-32

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

share for an aggregate amount of $740 million from January 1, 2015 through December 31, 2015. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares. At December 31, 2015, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $806 million.

From January 1, 2016 through February 19, 2016, L-3 Holdings repurchased 1,133,885 shares of its common stock at an average price of $114.60 per share for an aggregate amount of approximately $130 million. The remaining dollar value of authorization under the December 4, 2014 share repurchase program was $676 million at February 19, 2016.

12. Fair Value Measurements

L-3 applies the accounting standards for fair value measurements to all of the Company’s assets and liabilities that are measured and recorded at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. The standards establish a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs.

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2015						2014
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	187	$	—	$	—	$	416	$	—	$	—
Derivatives (foreign currency forward contracts)		—		2		—		—		5		—
Total assets	$	187	$	2	$	—	$	416	$	5	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	16	$	—	$	—	$	11	$	—

⁽¹⁾  Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾  Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾  Level 3 is based on pricing inputs that are not observable and not corroborated by market data. The Company has no Level 3 assets or liabilities.

F-33

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

13. Financial Instruments

At December 31, 2015 and 2014, the Company’s financial instruments consisted primarily of cash and cash equivalents, billed receivables, trade accounts payable, Senior Notes, and foreign currency forward contracts. The carrying amounts of cash and cash equivalents, billed receivables and trade accounts payable are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2015						December 31, 2014
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,642		$	3,754		$	3,939		$	4,178
Foreign currency forward contracts(2)	$	(14	)	$	(14	)	$	(6	)	$	(6	)

⁽¹⁾  The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾  The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

14. Derivative Financial Instruments

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency as of December 31, 2015.

Currency	Notional Amount
	(in millions)
Canadian dollar	$	112
U.S. dollar		86
Euro		37
British pound		30
Total	$	265

At December 31, 2015, the Company’s foreign currency forward contracts had maturities through 2020.

F-34

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2015								December 31, 2014
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1) (2)	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1
Total derivative instruments	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1

⁽¹⁾  See Note 12 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

⁽²⁾  Assets held for sale at December 31, 2014 include $2 million of other current assets relating to the fair value of derivative instruments and liabilities held for sale at December 31, 2014 include $2 million of other current liabilities relating to the fair value of derivative instruments.

The effects from foreign currency forward contracts on the consolidated statements of operations were a pre-tax loss of $18 million for the year ended December 31, 2015, a pre-tax loss of $8 million for the year ended December 31, 2014, and a pre-tax gain of $1 million for the year ended December 31, 2013. At December 31, 2015, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months is $12 million.

F-35

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

15. L-3 Holdings’ Earnings Per Share

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions, except per share data)
Reconciliation of net (loss) income:
Net (loss) income	$	(225)	$	677	$	760
Net income from continuing operations attributable to noncontrolling interests		(15)		(13)		(9)
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	282	$	632	$	707
Discontinued operations, net of income tax		(522)		32		44
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		80.7		85.4		89.4
Basic (loss) earnings per share:
Continuing operations	$	3.49	$	7.40	$	7.91
Discontinued operations, net of income tax		(6.46)		0.38		0.49
Net (loss) income	$	(2.97)	$	7.78	$	8.40
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		80.7		85.4		89.4
Assumed exercise of stock options		2.4		3.0		3.9
Unvested restricted stock awards		1.3		1.6		1.8
Employee stock purchase plan contributions		0.1		—		0.2
Performance unit awards		0.1		0.1		0.1
Assumed purchase of common shares for treasury		(2.7)		(3.1)		(4.5)
Assumed conversion of the CODES(1)		—		0.8		0.2
Common and potential common shares		81.9		87.8		91.1
Diluted (loss) earnings per share:
Continuing operations	$	3.44	$	7.20	$	7.76
Discontinued operations, net of income tax		(6.37)		0.36		0.48
Net (loss) income	$	(2.93)	$	7.56	$	8.24

⁽¹⁾  The CODES were retired on June 20, 2014 and were dilutive for the years ended December 31, 2014 and 2013 as the average market price of L-3 Holdings’ common stock during the periods that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L-3 Holdings’ common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71. As of December 31, 2013, the conversion price was $90.24.

The computation of diluted EPS excluded shares for stock options and employee stock purchase plan contributions of 0.6 million, 0.5 million and 0.9 million for the years ended December 31, 2015, 2014 and 2013, respectively, as they were anti-dilutive.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

16. Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Domestic	$	192	$	707	$	783
Foreign		130		165		197
Income from continuing operations before income taxes	$	322	$	872	$	980

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Current income tax provision:
Federal	$	60	$	78	$	159
State and local		5		1		29
Foreign		26		35		39
Subtotal		91		114		227
Deferred income tax provision/(benefit):
Federal		(67)		101		31
State and local		(1)		11		(1)
Foreign		2		1		7
Subtotal		(66)		113		37
Total provision for income taxes	$	25	$	227	$	264

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2015			2014			2013
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.0			2.1			1.9
Foreign income taxes		(14.2	)		(3.6	)		(1.8	)
Manufacturing benefits		(3.7	)		(1.7	)		(1.9	)
Research and experimentation and other tax credits		(12.9	)		(4.3	)		(3.8	)
Resolution of tax contingencies		(2.8	)		(1.0	)		(1.1	)
Tax deductible dividends		(2.3	)		(0.8	)		(0.3	)
Goodwill Impairment		6.6			—			—
Other, net		0.1			0.3			(1.1	)
Effective income tax rate on continuing operations		7.8	%(1)		26.0	%		26.9	%

⁽¹⁾  In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

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L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Deferred tax assets:
Inventoried costs	$	56	$	87
Compensation and benefits		147		143
Pension and postretirement benefits		354		402
Loss carryforwards		12		15
Tax credit carryforwards		6		10
Other		79		80
Gross deferred tax assets		654		737
Less: valuation allowance		(9)		(9)
Net deferred tax assets		645		728
Deferred tax liabilities:
Goodwill and other intangible assets	$	(675)	$	(728)
Income recognition on contracts in process		(36)		(39)
Property, plant and equipment		(94)		(93)
Other		(56)		(88)
Gross deferred tax liabilities		(861)		(948)
Total net deferred tax liabilities	$	(216)	$	(220)

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Non-current deferred tax assets	$	3	$	15
Non-current deferred tax liabilities		(219)		(235)
Total net deferred tax liabilities	$	(216)	$	(220)

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following table presents the Company’s loss and tax credit carryforwards as of December 31, 2015 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2015
	Carryforwards		Valuation Allowances
	Gross	Tax   Effected	Gross	Tax   Effected	Expiration   Periods
	(in millions)		(in millions)
Capital loss carryforwards(1)	$            5	$            2	$            5	$            2	2016-2017
Federal net operating loss carryforwards	11	4	5	2	2026-2034
Foreign net operating loss carryforwards	16	4	4	1	Indefinite
State net operating loss carryforwards	118	2	50	1	2017-2035
Total loss carryforwards		$         12		$            6
State tax credit carryforwards	7	5	5	3	2017-2035
Foreign tax credit carryforwards	1	1	—	—	Indefinite
Total tax credit carryforwards		$           6		$           3

⁽¹⁾  During 2015, the Company reduced its valuation allowance for capital loss carryforwards by $3 million because it generated approximately $9 million of net capital gains in 2015 from business divestitures and the sale of other capital assets.

As of December 31, 2015, the total amount of unrecognized tax benefits was $140 million, $93 million of which would reduce the effective income tax rate, if recognized. A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2015		2014		2013
	(in millions)
Balance at January 1	$	169	$	155	$	127
Additions for tax positions related to the current year		14		20		17
Additions for tax positions related to prior years		2		12		38
Reductions for tax positions related to prior years		(37)		(11)		(7)
Reductions for tax positions related to settlements with taxing authorities		(1)		(1)		—
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7)		(6)		(20)
Balance at December 31	$	140	$	169	$	155

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, which is the Company’s primary tax jurisdiction, and various state and foreign jurisdictions. The statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2014 are open as of December 31, 2015. The U.S. Internal Revenue Service (IRS) commenced an audit of the Company’s U.S. Federal income tax return for 2012. The Company cannot predict the outcome of the audit at this time. As of December 31, 2015, the Company anticipates that unrecognized tax benefits will decrease by approximately

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

$8 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.

During the year ended December 31, 2015, the Company reached an agreement with the IRS relating to the audit of 2010 and 2011 U.S. Federal income tax returns. The Company also reached an agreement on several state and foreign audits. As a result of these agreements, the Company reversed previously accrued income tax expense of $9 million, including interest and penalties.

During the year ended December 31, 2014, the Company settled various state and local tax audits. As a result, the Company reduced its income tax provision by $8 million for the reversal of previously accrued amounts.

During the year ended December 31, 2013, the statutes of limitations for several of the Company’s tax returns, including its 2009 U.S. Federal income tax return and certain foreign tax returns, expired. As a result, the Company reduced its income tax provision by $10 million in the year ended December 31, 2013 for the reversal of previously accrued amounts.

As of December 31, 2015 and 2014, current and non-current income taxes payable include accrued potential interest of $18 million ($11 million after income taxes) and $15 million ($9 million after income taxes), respectively, and potential penalties of $9 million for both years. With respect to the interest related items, the Company’s income tax expense included an expense of $2 million for the years ended December 31, 2015 and 2014.

Prior to 2015, the Company recorded a deferred tax liability related to the repatriation of earnings from certain subsidiaries. During 2015, the Company completed a legal restructuring of its significant foreign operations, and the earnings of these subsidiaries are now considered reinvested indefinitely. As a result, the Company recognized a $17 million deferred tax benefit. At December 31, 2015, the Company had not provided deferred U.S. income taxes and foreign withholding taxes for $661 million of undistributed earnings by its non-U.S. subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of additional taxes that may be payable on distribution is not practicable.

17. Stock-Based Compensation

Stock-Based Compensation Plans. The Company has adopted stock-based compensation plans in order to provide incentives to directors, officers, employees and other individuals providing services to or on behalf of the Company and its subsidiaries. The Company believes that its stock-based compensation awards encourage high levels of performance by individuals who contribute to the success of the Company and enable the Company to attract, retain and reward talented and experienced individuals. This is accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Company and/or by providing eligible individuals with additional incentives to join or remain with the Company. The stock-based compensation plans serve to better align the interests of management and its employees with those of the Company’s shareholders. During the year ended December 31, 2015, the Company awarded stock-based compensation under its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP). Awards under the 2008 LTPP may be granted to any officer or employee of the Company or any of its subsidiaries, non-employee directors, or to any other individual who provides services to or on behalf of the Company or any of its subsidiaries. To date, awards under the 2008 LTPP have been in the form of L-3 Holdings’ restricted stock units, performance units and options to purchase L-3 Holdings’ common stock.

On April 30, 2013, the stockholders of L-3 Holdings approved an amendment to the 2008 LTPP to increase the number of shares authorized for issuance to approximately 19.2 million shares. Each share of L-3 Holdings’

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

common stock issued under a full value award (that is, awards other than stock options and stock appreciation rights) granted on or after February 26, 2013 is counted as 3.69 shares for purposes of this share limit. Each share issued under full value awards granted between March 1, 2010 and February 25, 2013 is counted as 2.6 shares for purposes of the share limit. At December 31, 2015, 4.2 million shares of L-3 Holdings’ common stock remained available for future awards under the 2008 LTPP.

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Stock options	$          9	$          9	$        10
Restricted stock units	38	40	41
Performance units	2	3	7
Total before income taxes	49	52	58
Income taxes	(18)	(20)	(22)
Total after income taxes	31	32	36
Less: Stock based compensation recorded in discontinued operations, net of income taxes	1	1	1
Stock based compensation recorded in continuing operations, net of income taxes	$        30	$        31	$      35

Stock Options. The exercise price of stock options granted under the 2008 LTPP may not be less than the fair market value of L-3 Holdings’ common stock on the date of grant. Options expire after 10 years from the date of grant and vest ratably over a three year period on the annual anniversary of the date of grant. All unvested options are subject to forfeiture upon termination of employment (subject to customary exceptions for death or disability). All of the stock option awards issued under the 2008 LTPP are non-qualified stock options for U.S. income tax regulations. The table below presents a summary of the Company’s stock option activity as of December 31, 2015 and changes during the year then ended.

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)		(in years)	(in millions)
Number of shares under option:
Outstanding at January 1, 2015	3,101.2	$83.02	6.2	$134
Options granted	504.3	128.78
Options exercised	(656.8)	74.97
Options forfeited	(17.2)	101.61
Outstanding at December 31, 2015	2,931.5	$92.59	6.0	$84
Vested and expected to vest at December 31, 2015(1)	2,921.2	$92.48	6.0	$84
Exercisable at December 31, 2015	1,930.1	$82.02	4.8	$72

⁽¹⁾  Represents outstanding options reduced by expected forfeitures for options not fully vested.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The weighted average grant date fair value of the stock options awarded during 2015, 2014 and 2013 was $19.76, $20.02 and $12.09, respectively. The aggregate intrinsic value, disclosed in the table above, represents the difference between L-3 Holdings’ closing stock price on the last trading day for the period, and the exercise price, multiplied by the number of in-the-money stock options.

The total intrinsic value of stock options exercised, based on the difference between the L-3 Holdings’ stock price at the time of exercise and the related exercise price, was $35 million, $43 million and $32 million for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, unrecognized compensation costs related to stock options were $11 million ($7 million after income taxes), which are expected to be recognized over a weighted average remaining period of 1.2 years.

The actual income tax benefit realized related to compensation deductions arising from the exercise of stock options by the Company’s employees totaled $13 million, $14 million and $10 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Stock Option Fair Value Estimation Assumptions. The Company estimates the fair value of its stock options at the date of grant using the Black-Scholes option-pricing valuation model. The Company’s valuation model is affected by L-3 Holdings’ stock price as well as weighted average assumptions for a number of subjective variables described below.

• Expected Holding Period. The expected holding period represents the period of time that granted stock options are expected to be outstanding until they are exercised. The Company uses historical stock option exercise data to estimate the expected holding period.

• Expected Volatility. Expected volatility is based on L-3 Holdings’ historical share price volatility matching the expected holding period.

• Expected Dividend Yield. Expected dividend yield is based on L-3 Holdings’ anticipated dividend payments and historical pattern of dividend increases over the expected holding period.

• Risk-Free Interest Rates. The risk-free interest rates for stock options are based on U.S. Treasuries for a maturity period matching the expected holding period.

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2015     Grants	2014     Grants	2013     Grants
Expected holding period (in years)	5.0	5.5	5.6
Expected volatility	21.4%	24.4%	26.4%
Expected dividend yield	2.4%	2.7%	3.6%
Risk-free interest rate	1.5%	1.7%	1.0%

Restricted Stock Units. The Company awards restricted stock units that automatically convert into shares of L-3 Holdings’ common stock upon vesting (in the case of awards granted to employees) or upon the date on which the recipient ceases to be a director (in the case of awards granted to directors). These awards are subject to forfeiture until certain restrictions have lapsed, including a three year cliff vesting period for employees and a

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

one year cliff vesting period for directors, in each case starting on the date of grant. The weighted average grant date fair value of the restricted stock units awarded during 2015, 2014 and 2013 was $128.59, $113.58 and $77.12, respectively. The grant date fair value of the restricted stock unit awards is based on L-3 Holdings’ closing stock price at the date of grant, and is generally recognized as compensation expense on a straight-line basis over the vesting period. However, for employees who attain retirement eligibility status prior to the end of the three year cliff vesting period, and who have provided at least one year of service after the date of grant, compensation expense is recognized over the shorter period from the date of grant to the retirement eligibility date. Retirement eligible employees are those employees that have attained the age of 65 and have completed at least five years of service (which service must be continuous through the date of termination except for a single break in service that does not exceed one year in length).

The table below presents a summary of the Company’s nonvested restricted stock unit awards as of December 31, 2015 and changes during the year then ended.

	Number of         Shares	Weighted Average Grant Date         Fair Value
	(in thousands)
Nonvested balance at January 1, 2015	1,517.6	$          82.72
Granted	364.8	128.59
Vested	(616.7)	68.90
Forfeited	(93.8)	99.72
Nonvested balance at December 31, 2015	1,171.9	$        102.91

As of December 31, 2015, total unrecognized compensation costs related to nonvested restricted stock unit awards were $38 million ($24 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.1 years. The total fair value of restricted stock unit awards vested during the years ended December 31, 2015, 2014 and 2013 as of their vesting dates was $82 million, $66 million and $37 million, respectively.

Performance Units. The Company grants performance unit awards, with each unit having a value at the time of grant equal to a share of L-3 Holdings’ common stock. The number of units ultimately earned can range from zero to 200% of the original award based upon the level of performance achieved by the Company over the associated performance period in relation to pre-determined performance goals. Units earned under the program are converted into shares of L-3 Holdings’ common stock, or are paid in cash based on the closing price of L-3 Holdings’ common stock at the end of the performance period, as determined at the time of grant by the Compensation Committee of the Board of Directors of L-3 Holdings.

During the years ended December 31, 2015, 2014, and 2013, the Company granted performance unit awards with a weighted average grant date fair value per unit of $129.03, $113.67 and $77.00, respectively. All the awards granted in 2015, 2014, and 2013 have performance conditions based on L-3’s diluted EPS. The performance periods for the awards began on January 1 of the applicable grant year and end on December 31 of the year corresponding to a three-year performance period. Units earned under the awards are convertible into shares of L-3 Holdings’ common stock. As of December 31, 2015, total unrecognized compensation costs related to the awards were $4 million ($2 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.6 years.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The table below presents a summary of the Company’s performance unit awards based on expected performance as of December 31, 2015 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of     Units	Weighted Average     Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2015	85.2	$	96.53
Granted	41.1		129.03
Decrease due to expected performance	(52.3)		115.27
Vested	(32.9)		77.00
Forfeited	(1.5)		109.65
Outstanding at December 31, 2015	39.6	$	121.27

The performance period for awards granted in 2013 ended on December 31, 2015. Based on L-3’s cumulative diluted EPS during the performance period, a total of 32,911 performance units having a fair market value of $4 million as of their vesting date were earned by the participants on December 31, 2015.

Employee Stock Purchase Plan. Effective July 1, 2009, the Company adopted the 2009 Employee Stock Purchase Plan (2009 ESPP). Under the 2009 ESPP, eligible employees are offered options to purchase shares of L-3 Holdings’ common stock at the end of each six-month offering period at 95% of fair market value based on the average of the highest and lowest sales prices for the stock on the purchase date. Eligible employees generally include all employees of the Company and each subsidiary or affiliate of the Company that has been designated to participate in the 2009 ESPP. Offering periods begin on the first trading day in January and July of each calendar year and end on the last trading day in June and December of each calendar year. Share purchases are funded through payroll deductions of up to 10% of an employee’s eligible compensation for each payroll period, or $21,250 each calendar year.

As of December 31, 2015, 4.0 million shares were available for future issuance under the 2009 ESPP (i.e., excluding the effect of shares issued in January 2016 as described below). In July 2015, the Company issued 0.2 million shares under the 2009 ESPP at an average price of $107.98 per share, which covered employee contributions for the six months ended June 30, 2015. In January 2016, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $113.93 per share, which covered employee contributions for the six months ended December 31, 2015. The 5% discount is not recognized as compensation expense in accordance with the accounting standard for share-based compensation expense.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

18. Commitments and Contingencies

Non-Cancelable Operating Leases

The Company leases certain facilities and equipment under agreements expiring at various dates through 2033. Certain leases contain renewal options or escalation clauses providing for increased rental payments based upon maintenance, utility and tax increases. No lease agreement imposes a restriction on the Company’s ability to pay dividends, engage in debt or equity financing transactions, or enter into further lease agreements.

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2015.

	Real Estate		Equipment		Total
			(in millions)
2016	$	77	$	5	$	82
2017		78		4		82
2018		67		2		69
2019		53		1		54
2020		85		—		85
Thereafter		166		—		166
Total minimum payments required		526		12		538
Less: Sublease rentals under non-cancelable leases		11		—		11
Net minimum payments required	$	515	$	12	$	527

Rent expense was $104 million for 2015, $117 million for 2014, and $116 million for 2013. Sublease rental income was $2 million for 2015, and $1 million for each of 2014 and 2013, respectively.

Letters of Credit

The Company enters into standby letters of credit with financial institutions covering performance and financial guarantees pursuant to contractual arrangements with certain customers. The Company had total outstanding letters of credit aggregating to $425 million and $615 million at December 31, 2015 and 2014, respectively. The Company had the full availability of its $1 billion Credit Facility at December 31, 2015 and December 31, 2014. These letters of credit may be drawn upon in the event of the Company’s nonperformance.

Guarantees

The Company, from time to time, enters into contractual guarantees that arise in connection with its business acquisitions, dispositions, and other contractual arrangements in the normal course of business.

In connection with the spin-off of Engility in 2012, L-3 entered into a Distribution Agreement and several other agreements that govern certain aspects of L-3’s relationship with Engility, including employee matters, tax matters, transition services, and the future supplier/customer relationship between L-3 and Engility. These agreements generally provide cross-indemnities that, except as otherwise provided, are principally designed to place the financial responsibility for the obligations and liabilities of each entity with that respective entity. Engility has joint and several liability with L-3 to the U.S. Internal Revenue Service (IRS) for the consolidated U.S. Federal income taxes of L-3’s consolidated group for taxable periods in which Engility was a part of that

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

group. However, the Tax Matters Agreement specifies the portion of this tax liability for which L-3 and Engility will each bear responsibility, and L-3 and Engility have agreed to indemnify each other against any amounts for which the other is not responsible. The Tax Matters Agreement also allocates responsibility between L-3 and Engility for other taxes, including special rules for allocating tax liabilities in the event that the spin-off is determined not to be tax-free. Though valid as between the parties, the Tax Matters Agreement is not binding on the IRS.

The Company has three existing real estate lease agreements, which include residual guarantee amounts, expiring on August 31, 2020 and are accounted for as operating leases. On or before the lease expiration date, the Company can exercise options under the lease agreements to renew the leases, purchase the properties for $45 million, or sell the properties on behalf of the lessor (the “Sale Option”). If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $39 million for the properties, on or before the lease expiration date. In addition, at the time the properties are sold, the Company must pay the lessor a supplemental rent payment equal to the gross sales proceeds in excess of the residual guarantee, provided that such amount shall not exceed $6 million. For these real estate lease agreements, if the gross sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent payment, the Company is required to pay a supplemental rent payment to the extent the reduction in the fair value of the properties is demonstrated by an independent appraisal to have been caused by the Company’s failure to properly maintain the properties. The aggregate residual guarantee amounts equal $39 million and are included in the future minimum payments under non-cancelable real estate operating lease payments relating to the expiration dates of such leases.

The Company has a contract to provide and operate a full-service training facility for the U.S. Air Force (USAF), including simulator systems adjacent to a USAF base in Oklahoma. The Company acted as the construction agent on behalf of the third-party owner-lessors for procurement and construction for the simulator systems, which were completed and delivered in August 2002. The Company, as lessee, entered into operating lease agreements for a term of 15 years for the simulator systems with the owner-lessors. At the end of the lease term, the Company may elect to purchase the simulator systems at fair market value, which can be no less than $7 million and no greater than $21 million. If the Company does not elect to purchase the simulator systems on the date of expiration (during the first quarter of 2018), the Company must pay to the lessor, as additional rent, $7 million and return the simulator systems to the lessors.

Environmental Matters

Management continually assesses the Company’s obligations with respect to applicable environmental protection laws, including those obligations assumed in connection with certain business acquisitions. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company’s consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with U.S. Government and foreign government customers. U.S. Government contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance

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with these requirements. The Company is currently cooperating with the U.S. Government on several investigations from which civil, criminal or administrative proceedings have or could result and give rise to fines, penalties, compensatory and treble damages, restitution and/or forfeitures. In that regard, in November 2015 the Company paid $25.6 million in settlement of a complaint alleging violations of the False Claims Act in connection with the sale of EoTech’s holographic weapon sights. The Company has other ongoing government investigations, including investigations into the pricing of certain contracts entered into by the Communication Systems segment. The Company does not currently anticipate that any of these investigations will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows. However, under U.S. Government regulations, an indictment of the Company by a federal grand jury, or an administrative finding against the Company as to its present responsibility to be a U.S. Government contractor or subcontractor, could result in the Company being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges. A conviction, or an administrative finding against the Company that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term. In addition, all of the Company’s U.S. Government contracts: (1) are subject to audit and various pricing and cost controls, (2) include standard provisions for termination for the convenience of the U.S. Government or for default, and (3) are subject to cancellation if funds for contracts become unavailable. Foreign government contracts generally include comparable provisions relating to terminations for convenience or default, as well as other procurement clauses relevant to the foreign government.

Litigation Matters

The Company is also subject to litigation, proceedings, claims or assessments and various contingent liabilities incidental to its businesses, including those specified below. Furthermore, in connection with certain business acquisitions, the Company has assumed some or all claims against, and liabilities of, such acquired businesses, including both asserted and unasserted claims and liabilities.

In accordance with the accounting standard for contingencies, the Company records a liability when management believes that it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of the loss. Generally, the loss is recorded at the amount the Company expects to resolve the liability. The estimated amounts of liabilities recorded for pending and threatened litigation are disclosed in Note 7. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At December 31, 2015, the Company recorded approximately $4 million of receivables for recoveries from insurance contracts or third parties in connection with the Bashkirian Airways matter discussed below. Legal defense costs are expensed as incurred. The Company believes it has recorded adequate provisions for its litigation matters. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While it is reasonably possible that an unfavorable outcome may occur in one or more of the following matters, unless otherwise stated below, the Company believes that it is not probable that a loss has been incurred in any of these matters. With respect to the litigation matters below for which it is reasonably possible that an unfavorable outcome may occur, an estimate of loss or range of loss is disclosed when such amount or amounts can be reasonably estimated. Although the Company believes that it has valid defenses with respect to legal matters and investigations pending against it, the results of litigation can be difficult to predict, particularly those involving jury trials. Accordingly, the Company’s current judgment as to the likelihood of loss (or our current estimate as to the potential range of loss, if any) with respect to any particular litigation matter may turn out to be wrong. Therefore, it is possible that one or more of the following or other contingencies could have a material impact on the financial position, results of operations or cash flows of the Company in future periods.

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EoTech Class Actions. In December 2015 and February 2016, three putative class action complaints against the Company were filed in the United States District Court for the Western District of Missouri and the United States District Court of the District of Oregon. The complaints allege that the Company’s EoTech business unit knowingly sold defective holographic weapons sights, and seek monetary damages, pre- and post-judgment interest, and fees and expenses based on claims including breach of warranty, fraud, violation of state consumer protection statues and unjust enrichment. The Company believes it has valid defenses with respect to these actions and intends to defend against them vigorously. The Company is unable to reasonably estimate any amount or range of loss that may be incurred in connection with these matters because the proceedings are in their early stages.

Securities Class Action. In August 2014, three separate, putative class actions were filed in the United States District Court for the Southern District of New York (the District Court) against the Company and certain of its officers. These cases were consolidated into a single action on October 24, 2014. A consolidated amended complaint was filed in the District Court on December 22, 2014, which was further amended and restated on March 13, 2015. The complaint alleges violations of federal securities laws related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment, and seeks monetary damages, pre- and post-judgment interest, and fees and expenses. The Company believes the action lacks merit and intends to defend itself vigorously. On April 24, 2015, the Company moved to dismiss the amended and restated complaint. The motion has been fully briefed. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

Government Inquiries. On July 30, 2014, the Company voluntarily contacted the Securities and Exchange Commission (SEC) to report information concerning its internal review related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The Company has received requests for interviews of current and former employees, and subpoenas for documents and other materials from the SEC and the Department of Justice concerning these self-reported matters. The Company is fully cooperating with both agencies. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with these inquiries based on the nature of the inquiries to date.

Bashkirian Airways. On July 1, 2004, lawsuits were filed on behalf of the estates of 31 Russian children in the state courts of Washington, Arizona, California, Florida, New York and New Jersey against Honeywell, Honeywell TCAS, Thales USA, Thales France, the Company and Aviation Communications & Surveillance Systems (ACSS), which is a joint venture of L-3 and Thales. The suits relate to the crash over southern Germany of a Bashkirian Airways Tupelov TU 154M aircraft and a DHL Boeing 757 cargo aircraft. On-board the Tupelov aircraft were 9 crew members and 60 passengers, including 45 children. The Boeing aircraft carried a crew of two. Both aircraft were equipped with Honeywell/ACSS Model 2000, Change 7 Traffic Collision and Avoidance Systems (TCAS). Sensing the other aircraft, the on-board DHL TCAS instructed the DHL pilot to descend, and the Tupelov on-board TCAS instructed the Tupelov pilot to climb. However, the Swiss air traffic controller ordered the Tupelov pilot to descend. The Tupelov pilot disregarded the on-board TCAS and put the Tupelov aircraft into a descent striking the DHL aircraft in midair at approximately 35,000 feet. All crew and passengers of both planes were lost. Investigations by the National Transportation Safety Board after the crash revealed that both TCAS units were performing as designed. The suits allege negligence and strict product liability based upon the design of the units and the training provided to resolve conflicting commands. The Company’s insurers accepted defense of these matters and retained counsel. The matters were consolidated in the U.S. District Court for the District of New Jersey, which then dismissed the actions on the basis of forum non conveniens. Plaintiffs representing 30 of the estates re-filed their complaint against ACSS on April 23, 2007 with the Barcelona Court’s Registry in Spain. On March 9, 2010, the court ruled in favor of the plaintiffs and entered judgment against ACSS in the amount of approximately $6.7 million, all of which represented compensatory damages. Both ACSS

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and the plaintiffs appealed the judgment. In May 2012, the appellate court ruled in favor of the plaintiffs and entered judgment against ACSS in the amount of $48 million. ACSS filed an appeal of the judgment with the Supreme Court of Spain (the Supreme Court) on September 28, 2012. During the Supreme Court’s consideration of the appeal, 18 of 30 plaintiffs released their claims against ACSS in consideration for payments made by the Company’s insurance carriers. On February 10, 2015, the Supreme Court issued a ruling that awarded the remaining 12 plaintiffs approximately $11 million in the aggregate (including interest), plus certain legal expenses incurred by the plaintiffs in connection with the appeal to the Supreme Court. The Company’s insurers have paid the $11 million award amount into an escrow account held by the Company’s legal representatives for payment to the plaintiffs if and when the award becomes due, and have confirmed that they will pay the plaintiffs’ legal expenses on behalf of the Company once they are certified and become due. On May 20, 2015, an appeal was filed on behalf of ACSS to annul the Supreme Court decision on constitutional grounds. In October 2015, eight of the remaining 12 plaintiffs released their claims against ACSS in consideration for approximately $7.0 million in aggregate payments made from the escrow account (representing a discount of approximately $0.1 million from the portion of the $11 million award attributable to these plaintiffs). On October 28, 2015, the appeal to annul the Supreme Court decision was denied. The amount owed to the remaining four plaintiffs (approximately $3.7 million) plus fees of plaintiffs’ counsel (approximately €30,000) is expected to be paid from the escrow account in the first quarter of 2016, and any remaining amount in the escrow account will be returned to the Company’s insurers.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our JovyAtlas business unit. The notice relates to losses resulting from a fire that occurred at an HVC Alkmaar bio-energy plant on July 21, 2013. The notice states that the fire resulted from the failure of an uninterruptible power supply (UPS) to provide sufficient power to act as a back-up energy supply, alleges that JovyAtlas was the manufacturer and service provider for the UPS and claims €11 million in estimated property damages and €35 million in estimated business interruption damages. The Company has tendered the notice of claim to its insurance carriers, who have commenced their own investigation.

19. Pensions and Other Employee Benefits

The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant’s compensation and/or years of service. The Company’s funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. Plan assets are invested primarily in listed stocks, mutual funds, corporate bonds, U.S. Government obligations and U.S. Government agency obligations.

The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company’s pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

In accordance with accounting standards for employee pension and postretirement benefits, the Company recognizes the unfunded status of its pension and postretirement benefit plans in the consolidated financial statements and measures its pension and postretirement benefit plan assets and benefit obligations as of December 31.

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The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement         Benefit Plans
	2015			2014			2015			2014
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,663		$	2,973		$	199		$	194
Service cost		123			106			3			3
Interest cost		149			147			7			8
Plan participants’ contributions		2			2			4			4
Amendments		—			1			—			(1	)
Actuarial (gain) loss		(261	)		579			(12	)		5
Foreign currency exchange rate changes		(53	)		(34	)		(4	)		(2	)
Curtailments, settlements and special termination benefits		3			1			—			—
Business divestiture		(59	)		—			—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Benefit obligation at the end of the year	$	3,448		$	3,663		$	184		$	199
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,570		$	2,403		$	60		$	55
Actual return on plan assets		54			205			—			6
Employer contributions		97			97			6			7
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		(52	)		(25	)		—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Fair value of plan assets at the end of the year	$	2,552		$	2,570		$	57		$	60
Unfunded status at the end of the year	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current assets	$	37		$	26		$	—		$	—
Current liabilities		(5	)		(4	)		(8	)		(8	)
Non-current liabilities		(928	)		(1,056	)		(119	)		(131	)
Liabilities held for sale(1)		—			(59	)		—			—
	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)

⁽¹⁾  Liabilities held for sale consists of $3 million of current liabilities and $56 million of non-current liabilities relating to L-3 MSI.

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The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2015		2014		2015		2014
	(in millions)
Net loss (gain)	$	768	$	968	$	(10)	$	(6)
Prior service credit		—		—		(3)		(3)
Total amount recognized	$	768	$	968	$	(13)	$	(9)

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,120 million at December 31, 2015 and $3,272 million at December 31, 2014. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31. 2015 and 2014.

	Pension Plans
	2015	2014
	(in millions)
Projected benefit obligation	$  3,232	$	3,467
Accumulated benefit obligation	2,913		3,083
Fair value of plan assets	2,302		2,349

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2015 and 2014.

	Pension Plans						Postretirement Benefit Plans
	2015			2014			2015			2014
Benefit obligations:
Discount rate		4.63%	(1)		4.14%	(1)		4.23%	(2)		3.70%	(2)
Rate of compensation increase		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.7% and 4.2% for the U.S. based plans, respectively, 3.9% for the Canadian based plans and 2.2% for the German based plans at December 31, 2014.

⁽²⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.3% and 3.7% for the U.S. based plans, respectively, and 3.7% for the Canadian based plans.

⁽³⁾  The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2015 and 2014.

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The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Components of net periodic benefit cost:
Service cost	$    123	$    106	$    126	$        3	$        3	$        4
Interest cost	149	147	132	7	8	7
Expected return on plan assets	(205)	(193)	(164)	(5)	(4)	(4)
Amortization of prior service cost (credits)	1	2	1	(2)	(2)	(3)
Amortization of net loss (gain)	68	17	83	—	(2)	2
Curtailment or settlement loss (gain)	3	1	3	—	(1)	—
Net periodic benefit cost	$    139	$      80	$    181	$        3	$        2	$        6

At the end of fiscal 2015, the Company changed the approach used to measure service and interest costs for pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For fiscal 2016, the Company elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. The Company has accounted for this change as a change in accounting estimate and, accordingly, has accounted for it on a prospective basis.

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$    (132)	$    560	$    (637)	$    (7)	$      5	$    (29)
Prior service cost (credit)	—	1	14	—	(1)	—
Amortization of net (loss) gain	(68)	(17)	(83)	—	2	(2)
Amortization of prior service (cost) credit	(1)	(2)	(1)	2	2	3
Total recognized in other comprehensive income	(201)	542	(707)	(5)	8	(28)
Total recognized in net periodic benefit cost and other comprehensive income	$      (62)	$    622	$    (526)	$    (2)	$    10	$    (22)

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The following table summarizes the amounts expected to be amortized from accumulated other comprehensive income (loss) and recognized as components of net periodic benefit costs during 2016.

	Pension Plans	Postretirement Benefit Plans	Total
		(in millions)
Net loss (gain)	$        53	$        (1)	$        52
Prior service credit	(1)	(1)	(2)
	$        52	$        (2)	$        50

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans									Postretirement Benefit Plans
	2015			2014			2013			2015			2014			2013
Discount rate		4.14%	(1)		5.03%	(1)		4.15%	(1)		3.70%	(4)		4.43%	(4)		3.37%	(4)
Expected long-term return on plan assets		8.14%	(2)		8.13%	(2)		8.13%	(2)		7.65%			7.64%			7.64%
Rate of compensation increase		3.50%	(3)		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014, and 2013 were comprised of separate assumptions determined by country of 4.2%, 5.1% and 4.2% for the U.S. based plans, 3.9%, 4.7% and 3.9% for the Canadian based plans and 2.2%, 3.5%, and 3.4% for the German based plans, respectively.

⁽²⁾  The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.25% for the U.S. based plans and 7.25% for the Canadian based plans for the years ended December 31, 2015, 2014 and 2013.

⁽³⁾  The weighted average rate of compensation increase assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.5% for both the U.S and Canadian based plans.

⁽⁴⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.7%, 4.4% and 3.3% for the U.S. based plans and 3.7%, 4.6% and 3.7% for the Canadian based plans, respectively.

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company’s benefit plans, including those from dividends, interest income and capital appreciation. The Company utilizes a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class. The Company utilizes a building block methodology that utilizes historical and forward looking rates of return for each asset class and takes into account expected returns above inflation and risk premium. These long-term rates of return are then applied to the target portfolio allocations that are generally aligned with the actual asset allocations of our plans to develop the expected long-term rate of return.

The annual increase in cost of benefits (health care cost trend rate) for the Company’s U.S. based plans covering retirees under 65 years of age is assumed to be an average of 7.5% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2021 and thereafter. The health care cost trend rate for the Company’s U.S. based plans covering retirees over 65 years of age is assumed to be an average of 9.0% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2024 and thereafter. The health care cost trend rate for the Company’s Canadian based plans is assumed to be an average of 6.75% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2023 and thereafter. Health care cost trend assumptions are based on (1) observed or expected

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short term rates of increase for different types of health models based on actual claims experience and benchmarking, and (2) a reasonable estimate of an appropriate, sustainable level of health care cost trend in the future, weighting the factors that primarily influence trends, which are price inflation and cost leveraging benefit plan features. Assumed health care cost trend rates can have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase	Decrease
	(in millions)
Effect on total service and interest cost	$            —	$            —
Effect on postretirement benefit obligations	7	(5)

Plan Assets. The Company’s Benefit Plan Committee (Committee) has the responsibility to formulate the investment policies and strategies for the plans’ assets. The Committee structures the investment of plan assets to achieve the following goals: (1) maximize the plans’ long-term rate of return on assets for an acceptable level of risk; and (2) limit the volatility of investment returns and consequent impact on the plans’ assets. In the pursuit of these goals, the Committee has formulated the following investment policies and objectives: (1) invest assets of the plans in a manner consistent with the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA); (2) preserve the plans’ assets; (3) maintain sufficient liquidity to fund benefit payments and pay plan expenses; (4) evaluate the performance of investment managers; and (5) achieve, on average, a minimum total rate of return equal to the established benchmarks for each asset category.

The Committee retains a professional investment consultant to advise the Committee and help ensure that the above policies and strategies are met. The Committee does not actively manage the day to day operations and selection process of individual securities and investments, as it retains the professional services of qualified investment management organizations to fulfill those tasks. Qualified investment management organizations are evaluated on several criteria for selection, with a focus on the investment management organizations’ demonstrated capability to achieve results that will meet or exceed the investment objectives they have been assigned and conform to the policies established by the Committee. While the investment management organizations have investment discretion over the assets placed under their management, the Committee provides each investment manager with specific investment guidelines relevant to its asset class.

The Committee has established the allowable range that the plans’ assets may be invested in for each major asset category. In addition, the Committee has established guidelines regarding diversification within asset categories to limit risk and exposure to a single or limited number of securities. The investments of the plans’ include a diversified portfolio of both equity and fixed income investments. Equity investments are further diversified across U.S. and non-U.S. stocks, small to large capitalization stocks, and growth and value stocks. Fixed income assets are diversified across U.S. and non-U.S. issuers, corporate and governmental issuers, and credit quality. The plan also invests in real estate through publicly traded real estate securities. Derivatives may be used only for hedging purposes or to create synthetic long positions. The plans are prohibited from directly owning commodities, unregistered securities, restricted stock, private placements, or interests in oil, gas, mineral exploration, or other development programs. Further, short selling or utilizing margin buying for investment purposes is prohibited.

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The table below presents the allowable range for each major category of the plans’ assets at December 31, 2015 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2015 and 2014, by asset category.

	U.S.							Canada
Asset Category	Range	2015			2014			Range	2015			2014
Domestic equity(1)	30%-60%		52	%		52	%	—		13	%		15	%
International equity(2)	10%-20%		11			10		—		62			55
Total equities	45%-75%		63			62		40%-80%		75			70
Fixed income securities	20%-40%		22			22		—		16			20
Other, primarily cash and cash equivalents	0%-15%		8			9		—		9			10
Total fixed income securities and cash and cash equivalents	—		30			31		20%-60%		25			30
Real estate securities	0%-15%		7			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾  Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾  International equities for Canadian plans includes equities of U.S. companies.

The Committee regularly monitors the investment of the plans’ assets to ensure that the actual investment allocation remains within the established range. The Committee also regularly measures and monitors investment risk through ongoing performance reporting and investment manager reviews. Investment manager reviews include assessing the managers’ performance versus the appropriate benchmark index both in the short and long-term period, performance versus peers, and an examination of the risk the managers assumed in order to achieve rates of return.

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets						Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015						Fair Value Measured at December 31, 2015
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$1,200	$    —	$    —	$	1,200		$  73	$    —	$    —	$  73
International Equity	79	—	—		79		91	—	—	91
Fixed Income — Investment Grade(2)	237	163	—		400		—	—	—	—
Fixed Income — High Yield(3)	—	114	—		114		—	—	—	—
Real Estate Investment Trusts(4)	170	—	—		170		—	—	—	—
Other(5)	—	166	—		166		6	21	—	27
Total assets at fair value	$1,686	$  443	$    —	$	2,129		$170	$    21	$    —	$191
Liabilities for unsettled trades, net					(30	)				—
Other investments measured at net asset value(6)(7)					170					92
Total				$	2,269					$283

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	Fair Value Measured at December 31, 2014						Fair Value Measured at December 31, 2014
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$  1,172	$    —	$    —	$	1,172		$    58	$    —	$    —	$    58
International Equity	87	—	—		87		107	—	—	107
Fixed Income — Investment Grade(2)	237	157	—		394		—	—	—	—
Fixed Income — High Yield(3)	—	120	—		120		—	—	—	—
Real Estate Investment Trusts(4)	159	—	—		159		—	—	—	—
Other(5)	—	208	—		208		4	26	—	30
Total assets at fair value	$  1,655	$  485	$    —	$	2,140		$  169	$    26	$    —	$  195
Liabilities for unsettled trades, net					(13	)				—
Other investments measured at net asset value(6)(7)					140					108
Total				$	2,267					$  303

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾  Approximately 59% at December 31, 2015 and 60% at December 31, 2014 of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the “Fund”) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 41% at December 31, 2015 and 40% at December 31, 2014 of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of: (1) money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾  All of the U.S. plans other investments measured using NAV at December 31, 2015 and 2014 and approximately 52% and 43% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 48% and 57% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

F-56

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2015								Fair Value Measured at December 31, 2014
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	35	$	—	$	—	$	35	$	36	$	—	$	—	$	36
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		10		2		—		12
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		2		—		—		2
Other(5)		—		2		—		2		—		4		—		4
Total assets at fair value	$	47	$	7	$	—	$	54	$	49	$	8	$	—	$	57
Other investments measured at net asset value(6)(7)								3								3
Total							$	57							$	60

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾  Approximately 73% at December 31, 2015 and 83% at December 31, 2014 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2015 and 17% at December 31, 2014 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  REITs consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2015 and 2014 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

F-57

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Contributions. The funding policy for the Company’s pension and postretirement benefit plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. The Company makes voluntary, additional contributions to the pension plans depending on a number of factors, including operating cash flow levels, alternative uses for excess cash and the plans’ funded status. At December 31, 2015, all legal funding requirements had been met. For the year ending December 31, 2016, the Company currently expects to contribute approximately $100 million to its pension plans, and approximately $10 million to its postretirement benefit plans.

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension                      Benefits		Benefit         Payments	Subsidy         Receipts
	(in millions)
2016	$	151	13	—
2017		151	14	—
2018		155	14	—
2019		162	14	—
2020		167	15	—
Years 2021-2025		1,012	70	1

Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company’s matching contributions in L-3 Holdings’ common stock and cash were $131 million for 2015, $135 million for 2014 and $120 million for 2013. These matching contributions include amounts attributable to discontinued operations of $12 million for 2015, $11 million for 2014 and $9 million for 2013.

Multi-employer Benefit Plans. Certain of the Company’s businesses participate in multi-employer defined benefit pension plans. The Company makes cash contributions to these plans under the terms of collective-bargaining agreements that cover its union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

F-58

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

Pension Fund	EIN/Pension         Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L-3 Communications			Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
		2015	2014		2015	2014	2013
					(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$23(3)	$19(4)	$21(4)	No	1/29/2016 to 5/25/2019(5)
Other Pension Funds(6)					—	—	—
			Total contributions		$23	$19	$21

⁽¹⁾  A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾  Funding improvement plan or rehabilitation plan.

⁽³⁾  At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2015 was not available.

⁽⁴⁾  Represents 5% and 6% of total plan contributions for the years ended December 31, 2014 and 2013, respectively, based on Form 5500.

⁽⁵⁾  The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 58% of 2015 contributions.

⁽⁶⁾  Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

20. Supplemental Cash Flow Information

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Interest paid on outstanding debt	$    182	$    176	$    171
Income tax payments	132	129	245
Income tax refunds	8	9	23

21. Segment Information

The Company has three reportable segments, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales and operating income. All corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, all costs and expenses, except for goodwill impairment charges and the loss related to business divestitures (which were not included in the Company’s segment performance measures) are included in the Company’s measure of segment profitability. Certain Corporate expenses of $15 million, $16 million and $15 million for the years ended December 31, 2015, 2014 and 2013, respectively, that had previously been allocated to the NSS business were retained by the Company and were allocated to L-3’s three reportable segments.

F-59

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The tables below present net sales, operating income, depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Net Sales
Products
Electronic Systems	$	3,390	$	3,685	$	3,665
Aerospace Systems		1,661		1,722		1,827
Communication Systems		1,648		1,546		1,762
Elimination of intercompany sales		(110)		(114)		(125)
Total products sales		6,589		6,839		7,129
Services
Electronic Systems	$	999	$	1,057	$	1,092
Aerospace Systems		2,503		2,604		2,730
Communication Systems		441		539		517
Elimination of intercompany sales		(66)		(53)		(48)
Total services sales		3,877		4,147		4,291
Consolidated total	$	10,466	$	10,986	$	11,420
Operating income
Electronic Systems	$	489	$	533	$	529
Aerospace Systems		205		283		421
Communication Systems		196		196		167
Segment total		890		1,012		1,117
Loss related to business divestitures(1)		(31)		—		—
Impairment charges(2)		(384)		—		—
Consolidated total	$	475	$	1,012	$	1,117
Depreciation and amortization
Electronic Systems	$	110	$	123	$	117
Aerospace Systems		50		40		38
Communication Systems		50		51		47
Consolidated total	$	210	$	214	$	202
Capital Expenditures
Electronic Systems	$	99	$	80	$	71
Aerospace Systems		55		59		54
Communication Systems		37		29		59
Corporate		6		6		20
Consolidated total	$	197	$	174	$	204
Total Assets
Electronic Systems	$	6,426	$	6,281	$	6,933
Aerospace Systems		2,630		3,011		3,106
Communication Systems		1,984		2,025		2,161
Corporate		381		589		455
Assets held for sale		—		547		—
Assets of discontinued operations		664		1,262		1,213
Consolidated total	$	12,085	$	13,715	$	13,868

⁽¹⁾  See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾  Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, and (ii) $46 million related to a business retained by L-3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

F-60

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, deferred income tax assets and liabilities and deferred debt issue costs. In addition, substantially all of the Company’s assets are located in North America.

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S.	$	7,908	$	8,051	$	8,630
International:
United Kingdom		336		335		435
Australia		321		254		218
Canada		281		289		357
South Korea		207		226		178
Saudi Arabia		201		160		132
Germany		113		243		272
Japan		95		124		67
Other		1,004		1,304		1,131
Total international		2,558		2,935		2,790
Consolidated	$	10,466	$	10,986	$	11,420
Net sales to principal customers are summarized in the table below.
	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S. Government agencies(1)	$	7,291	$	7,464	$	8,008
Commercial		1,376		1,656		1,689
Foreign governments(1)		1,799		1,866		1,723
Consolidated	$	10,466	$	10,986	$	11,420

⁽¹⁾  Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

F-61

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

22. Employee Severance and Termination Costs

Consistent with the Company’s strategy to continuously improve its cost structure and right-size its businesses, especially in view of U.S. defense budget constraints, L-3 is completing employment reduction actions across several of its businesses to reduce both direct and indirect costs, including overhead and general and administrative costs. As a result of these initiatives and due to the impact of U.S. defense budget constraints at certain affected business units, the Company recorded employee severance and other termination costs of $18 million with respect to approximately 800 employees during the year ended December 31, 2015 and $29 million with respect to approximately 1,800 employees during each of the years ended December 31, 2014 and 2013. Employee severance and other termination costs are reported within cost of sales on the consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $9 million at December 31, 2015, which is expected to be paid in 2016, and $11 million at December 31, 2014, which was paid during 2015. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2015	2014		2013
	(in millions)
Electronic Systems	$            8	$	16	$	16
Aerospace Systems	4		5		2
Communication Systems	6		8		11
Consolidated	$            18	$	29	$	29

23. Unaudited Quarterly Financial Data

Unaudited summarized financial data by quarter for the years ended December 31, 2015 and 2014 is presented in the table below. The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in millions, except per share data)
2015
Sales	$	2,488	$	2,543	$	2,564	$	2,871
Operating income (loss)		187		153		231		(96)
Income (loss) from continuing operations		105		120		128		(56)
Net income (loss)		109		124		(296)		(162)
Net income (loss) attributable to L-3		105		120		(299)		(166)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56		(0.76)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74)		(2.11)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54		(0.76)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68)		(2.11)

F-62

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in millions, except per share data)
2014
Sales	$	2,670	$	2,702	$	2,653	$	2,961
Operating income		266		217		235		294
Income from continuing operations		163		131		146		205
Net income		172		141		157		207
Net income attributable to L-3		170		137		154		203
Basic EPS from continuing operations(1)		1.87		1.47		1.68		2.38
Basic EPS(1)		1.97		1.59		1.81		2.41
Diluted EPS from continuing operations(1)		1.80		1.42		1.65		2.34
Diluted EPS(1)		1.90		1.53		1.78		2.36

⁽¹⁾  EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

24. Financial Information of L-3 Communications and Its Subsidiaries

Total shareholders’ equity for L-3 Communications equals that of L-3 Holdings, but the components (common stock, additional paid-in capital, treasury stock and retained earnings) are different. The table below presents information regarding the balances and changes in common stock, additional paid-in capital, treasury stock and retained earnings of L-3 Communications for each of the three years ended December 31, 2015.

	L-3 Communications Common Stock				Additional Paid-in   Capital		Treasury     Stock		Retained Earnings     (Deficit)		Accumulated Other Comprehensive (Loss) Income		Total
	Shares   Issued		Par Value
	(in millions, except shares issued)
Balance at December 31, 2012		100	$	—	$	5,314	$	—	$	687	$	(550)	$	5,451
Net income attributable to L-3		—		—		—		—		751		—		751
Contributions from L-3 Holdings		—		—		339		—		—		—		339
Dividends to L-3 Holdings		—		—		—		—		(1,001)		—		(1,001)
Comprehensive income		—		—		—		—		—		440		440
Other		—		—		—		—		1		—		1
Balance at December 31, 2013		100	$	—	$	5,653	$	—	$	438	$	(110)	$	5,981
Net income attributable to L-3		—		—		—		—		664		—		664
Contributions from L-3 Holdings		—		—		146		—		—		—		146
Dividends to L-3 Holdings		—		—		—		—		(1,032)		—		(1,032)
Comprehensive loss		—		—		—		—		—		(474)		(474)
Balance at December 31, 2014		100	$	—	$	5,799	$	—	$	70	$	(584)	$	5,285
Net loss attributable to L-3		—		—		—		—		(240)		—		(240)
Contributions from L-3 Holdings		—		—		253		—		—		—		253
Dividends to L-3 Holdings		—		—		—		—		(953)		—		(953)
Comprehensive income		—		—		—		—		—		10		10
Balance at December 31, 2015		100	$	—	$	6,052	$	—	$	(1,123)	$	(574)	$	4,355

F-63

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The net proceeds received by L-3 Holdings from (i) the sale of its common stock, (ii) exercise of L-3 Holdings’ employee and director stock options, and related tax benefits, and (iii) L-3 Holdings’ common stock contributed to the Company’s savings plans are contributed to L-3 Communications. The amounts paid by L-3 Holdings for dividends and share repurchases are generated from dividends received from L-3 Communications.

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 are 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 9 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.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

F-64

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

The following 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 December 31, 2015:
Current assets:
Cash and cash equivalents	$	—	$	137	$	—	$	165	$	(95)	$	207
Billed receivables, net		—		278		297		171		—		746
Contracts in process		—		872		958		251		—		2,081
Other current assets		—		288		137		109		—		534
Assets of discontinued operations		—		—		664		—		—		664
Total current assets		—		1,575		2,056		696		(95)		4,232
Goodwill		—		2,318		2,973		990		—		6,281
Other assets		—		816		496		260		—		1,572
Investment in and amounts due from consolidated subsidiaries		4,355		5,609		3,739		111		(13,814)		—
Total assets	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085
Current portion of long-term debt	$	—	$	499	$	—	$	—	$	—	$	499
Current liabilities		—		911		899		445		(95)		2,160
Liabilities of discontinued operations		—		—		220		—		—		220
Other long-term liabilities		—		1,410		195		29		—		1,634
Long-term debt		—		3,143		—		—		—		3,143
Total liabilities		—		5,963		1,314		474		(95)		7,656
L-3 shareholders’ equity		4,355		4,355		7,950		1,583		(13,888)		4,355
Noncontrolling interests		—		—		—		—		74		74
Total equity		4,355		4,355		7,950		1,583		(13,814)		4,429
Total liabilities and equity	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085

F-65

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

	L-3 Holdings   (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
At December 31, 2014:
Current assets:
Cash and cash equivalents	$	—	$	361	$	1	$	142	$	(62)	$	442
Billed receivables, net		—		320		281		202		—		803
Contracts in process		—		862		1,009		277		—		2,148
Other current assets		—		238		131		94		—		463
Assets held for sale		—		—		52		495		—		547
Assets of discontinued operations		—		—		1,262		—		—		1,262
Total current assets		—		1,781		2,736		1,210		(62)		5,665
Goodwill		—		2,309		3,331		872		—		6,512
Other assets		—		833		511		194		—		1,538
Investment in and amounts due from consolidated subsidiaries		5,285		6,747		3,196		—		(15,228)		—
Total assets	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715
Current liabilities	$	—	$	873	$	904	$	452	$	(62)	$	2,167
Liabilities held for sale		—		—		10		227		—		237
Liabilities of discontinued operations		—		—		230		—		—		230
Amounts due to consolidated subsidiaries		—		—		—		320		(320)		—
Other long-term liabilities		—		1,573		178		31		—		1 ,782
Long-term debt		—		3,939		—		—		—		3,939
Total liabilities		—		6,385		1,322		1,030		(382)		8,355
L-3 shareholders’ equity		5,285		5,285		8,452		1,246		(14,983)		5,285
Noncontrolling interests		—		—		—		—		75		75
Total equity		5,285		5,285		8,452		1,246		(14,908)		5,360
Total liabilities and equity	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715

F-66

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
Condensed Combining Statements of Operations: For the year ended December 31, 2015:
Total net sales	$	—	$	3,580	$	5,265	$	1,935	$	(314)	$	10,466
Total cost of sales		(46)		(3,283)		(4,906)		(1,701)		360		(9,576)
(Loss) gain related to business divestitures		—		(13)		(31)		13		—		(31)
Impairment charge		—		—		(364)		(20)		—		(384)
Operating (loss) income		(46)		284		(36)		227		46		475
Interest expense		—		(167)		(1)		(1)		—		(169)
Interest and other income (expense), net		—		16		—		1		—		17
Debt retirement charge		—		(1)		—		—		—		(1)
(Loss) income from continuing operations before income taxes		(46)		132		(37)		227		46		322
Benefit (provision) for income taxes		4		(10)		3		(18)		(4)		(25)
Equity in net income of consolidated subsidiaries		(198)		(362)		—		—		560		—
Income from continuing operations		(240)		(240)		(34)		209		602		297
Income from discontinued operations, net of income tax		—		—		(522)		—		—		(522)
Net (loss) income		(240)		(240)		(556)		209		602		(225)
Net income attributable to noncontrolling interests		—		—		—		—		(15)		(15)
Net (loss) income attributable to L-3	$	(240)	$	(240)	$	(556)	$	209	$	587	$	(240)
Comprehensive (loss) income attributable to L-3	$	(230)	$	(230)	$	(560)	$	98	$	692	$	(230)
For the year ended December 31, 2014:
Total net sales	$	—	$	3,586	$	5,460	$	2,218	$	(278)	$	10,986
Total cost of sales		(50)		(3,255)		(5,017)		(1,980)		328		(9,974)
Operating (loss) income		(50)		331		443		238		50		1,012
Interest expense		(2)		(156)		(2)		—		2		(158)
Interest and other income (expense), net		—		15		—		3		—		18
(Loss) income from continuing operations before income taxes		(52)		190		441		241		52		872
Benefit (provision) for income taxes		14		(49)		(115)		(63)		(14)		(227)
Equity in net income of consolidated subsidiaries		702		523		—		—		(1,225)		—
Income from continuing operations		664		664		326		178		(1,187)		645
Income from discontinued operations, net of income tax		—		—		32		—		—		32
Net income		664		664		358		178		(1,187)		677
Net income attributable to noncontrolling interests		—		—		—		—		(13)		(13)
Net income attributable to L-3	$	664	$	664	$	358	$	178	$	(1,200)	$	664
Comprehensive income attributable to L-3	$	190	$	190	$	356	$	47	$	(593)	$	190
For the year ended December 31, 2013:
Total net sales	$	—	$	3,874	$	5,555	$	2,362	$	(371)	$	11,420
Total cost of sales		(56)		(3,595)		(4,971)		(2,108)		427		(10,303)
Operating (loss) income		(56)		279		584		254		56		1,117
Interest expense		(21)		(156)		—		(1)		21		(157)
Interest and other income, net		—		15		—		5		—		20
(Loss) income from continuing operations before income taxes		(77)		138		584		258		77		980
Benefit (provision) for income taxes		21		(38)		(157)		(69)		(21)		(264)
Equity in net income of consolidated subsidiaries		807		651		—		—		(1,458)		—
Income from continuing operations		751		751		427		189		(1,402)		716
Income from discontinued operations, net of income tax		—		—		44		—		—		44
Net income		751		751		471		189		(1,402)		760
Net income attributable to noncontrolling interests		—		—		—		—		(9)		(9)
Net income attributable to L-3	$	751	$	751	$	471	$	189	$	(1,411)	$	751
Comprehensive income attributable to L-3	$	1,191	$	1,191	$469		$	164	$	(1,824)	$	1,191

F-67

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	954	$	589	$	422	$	216	$	(1,139)	$	1,042
Investing activities:
Business acquisitions, net of cash acquired		—		(320)		—		—		—		(320)
Proceeds from sale of business, net of closing date cash balances		—		14		28		276		—		318
Investments in L-3 Communications		(49)		—		—		—		49		—
Other investing activities		—		(84)		(69)		(37)		—		(190)
Net cash used in investing activities from continuing operations		(49)		(390)		(41)		239		49		(192)
Financing activities:
Repurchases of senior notes		—		(296)		—		—		—		(296)
Common stock repurchased		(740)		—		—		—		—		(740)
Dividends paid on L-3 Holdings’ common stock		(214)		—		—		—		—		(214)
Dividends paid to L-3 Holdings		—		(954)		—		—		954		—
Investments from L-3 Holdings		—		49		—		—		(49)		—
Other financing activities		49		778		(434)		(473)		152		72
Net cash used in financing activities from continuing operations		(905)		(423)		(434)		(473)		1,057		(1,178)
Effect of foreign currency exchange rate changes on cash		—		—		—		(19)		—		(19)
Net increase in cash and cash equivalents of discontinued operations		—		—		51		—		—		51
Change in cash balance in assets held for sale		—		—		1		60		—		61
Net (decrease) increase in cash		—		(224)		(1)		23		(33)		(235)
Cash and cash equivalents, beginning of the year		—		361		1		142		(62)		442
Cash and cash equivalents, end of the year	$	—	$	137	$	—	$	165	$	(95)	$	207

F-68

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	1,966	$	450	$	571	$	143	$	(2,059)	$	1,071
Investing activities:
Business acquisitions, net of cash acquired		—		(57)		—		—		—		(57)
Investments in L-3 Communications		(102)		—		—		—		102		—
Other investing activities		—		(58)		(85)		(21)		—		(164)
Net cash used in investing activities from continuing operations		(102)		(115)		(85)		(21)		102		(221)
Financing activities:
Proceeds from sale of senior notes		—		996		—		—		—		996
Redemption of CODES		(935)		—				—		—		(935)
Common stock repurchased		(823)		—		—		—		—		(823)
Dividends paid on L-3 Holdings’ common stock		(208)		—		—		—		—		(208)
Dividends paid to L-3 Holdings		—		(1,966)		—		—		1,966		—
Investments from L-3 Holdings		—		102		—		—		(102)		—
Other financing activities		102		636		(530)		(164)		50		94
Net cash used in financing activities on continuing operations		(1,864)		(232)		(530)		(164)		1,914		(876)
Effect of foreign currency exchange rate changes on cash		—		—		—		(17)		—		(17)
Net increase in cash and cash equivalents of discontinued operations		—		—		46		—		—		46
Change in cash balance in assets held for sale		—		—		(1)		(60)		—		(61)
Net increase (decrease) in cash		—		103		1		(119)		(43)		(58)
Cash and cash equivalents, beginning of the year		—		258		—		261		(19)		500
Cash and cash equivalents, end of the year	$	—	$	361	$	1	$	142	$	(62)	$	442
For the year ended December 31, 2013:
Operating activities:
Net cash from operating activities from continuing operations	$	999	$	383	$	717	$	237	$	(1,180)	$	1,156
Investing activities:
Business acquisitions, net of cash acquired		—		(62)		—		—		—		(62)
Investments in L-3 Communications		(149)		—		—		—		149		—
Other investing activities		—		(89)		(84)		(21)		—		(194)
Net cash used in investing activities from continuing operations		(149)		(151)		(84)		(21)		149		(256)
Financing activities:
Common stock repurchased		(800)		—		—		—		—		(800)
Dividends paid on L-3 Holdings’ common stock		(199)		—		—		—		—		(199)
Dividends paid to L-3 Holdings		—		(999)		—		—		999		—
Investments from L-3 Holdings		—		149		—		—		(149)		—
Other financing activities		149		630		(735)		(195)		301		150
Net cash used in financing activities from continuing operations		(850)		(220)		(735)		(195)		1,151		(849)
Effect of foreign currency exchange rate changes on cash		—		—		—		(2)		—		(2)
Net increase in cash and cash equivalents of discontinued operations		—		—		102		—		—		102
Net increase in cash		—		12		—		19		120		151
Cash and cash equivalents, beginning of the year		—		246		—		242		(139)		349
Cash and cash equivalents, end of the year	$	—	$	258	$	—	$	261	$	(19)	$	500

F-69

EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

L-3 COMMUNICATIONS HOLDINGS, INC.

(hereinafter called the “Corporation”)

Dated February 9, 2016

Incorporated under the Laws of the State of Delaware

ARTICLE I

OFFICES AND RECORDS

Section 1.1 Registered Office. The registered office of the Corporation in the State of Delaware, and the name of the registered agent at such address, shall be as set forth in the Amended and Restated Certificate of Incorporation of the Corporation (as the same may be amended and/or restated from time to time, the “Certificate of Incorporation”).

Section 1.2 Other Offices. The Corporation may have such other offices, either within or outside the State of Delaware, as the Board of Directors may designate or as the business of the Corporation may from time to time require.

Section 1.3 Books and Records. The books and records of the Corporation may be kept within or outside the State of Delaware at such place or places as may from time to time be designated by the Board of Directors.

ARTICLE II

STOCKHOLDERS

Section 2.1 Annual Meeting. An annual meeting of the stockholders of the Corporation for the election of directors shall be held on such date, and at such place (if any) and time, as may be fixed by resolution of the Board of Directors. Any other proper business may be transacted at the annual meeting.

             2.2 Special Meetings.

(A) Special meetings of the stockholders of the Corporation (i) may be called by the Chairman of the Board, if there be one, or the President, (ii) shall be called by the Chairman of the Board or the President at the request in writing of a majority of the Board of Directors, and (iii) shall be called by the Secretary upon the written request of one or more Proposing Person(s) (as defined below) who (x) have Net Long Beneficial Ownership (as defined below) of at least twenty percent (20%) of the outstanding shares of common stock of the Corporation (the “Requisite Percentage”) at the time such special meeting request is validly delivered to the Secretary (the “Delivery Date”) and (y) have had continuous Net Long Beneficial Ownership of at least the Requisite Percentage for a minimum of one full year prior to the Delivery Date (the “Holding Requirement”), subject to and in compliance with this Section 2.2 and, to the extent applicable to special meetings of stockholders, Section 2.8. Compliance by the Proposing Person(s) with the requirements of this Section 2.2, Section 2.8, to the extent applicable to special meetings of stockholders, and related provisions of these Bylaws shall be determined in good faith by the Board of Directors, which determination shall be binding on the Corporation and its stockholders.

The term “Net Long Beneficial Ownership” (and its correlative terms), when used to describe the nature of a Proposing Person’s ownership of common stock of the Corporation, shall mean those shares of common stock of the Corporation as to which the Proposing Person in question possesses: (i) the sole power to vote or direct the voting of, (ii) the sole economic incidents of ownership (including the sole right to profits and the sole risk of loss), and (iii) the sole power to dispose of or direct the disposition of. The number of shares calculated in accordance with clauses (i), (ii) and (iii) shall not include any shares that, directly or indirectly, underlie any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act (as defined

below)) that constitutes a “call equivalent position” (as such term is defined in Rule 16a-1(b) under the Exchange Act) and that is, directly or indirectly, held or maintained by a Proposing Person with respect to any shares of any class or series of shares of the Corporation.

“Proposing Person” shall mean the holder of record of common stock of the Corporation submitting a special meeting request and the beneficial owner of common stock, if any, on whose behalf such request is made; provided, however, that, with respect to the informational requirements of Section 2.2(B), if the record holder of such common stock is making the Special Meeting Request on behalf of the beneficial owner of such common stock, the term “Proposing Person” shall be deemed to refer solely to such beneficial owner.

(B) In order for a special meeting to be called upon stockholder request (a “Stockholder Requested Special Meeting”), one or more requests for a special meeting in the form required by this Section 2.2 must be signed by Proposing Person(s) holding the Requisite Percentage and be delivered to the Secretary at the principal executive offices of the Corporation by registered mail, return receipt requested. Such request(s) shall: (i) set forth a statement of the specific purpose or purposes of the meeting and the matters proposed to be acted on at such special meeting; (ii) bear the date of signature of each such Proposing Person signing the request; (iii) set forth (a) the name and address of each Proposing Person signing such request, (b) the class and the number of shares of common stock of the Corporation which are owned of record or beneficially by such Proposing Person, (c) the class and number of shares of capital stock of the Corporation representing such Proposing Person’s Net Long Beneficial Ownership, including a description of all securities or other instruments relating thereto, (d) documentary evidence that the Proposing Person(s) have had continuous Net Long Beneficial Ownership of the Requisite Percentage for a minimum of one full year prior to the Delivery Date, and (e) a certification that the Proposing Person satisfies the Net Long Beneficial Ownership requirement and the Holding Requirement of these Bylaws; (iv) contain the information required by Section 2.8 of these Bylaws as if incorporated in this Section 2.2; (v) contain a representation that the Proposing Person intends to hold the shares of common stock of the Corporation described in clause (iii) of this Section 2.2(B) through the date of the Stockholder Requested Special Meeting; and (vi) contain an acknowledgement by such Proposing Person that any reduction in such stockholder’s Net Long Beneficial Ownership with respect to which the special meeting request relates following the Delivery Date shall constitute a revocation of such request to the extent of such reduction. Any Proposing Person may revoke a request for a Stockholder Requested Special Meeting at any time by written revocation delivered to the Secretary at the principal executive offices of the Corporation. If, following any such revocation (or any deemed revocation hereunder), at any time before the date of the Stockholder Requested Special Meeting, the remaining requests are from Proposing Person(s) holding in the aggregate less than the Requisite Percentage, the Board of Directors, in its discretion, shall cancel the Stockholder Requested Special Meeting.

(C) Notwithstanding the foregoing, the Secretary shall not be required to call a Stockholder Requested Special Meeting if: (i) the Board of Directors has called or calls an annual or special meeting of stockholders to be held not later than one hundred twenty (120) days after the Delivery Date at which an identical or substantially similar item (a “Similar Item” and, for purposes of this clause (C), the removal of directors shall be deemed a “Similar Item” with respect to all items of business involving the election or removal of directors) to that included in such request will be presented; or (ii) the special meeting request (a) is received by the Secretary during the period commencing ninety (90) days prior to the first anniversary of the date of the immediately preceding annual meeting and ending on the date of the next annual meeting; (b) contains a Similar Item to an item that was presented at any meeting of stockholders held within one year prior to the Delivery Date; (c) relates to an item of business that is not a proper subject for action by the stockholders of the Corporation under applicable law; (d) was made in a manner that involved a violation of Regulation 14A under the Exchange Act or other applicable law; or (e) does not comply with the provisions of this Section 2.2 or, to the extent applicable, Section 2.8.

(D) Any special meeting of stockholders, including any Stockholder Requested Special Meeting, shall be held at such date, time and place, if any, as may be fixed by the Board of Directors in accordance with these Bylaws and in compliance with applicable law; provided that a Stockholder Requested Special Meeting shall be held within one hundred twenty (120) days after the Delivery Date.

(E) Any Proposing Person who delivered a valid special meeting request shall further update and supplement such request, if necessary, so that the information provided or required to be provided in such request shall be true and correct: (i) as of the record date for notice of the Stockholder Requested Special Meeting, and (ii) as of the date that is fifteen (15) days prior to the Stockholder Requested Special Meeting or any adjournment or postponement thereof, and such update and supplement shall be delivered to the Secretary at the principal executive offices of the Corporation not later than five (5) days after the record date for the Stockholder Requested Special Meeting (in the case of the update and supplement required to be made as of the record date), and not later than ten (10) days prior to the date for the Stockholder Requested Special Meeting or, if practical, any adjournment or postponement thereof (and, if not practicable, on the first practicable date prior to the date to which the Stockholder Requested Special Meeting has been adjourned or postponed) (in the case of the update and supplement required to be made as of fifteen (15) days prior to the Stockholder Requested Special Meeting or any adjournment or postponement thereof).

(F) Business transacted at any Stockholder Requested Special Meeting shall be limited to the purpose(s) stated in the special meeting request; provided, however, that nothing herein shall prohibit the Board of Directors from submitting matters to a vote of the stockholders at any Stockholder Requested Special Meeting.

Section 2.3 Place of Meeting; Meetings by Remote Communication. (A) The Board of Directors may designate the place, if any, of any meeting of the stockholders, or may direct that the meeting be held solely by means of remote communication. If the Board of Directors does not (x) designate the place of any meeting or (y) direct that the meeting be held solely by means of remote communication, the meeting shall be held at the principal office of the Corporation.

(B) If authorized by the Board of Directors in its sole discretion, and subject to such guidelines and procedures as the Board of Directors may adopt, stockholders and proxyholders not physically present at a meeting of stockholders may, by means of remote communication: (i) participate in a meeting of stockholders; and (ii) be deemed present in person and vote at a meeting of stockholders whether such meeting is to be held at a designated place or solely by means of remote communication; provided that (a) the Corporation shall implement reasonable measures to verify that each person deemed present and permitted to vote at the meeting by means of remote communication is a stockholder or proxyholder; (b) the Corporation shall implement reasonable measures to provide such stockholders and proxyholders a reasonable opportunity to participate in the meeting and to vote on matters submitted to the stockholders, including an opportunity to read or hear the proceedings of the meeting substantially concurrently with such proceedings; and (c) if any stockholder or proxyholder votes or takes other action at the meeting by means of remote communication, a record of such vote or other action shall be maintained by the Corporation.

Section 2.4 Notice of Meeting. Unless otherwise required by law, a notice, stating the place of the meeting (or the means of remote communication, if any, by which stockholders and proxyholders may be deemed present in person and entitled to vote at such meeting), the record date for determining stockholders entitled to vote at such meeting if such date is different from the record date for determining stockholders entitled to notice of such meeting, the date and time of any meeting of stockholders and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be prepared and delivered by the Corporation not less than ten (10) days nor more than sixty (60) days before the date of the meeting to each stockholder of record as of the record date for determining stockholders entitled to notice of the meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail with postage thereon prepaid, directed to the stockholder at such stockholder’s address as it appears on the records of the Corporation. If given by electronic transmission, such notice shall be deemed given at the time specified in Section 232 of the General Corporation Law of the State of Delaware. Any previously scheduled meeting of the stockholders may be postponed, canceled or rescheduled by resolution of the Board of Directors upon public notice given prior to the date previously scheduled for such meeting of stockholders.

Section 2.5 Quorum and Adjournment. Except as otherwise provided by law or by the Certificate of Incorporation, the holders of a majority in voting power of the outstanding shares of capital stock of the Corporation, represented in person or by proxy, shall constitute a quorum at a meeting of stockholders, provided

that where a separate vote by a class or series (or classes or series) is required, the holders of a majority in voting power of the shares of such class or series (or classes or series) shall constitute a quorum entitled to take action with respect to that vote on that matter. The stockholders present at a duly organized meeting may continue to transact business until adjournment, notwithstanding the withdrawal of enough stockholders to leave less than a quorum. The chairman of the meeting or a majority in voting power of the shares so represented may adjourn the meeting from time to time, whether or not there is such a quorum. At the adjourned meeting the Corporation may transact any business which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) days, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting. If after the adjournment a new record date for determination of stockholders entitled to vote is fixed for the adjourned meeting, the Board of Directors shall fix as the record date for determining stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote at the adjourned meeting, and shall give notice of the adjourned meeting to each stockholder of record entitled to vote at such adjourned meeting as of the record date so fixed for notice of such adjourned meeting.

Section 2.6 Voting; Proxies. Except as otherwise provided by the Certificate of Incorporation, each director shall be elected by the vote of a majority of the votes cast with respect to that director’s election at any meeting for the election of directors at which a quorum is present; provided that if, as of the tenth (10th) day preceding the date the Corporation first transmits its notice of meeting for such meeting to the stockholders of the Corporation, or, at any time thereafter, the number of nominees exceeds the number of directors to be elected (a “Contested Election”), the directors shall be elected by the vote of a plurality of the votes cast. For purposes of this Section 2.6, a majority of the votes cast in respect of the election of any director means that the number of votes cast “for” such director’s election must exceed the number of votes cast “against” such director’s election, and an abstention or broker non-vote will not count as a vote “for” or “against” a director’s election. All other matters presented to the stockholders at a meeting at which a quorum is present shall, unless a different or minimum vote is required by the Certificate of Incorporation, these Bylaws, the rules or regulations of any stock exchange applicable to the Corporation, or any law or regulation applicable to the Corporation or its securities, in which case such different or minimum vote shall be the applicable vote on the matter, be decided by a majority of the votes cast on such matter. Such votes may be cast in person or by proxy but no proxy shall be voted on after three years from its date, unless such proxy provides for a longer period. A proxy shall be irrevocable if it states that it is irrevocable and if, and only as long as, it is coupled with an interest sufficient in law to support an irrevocable power. A stockholder may revoke any proxy which is not irrevocable by attending the meeting and voting in person or by delivering to the Secretary of the Corporation a revocation of such proxy or a new proxy bearing a later date. The Board of Directors, in its discretion, or the chairman of the meeting, in his or her discretion, may require that any votes cast at such meeting shall be cast by written ballot.

Section 2.7 Inspectors of Elections; Conduct of the Meeting.

(A) The Board of Directors by resolution may appoint one or more inspectors, which inspector or inspectors may include individuals who serve the Corporation in other capacities, including, without limitation, as officers, employees, agents or representatives of the Corporation, to act at the meeting and make a written report thereof. One or more persons may be designated as alternate inspectors to replace any inspector who fails to act. If no inspector or alternate has been appointed to act, or if all inspectors or alternates who have been appointed are unable to act, at a meeting of stockholders, the chairman of the meeting shall appoint one or more inspectors to act at the meeting. Each inspector, before discharging his or her duties, shall take and sign an oath faithfully to execute the duties of inspector with strict impartiality and according to the best of his or her ability. The inspectors shall have the duties prescribed by the General Corporation Law of the State of Delaware.

(B) The chairman of the meeting shall fix and announce at the meeting the date and time of the opening and the closing of the polls for each matter upon which the stockholders will vote at a meeting. The Board of Directors may adopt by resolution such rules and regulations for the conduct of the meeting of stockholders as it shall deem appropriate. Except to the extent inconsistent with such rules and regulations as adopted by the Board of Directors, the chairman of the meeting shall have the right and authority to convene and (for any or no reason) to recess and/or adjourn the meeting, to prescribe such rules, regulations and procedures and to do all such acts

as, in the judgment of such chairman, are appropriate for the proper conduct of the meeting. Such rules, regulations or procedures, whether adopted by the Board of Directors or prescribed by the chairman of the meeting, may include, without limitation, the following: (i) the establishment of an agenda or order of business for the meeting; (ii) rules and procedures for maintaining order at the meeting and the safety of those present; (iii) limitations on attendance at or participation in the meeting to stockholders entitled to vote at the meeting, their duly authorized and constituted proxies or such other persons as the chairman of the meeting shall determine; (iv) restrictions on entry to the meeting after the time fixed for the commencement thereof; and (v) limitations on the time allotted to questions or comments by participants. In addition to making any other determinations that may be appropriate to the conduct of the meeting, the chairman of the meeting shall, if the facts warrant, determine and declare to the meeting that a matter or business was not properly brought before the meeting and, if such chairman should make such determination and declaration, any such matter or business not properly brought before the meeting shall not be transacted or considered at the meeting. Unless and to the extent determined by the Board of Directors or the chairman of the meeting, meetings of stockholders shall not be required to be held in accordance with the rules of parliamentary procedure.

Section 2.8 Notice of Stockholder Business and Nominations.

(A) Annual Meetings. (1) Nominations of persons for election to the Board of Directors and the proposal of other business to be considered by the stockholders may be made at an annual meeting of stockholders only (a) pursuant to the Corporation’s notice of meeting (or any supplement thereto) delivered pursuant to Section 2.4 of these Bylaws, (b) by or at the direction of the Board of Directors or any committee thereof or (c) by any stockholder of the Corporation who is entitled to vote on such election or such other business at the meeting, who complied with the notice procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this Bylaw and who was a stockholder of record at the time such notice is delivered to the Secretary of the Corporation.

(2) For nominations or other business to be properly brought before an annual meeting by a stockholder, the stockholder must have given timely notice thereof in writing to the Secretary of the Corporation, and, in the case of business other than nominations of persons for election to the Board of Directors, such other business must be a proper matter for stockholder action. To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the Corporation not less than ninety (90) days nor more than one hundred twenty (120) days prior to the first anniversary of the preceding year’s annual meeting; provided, however, that in the event that the date of the current year’s annual meeting is advanced by more than twenty (20) days, or delayed by more than seventy (70) days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the one hundred twentieth (120th) day prior to such current year’s annual meeting and not later than the close of business on the later of the ninetieth (90th) day prior to such annual meeting or the tenth (10th) day following the day on which public announcement of the date of such meeting is first made. Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director (i) all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to and in accordance with Section 14of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the rules and regulations promulgated thereunder, and (ii) such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the text of the proposal or business (including the text of any resolutions proposed for consideration and, in the event that such business includes a proposal to amend these Bylaws, the language of the proposed amendment), the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the Corporation’s books, and of such beneficial owner, (ii) the class or series and number of shares of the Corporation which are owned beneficially and of record by such stockholder and such beneficial owner, (iii) a description of any agreement, arrangement or understanding with respect to the nomination or proposal between or among such stockholder and such beneficial

owner, any of their respective affiliates or associates, and any others acting in concert with any of the foregoing, including, in the case of a nomination, the nominee, (iv) a description of any agreement, arrangement and/or understanding (including any derivative or short positions, profit interests, options, warrants, convertible securities, stock appreciation or similar rights, hedging transactions, and borrowed or loaned shares) that has or have been entered into as of the date of the stockholder’s notice by, or on behalf of, such stockholder and such beneficial owners, whether or not such instrument or right shall be subject to settlement in underlying shares of the Corporation, the effect or intent of which is to mitigate loss to, manage risk or benefit of share price changes for, or increase or decrease the voting power of, such stockholder or such beneficial owner, with respect to securities of the Corporation, (v) a representation that the stockholder is a holder of record or beneficial owner of stock of the Corporation entitled to vote at such meeting and intends to appear in person or by proxy at the meeting to propose such business or nomination, (vi) a representation whether the stockholder or the beneficial owner, if any, intends or is part of a group which intends (A) to deliver a proxy statement and/or form of proxy to holders of at least the percentage of the Corporation’s outstanding capital stock required to approve or adopt the proposal or elect the nominee and/or (B) otherwise to solicit proxies from stockholders in support of such proposal or nomination, and (vii) any other information relating to such stockholder and beneficial owner, if any, required to be disclosed in a proxy statement or other filings required to be made in connection with solicitations of proxies for, as applicable, the proposal and/or for the election of directors in an election contest pursuant to and in accordance with Section 14(a) of the Exchange Act and the rules and regulations promulgated thereunder.

(3) Notwithstanding anything in the second sentence of paragraph (A)(2) of this Section 2.8 to the contrary, in the event that the number of directors to be elected to the Board of Directors of the Corporation at the annual meeting is increased effective after the time period for which nominations would otherwise be due under paragraph (A)(2) of this Section 2.8 and there is no public announcement by the Corporation naming the nominees for the additional directorships at least one hundred (100) days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this Section 2.8 shall also be considered timely, but only with respect to nominees for the additional directorships, if it shall be delivered to the Secretary at the principal executive offices of the Corporation not later than the close of business on the tenth (10th) day following the day on which such public announcement is first made by the Corporation.

(B) Special Meetings of Stockholders. Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the Corporation’s notice of meeting in compliance with Article II, Section 2.4 of these Bylaws. The proposal by stockholders of any business to be conducted at a special meeting of stockholders may be made only pursuant to and in compliance with Section 2.2 of these Bylaws.

(C) General. (1) A stockholder providing notice of a proposed nomination for election to the Board or other business proposed to be brought before a meeting (whether given pursuant to paragraph (A)(2) or paragraph (B) of this Section 2.8) shall update and supplement such notice from time to time to the extent necessary so that the information provided or required to be provided in such notice shall be true and correct as of the record date for the meeting and as of the date that is fifteen (15) days prior to the meeting or any adjournment or postponement thereof; such update and supplement shall be delivered in writing to the Secretary at the principal executive offices of the Corporation not later than five (5) days after the record date for the meeting (in the case of any update and supplement required to be made as of the record date), and not later than ten (10) days prior to the date for the meeting or any adjournment or postponement thereof (in the case of any update and supplement required to be made as of fifteen (15) days prior to the meeting or any adjournment or postponement thereof).

(2) The Corporation may require any proposed nominee for election to the Board of Directors to furnish such other information as it may reasonably require to determine the eligibility of such proposed nominee to serve as a director of the Corporation.

(3) Only such persons who are nominated in accordance with the procedures set forth in this Section 2.8 shall be eligible to be elected at a meeting of stockholders of the Corporation to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting

in accordance with the procedures set forth in this Section 2.8. Except as otherwise provided by law, the chairman of the meeting shall have the power and duty (a) to determine whether a nomination or any business proposed to be brought before the meeting was made or proposed, as the case may be, in accordance with the procedures set forth in this Section 2.8 (including whether the stockholder or beneficial owner, if any, on whose behalf the nomination or proposal is made or solicited (or is part of a group which solicited) or did not so solicit, as the case may be, proxies or votes in support of such stockholder’s nominee or proposal in compliance with such stockholder’s representation as required by clause (A)(2)(c)(vi) of this Section 2.8) and (b) if any proposed nomination or business was not made or proposed in compliance with this Section 2.8, to declare that such nomination shall be disregarded or that such proposed business shall not be transacted. Notwithstanding the foregoing provisions of this Section 2.8, unless otherwise required by law, if the stockholder (or a qualified representative of the stockholder) does not appear at the annual or special meeting of stockholders of the Corporation to present a nomination or proposed business, such nomination shall be disregarded and such proposed business shall not be transacted, notwithstanding that proxies in respect of such vote may have been received by the Corporation. For purposes of this Section 2.8, to be considered a qualified representative of the stockholder, a person must be a duly authorized officer, manager or partner of such stockholder or must be authorized by a writing executed by such stockholder or an electronic transmission delivered by such stockholder to act for such stockholder as proxy at the meeting of stockholders and such person must produce such writing or electronic transmission, or a reliable reproduction of the writing or electronic transmission, at the meeting of stockholders.

(4) For purposes of this Section 2.8, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed or furnished by the Corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act and the rules and regulations promulgated thereunder.

(5) For purposes of this Bylaw, no adjournment or postponement or notice of adjournment or postponement of any meeting shall be deemed to constitute a new notice of such meeting for purposes of this Section 2.8, and in order for any notification required to be delivered by a stockholder pursuant to this Section 2.8 to be timely, such notification must be delivered within the periods set forth above with respect to the originally scheduled meeting.

(6) Notwithstanding the foregoing provisions of this Section 2.8, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations promulgated thereunder with respect to the matters set forth in this Section 2.8 and in Section 2.2 (as applicable); provided however, that any references in these Bylaws to the Exchange Act or the rules and regulations promulgated thereunder are not intended to and shall not limit any requirements applicable to nominations or proposals as to any other business to be considered pursuant to this Section 2.8 (including paragraphs (A)(1)(c) hereof) and Section 2.2 (as applicable), and compliance with paragraphs (A)(1)(c) of this Section 2.8 and Section 2.2 (as applicable) shall be the exclusive means for a stockholder to make nominations or submit other business. Nothing in this Section 2.8 or in Section 2.2 shall apply to the right, if any, of the holders of any series of Preferred Stock (as defined in the Certificate of Incorporation of the Corporation) to elect directors pursuant to any applicable provisions of the Certificate of Incorporation.

Section 2.9 Fixing Date for Determination of Stockholders of Record.

(A) In order that the Corporation may determine the stockholders entitled to notice of any meeting of stockholders or any adjournment thereof, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted by the Board of Directors, and which record date shall, unless otherwise required by law, not be more than sixty (60) nor less than ten (10) days before the date of such meeting. If the Board of Directors so fixes a date, such date shall also be the record date for determining the stockholders entitled to vote at such meeting unless the Board of Directors determines, at the time it fixes such record date, that a later date on or before the date of the meeting shall be the date for making such determination. If no record date is fixed by the Board of Directors, the record date for determining stockholders entitled to notice of or to vote at a meeting of stockholders shall be at the close of business on the

day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day on which the meeting is held. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for determination of stockholders entitled to vote at the adjourned meeting, and in such case shall also fix as the record date for stockholders entitled to notice of such adjourned meeting the same or an earlier date as that fixed for determination of stockholders entitled to vote in accordance herewith at the adjourned meeting.

(B) In order that the Corporation may determine the stockholders entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date shall not be more than sixty (60) days prior to such action. If no such record date is fixed, the record date for determining stockholders for any such purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto.

ARTICLE III

BOARD OF DIRECTORS

Section 3.1 General Powers. Except as otherwise provided by the Certificate of Incorporation or the General Corporation Law of the State of Delaware, the business and affairs of the Corporation shall be managed by or under the direction of its Board of Directors.

Section 3.2 Number, Tenure and Qualifications. Subject to the rights of the holders of any series of Preferred Stock to elect additional directors under specified circumstances, the number of directors shall be fixed from time to time exclusively by the Board of Directors pursuant to a resolution adopted by a majority of the Board of Directors. A director of the Corporation shall be elected to hold office until the expiration of the term for which such person is elected and until such person’s successor shall be duly elected and qualified, or until such director’s earlier death, resignation, retirement, disqualification or removal. Commencing at the annual meeting of stockholders that is scheduled to be held in calendar year 2014 (the “2014 Annual Meeting”), the directors of the Corporation shall be elected annually for terms of one year, except that any director in office at the 2014 Annual Meeting whose term expires at the annual meeting of stockholders scheduled to be held in calendar year 2015 or calendar year 2016, shall continue to hold office until the end of the term for which such director was elected and until such director’s successor shall have been elected or qualified, or until such director’s earlier death, resignation, retirement, disqualification or removal.

Section 3.3 Regular Meetings. A meeting of the Board of Directors shall be held without other notice than this Bylaw immediately prior to or after, and at the same place (if any) as, each annual meeting of stockholders. If the annual meeting of stockholders is not held at a place, such meeting of the Board of Directors may be held by teleconference or at such place as may be determined by resolution of the Board of Directors, notice of which shall be provided in accordance with Section 3.5 of these Bylaws. The Board of Directors may, by resolution, provide the time and place for the holding of additional regular meetings without other notice than such resolution.

Section 3.4 Special Meetings. Special meetings of the Board of Directors shall be called by the Chairman of the Board or the President or by the Chairman of the Board, the President or the Secretary at the request of a majority of the Board of Directors. The person or persons authorized to call special meetings of the Board of Directors may fix the place and time of the meetings.

Section 3.5 Notice. Notice of any special meeting shall be given to each director at such director’s business or residence in writing or by telephone or facsimile or electronic transmission. If mailed, such notice shall be deemed adequately delivered when deposited in the United States mails so addressed, with postage thereon prepaid, at least three (3) days before such meeting. If by telephone, facsimile or electronic transmission, the

notice shall be given at least twenty-four (24) hours prior to the time set for the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice of such meeting. A meeting may be held at any time without notice if all the directors are present or if those not present waive notice of the meeting in writing, either before or after such meeting.

Section 3.6 Quorum. Unless the Certificate of Incorporation provides otherwise, a majority of the total number of directors shall constitute a quorum for the transaction of business. If at any meeting of the Board of Directors there shall be less than a quorum present, a majority of the directors present may adjourn the meeting from time to time without further notice. Except as may be otherwise specifically provided by law, the Certificate of Incorporation or these Bylaws, the act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the Board of Directors.

Section 3.7 Newly Created Directorships and Vacancies. Subject to the rights of the holders of any series of Preferred Stock then outstanding, any vacancy in the Board of Directors resulting from the death, resignation, retirement, disqualification or removal of any director, or any newly created directorship resulting from an increase in the authorized number of directors, shall be filled exclusively by a majority of the directors then in office, although less than a quorum, or by a sole remaining director. No decrease in the number of authorized directors constituting the Board of Directors shall shorten the term of any incumbent director.

Section 3.8 Committees of the Board of Directors. The Board of Directors may designate one or more committees to exercise, subject to applicable law and the resolutions of the Board of Directors designating and empowering such committee, any or all powers of the Board of Directors. Each such committee shall consist of one or more directors of the Corporation. The Board of Directors may designate one or more directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee. Any such committee may, to the extent permitted by law, exercise such powers and shall have such responsibilities as shall be specified in the designating resolution. In the absence or disqualification of any member of such committee or committees, the member or members thereof present at any meeting and not disqualified from voting, whether or not constituting a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member. A majority of any committee may determine its action and fix the time and place of its meetings, unless the Board of Directors shall otherwise provide. Notice of such meetings shall be given to each member of the committee in the manner provided for in Section 3.5 of these Bylaws. The Board of Directors shall have power at any time to fill vacancies in, to change the membership of, or to dissolve any such committee. Except as otherwise provided by law, the presence of a majority of the members of a committee shall constitute a quorum for the transaction of business by that committee, and in every case where a quorum is present the affirmative vote of a majority of the members of the committee present shall be the act of the committee.

ARTICLE IV

OFFICERS

Section 4.1 Elected Officers. The elected officers of the Corporation shall be a President, a Secretary, a Treasurer, and such other officers as the Board of Directors from time to time may deem proper, including one or more vice presidents, assistant treasurers and assistant secretaries. In addition, the Board of Directors at any time and from time to time may elect a Chairman of the Board from among its members. A director serving as Chairman of the Board may be, but need not be, an elected officer. All officers chosen by the Board of Directors shall each have such powers and duties as from time to time may be conferred by the Board of Directors.

Section 4.2 Election and Term of Office. The elected officers of the Corporation shall be elected annually by the Board of Directors at the regular meeting of the Board of Directors held immediately prior to or after each annual meeting of the stockholders. If the election of officers shall not be held at such meeting such election shall be held as soon thereafter as convenient. Subject to Section 4.5 of these By-Laws, each officer shall hold office until such officer’s successor shall have been duly elected and shall have qualified or until such officer’s earlier death or resignation.

Section 4.3 Secretary. The Secretary shall give, or cause to be given, notice of all meetings of stockholders and directors and all other notices required by law or by these Bylaws, and in case of his or her absence or refusal or neglect so to do, any such notice may be given by any person thereunto directed by the Chairman of the Board or the President, or by the Board of Directors, upon whose request the meeting is called as provided in these Bylaws. The Secretary shall record all the proceedings of the meetings of the Board of Directors, any committees thereof and the stockholders of the Corporation in a book to be kept for that purpose, and shall perform such other duties as may be assigned to him or her by the Board of Directors, the Chairman of the Board or the President. The Secretary shall have the custody of the seal of the Corporation and see that the same is affixed to all instruments requiring it.

Section 4.4 Treasurer. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate account of receipts and disbursements in books belonging to the Corporation. The Treasurer shall deposit all moneys and other valuables in the name and to the credit of the Corporation in the depository or depositaries of the Corporation. The Treasurer shall disburse the funds of the Corporation, taking proper vouchers for such disbursements. The Treasurer shall render to the Chairman of the Board, the President and the Board of Directors, whenever requested, an account of all his or her transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for the faithful discharge of his or her duties in such amount and with such surety as the Board of Directors shall prescribe.

Section 4.5 Removal. Any officer elected by the Board of Directors may be removed by a majority of the Board of Directors, with or without cause. No elected officer shall have any contractual rights against the Corporation for compensation by virtue of such election beyond the date of the election of such officer’s successor or such officer’s death, resignation or removal, whichever event shall first occur, except as otherwise provided in an employment contract or under an employee deferred compensation plan.

Section 4.6 Vacancies. A newly created office and a vacancy in any office because of death, resignation, removal or other cause may be filled by the Board of Directors for the unexpired portion of the term at any meeting of the Board of Directors.

ARTICLE V

STOCK CERTIFICATES; UNCERTIFICATED SHARES

Section 5.1 Form. The shares of stock of the Corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of stock shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the Corporation. Every holder of stock represented by certificates shall be entitled to have a certificate signed by or in the name of the Corporation by the Chairman of the Board of Directors, if any, or the President or a vice president, and by the Treasurer or an assistant treasurer, or the Secretary or an assistant secretary, of the Corporation representing the number of shares registered in certificate form. Any of or all the signatures on the certificate may be a facsimile. In case any officer, transfer agent or registrar who has signed or whose facsimile signature has been placed upon a certificate shall have ceased to be such officer, transfer agent, or registrar before such certificate is issued, it may be issued by the Corporation with the same effect as if such person were such officer, transfer agent, or registrar at the date of issue.

Section 5.2 Lost, Stolen, Destroyed or Mutilated Certificates. A new certificate of stock or uncertificated shares may be issued in the place of any certificate previously issued by the Corporation alleged to have been lost, stolen or destroyed, and the Corporation may, in its discretion, require the owner of such lost, stolen or destroyed certificate, or his, her or its legal representative, to give the Corporation a bond, in such sum as the Corporation may direct, in order to indemnify the Corporation against any claims that may be made against it in connection therewith. A new certificate or uncertificated shares of stock may be issued in the place of any certificate previously issued by the Corporation that has become mutilated upon the surrender by such owner of

such mutilated certificate and, if required by the Corporation, the posting of a bond by such owner in an amount sufficient to indemnify the Corporation against any claim that may be made against it in connection therewith.

Section 5.3 Transfers. Shares of stock of the Corporation shall be transferable upon its books by the holders thereof, in person or by their duly authorized attorneys or legal representatives, upon surrender to the Corporation by delivery thereof (to the extent extend evidenced by a physical stock certificate) to the person in charge of the stock and transfer books and ledgers. Certificates representing such shares, if any, shall be cancelled and new certificates, if the shares are to be certificated, shall thereupon be issued. Shares of capital stock of the Corporation that are not represented by a certificate shall be transferred in accordance with applicable law. A record shall be made of each transfer. Whenever any transfer of shares shall be made for collateral security, and not absolutely, it shall be so expressed in the entry of the transfer if, when the certificates are presented or uncertificated shares are requested to be transferred, both the transferor and transferee request the Corporation to do so. The Board of Directors shall have power and authority to make such rules and regulations as it may deem necessary or proper concerning the issue, transfer and registration of shares of stock of the Corporation and of the certificates, if any, representing such shares.

ARTICLE VI

MISCELLANEOUS PROVISIONS

Section 6.1 Fiscal Year. The fiscal year of the Corporation shall be fixed by the Board of Directors.

Section 6.2 Dividends. The Board of Directors may from time to time declare, and the Corporation may pay, dividends on its outstanding shares in the manner and upon the terms and conditions provided by law and its Certificate of Incorporation.

Section 6.3 Seal. The corporate seal shall be in such form as the Board of Directors shall prescribe.

Section 6.4 List of Stockholders Entitled To Vote. The officer who has charge of the stock ledger shall prepare and make, at least ten (10) days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting (provided, however, that if the record date for determining the stockholders entitled to vote is less than ten (10) days before the date of the meeting, the list shall reflect the stockholders entitled to vote as of the tenth (10th) day before the meeting date), arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting at least ten (10) days prior to the meeting (a) on a reasonably accessible electronic network; provided that the information required to gain access to such list is provided with the notice of meeting, or (b) during ordinary business hours at the principal place of business of the Corporation. In the event that the Corporation determines to make the list available on an electronic network, the Corporation may take reasonable steps to ensure that such information is available only to stockholders of the Corporation. If the meeting is to be held at a place, then a list of stockholders entitled to vote at the meeting shall be produced and kept at the time and place of the meeting during the whole time thereof and may be examined by any stockholder who is present. If the meeting is to be held solely by means of remote communication, then the list shall also be open to the examination of any stockholder during the whole time of the meeting on a reasonably accessible electronic network, and the information required to access such list shall be provided with the notice of the meeting. Except as otherwise provided by law, the stock ledger shall be the only evidence as to who are the stockholders entitled to examine the list of stockholders required by this Section 6.4 or to vote in person or by proxy at any meeting of stockholders.

Section 6.5 Waiver of Notice. Whenever any notice is required to be given to any stockholder or director of the Corporation under the provisions of the General Corporation Law of the State of Delaware, the Certificate of Incorporation or these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to such notice, or a waiver by electronic transmission by the person entitled to notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance of a person at a meeting shall constitute a waiver

of notice of such meeting, except when the person attends a meeting for the express purpose of objecting at the beginning of the meeting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any annual or special meeting of the stockholders or the Board of Directors need be specified in any waiver of notice of such meeting.

Section 6.6 Audits. The accounts, books and records of the Corporation shall be audited upon the conclusion of each fiscal year by an independent certified public accountant, and it shall be the duty of the Board of Directors to cause such audit to be made annually.

Section 6.7 Resignations. Any director or any officer, whether elected or appointed, may resign at any time by serving written notice of such resignation on the Chairman of the Board, the President or the Secretary, and such resignation shall be deemed to be effective as of the close of business on the date said notice is received by the Chairman of the Board, the President, or the Secretary, unless otherwise specified in said notice. No formal action shall be required of the Board of Directors or the stockholders to make any such resignation effective.

Section 6.8 Indemnification and Insurance. (A) Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit, or proceeding, whether civil, criminal, administrative or investigative (hereinafter a “proceeding”), by reason of the fact that he or she or a person of whom he or she is the legal representative is or was a director or officer of the Corporation or, while serving as a director or officer of the Corporation, is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the General Corporation Law of the State of Delaware as the same exists or may hereafter be amended, against all expense, liability and loss (including, without limitation, attorneys’ fees, judgments, fines, penalties and amounts paid or to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director or officer and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in paragraph (B) of this Section 6.8 of this Bylaw with respect to proceedings seeking to enforce rights to indemnification, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized in the first instance by the Board of Directors of the Corporation.

(B) If a claim under paragraph (A) of this Section 6.8 of this Bylaw is not paid in full by the Corporation within thirty days after a written claim has been received by the Corporation, or if a claim for any advancement of expenses under this Section 6.8 is not paid in full within thirty days after the Corporation has received a statement or statements requesting such amounts to be advanced, the claimant may at any time thereafter (but not before) bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim to the fullest extent permitted by law. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the General Corporation Law of the State of Delaware for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, any committee of the Board of Directors, independent legal counsel or stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the General Corporation Law of the State of Delaware, nor an actual determination by the Corporation (including its Board of Directors, any committee of the Board of Directors, independent legal counsel or stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct.

(C) The right to indemnification and the payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this Bylaw shall not be exclusive of any other right which any person

may have or hereafter acquire under any statute, provision of the Certificate of Incorporation, Bylaws, agreement, vote of stockholders or disinterested directors or otherwise.

(D) The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the General Corporation Law of the State of Delaware.

(E) The Corporation may, to the extent authorized from time to time by the Board of Directors, grant rights to indemnification, and rights to be paid by the Corporation the expenses incurred in defending any proceeding in advance of its final disposition, to any employee or agent of the Corporation to the fullest extent of the provisions of this Bylaw with respect to the indemnification and advancement of expenses of directors and officers of the Corporation.

(F) The right to indemnification conferred in this Bylaw on the persons entitled thereto shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the General Corporation Law of the State of Delaware requires the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer, including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, such advancement shall be made only upon delivery to the Corporation of an undertaking by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Bylaw or otherwise.

(G) For the avoidance of doubt, claimant’s right to indemnification and advancement of expenses provided under this Article VI shall (i) vest at the time that such claimant becomes a director or officer of the Corporation or at the time such claimant becomes a director, officer, employee or agent of another corporation or of a partnership, joint venture, trust or other enterprise, including service with respect to employee benefit plans, at the request of the Corporation and (ii) continue as to the claimant even though such claimant may have ceased to be a director or officer of the Corporation.

(H) Any amendment or modification of these Bylaws affecting a claimant’s right to indemnification or the advancement of expenses provided under this Article VI shall not alter the claimant’s right to indemnification or the advancement of expenses with respect to such claimant’s conduct prior to the amendment or modification, without the express written consent of such claimant.

Section 6.9 Forum Selection. Unless the Corporation consents in writing to the selection of an alternative forum, the Court of Chancery of the State of Delaware shall, to the fullest extent permitted by law, be the sole and exclusive forum for (i) any derivative action or proceeding brought on behalf of the Corporation, (ii) any action asserting a claim of breach of a fiduciary duty owed by any director, officer or other employee of the Corporation to the Corporation or the Corporation’s stockholders, (iii) any action asserting a claim arising pursuant to any provision of the General Corporation Law of the State of Delaware, or (iv) any action asserting a claim governed by the internal affairs doctrine. Any person or entity purchasing or otherwise acquiring or holding any interest in shares of capital stock of the Corporation shall be deemed to have notice of and consented to the provisions of this Section 6.9.

ARTICLE VII

AMENDMENTS

Section 7.1 Amendments. Except as otherwise provided by the Certificate of Incorporation or applicable law, these Bylaws may be altered, amended, rescinded or repealed in whole or in part, or new Bylaws may be adopted by (i) the affirmative vote of a majority of the Board of Directors or (ii) the holders of a majority in voting power of the outstanding capital stock of the Corporation, provided that, in the case of any such amendment by the stockholders voted on at a meeting of stockholders, notice of the proposed change was given in the notice of the meeting of stockholders.

EX-10.43

Exhibit 10.43

AMENDMENT 2015-1

TO THE

L-3 COMMUNICATIONS CORPORATION

SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN

WHEREAS, L-3 Communications Corporation (“L-3”) maintains the L-3 Communications Corporation Supplemental Executive Retirement Plan (the “Plan”); and

WHEREAS, the Compensation Committee of L-3’s Board of Directors (the “Committee”) has the authority to amend the Plan pursuant to Section 5.1 of the Plan; and

WHEREAS, the Committee has approved a resolution authorizing an amendment to Section of 5.1 of the Plan as contemplated hereunder.

NOW THEREFORE, Section 5.1 of the Plan is hereby amended in its entirety to read as follows:

5.1.    Amendment. The Board, the Compensation Committee of the Board or, to the extent permitted by resolution of the Board or the Compensation Committee, any delegate of the Board or Compensation Committee may amend, modify, suspend or discontinue this SERP at any time; provided, however, that no such amendment, modification, suspension or discontinuance of the SERP shall have the effect of reducing a Participant’s Supplemental Pension Benefit determined as though the Participant had terminated employment with the Participating Company on the date of the amendment, modification, suspension or discontinuance.

IN WITNESS WHEREOF, this Amendment 2015-1 to the Plan has been duly executed as of October 19, 2015.

L-3 Communications Corporation
By:	/s/ Kevin Weiss
	Kevin Weiss
	Vice President, Human Resources

EX-21

Exhibit 21

L-3 Communications Holdings, Inc. and Subsidiaries

As of December 31, 2015

Name	Jurisdiction
Airline Placement Limited	United Kingdom
Airline Placement Limited	United Kingdom
Asian Aviation Training Centre Ltd.	Thailand
Aviation Communications & Surveillance Systems, LLC*	Delaware
Aydin Yazilim ve Elektronik Sanayi A.S.*	Turkey
Beijing MAPPS-SERI Technology Company Ltd.*	China
Calzoni Srl.	Italy
Combat Advanced Propulsion, LLC*	Delaware
CTC Aviation Group Limited	United Kingdom
CTC Aviation Holdings Limited	United Kingdom
CTC Aviation International Limited	United Kingdom
CTC Aviation Jet Services Limited	United Kingdom
CTC Aviation Services Limited	United Kingdom
CTC Aviation Training (N.Z.) Limited	New Zealand
CTC Aviation Training (U.K) Limited	United Kingdom
Electrodynamics, Inc.	Arizona
ESSCO Collins Limited	Ireland
FAST Holdings Limited*	United Kingdom
FAST Training Services Limited*	United Kingdom
ForceX, Inc.	Tennessee
Honeywell TCAS Inc.*	Delaware
Interstate Electronics Corporation	California
L-3 Advanced Programs, Inc.	Delaware
L-3 Afghanistan, LLC	Delaware
L-3 Applied Technologies, Inc.	Delaware
L-3 Army Sustainment, LLC	Delaware
L-3 Brasil Importação, Exportação e Comércio Ltda.	Brazil
L-3 Centaur, LLC	Delaware
L-3 Chesapeake Sciences Corporation	Maryland
L-3 Communications AIS GP Corporation	Delaware
L-3 Communications ASA Limited	United Kingdom
L-3 Communications Australia Group Pty Ltd	Australia
L-3 Communications Australia Pty Ltd	Australia
L-3 Communications Avionics Systems, Inc.	Delaware
L-3 Communications Canada Inc.	Canada
L-3 Communications Cincinnati Electronics Corporation	Ohio
L-3 Communications Corporation	Delaware
L-3 Communications Electron Technologies, Inc.	Delaware
L-3 Communications Electronic Systems Inc.	Canada
L-3 Communications EO/IR, Inc.	Florida
L-3 Communications ESSCO, Inc.	Delaware
L-3 Communications Flight Capital LLC	Delaware
L-3 Communications Flight International Aviation LLC	Delaware
L-3 Communications Foreign Holdings, Inc.	Delaware
L-3 Communications Holding GmbH	Germany
L-3 Communications Holdings, Inc.	Delaware
L-3 Communications Hong Kong Limited	Hong Kong
L-3 Communications India Private Limited	India

Name	Jurisdiction
L-3 Communications Integrated Systems L.P.	Delaware
L-3 Communications Investments Inc.	Delaware
L-3 Communications Korea Corporation	South Korea
L-3 Communications Link Simulation and Training UK Limited	United Kingdom
L-3 Communications Link Simulation and Training UK (Overseas) Limited	United Kingdom
L-3 Communications Ltd.	United Kingdom
L-3 Communications Magnet-Motor GmbH	Germany
L-3 Communications MAPPS Inc.	Canada
L-3 Communications MAPPS Malaysia Sdn. Bhd.	Malaysia
L-3 Communications Marine Systems UK Ltd.	United Kingdom
L-3 Communications MariPro, Inc.	California
L-3 Communications MAS (Canada) Inc.	Canada
L-3 Communications Mobile-Vision, Inc.	New Jersey
L-3 Communications Oceania Pty Limited	Australia
L-3 Communications Security and Detection Systems, Inc.	Delaware
L-3 Communications Singapore Pte Ltd	Singapore
L-3 Communications U.K. Ltd.	United Kingdom
L-3 Communications Vector International Aviation LLC	Delaware
L-3 Communications Vertex Aerospace LLC	Delaware
L-3 Communications Westwood Corporation	Nevada
L-3 CTC Aviation Holdings Inc.	Delaware
L-3 CTC Aviation Leasing (US) Inc.	Delaware
L-3 CTC Aviation Training (US) Inc.	Delaware
L-3 CTC Ltd.	United Kingdom
L-3 Data Tactics Corporation	Virginia
L-3 Domestic Holdings, Inc.	Delaware
L-3 Fuzing and Ordnance Systems, Inc.	Delaware
L-3 Global Holding UK Ltd.	United Kingdom
L-3 International UK Ltd.	United Kingdom
L-3 Investments, LLC	Delaware
L-3 National Security Solutions, Inc.	Delaware
L-3 NSS International, LLC	Delaware
L-3 Saudi Arabia LLC	Saudi Arabia
L-3 Security Equipment Trading (Beijing) Co., Ltd.*	China
L-3 Societa Srl.	Italy
L-3 Technology & Services UK Ltd.	United Kingdom
L-3 Unidyne, Inc.	Delaware
L-3 Unmanned Systems, Inc.	Texas
L-Tres Communicaciones Costa Rica, S.A.	Costa Rica
Mustang Technology Group, L.P.	Texas
Narda Safety Test Solutions GmbH	Germany
Narda Safety Test Solutions S.r.l.	Italy
Pac Ord Inc.	Delaware
Power Paragon, Inc.	Delaware
SPD Electrical Systems, Inc.	Delaware
SPD Switchgear Inc.	Delaware
Titan Facilities, Inc.	Virginia
TRL Electronics Limited	United Kingdom
TRL Technology Limited	United Kingdom
Wescam Inc.	Canada

* Represents a non-wholly owned subsidiary.

EX-23

Exhibit 23

CONSENT OF THE INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-8 (Nos. 333-59281, 333-78317, 333-120393, 333-123424, 333-151964, 333-160359, 333-168466, 333-168467, 333-183353 and 333-188450) of L-3 Communications Holdings, Inc. and in the Registration Statements on Form S-8 (No. 333-184783) of L-3 Communications Corporation of our report dated February 26, 2016, relating to the consolidated financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

PricewaterhouseCoopers, LLP

New York, New York

February 26, 2016

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael T. Strianese, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2015 of L-3 Communications Holdings, Inc. and L-3 Communications Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date February 26, 2016

/s/ Michael T. Strianese

Michael T. Strianese

Chairman and Chief Executive Officer

EX-31.2

Exhibit 31.2

CERTIFICATION

I, Ralph G. D’Ambrosio, certify that:

1. I have reviewed this report on Form 10-K for the year ended December 31, 2015 of L-3 Communications Holdings, Inc. and L-3 Communications Corporation;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrants as of, and for, the periods presented in this report;

4. The registrants’ other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrants and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrants, including their consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrants’ disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrants’ internal control over financial reporting that occurred during the registrants’ most recent fiscal quarter (the registrants’ fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrants’ internal control over financial reporting; and

5. The registrants’ other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrants’ auditors and the audit committee of the registrants’ board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrants’ ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants’ internal control over financial reporting.

Date: February 26, 2016

/s/ Ralph G. D’Ambrosio

Ralph G. D’Ambrosio

Senior Vice President and Chief Financial Officer

EX-32

Exhibit 32

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Annual Report of L-3 Communications Holdings, Inc. (“L-3 Holdings”) and L-3 Communications Corporation (“L-3 Communications”; together with L-3 Holdings referred to as “L-3”) on Form 10-K for the year ended December 31, 2015 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Michael T. Strianese, Chairman and Chief Executive Officer and Ralph G. D’Ambrosio, Senior Vice President and Chief Financial Officer, in each case, of L-3 Holdings and L-3 Communications, each certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of L-3.

Date: February 26, 2016

/s/ Michael T. Strianese	/s/ Ralph G. D’Ambrosio
Michael T. Strianese	Ralph G. D’Ambrosio
Chairman and Chief Executive Officer	Senior Vice President and Chief Financial Officer

XML

Document and Entity Information - USD ($) $ in Billions	12 Months Ended
	Dec. 31, 2015	Feb. 19, 2016	Jun. 26, 2015
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2015
Document Fiscal Year Focus	2015
Document Fiscal Period Focus	FY
Trading Symbol	LLL
Entity Registrant Name	L 3 COMMUNICATIONS HOLDINGS INC
Entity Central Index Key	0001056239
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	Yes
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		77,818,517
Entity Public Float			$ 9.2

XML

Consolidated Balance Sheets - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 207	$ 442
Billed receivables, net of allowances of $15 in 2015 and $13 in 2014	746	803
Contracts in process	2,081	2,148
Inventories	333	288
Other current assets	201	175
Total current assets	4,232	5,665
Property, plant and equipment, net	1,097	1,061
Goodwill	6,281	6,512
Identifiable intangible assets	199	195
Deferred debt issue costs	18	27
Deferred income taxes	3	15
Other assets	255	240
Total assets	12,085	13,715
Current liabilities:
Current portion of long-term debt	499
Accounts payable, trade	297	346
Accrued employment costs	504	474
Accrued expenses	390	370
Advance payments and billings in excess of costs incurred	562	565
Income taxes	13	23
Other current liabilities	394	389
Total current liabilities	2,879	2,634
Pension and postretirement benefits	1,047	1,187
Deferred income taxes	219	235
Other liabilities	368	360
Long-term debt	3,143	3,939
Total liabilities	$ 7,656	$ 8,355
Commitments and contingencies (see Note 18)
L-3 shareholders' equity:
L-3 Communications Holdings, Inc.'s common stock: $.01 par value; 300,000,000 shares authorized, 78,133,763 shares outstanding at December 31, 2015 and 82,040,525 shares outstanding at December 31, 2014 (L-3 Communications Corporation's common stock: $.01 par value, 100 shares authorized, issued and outstanding)	$ 6,052	$ 5,799
L-3 Communications Holdings, Inc.'s treasury stock (at cost), 79,375,063 shares at December 31, 2015 and 73,005,891 shares at December 31, 2014	(6,851)	(6,111)
Retained earnings	5,728	6,181
Accumulated other comprehensive loss	(574)	(584)
Total L-3 shareholders' equity	4,355	5,285
Noncontrolling interests	74	75
Total equity	4,429	5,360
Total liabilities and equity	$ 12,085	13,715
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Current assets:
Assets held for sale		547
Current liabilities:
Liabilities held for sale		237
Discontinued Operations, Held-for-sale [Member]
Current assets:
Assets held for sale	$ 664	1,262
Current liabilities:
Liabilities held for sale	$ 220	$ 230

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Class of Stock [Line Items]
Allowances for billed receivables	$ 15	$ 13
L-3 Communications Holdings, Inc. [Member]
Class of Stock [Line Items]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	300,000,000	300,000,000
Common stock, shares outstanding	78,133,763	82,040,525
Treasury stock (at cost), shares	79,375,063	73,005,891
L-3 Communications Corporation [Member]
Class of Stock [Line Items]
Common stock, par value	$ 0.01	$ 0.01
Common stock, shares authorized	100	100
Common stock, shares issued	100	100
Common stock, shares outstanding	100	100

XML

Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Net sales:
Products	$ 6,589	$ 6,839	$ 7,129
Services	3,877	4,147	4,291
Total net sales	10,466	10,986	11,420
Cost of sales:
Products	(6,007)	(6,161)	(6,366)
Services	(3,569)	(3,813)	(3,937)
Total cost of sales	(9,576)	$ (9,974)	$ (10,303)
Loss related to business divestitures	(31)
Impairment charges	(384)	$ 0	$ 0
Operating income	475	1,012	1,117
Interest expense	(169)	(158)	(157)
Interest and other income, net	17	18	20
Debt retirement charge	(1)
Income from continuing operations before income taxes	322	872	980
Provision for income taxes	(25)	(227)	(264)
Income from continuing operations	297	645	716
(Loss) income from discontinued operations, net of income taxes	(522)	32	44
Net (loss) income	(225)	677	760
Net income from continuing operations attributable to noncontrolling interests	(15)	(13)	(9)
Net (loss) income attributable to L-3	$ (240)	$ 664	$ 751
Basic earnings (loss) per share attributable to L-3 Holdings' common shareholders:
Continuing operations	$ 3.49	$ 7.40	$ 7.91
Discontinued operations	(6.46)	0.38	0.49
Basic (loss) earnings per share	(2.97)	7.78	8.40
Diluted earnings (loss) per share attributable to L-3 Holdings' common shareholders:
Continuing operations	3.44	7.20	7.76
Discontinued operations	(6.37)	0.36	0.48
Diluted (loss) earnings per share	(2.93)	7.56	8.24
Cash dividends declared per common share	$ 2.60	$ 2.40	$ 2.20
L-3 Holdings' weighted average common shares outstanding:
Basic	80.7	85.4	89.4
Diluted	81.9	87.8	91.1

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Millions		12 Months Ended
		Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net (loss) income		$ (225)	$ 677	$ 760
Other comprehensive (loss) income:
Foreign currency translation adjustments		(120)	(123)	(25)
Unrealized losses on hedging instruments	[1]	(3)	(6)	(2)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized	[2]	43	9	53
Net prior service costs arising during the period	[3]			(9)
Net gain (loss) arising during the period	[4]	90	(354)	423
Net change in pension and postretirement benefit plans		133	(345)	467
Total other comprehensive income (loss)		10	(474)	440
Comprehensive (loss) income		(215)	203	1,200
Comprehensive income attributable to noncontrolling interests		(15)	(13)	(9)
Comprehensive (loss) income attributable to L-3		$ (230)	$ 190	$ 1,191

[1] Net of income tax benefits of $2 million in 2015, $1 million in 2014 and $3 million in 2013.

[2] Net of income taxes of $24 million in 2015, $6 million in 2014 and $30 million in 2013.

[3] Net of an income tax benefit of $5 million in 2013.

[4] Net of income taxes of $49 million in 2015, an income tax benefit of $211 million in 2014 and income taxes of $243 million in 2013. The 2015 amount includes $9 million (net of income taxes of $5 million) for the reclassification of actuarial losses into net income related to the Marine Systems International business divestiture in accordance with Accounting Standards Codification 715 Defined Benefit Plans - Pension.

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Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Comprehensive Income [Abstract]
Net of income tax benefits on unrealized losses on hedging instruments	$ 2	$ 1	$ 3
Income taxes on amortization of net loss and prior service cost previously recognized	24	6	30
Income tax benefit on net prior service costs arising during the period			5
Income tax expense (benefit) on net gain (loss) arising during the period	49	$ (211)	$ 243
Amount includes in Other Comprehensive Income (Loss), Net Actuarial Gain (Loss), before Tax	9
Other Comprehensive Income (Loss), Net Actuarial Gain (Loss), Tax	$ 5

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Consolidated Statements of Equity - USD ($) $ in Millions	Total	Common Stock [Member]	Additional Paid-in Capital [Member]	Treasury Stock [Member]	Retained Earnings [Member]	Accumulated Other Comprehensive Loss [Member]	Noncontrolling Interests [Member]
Beginning Balance at Dec. 31, 2012	$ 5,527	$ 1	$ 5,313	$ (4,488)	$ 5,175	$ (550)	$ 76
Beginning Balance, Shares at Dec. 31, 2012		90,400,000
Class of Stock [Line Items]
Net (loss) income	760				751		9
Other comprehensive income (loss)	440					440
Distributions to noncontrolling interests	(10)						(10)
Cash dividends declared	(201)				(201)
Shares issued:
Employee savings plans	121		121
Employee savings plans, Shares		1,500,000
Exercise of stock options	128		128
Exercise of stock options, Shares		1,800,000
Employee stock purchase plan	36		36
Employee stock purchase plan, Shares		500,000
Vesting of restricted stock and performance units	0	$ 0	0	0	0	0	0
Vesting of restricted stock and performance units, Shares		500,000
Employee restricted stock units surrendered in lieu of income tax withholding	(15)		(15)
Employee restricted stock units surrendered in lieu of income tax withholding, Shares		(200,000)
Stock-based compensation expense	59		59
Treasury stock purchased	(800)			(800)
Treasury stock purchased, Shares		(8,700,000)
Other	11		10		1
Ending Balance at Dec. 31, 2013	6,056	$ 1	5,652	(5,288)	5,726	(110)	75
Ending Balance, Shares at Dec. 31, 2013		85,800,000
Class of Stock [Line Items]
Net (loss) income	677				664		13
Other comprehensive income (loss)	(474)					(474)
Distributions to noncontrolling interests	(13)						(13)
Cash dividends declared	(209)				(209)
Shares issued:
Employee savings plans	130		130
Employee savings plans, Shares		1,200,000
Exercise of stock options	109		109
Exercise of stock options, Shares		1,200,000
Employee stock purchase plan	35		35
Employee stock purchase plan, Shares		300,000
Vesting of restricted stock and performance units	0	$ 0	0	0	0	0	0
Vesting of restricted stock and performance units, Shares		600,000
Employee restricted stock units surrendered in lieu of income tax withholding	(27)		(27)
Employee restricted stock units surrendered in lieu of income tax withholding, Shares		(200,000)
Stock-based compensation expense	52		52
Treasury stock purchased	(823)			(823)
Treasury stock purchased, Shares		(6,900,000)
Retirement of Convertible Contingent Debt Securities	(161)		(161)
Other	8		8
Ending Balance at Dec. 31, 2014	5,360	$ 1	5,798	(6,111)	6,181	(584)	75
Ending Balance, Shares at Dec. 31, 2014		82,000,000
Class of Stock [Line Items]
Net (loss) income	(225)				(240)		15
Other comprehensive income (loss)	10					10
Distributions to noncontrolling interests	(16)						(16)
Cash dividends declared	(213)				(213)
Shares issued:
Employee savings plans	120		120
Employee savings plans, Shares		1,100,000
Exercise of stock options	$ 74		74
Exercise of stock options, Shares	656,800	700,000
Employee stock purchase plan	$ 34		34
Employee stock purchase plan, Shares		300,000
Vesting of restricted stock and performance units	0	$ 0	0	0	0	0	0
Vesting of restricted stock and performance units, Shares		700,000
Employee restricted stock units surrendered in lieu of income tax withholding	(33)		(33)
Employee restricted stock units surrendered in lieu of income tax withholding, Shares		(300,000)
Stock-based compensation expense	49		49
Treasury stock purchased	(740)			(740)
Treasury stock purchased, Shares		(6,400,000)
Other	9		9
Ending Balance at Dec. 31, 2015	$ 4,429	$ 1	$ 6,051	$ (6,851)	$ 5,728	$ (574)	$ 74
Ending Balance, Shares at Dec. 31, 2015		78,100,000

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Consolidated Statements of Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Class of Stock [Line Items]
Cash dividends declared per share	$ 2.60	$ 2.40	$ 2.20
Retained Earnings [Member]
Class of Stock [Line Items]
Cash dividends declared per share	$ 2.60	$ 2.40	$ 2.20

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Consolidated Statements of Cash Flows - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Operating activities:
Net (loss) income	$ (225)	$ 677	$ 760
Less: Loss (income) from discontinued operations, net of tax	522	(32)	(44)
Income from continuing operations	297	645	716
Depreciation of property, plant and equipment	166	165	159
Amortization of intangibles and other assets	44	49	43
Deferred income tax (benefit) provision	(66)	113	37
Stock-based employee compensation expense	46	50	56
Excess income tax benefits related to share-based payment arrangements	(26)	(17)	(4)
Contributions to employee savings plans in L-3 Holdings' common stock	110	119	104
Impairment charges	384	0	0
Amortization of pension and postretirement benefit plans net loss and prior service cost	67	15	83
Amortization of bond discounts and deferred debt issue costs (included in interest expense)	8	$ 7	$ 6
Loss related to business divestitures	31
Other non-cash items	(3)		$ 3
Changes in operating assets and liabilities, excluding amounts from acquisitions, divestitures, and discontinued operations:
Billed receivables	50	$ 39	(16)
Contracts in process	32	7	76
Inventories	(38)		1
Other assets	(27)	(17)	(88)
Accounts payable, trade	(32)	(80)	8
Accrued employment costs	34	(5)	(4)
Accrued expenses	14	(14)	13
Advance payments and billings in excess of costs incurred	(6)	65	(42)
Income taxes	(33)	(7)	5
Other current liabilities	(3)	6	15
Pension and postretirement benefits	(8)	(44)	14
All other operating activities	1	(25)	(29)
Net cash from operating activities from continuing operations	1,042	1,071	1,156
Investing activities:
Business acquisitions, net of cash acquired	(320)	(57)	(62)
Proceeds from sale of businesses, net of closing date cash balances	318	1	4
Capital expenditures	(197)	(174)	(204)
Dispositions of property, plant and equipment	3	4	12
Other investing activities	4	5	(6)
Net cash used in investing activities from continuing operations	(192)	(221)	(256)
Financing activities:
Proceeds from sale of senior notes		996
Redemption of CODES		(935)
Repurchases of senior notes	(296)
Borrowings under revolving credit facility	1,194	1,367	1,893
Repayment of borrowings under revolving credit facility	(1,194)	(1,367)	(1,893)
Common stock repurchased	(740)	(823)	(800)
Dividends paid on L-3 Holdings' common stock	(214)	(208)	(199)
Proceeds from exercise of stock options	48	93	128
Proceeds from employee stock purchase plan	34	35	36
Excess income tax benefits related to share-based payment arrangements	26	17	4
Debt issue costs		(8)
Employee restricted stock units surrendered in lieu of income tax withholding	(33)	(27)	(15)
Other financing activities	(3)	(16)	(3)
Net cash used in financing activities from continuing operations	(1,178)	(876)	(849)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(19)	(17)	(2)
Cash from (used in) discontinued operations:
Operating activities	56	54	107
Investing activities	(5)	(8)	(5)
Cash from discontinued operations	51	46	102
Change in cash balance in assets held for sale	61	(61)
Net (decrease) increase in cash and cash equivalents	(235)	(58)	151
Cash and cash equivalents, beginning of the year	442	500	349
Cash and cash equivalents, end of the year	$ 207	$ 442	$ 500

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Description of Business

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Description of Business

1. Description of Business

L-3 Communications Holdings, Inc. derives all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications Corporation (L-3 Communications). L-3 Communications Holdings, Inc. (L-3 Holdings and, together with its subsidiaries, referred to herein as L-3 or the Company) is a prime contractor in Intelligence, Surveillance and Reconnaissance (ISR) systems, aircraft sustainment (including modifications, logistics and maintenance), simulation and training, night vision and image intensification equipment, and security and detection systems. L-3 is also a leading provider of a broad range of communication and electronic systems and products used on military and commercial platforms. The Company’s customers include the United States (U.S.) Department of Defense (DoD) and its prime contractors, U.S. Government intelligence agencies, the U.S. Department of Homeland Security (DHS), foreign governments, and domestic and international commercial customers.

On December 8, 2015, the Company entered into a definitive agreement to sell its National Security Solutions (NSS) business to CACI International Inc. The transaction was completed on February 1, 2016. NSS, which provides cybersecurity solutions, high-performance computing, enterprise IT services, analytics and intelligence analysis to the DoD, U.S. Government intelligence agencies, federal civilian agencies and foreign governments, has historically been reported as a reportable segment. In accordance with Accounting Standards Update (ASU) 2014-08, Reporting Discontinued Operations and Disclosures of Disposals of Components of an Entity, the assets and liabilities and results of operations of NSS are reported as discontinued operations for all periods presented. Accordingly, all references made to financial data in this Annual Report on Form 10-K are to the Company’s continuing operations, unless specifically noted. See Note 3 for additional information.

The Company has the following three reportable segments: (1) Electronic Systems, (2) Aerospace Systems and (3) Communication Systems. Electronic Systems provides a broad range of components, products, subsystems, systems, and related services for military and commercial customers in several niche markets across several business areas. These business areas include precision engagement & training, sensor systems, power & propulsion systems, aviation products & security systems, warrior systems and advanced programs. Aerospace Systems delivers integrated solutions for the global ISR market and provides modernization, upgrade, sustainment, and maintenance and logistics support for a wide variety of aircraft and ground systems. Communication Systems delivers products and services for the global communications market, specializing in strategic and tactical airborne, space, ground and sea-based communication systems. Financial information with respect to each of our segments is included in Note 21.

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Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

2. Summary of Significant Accounting Policies

Basis of Presentation: The accompanying financial statements comprise the consolidated financial statements of L-3 Holdings and L-3 Communications. L-3 Holdings’ only asset is its investment in the common stock of L-3 Communications, its wholly-owned subsidiary, and its only obligations are: (1) its guarantee of borrowings under the Amended and Restated Revolving Credit Facility (“Credit Facility”) of L-3 Communications and (2) its guarantee of other contractual obligations of L-3 Communications and its subsidiaries. All issuances of and conversions into L-3 Holdings’ equity securities, including grants of stock options, restricted stock units and performance units by L-3 Holdings to employees and directors of L-3 Communications and its subsidiaries, have been reflected in the consolidated financial statements of L-3 Communications. As a result, the consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. See Note 24 for additional information regarding the audited financial information of L-3 Communications and its subsidiaries.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapon sight products, and recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will differ from these estimates and could differ materially.

Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Principles of Consolidation: The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method.

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 49% of the Company’s 2015 sales were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 8% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a Percentage-of-Completion (POC) method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts). Aggregate net changes in contract estimates amounted to increases of $49 million, or 10% of consolidated operating income (6% of segment operating income) for the year ended December 31, 2015, increases of $72 million, or 7% of consolidated operating income for the year ended December 31, 2014, and increases of $106 million, or 9% of consolidated operating income for the year ended December 31, 2013.

Sales and profits on fixed-price type contracts covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become evident. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

Sales and profits on cost-plus type contracts covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement. Incentive and award fees are the primary variable fee contractual arrangements. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require us to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts to perform services are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2015		2014
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	93	$	99
Acquisitions during this period		1		—
Accruals for product warranties issued during the period		75		71
Changes to accruals for product warranties existing before January 1		2		1
Foreign currency translation adjustments		(2)		(2)
Settlements made during the period		(64)		(67)
Liabilities held for sale(2)		—		(9)
Balance at December 31	$	105	$	93

⁽¹⁾  Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

⁽²⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method.

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L-3 Holdings common stock instead of settling such obligations with cash payments.

Compensation expense for all restricted stock unit and stock option awards is recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L-3 Holdings common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period.

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This update is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted, and may be applied retrospectively or prospectively. The Company has elected to early adopt this standard retrospectively, as reflected in the accompanying audited consolidated balance sheets.

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range substantially from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill: The carrying value of goodwill and indefinite lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely or not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2015 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flows valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2014 and 2013. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If such estimates indicate that the duration of the Company’s customer contractual relationships have decreased compared to the estimates made as of the date the Company acquired these intangible assets, then the Company accelerates the amortization period for its customer contractual relationships over their remaining useful economic life.

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the Canadian dollar, the U.S. dollar, the Euro and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2015, 2014 and 2013 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated other comprehensive income (loss) and are only recognized in income when a foreign subsidiary is divested.

Accounting Standards Issued and Not Yet Implemented: In February 2016, the FASB issued ASU 2016-02, Leases, which will update the existing guidance on accounting for leases and require new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from that applied under previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that the Company may elect to apply. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-3, to simplify the presentation of debt issuance costs. This update requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the required presentation for debt discounts. This update is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. The adoption of this standard will change the Company’s current practice of presenting debt issuance costs as an asset and will result in a reduction of total assets and total liabilities in an amount equal to the balance of unamortized debt issuance costs at each balance sheet date. The Company has not elected to early adopt this standard and debt issuance costs amounted to $18 million at December 31, 2015 and $27 million at December 31, 2014.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provide companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expand the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early application permitted beginning on January 1, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures and the transition alternatives available. As the new standard will supersede substantially all existing revenue guidance, it could impact revenue and cost recognition on substantially all of the Company’s contracts, in addition to the Company’s business processes and our information technology systems. As a result, the Company’s evaluation of the impact of the standard will extend over future periods.

Other accounting standard updates effective for interim and annual periods beginning after December 15, 2015 are not expected to have an impact on the Company’s financial position, results of operations or cash flows.

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Divestitures and Acquisitions

12 Months Ended

Dec. 31, 2015

Business Combinations [Abstract]

Divestitures and Acquisitions

3. Divestitures and Acquisitions

Business Divestitures

Discontinued Operations

As discussed in Note 1, the Company entered into a definitive agreement to sell its NSS business to CACI International Inc. on December 8, 2015. The transaction was completed on February 1, 2016 for a preliminary sale price of $561 million, subject to finalization based on customary adjustments for closing date net working capital.

The table below presents statement of operations data for NSS, which has been classified as discontinued operations and includes allocated interest expense for debt not directly attributable or related to L-3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L-3 consolidated net assets and (2) L-3 consolidated total debt.

	Year Ended December 31,
	2015			2014			2013
	(in millions)
Product and service revenues	$	1,088		$	1,138		$	1,202
Operating (loss) income from discontinued operations(1)		(523	)		73			95
Interest expense allocated to discontinued operations		(20	)		(20	)		(20	)
(Loss) income from discontinued operations before income taxes(1)	$	(543	)	$	53		$	75
Income tax benefit (expense)		21			(21	)		(31	)
(Loss) income from discontinued operations, net of income taxes(1)	$	(522	)	$	32		$	44

⁽¹⁾ The year ended December 31, 2015, includes a goodwill impairment charge of $571 million ($537 million after income taxes).

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31,             2015		December 31,             2014
	(in millions)
Assets
Current assets	$	201	$	198
Property, plant and equipment, net		25		27
Goodwill(1)		390		989
Other assets		48		48
Total assets of discontinued operations	$	664	$	1,262
Liabilities
Accounts payable, trade	$	48	$	36
Other current liabilities		78		75
Current liabilities		126		111
Long-term liabilities		94		119
Total liabilities of discontinued operations	$	220	$	230

⁽¹⁾  The goodwill balance at December 31, 2014 is based on the total goodwill attributable to the NSS reporting unit, less the historical goodwill attributable to the business retained by L-3. The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L-3 and the NSS business sold.

2015 Business Divestitures

During the year ended December 31, 2015, the Company completed the sales of Marine Systems International (MSI), Broadcast Sports Inc. (BSI), the Tinsley Product Line and Klein Associates, Inc. (Klein). The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture		Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17)	$	318	$	185
BSI divestiture		(4)		26		7
Tinsley Product Line divestiture		(8)		4		9
Klein divestiture		(2)		10		8
Total	$	(31)	$	358	$	209

NetMSI Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a preliminary sale price of €295 million (approximately $318 million), in addition to the assumption by Wärtsilä Corporation of approximately €60 million of MSI employee pension-related liabilities. The sale price is subject to finalization based on customary adjustments for closing date net working capital. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. In accordance with ASU 2014-08, MSI’s assets and liabilities are classified as held for sale in the Company’s audited consolidated balance sheet as of December 31, 2014 and MSI’s results of operations are included in income from continuing operations for all periods presented. During the year ended December 31, 2015, the Company recorded a pre-tax loss of $17 million ($6 million after income taxes) related to the divestiture of MSI. The loss is comprised of: (1) $17 million for non-cash impairment charge, (2) a loss of $4 million on a forward contract to sell Euro proceeds from the MSI divestiture and (3) a realized gain of $4 million upon completion of the sale of MSI, each of which is discussed below.

The accounting standards for long-lived assets to be disposed of by sale require the Company to measure assets and liabilities of a disposal group, classified as held for sale, at the lower of its carrying amount or fair value less costs to sell, at the end of each reporting period. As a result of the decline in the estimated U.S. dollar equivalent divestiture proceeds due to the weakening of the Euro against the U.S. dollar, the carrying value of the MSI disposal group exceeded its fair value at March 27, 2015. Accordingly, a pre-tax non-cash impairment charge of $17 million ($12 million after income taxes) was recorded during the quarterly period ended March 27, 2015.

In March 2015, L-3 entered into a forward contract to sell €285 million of the proceeds obtained from the divestiture of MSI at a rate of $1.0782. The Company accounted for this contract as an economic hedge and recorded a mark to market adjustment to earnings based on the fair value of the forward contract at March 27, 2015. Accordingly, the Company recorded an unrealized pre-tax loss of $5 million ($3 million after income taxes) during the quarterly period ended March 27, 2015. On May 29, 2015, upon settlement of the contract, the Company realized $4 million of the $5 million previously recorded pre-tax loss and recorded a $1 million pre-tax gain ($1 million after income taxes) in the quarterly period ended June 26, 2015.

During the quarterly period ended June 26, 2015, the Company realized a pre-tax gain of $4 million ($8 million after income tax benefits), based on the proceeds received on the date of sale.

The major classes of assets and liabilities included as held for sale related to MSI are presented in the table below.

	December 31,       2014
	(in millions)
Assets
Cash and cash equivalents	$	61
Billed receivables, net of allowances of $6		77
Contracts in process		70
Inventories		70
Other current assets		10
Total current assets		288
Goodwill		231
Other assets		28
Total assets classified as held for sale	$	547
Liabilities
Accounts payable, trade	$	31
Accrued employment costs		22
Accrued expenses		33
Advance payments and billings in excess of costs incurred		55
Other current liabilities		21
Total current liabilities		162
Pension and postretirement benefits		56
Other liabilities		19
Total liabilities classified as held for sale	$	237

BSI Divestiture. On April 24, 2015, the Company divested its BSI business for a sale price of $26 million. BSI is a provider of wireless technology and communications systems services for use in the field of sports television broadcasting, and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $4 million ($6 million after income taxes) during the year ended December 31, 2015. In accordance with ASU 2014-08, BSI’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sale price of $4 million. Tinsley is a provider of optical components, sub-assemblies and passive sub-systems and was included in the Sensor Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $8 million ($6 million after income taxes) during the quarterly period ended September 25, 2015. In accordance with ASU 2014-08, Tinsley’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Klein Divestiture. On December 31, 2015, the Company divested its Klein business for a sale price of $10 million. Klein is a provider of side scan sonar equipment and waterside security and surveillance systems, and was included in the Power & Propulsion Systems sector of the Electronic Systems segment. The divestiture resulted in a pre-tax loss of $2 million ($2 million after income taxes) during the quarterly period ended December 31, 2015. In accordance with ASU 2014-08, Klein’s assets and liabilities as of December 31, 2014, and results of operations for all periods presented are classified as held and used in the audited consolidated financial statements.

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L-3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December  31,
	2015		2014		2013
	(in millions)
Net sales	$	209	$	596	$	569
Income (loss) before income taxes	$	—	$	27	$	(3)

Business Acquisitions

The business acquisitions discussed below are included in the Company’s results of operations from their respective dates of acquisition.

2015 Business Acquisitions

ForceX, Inc. Acquisition. On October 13, 2015, the Company acquired ForceX, Inc., renamed L-3 ForceX, for a purchase price of $61 million, which was financed with cash on hand. L-3 ForceX specializes in ISR mission management software and geospatial application technology programs, offering an array of advanced products, including cueing system software, hardware and video algorithms, and wide-area sensor integration solutions and software. L-3 ForceX’s proprietary processing, exploitation and dissemination capability provides an integrated tactical operational picture, allowing users to make critical decisions in real time. L-3 ForceX also supports several key DoD ISR initiatives and classified programs. L-3 ForceX’s customer base includes the U.S. Air Force, U.S. Special Operations Command, the Naval Surface Warfare Center and a variety of DoD agencies. The aggregate goodwill recognized for this business was $48 million, which was assigned to the Electronic Systems reportable segment, of which $47 million is expected to be deductible for income tax purposes. The final purchase price allocation, which is expected to be completed in the first quarter of 2016, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position.

CTC Aviation Group Acquisition. On May 27, 2015, the Company acquired CTC Aviation Group, renamed L-3 CTC Ltd. (L-3 CTC), for a purchase price of £153 million (approximately $236 million), which was financed with cash on hand. L-3 CTC is a global airline pilot training and crew resourcing specialist, based in the United Kingdom, which offers customized and innovative solutions to major airlines and flight training customers globally. L-3 CTC expands L-3’s commercial aviation training business to encompass a growing portfolio of airline and third-party training company customers. The aggregate goodwill recognized for this business was $185 million, which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes. The final purchase price allocation, which is expected to be completed in the first quarter of 2016, will be based on final appraisals and other analysis of fair values of acquired assets and liabilities. The Company does not expect that differences between the preliminary and final purchase price allocations will have a material impact on its results of operations or financial position.

MITEQ, Inc. Acquisition. On January 21, 2015, the Company acquired the assets of MITEQ, Inc. (Miteq) for a purchase price of $41 million, which was financed with cash on hand. The purchase price and purchase price allocation of Miteq was finalized as of September 25, 2015, with no significant changes to preliminary amounts. Miteq was combined with the Company’s Narda Microwave-East business and the new organization was re-named L-3 Narda-Miteq. Miteq offers a broad product line of active and passive radio frequency (RF) microwave components and low-power satellite communications (SATCOM) products for space and military applications that complement the existing Narda Microwave East product line. The combined L-3 Narda-Miteq business will provide products for the DoD, other U.S. Government agencies, prime contractors and commercial customers. The aggregate goodwill recognized for this business was $11 million, of which $4 million is expected to be deductible for income tax purposes. The goodwill was assigned to the Communication Systems reportable segment.

Net sales and income before income taxes for L-3 ForceX, L-3 CTC and Miteq, included in L-3’s consolidated statement of operations for the year ended December 31, 2015, are presented in the table below.

	Year Ended December 31, 2015
	(in millions)
Net sales	$	103
Income before income taxes	$	5

2014 Business Acquisition

Data Tactics Corporation Acquisition. On March 4, 2014, the Company acquired Data Tactics Corporation, renamed L-3 Data Tactics, for a purchase price of $57 million, which was financed with cash on hand. The purchase price and purchase price allocation for L-3 Data Tactics was finalized as of December 31, 2014, with no significant changes to preliminary amounts. L-3 Data Tactics is a specialized provider of large-scale data analytics, cybersecurity and cloud computing solution services, primarily to the DoD. Based on the final purchase price allocation, the aggregate goodwill recognized for this business was $39 million, substantially all of which is expected to be deductible for income tax purposes. The goodwill was assigned to the former NSS reportable segment.

2013 Business Acquisition

On December 19, 2013, the Company acquired Mustang Technology Group, L.P. (Mustang) business for a purchase price of $54 million, which was financed with cash on hand. The purchase price and purchase price allocation for Mustang was finalized as of June 27, 2014, with no significant changes from preliminary amounts. Mustang develops and manufactures radar-based sensors and systems used in precision-guided weapons, electronic warfare, unmanned systems and other military applications. Based on the final purchase price allocation, the aggregate goodwill recognized for this business was $41 million, substantially all of which is expected to be deductible for income tax purposes. The goodwill was assigned to the Electronic Systems reportable segment.

Business Acquisitions Completed After December 31, 2015

On January 22, 2016, the Company acquired the assets of Advanced Technical Materials, Inc. (ATM) for a purchase price of $27 million (subject to customary adjustments), which was financed with cash on hand. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components.

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data presents the combined results of the Company and its business acquisitions completed during the years ended December 31, 2015 and 2014 assuming that the business acquisitions completed during 2015 and 2014 had occurred on January 1, 2014.

	Year Ended December 31,
	2015		2014
	(in millions, except per share data)
Pro forma net sales	$	10,523	$	11,146
Pro forma income from continuing operations	$	302	$	657
Pro forma net (loss) income attributable to L-3	$	(235)	$	676
Pro forma diluted earnings per share from continuing operations	$	3.50	$	7.34
Pro forma diluted (loss) earnings per share	$	(2.87)	$	7.70

The unaudited pro forma results disclosed in the table above are based on various assumptions and are not necessarily indicative of the results of operations that would have occurred had the Company completed these acquisitions on the dates indicated above.

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Contracts in Process

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Contracts in Process

4. Contracts in Process

The components of contracts in process are presented in the table below. The unbilled contract receivables, inventoried contract costs and unliquidated progress payments principally relate to contracts with the U.S. Government and prime contractors or subcontractors of the U.S. Government. In connection with contracts in process assumed by the Company in its business acquisitions, the underlying contractual customer relationships are separately recognized as identifiable intangible assets at the date of acquisition, and are discussed and presented in Note 6.

	December 31,
	2015		2014
	(in millions)
Unbilled contract receivables, gross	$	2,097	$	2,149
Unliquidated progress payments		(869)		(887)
Unbilled contract receivables, net		1,228		1,262
Inventoried contract costs, gross		975		981
Unliquidated progress payments		(122)		(95)
Inventoried contract costs, net		853		886
Total contracts in process	$	2,081	$	2,148

Unbilled Contract Receivables. Unbilled contract receivables represent accumulated incurred costs and earned profits on contracts (revenue arrangements), which have been recorded as sales, but have not yet been billed to customers. Unbilled contract receivables arise from the cost-to-cost method of revenue recognition that is used to record sales on certain fixed-price contracts. Unbilled contract receivables from fixed-price type contracts are converted to billed receivables when amounts are invoiced to customers according to contractual billing terms, which generally occur when deliveries or other performance milestones are completed. Unbilled contract receivables also arise from cost-plus type contracts, time-and-material type contracts and fixed-price service type contracts for revenue amounts that have not been billed by the end of the accounting period due to the timing of preparation of invoices to customers. The Company believes that approximately 92% of the unbilled contract receivables, net at December 31, 2015 will be billed and collected within one year.

Unliquidated Progress Payments. Unliquidated progress payments arise from fixed-price type contracts with the U.S. Government that contain progress payment clauses, and represent progress payments on invoices that have been collected in cash, but have not yet been liquidated. Progress payment invoices are billed to the customer as contract costs are incurred at an amount generally equal to 75% to 80% of incurred costs. Unliquidated progress payments are liquidated as deliveries or other contract performance milestones are completed, at an amount equal to a percentage of the contract sales price for the items delivered or work performed, based on a contractual liquidation rate. Therefore, unliquidated progress payments are a contra asset account, and are classified against unbilled contract receivables if revenue for the underlying contract is recorded using the cost-to-cost method, and against inventoried contract costs if revenue is recorded using the units-of-delivery method.

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their G&A, IRAD and B&P costs that are allowable and reimbursable indirect contract costs under U.S. Government procurement regulations on their U.S. Government contracts (revenue arrangements) as inventoried contract costs. G&A, IRAD and B&P costs are allocated to contracts for which the U.S. Government is the end customer and are charged to costs of sales when sales on the related contracts are recognized. The Company’s U.S. Government contractor businesses record the unallowable portion of their G&A, IRAD and B&P costs to expense as incurred, and do not include them in inventoried contract costs.

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	135	$	133	$	104
Contract costs incurred:
IRAD and B&P		280		266		279
Other G&A		812		805		817
Total		1,092		1,071		1,096
Amounts charged to cost of sales		(1,065)		(1,069)		(1,067)
Amounts included in inventoried contract costs at end of the year	$	162	$	135	$	133

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the Consolidated Statements of Operations.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Selling, general and administrative expenses	$	259	$	295	$	310
Research and development expenses		56		67		76
Total	$	315	$	362	$	386

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Inventories

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventories

5. Inventories

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2015		2014
	(in millions)
Raw materials, components and sub-assemblies	$	164	$	127
Work in process		103		97
Finished goods		66		64
Total	$	333	$	288

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Goodwill and Identifiable Intangible Assets

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

6. Goodwill and Identifiable Intangible Assets

Goodwill. In accordance with the accounting standards for business combinations, the Company records the assets acquired and liabilities assumed based on their estimated fair values at the date of acquisition (commonly referred to as the purchase price allocation). As part of the purchase price allocations for the Company’s business acquisitions, identifiable intangible assets are recognized as assets apart from goodwill if they arise from contractual or other legal rights, or if they are capable of being separated or divided from the acquired business and sold, transferred, licensed, rented or exchanged. However, the Company does not recognize any intangible assets apart from goodwill for the assembled workforces of its business acquisitions. At December 31, 2015, the Company had approximately 38,000 employees, and the substantial majority of the sales generated by the Company’s businesses were from the productive labor efforts of its employees, as compared to selling manufactured products or right-to-use technology.

Generally, the largest intangible assets from the businesses that the Company acquires are the assembled workforces, which includes the human capital of the management, administrative, marketing and business development, scientific, engineering and technical employees of the acquired businesses. The success of the Company’s businesses, including their ability to retain existing business (revenue arrangements) and to successfully compete for and win new business (revenue arrangements), is primarily dependent on the management, marketing and business development, contracting, engineering and technical skills and knowledge of its employees, rather than on productive capital (plant and equipment, and technology and intellectual property). Additionally, for a significant portion of its businesses, the Company’s ability to attract and retain employees who have U.S. Government security clearances, particularly those of top-secret and above, is critical to its success, and is often a prerequisite for retaining existing revenue arrangements and pursuing new ones. Generally, patents, trademarks and licenses are not material for the Company’s acquired businesses. Furthermore, the Company’s U.S. Government contracts (revenue arrangements) generally permit other companies to use the Company’s patents in most domestic work performed by such other companies for the U.S. Government. Therefore, because intangible assets for assembled workforces are part of goodwill in accordance with the accounting standards for business combinations, the substantial majority of the intangible assets for the Company’s business acquisitions is recognized as goodwill. Additionally, the value assigned to goodwill for the Company’s business acquisitions also includes the value that the Company expects to realize from cost reduction measures that it implements for its acquired businesses.

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems		Aerospace Systems		Communication Systems		Consolidated Total
	(in millions)
Balance at December 31, 2013
Goodwill	$	4,128	$	1,751	$	1,025	$	6,904
Accumulated impairment losses		(43)		—		(15)		(58)
		4,085		1,751		1,010		6,846
Business acquisitions(1)		(3)		—		—		(3)
Business divestitures		(1)		—		—		(1)
Foreign currency translation adjustments(2)		(77)		(21)		(1)		(99)
Assets held for sale(3)		(231)		—		—		(231)
Balance at December 31, 2014
Goodwill		3,816		1,730		1,024		6,570
Accumulated impairment losses		(43)		—		(15)		(58)
		3,773		1,730		1,009		6,512
Business acquisitions(1)		233		—		11		244
Business divestitures(4)		(20)		—		—		(20)
Business retained from NSS divestiture		26		—		2		28
Impairment charges		(26)		(338)		(20)		(384)
Foreign currency translation adjustments(2)		(61)		(39)		1		(99)
Balance at December 31, 2015
Goodwill		3,994		1,691		1,038		6,723
Accumulated impairment losses(5)		(69)		(338)		(35)		(442)
	$	3,925	$	1,353	$	1,003	$	6,281

⁽¹⁾  For the year ended December 31, 2015, the increase in goodwill for the Electronic Systems segment was due to the L-3 CTC and L-3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition. For the year ended December 31, 2014, the decrease in goodwill for the Electronic Systems segment was due to the final purchase price allocation for the Mustang business acquisition.

⁽²⁾  During 2015 and 2014, the decreases in goodwill presented in the Electronic Systems segment were primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. During 2015 and 2014, the decreases in goodwill presented in the Aerospace Systems segment were due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽³⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

⁽⁴⁾  For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽⁵⁾  The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

As discussed in Note 2, the carrying value of goodwill is tested for impairment annually as of November 30 and on an interim basis, using a two-step process, whenever events or changes in circumstances indicate that the carrying amount may not be recoverable.

The Company recorded aggregate goodwill impairment charges of $955 million in 2015 primarily due to a decline in the estimated fair value of the NSS business and the Logistics Solutions business as a result of the decline in their projected future cash flows. The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations, and are summarized and further discussed below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L-3 Consolidated
			(in millions)
Logistics Solutions reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Based on its annual impairment test as of November 30, 2015, the Company recorded non-cash impairment charges of $455 million for the impairment of goodwill during the fourth quarter of 2015. The goodwill impairment charges were comprised of: (1) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, which is part of the Aerospace Systems segment, as a result of a decline in its projected future cash flows and (2) $117 million, of which $115 million is included in discontinued operations, related to a decline in the estimated fair value of the NSS reporting unit based on the purchase price indicated in the definitive agreement entered into on December 8, 2015 to sell the NSS business. The decline in projected future cash flows for Logistics Solutions was caused by projected future year lower sales volumes and operating margins. Logistics Solutions did not achieve its 2015 annual plan for orders due to an inability to win new business, in part due to delays of certain contract competitions, as well as certain contract recompetition losses. Additionally, Logistics Solutions did not achieve its 2015 annual plan for sales and operating income primarily due to reduced flight hours and competitive pricing pressures on logistics and maintenance contracts. The Company determined, during the preparation of its 2016 financial plan and three year forecast (2016-2018), that these factors will continue to affect the future sales and operating income performance of the Logistics Solutions reporting unit.

In connection with the sale of NSS business, the Company recorded a non-cash impairment charge of $9 million during the fourth quarter of 2015 related to the re-allocation of goodwill to a business retained by L-3.

During the third quarter of 2015, a decline in the projected future cash flows of NSS indicated that the carrying amount of the goodwill for the NSS business may not be recoverable. Accordingly, the Company performed an impairment test for the NSS business, determined that the implied goodwill was lower than the carrying amount, and recorded a non-cash impairment charge of $491 million, of which $456 million is included in discontinued operations, for the impairment of goodwill. The goodwill impairment charge was due to a decline in the estimated fair value of the NSS business as a result of a decline in the projected future cash flows of NSS caused by NSS’s inability to achieve its planned 2015 orders, sales and operating income, primarily due to lower than expected new commercial and international business awards, and a reduced outlook for operating margin and international sales.

In summary, the Company recorded total impairment charges relating to the NSS business aggregating $608 million during the year ended December 31, 2015, including $117 million during the fourth quarter of 2015 and $491 million during the third quarter of 2015. The NSS goodwill impairment charges were allocated between income from continuing operations and income from discontinued operations based on the relative fair values of the NSS business retained by L-3, and the NSS business sold at each goodwill impairment test date. This resulted in $37 million classified in income from continuing operations and the remaining $571 million classified in income from discontinued operations.

Identifiable Intangible Assets. The most significant identifiable intangible asset that is separately recognized for the Company’s business acquisitions is customer contractual relationships. All of the Company’s customer relationships are established through written customer contracts (revenue arrangements). The fair value for customer contractual relationships is determined, as of the date of acquisition, based on estimates and judgments regarding expectations for the estimated future after-tax earnings and cash flows (including cash flows for working capital) arising from the follow-on sales on contract (revenue arrangement) renewals expected from the customer contractual relationships over their estimated lives, including the probability of expected future contract renewals and sales, less a contributory assets charge, all of which is discounted to present value.

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2015								December 31, 2014
	Weighted Average Amortization     Period		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount
	(in years)		(in millions)
Customer contractual relationships		16	$	370	$	246	$	124	$	355	$	221	$	134
Technology		11		156		91		65		132		82		50
Other		18		21		11		10		21		10		11
Total		15	$	547	$	348	$	199	$	508	$	313	$	195

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amortization expense	$	35	$	39	$	35

Based on gross carrying amounts at December 31, 2015, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2016 through 2020 is presented in the table below.

	Year Ending December 31,
	2016		2017		2018		2019		2020
	(in millions)
Estimated amortization expense	$	33	$	31	$	26	$	23	$	20

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Other Current Liabilities and Other Liabilities

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Other Current Liabilities and Other Liabilities

7. Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2015		2014
	(in millions)
Other Current Liabilities:
Accruals for pending and threatened litigation (see Note 18)	$	6	$	36
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position		82		75
Accrued product warranty costs		70		59
Accrued interest		45		46
Deferred revenues		32		30
Other(1)		159		143
Total other current liabilities	$	394	$	389

⁽¹⁾  In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech holographic weapons sight (HWS) products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for the purchase price, including shipping costs. The Company recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the 2015 fourth quarter associated with establishing a product returns reserve to reflect the estimated cost of the return program. The Company’s estimated product returns reserve is based on several factors, including the number of HWS units that it anticipates purchasers will return. The Company’s product returns reserve estimate is based on: (1) its analysis of various factors, including an assumed product return rate consistent with claim rates in other circumstances, (2) its experience to date with the voluntary return program, and among other things, an assumption that only a very small percentage of the total number of HWS products sold by the Company and eligible for the voluntary return program will be returned and (3) an assumed average unit purchase price of approximately $500. The voluntary return program is in the early stages of implementation, and the Company will continue to evaluate the amount of the product returns reserve in connection with the voluntary return program. The Company’s evaluation, including as a result of its actual experience with the voluntary return program, may lead it to record an adjustment to the product returns reserve in future periods. Any such adjustment could be material.

The table below presents the components of other liabilities.

	December 31,
	2015		2014
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	161	$	185
Deferred compensation		45		41
Accrued workers’ compensation		38		38
Accrued product warranty costs		35		34
Notes payable and capital lease obligations		10		1
Other		79		61
Total other liabilities	$	368	$	360

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Property, Plant and Equipment

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

8. Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2015		2014
	(in millions)
Land	$	60	$	62
Buildings and improvements		431		420
Machinery, equipment, furniture and fixtures		1,736		1,670
Leasehold improvements		343		309
Gross property, plant and equipment		2,570		2,461
Accumulated depreciation and amortization		(1,473)		(1,400)
Property, plant and equipment, net	$	1,097	$	1,061

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Debt

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Debt

9. Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2015		2014
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—	$	—
3.95% Senior Notes due 2016		500		500
1.50% Senior Notes due 2017		350		350
5.20% Senior Notes due 2019		1,000		1,000
4.75% Senior Notes due 2020		800		800
4.95% Senior Notes due 2021		650		650
3.95% Senior Notes due 2024		350		650
Subtotal		3,650		3,950
Principal amount of long-term debt		3,650		3,950
Unamortized discounts		(8)		(11)
Carrying amount of long-term debt	$	3,642	$	3,939
Current portion of long-term debt		(499)		—
Carrying amount of long-term debt, excluding current portion		3,143		3,939

⁽¹⁾  During 2015, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were $1,194 million. L-3 Communications had the full availability of its $1 billion Credit Facility at December 31, 2015 and December 31, 2014.

L-3 Communications Amended and Restated Revolving Credit Facility

On February 3, 2012, L-3 Communications amended and restated its $1 billion Revolving Credit Facility, which extended the expiration date to February 3, 2017. The terms of the Credit Facility are substantially consistent with the terms of this facility prior to its amendment and restatement except that: (1) provisions that previously limited the ability of L-3 Communications to pay dividends, repurchase L-3 Holdings’ common stock and make other distributions with respect to any capital stock were eliminated, (2) a provision that previously limited the ability of L-3 Communications to make investments in L-3 Holdings was made less restrictive and (3) the cost of borrowings, loan commitment fees and letter of credit fees were reduced. In addition, the Credit Facility provides for uncommitted incremental revolving facilities and additional term loan facilities in an aggregate principal amount of up to $500 million. Borrowings under the Credit Facility bear interest, at L-3 Communications’ option, at either: (1) the “base rate” equal to the highest of (a) 0.50% per annum above the latest federal funds rate, (b) the Bank of America “prime rate” (as defined in the Credit Facility), and (c) 1.00% per annum above a “Eurodollar Rate” (as defined in the Credit Facility), plus a spread ranging from 0.25% to 1.00% per annum, or (2) a “Eurodollar Rate” (as defined in the Credit Facility) plus a spread ranging from 1.25% to 2.00% per annum. L-3 Communications pays: (1) commitment fees calculated on the daily amounts of the available unused commitments at a rate ranging from 0.15% to 0.325% per annum, (2) letter of credit fees ranging from 0.675% to 1.20% per annum for commercial and performance letters of credit and (3) letter of credit fees ranging from 1.25% to 2.00% for financial letters of credit. The interest rate spread and the commitment fee rate, in all cases, depend on L-3 Communications’ debt rating at the time of determination. The debt rating is based on the credit ratings as determined by Standard & Poor’s Rating Services, Moody’s Investors Service, Inc. and Fitch Ratings of L-3 Communications’ non-credit enhanced senior, unsecured long-term debt.

L-3 Communications Senior Notes

The Senior Notes are unsecured senior obligations of L-3 Communications. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance		Amount Issued		Discount(1)		Net Cash   Proceeds			Effective Interest   Rate		Redemption at Treasury   Rate(2)(3)
			(in millions)
3.95% Senior Notes due November 15, 2016		November 22, 2011	$	500	$	4	$	491			4.11%		50 bps
1.50% Senior Notes due May 28, 2017		May 28, 2014	$	350	$	1	$	347	(4)		1.55%		10 bps
5.20% Senior Notes due October 15, 2019		October 2, 2009	$	1,000	$	4	$	987			5.25%		30 bps
4.75% Senior Notes due July 15, 2020		May 21, 2010	$	800	$	3	$	790			4.79%		25 bps
4.95% Senior Notes due February 15, 2021		February 7, 2011	$	650	$	4	$	639			5.02%		25 bps
3.95% Senior Notes due May 28, 2024		May 28, 2014	$	650	$	3	$	641	(4)		4.02%		20 bps

⁽¹⁾  Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾  The Senior Notes maturing in 2016, 2017, 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 may be redeemed at any time prior to February 28, 2024 (three months prior to their maturity) at the option of L-3 Communications, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 are redeemed at any time on or after February 28, 2024, the redemption price would be equal to 100% of the principal amount.

⁽³⁾  Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L-3 Communications to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾  The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

On December 7, 2015, L-3 Communications commenced a cash tender offer for up to $300 million aggregate principal amount of its 3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 with an early tender date of December 18, 2015. On December 18, 2015, L-3 determined and announced the pricing terms of this cash tender offer, including total consideration of $986.57 per $1,000 principal amount of 3.95% Notes due 2024. On December 22, 2015, $300 million of 3.95% Notes due 2024, accepted by L-3 in connection with the early tender date, were settled for $296 million in cash, plus accrued and unpaid interest, up to but not including the repurchase date. In connection with the repurchase of $300 million of the 3.95% Notes due 2024, the Company recorded a debt retirement charge of approximately $1 million.

L-3 Holdings

In 2005, L-3 Holdings sold $700 million of 3% Convertible Contingent Debt Securities (CODES) due August 1, 2035. On May 13, 2014, L-3 Holdings called for the redemption of all of its outstanding CODES effective on June 2, 2014 (the Redemption Date). The redemption price for the CODES was $1,000 per $1,000 principal amount of the CODES, plus accrued and unpaid interest to, but excluding, the Redemption Date. Holders of the CODES were entitled to convert all or a portion thereof (in integral multiples of $1,000) at any time prior to the close of business on the business day immediately preceding the Redemption Date. The conversion value of CODES of $935 million was calculated in accordance with the indenture governing the CODES. L-3 Holdings settled the entire conversion value with respect to converted CODES in cash. As a result of the conversion, the Company recorded a reduction to shareholders’ equity of $161 million, related to the excess conversion value over the fair value of the debt component of the CODES, net of deferred tax liability. Interest expense recognized for the CODES was $2 million for the year ended December 31, 2014 and $21 million for the year ended December 31, 2013.

Guarantees

The borrowings under the Credit Facility are fully and unconditionally guaranteed by L-3 Holdings and by substantially all of the material 100% owned domestic subsidiaries of L-3 Communications on an unsecured senior basis. The payment of principal and premium, if any, and interest on the Senior Notes is fully and unconditionally guaranteed, on an unsecured senior basis, jointly and severally, by L-3 Communications’ material 100% owned domestic subsidiaries that guarantee any of its other indebtedness.

Subordination

The guarantees of the Credit Facility and the Senior Notes rank pari passu with each other.

Covenants

Financial and other restrictive covenants. The Credit Facility contains financial and other restrictive covenants that limit, among other things, the ability of the subsidiaries of L-3 Communications to borrow additional funds, and the ability of L-3 Communications and its subsidiaries to incur liens, make investments, merge or consolidate or dispose of assets. The Company’s Credit Facility contains covenants that require that: (1) the Company’s consolidated leverage ratio be less than or equal to 4.0 to 1.0, (2) the Company’s consolidated interest coverage ratio be greater than or equal to 3.0 to 1.0, and (3) the Company’s consolidated senior leverage ratio be less than or equal to 3.5 to 1.0, in each case, as of the end of any fiscal quarter. Calculations of the financial covenants are to exclude, among other things, certain items such as impairment losses on goodwill or other intangible assets, non-cash gains or losses from discontinued operations, gains or losses in connection with asset dispositions, and gains or losses with respect to judgments or settlements in connection with litigation matters. As of December 31, 2015, the Company was in compliance with its financial and other restrictive covenants.

The indentures governing the Senior Notes (Senior Indentures) contain covenants customary for investment grade notes, including covenants that restrict the ability of L-3 Communications and its 100% owned domestic subsidiaries to create, incur, assume or permit to exist any lien, except permitted liens (as defined in the Senior Indentures) and restrict the ability of L-3 Communications and its subsidiaries to enter into certain sale and leaseback transactions (as defined in the Senior Indentures).

Cross default provisions. The Credit Facility contains cross default provisions that are triggered when a payment default occurs or certain other defaults occur that would allow the acceleration of indebtedness, swap contracts or guarantees of L-3 Holdings, L-3 Communications or its subsidiaries, so long as the aggregate amount of such indebtedness, swap contracts or guarantees is at least $50 million and such defaults (other than payment defaults and defaults that have resulted in acceleration) have not been cured within 10 days. The Senior Notes indenture contains a cross acceleration provision that is triggered when a default or acceleration occurs under any indenture or instrument of L-3 Communications or its subsidiaries or the payment of which is guaranteed by L-3 Communications or its subsidiaries in an aggregate amount of at least $100 million.

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Accumulated Other Comprehensive (Loss) Income (AOCI)

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Accumulated Other Comprehensive (Loss) Income (AOCI)

10. Accumulated Other Comprehensive (Loss) Income (AOCI)

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency   translation		Unrealized gains (losses) on hedging   instruments		Unrecognized (losses) gains and prior service cost, net		Total accumulated other comprehensive (loss) income
	(in millions)
Balance at December 31, 2012	$	167	$	3	$	(720)	$	(550)
Other comprehensive (loss) income before reclassifications, net of tax		(25)		(1)		414		388
Amounts reclassified from AOCI, net of tax		—		(1)		53		52
Net current period other comprehensive (loss) income		(25)		(2)		467		440
Balance at December 31, 2013	$	142	$	1	$	(253)	$	(110)
Other comprehensive loss before reclassifications, net of tax		(123)		(13)		(354)		(490)
Amounts reclassified from AOCI, net of tax		—		7		9		16
Net current period other comprehensive (loss)		(123)		(6)		(345)		(474)
Balance at December 31, 2014	$	19	$	(5)	$	(598)	$	(584)
Other comprehensive (loss) income before reclassifications, net of tax		(161)		(15)		81		(95)
Amounts reclassified from AOCI, net of tax		41		12		52		105
Net current period other comprehensive (loss) income		(120)		(3)		133		10
Balance at December 31, 2015	$	(101)	$	(8)	$	(465)	$	(574)

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)
	Year Ended December 31,						Affected Line Item in the Audited Consolidated Statements of Operations
Details About AOCI Components	2015		2014		2013(b)
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	(41)	$	—	$	—	Loss related to business divestitures
		(41)		—		—	Income from continuing operations before income taxes
	$	(41)	$	—	$	—	Income from continuing operations
(Loss) gains on hedging instruments:
MSI divestiture	$	(2)	$	—	$	—	Loss related to business divestitures
Other		(16)		(8)		1	Cost of sales-products
		(18)		(8)		1	Income from continuing operations before income taxes
		6		1		—	Provision for income taxes
	$	(12)	$	(7)	$	1	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	(14)	$	—	$	—	Loss related to business divestitures
Net loss		(67)		(15)		(83)	(b)
		(81)		(15)		(83)	Income from continuing operations before income taxes
		29		6		30	Provision for income taxes
		$    (52)		$    (9)		$    (53)	Income from continuing operations
Total reclassification for the period	$	(105)	$	(16)	$	(52)	Income from continuing operations

^(a)  Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b)  Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

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Equity

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Equity

11. Equity

On February 5, 2013, L-3 Holdings’ Board of Directors approved a share repurchase program that authorizes L-3 Holdings to repurchase up to $1.5 billion of its common stock through June 30, 2015, which was fully utilized as of February 20, 2015. On December 4, 2014, L-3 Holdings’ Board of Directors approved a new share repurchase program that authorizes L-3 Holdings to repurchase up to an additional $1.5 billion of its common stock through June 30, 2017. Repurchases of L-3 Holdings’ common stock are made from time to time at management’s discretion in accordance with applicable U.S. Federal securities laws. The timing and actual number of shares to be repurchased in the future will depend on a variety of factors, including, but not limited to, the Company’s financial position, earnings, legal requirements, other investment opportunities (including acquisitions) and market conditions. L-3 Holdings, repurchased 6.4 million shares of its common stock at an average price of $116.13 per share for an aggregate amount of $740 million from January 1, 2015 through December 31, 2015. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares. At December 31, 2015, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $806 million.

From January 1, 2016 through February 19, 2016, L-3 Holdings repurchased 1,133,885 shares of its common stock at an average price of $114.60 per share for an aggregate amount of approximately $130 million. The remaining dollar value of authorization under the December 4, 2014 share repurchase program was $676 million at February 19, 2016.

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Fair Value Measurements

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Fair Value Measurements

12. Fair Value Measurements

L-3 applies the accounting standards for fair value measurements to all of the Company’s assets and liabilities that are measured and recorded at fair value. Fair value is defined as the price that would be received for an asset or the exit price that would be paid to transfer a liability in the principal or most advantageous market in an orderly transaction between market participants. The standards establish a fair value hierarchy that gives the highest priority to observable inputs and the lowest priority to unobservable inputs.

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2015						2014
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	187	$	—	$	—	$	416	$	—	$	—
Derivatives (foreign currency forward contracts)		—		2		—		—		5		—
Total assets	$	187	$	2	$	—	$	416	$	5	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	16	$	—	$	—	$	11	$	—

⁽¹⁾  Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾  Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾  Level 3 is based on pricing inputs that are not observable and not corroborated by market data. The Company has no Level 3 assets or liabilities.

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Financial Instruments

12 Months Ended

Dec. 31, 2015

Investments, All Other Investments [Abstract]

Financial Instruments

13. Financial Instruments

At December 31, 2015 and 2014, the Company’s financial instruments consisted primarily of cash and cash equivalents, billed receivables, trade accounts payable, Senior Notes, and foreign currency forward contracts. The carrying amounts of cash and cash equivalents, billed receivables and trade accounts payable are representative of their respective fair values because of the short-term maturities or expected settlement dates of these instruments. The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2015						December 31, 2014
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,642		$	3,754		$	3,939		$	4,178
Foreign currency forward contracts(2)	$	(14	)	$	(14	)	$	(6	)	$	(6	)

⁽¹⁾  The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾  The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

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Derivative Financial Instruments

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

14. Derivative Financial Instruments

Notional amounts are used to measure the volume of foreign currency forward contracts and do not represent exposure to foreign currency losses. The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency as of December 31, 2015.

Currency	Notional Amount
	(in millions)
Canadian dollar	$	112
U.S. dollar		86
Euro		37
British pound		30
Total	$	265

At December 31, 2015, the Company’s foreign currency forward contracts had maturities through 2020.

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2015								December 31, 2014
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1) (2)	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1
Total derivative instruments	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1

⁽¹⁾  See Note 12 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

⁽²⁾  Assets held for sale at December 31, 2014 include $2 million of other current assets relating to the fair value of derivative instruments and liabilities held for sale at December 31, 2014 include $2 million of other current liabilities relating to the fair value of derivative instruments.

The effects from foreign currency forward contracts on the consolidated statements of operations were a pre-tax loss of $18 million for the year ended December 31, 2015, a pre-tax loss of $8 million for the year ended December 31, 2014, and a pre-tax gain of $1 million for the year ended December 31, 2013. At December 31, 2015, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months is $12 million.

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L-3 Holdings' Earnings Per Share

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

L-3 Holdings' Earnings Per Share

15. L-3 Holdings’ Earnings Per Share

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions, except per share data)
Reconciliation of net (loss) income:
Net (loss) income	$	(225)	$	677	$	760
Net income from continuing operations attributable to noncontrolling interests		(15)		(13)		(9)
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	282	$	632	$	707
Discontinued operations, net of income tax		(522)		32		44
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		80.7		85.4		89.4
Basic (loss) earnings per share:
Continuing operations	$	3.49	$	7.40	$	7.91
Discontinued operations, net of income tax		(6.46)		0.38		0.49
Net (loss) income	$	(2.97)	$	7.78	$	8.40
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		80.7		85.4		89.4
Assumed exercise of stock options		2.4		3.0		3.9
Unvested restricted stock awards		1.3		1.6		1.8
Employee stock purchase plan contributions		0.1		—		0.2
Performance unit awards		0.1		0.1		0.1
Assumed purchase of common shares for treasury		(2.7)		(3.1)		(4.5)
Assumed conversion of the CODES(1)		—		0.8		0.2
Common and potential common shares		81.9		87.8		91.1
Diluted (loss) earnings per share:
Continuing operations	$	3.44	$	7.20	$	7.76
Discontinued operations, net of income tax		(6.37)		0.36		0.48
Net (loss) income	$	(2.93)	$	7.56	$	8.24

⁽¹⁾  The CODES were retired on June 20, 2014 and were dilutive for the years ended December 31, 2014 and 2013 as the average market price of L-3 Holdings’ common stock during the periods that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L-3 Holdings’ common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71. As of December 31, 2013, the conversion price was $90.24.

The computation of diluted EPS excluded shares for stock options and employee stock purchase plan contributions of 0.6 million, 0.5 million and 0.9 million for the years ended December 31, 2015, 2014 and 2013, respectively, as they were anti-dilutive.

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Income Taxes

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income Taxes

16. Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Domestic	$	192	$	707	$	783
Foreign		130		165		197
Income from continuing operations before income taxes	$	322	$	872	$	980

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Current income tax provision:
Federal	$	60	$	78	$	159
State and local		5		1		29
Foreign		26		35		39
Subtotal		91		114		227
Deferred income tax provision/(benefit):
Federal		(67)		101		31
State and local		(1)		11		(1)
Foreign		2		1		7
Subtotal		(66)		113		37
Total provision for income taxes	$	25	$	227	$	264

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2015			2014			2013
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.0			2.1			1.9
Foreign income taxes		(14.2	)		(3.6	)		(1.8	)
Manufacturing benefits		(3.7	)		(1.7	)		(1.9	)
Research and experimentation and other tax credits		(12.9	)		(4.3	)		(3.8	)
Resolution of tax contingencies		(2.8	)		(1.0	)		(1.1	)
Tax deductible dividends		(2.3	)		(0.8	)		(0.3	)
Goodwill Impairment		6.6			—			—
Other, net		0.1			0.3			(1.1	)
Effective income tax rate on continuing operations		7.8	%(1)		26.0	%		26.9	%

⁽¹⁾  In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Deferred tax assets:
Inventoried costs	$	56	$	87
Compensation and benefits		147		143
Pension and postretirement benefits		354		402
Loss carryforwards		12		15
Tax credit carryforwards		6		10
Other		79		80
Gross deferred tax assets		654		737
Less: valuation allowance		(9)		(9)
Net deferred tax assets		645		728
Deferred tax liabilities:
Goodwill and other intangible assets	$	(675)	$	(728)
Income recognition on contracts in process		(36)		(39)
Property, plant and equipment		(94)		(93)
Other		(56)		(88)
Gross deferred tax liabilities		(861)		(948)
Total net deferred tax liabilities	$	(216)	$	(220)

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Non-current deferred tax assets	$	3	$	15
Non-current deferred tax liabilities		(219)		(235)
Total net deferred tax liabilities	$	(216)	$	(220)

The following table presents the Company’s loss and tax credit carryforwards as of December 31, 2015 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2015
	Carryforwards		Valuation Allowances
	Gross	Tax   Effected	Gross	Tax   Effected	Expiration   Periods
	(in millions)		(in millions)
Capital loss carryforwards(1)	$            5	$            2	$            5	$            2	2016-2017
Federal net operating loss carryforwards	11	4	5	2	2026-2034
Foreign net operating loss carryforwards	16	4	4	1	Indefinite
State net operating loss carryforwards	118	2	50	1	2017-2035
Total loss carryforwards		$         12		$            6
State tax credit carryforwards	7	5	5	3	2017-2035
Foreign tax credit carryforwards	1	1	—	—	Indefinite
Total tax credit carryforwards		$           6		$           3

⁽¹⁾  During 2015, the Company reduced its valuation allowance for capital loss carryforwards by $3 million because it generated approximately $9 million of net capital gains in 2015 from business divestitures and the sale of other capital assets.

As of December 31, 2015, the total amount of unrecognized tax benefits was $140 million, $93 million of which would reduce the effective income tax rate, if recognized. A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2015		2014		2013
	(in millions)
Balance at January 1	$	169	$	155	$	127
Additions for tax positions related to the current year		14		20		17
Additions for tax positions related to prior years		2		12		38
Reductions for tax positions related to prior years		(37)		(11)		(7)
Reductions for tax positions related to settlements with taxing authorities		(1)		(1)		—
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7)		(6)		(20)
Balance at December 31	$	140	$	169	$	155

The Company and its subsidiaries file income tax returns in the U.S. Federal jurisdiction, which is the Company’s primary tax jurisdiction, and various state and foreign jurisdictions. The statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2014 are open as of December 31, 2015. The U.S. Internal Revenue Service (IRS) commenced an audit of the Company’s U.S. Federal income tax return for 2012. The Company cannot predict the outcome of the audit at this time. As of December 31, 2015, the Company anticipates that unrecognized tax benefits will decrease by approximately $8 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount could vary significantly depending on the ultimate timing and nature of any settlements.

During the year ended December 31, 2015, the Company reached an agreement with the IRS relating to the audit of 2010 and 2011 U.S. Federal income tax returns. The Company also reached an agreement on several state and foreign audits. As a result of these agreements, the Company reversed previously accrued income tax expense of $9 million, including interest and penalties.

During the year ended December 31, 2014, the Company settled various state and local tax audits. As a result, the Company reduced its income tax provision by $8 million for the reversal of previously accrued amounts.

During the year ended December 31, 2013, the statutes of limitations for several of the Company’s tax returns, including its 2009 U.S. Federal income tax return and certain foreign tax returns, expired. As a result, the Company reduced its income tax provision by $10 million in the year ended December 31, 2013 for the reversal of previously accrued amounts.

As of December 31, 2015 and 2014, current and non-current income taxes payable include accrued potential interest of $18 million ($11 million after income taxes) and $15 million ($9 million after income taxes), respectively, and potential penalties of $9 million for both years. With respect to the interest related items, the Company’s income tax expense included an expense of $2 million for the years ended December 31, 2015 and 2014.

Prior to 2015, the Company recorded a deferred tax liability related to the repatriation of earnings from certain subsidiaries. During 2015, the Company completed a legal restructuring of its significant foreign operations, and the earnings of these subsidiaries are now considered reinvested indefinitely. As a result, the Company recognized a $17 million deferred tax benefit. At December 31, 2015, the Company had not provided deferred U.S. income taxes and foreign withholding taxes for $661 million of undistributed earnings by its non-U.S. subsidiaries as such earnings are intended to be reinvested indefinitely. Quantification of additional taxes that may be payable on distribution is not practicable.

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Stock-Based Compensation

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

17. Stock-Based Compensation

Stock-Based Compensation Plans. The Company has adopted stock-based compensation plans in order to provide incentives to directors, officers, employees and other individuals providing services to or on behalf of the Company and its subsidiaries. The Company believes that its stock-based compensation awards encourage high levels of performance by individuals who contribute to the success of the Company and enable the Company to attract, retain and reward talented and experienced individuals. This is accomplished by providing eligible individuals with an opportunity to obtain or increase a proprietary interest in the Company and/or by providing eligible individuals with additional incentives to join or remain with the Company. The stock-based compensation plans serve to better align the interests of management and its employees with those of the Company’s shareholders. During the year ended December 31, 2015, the Company awarded stock-based compensation under its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP). Awards under the 2008 LTPP may be granted to any officer or employee of the Company or any of its subsidiaries, non-employee directors, or to any other individual who provides services to or on behalf of the Company or any of its subsidiaries. To date, awards under the 2008 LTPP have been in the form of L-3 Holdings’ restricted stock units, performance units and options to purchase L-3 Holdings’ common stock.

On April 30, 2013, the stockholders of L-3 Holdings approved an amendment to the 2008 LTPP to increase the number of shares authorized for issuance to approximately 19.2 million shares. Each share of L-3 Holdings’ common stock issued under a full value award (that is, awards other than stock options and stock appreciation rights) granted on or after February 26, 2013 is counted as 3.69 shares for purposes of this share limit. Each share issued under full value awards granted between March 1, 2010 and February 25, 2013 is counted as 2.6 shares for purposes of the share limit. At December 31, 2015, 4.2 million shares of L-3 Holdings’ common stock remained available for future awards under the 2008 LTPP.

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Stock options	$          9	$          9	$        10
Restricted stock units	38	40	41
Performance units	2	3	7
Total before income taxes	49	52	58
Income taxes	(18)	(20)	(22)
Total after income taxes	31	32	36
Less: Stock based compensation recorded in discontinued operations, net of income taxes	1	1	1
Stock based compensation recorded in continuing operations, net of income taxes	$        30	$        31	$      35

Stock Options. The exercise price of stock options granted under the 2008 LTPP may not be less than the fair market value of L-3 Holdings’ common stock on the date of grant. Options expire after 10 years from the date of grant and vest ratably over a three year period on the annual anniversary of the date of grant. All unvested options are subject to forfeiture upon termination of employment (subject to customary exceptions for death or disability). All of the stock option awards issued under the 2008 LTPP are non-qualified stock options for U.S. income tax regulations. The table below presents a summary of the Company’s stock option activity as of December 31, 2015 and changes during the year then ended.

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)		(in years)	(in millions)
Number of shares under option:
Outstanding at January 1, 2015	3,101.2	$83.02	6.2	$134
Options granted	504.3	128.78
Options exercised	(656.8)	74.97
Options forfeited	(17.2)	101.61
Outstanding at December 31, 2015	2,931.5	$92.59	6.0	$84
Vested and expected to vest at December 31, 2015(1)	2,921.2	$92.48	6.0	$84
Exercisable at December 31, 2015	1,930.1	$82.02	4.8	$72

⁽¹⁾  Represents outstanding options reduced by expected forfeitures for options not fully vested.

The weighted average grant date fair value of the stock options awarded during 2015, 2014 and 2013 was $19.76, $20.02 and $12.09, respectively. The aggregate intrinsic value, disclosed in the table above, represents the difference between L-3 Holdings’ closing stock price on the last trading day for the period, and the exercise price, multiplied by the number of in-the-money stock options.

The total intrinsic value of stock options exercised, based on the difference between the L-3 Holdings’ stock price at the time of exercise and the related exercise price, was $35 million, $43 million and $32 million for the years ended December 31, 2015, 2014 and 2013, respectively. At December 31, 2015, unrecognized compensation costs related to stock options were $11 million ($7 million after income taxes), which are expected to be recognized over a weighted average remaining period of 1.2 years.

The actual income tax benefit realized related to compensation deductions arising from the exercise of stock options by the Company’s employees totaled $13 million, $14 million and $10 million for the years ended December 31, 2015, 2014 and 2013, respectively.

Stock Option Fair Value Estimation Assumptions. The Company estimates the fair value of its stock options at the date of grant using the Black-Scholes option-pricing valuation model. The Company’s valuation model is affected by L-3 Holdings’ stock price as well as weighted average assumptions for a number of subjective variables described below.

• Expected Holding Period. The expected holding period represents the period of time that granted stock options are expected to be outstanding until they are exercised. The Company uses historical stock option exercise data to estimate the expected holding period.

• Expected Volatility. Expected volatility is based on L-3 Holdings’ historical share price volatility matching the expected holding period.

• Expected Dividend Yield. Expected dividend yield is based on L-3 Holdings’ anticipated dividend payments and historical pattern of dividend increases over the expected holding period.

• Risk-Free Interest Rates. The risk-free interest rates for stock options are based on U.S. Treasuries for a maturity period matching the expected holding period.

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2015     Grants	2014     Grants	2013     Grants
Expected holding period (in years)	5.0	5.5	5.6
Expected volatility	21.4%	24.4%	26.4%
Expected dividend yield	2.4%	2.7%	3.6%
Risk-free interest rate	1.5%	1.7%	1.0%

Restricted Stock Units. The Company awards restricted stock units that automatically convert into shares of L-3 Holdings’ common stock upon vesting (in the case of awards granted to employees) or upon the date on which the recipient ceases to be a director (in the case of awards granted to directors). These awards are subject to forfeiture until certain restrictions have lapsed, including a three year cliff vesting period for employees and a one year cliff vesting period for directors, in each case starting on the date of grant. The weighted average grant date fair value of the restricted stock units awarded during 2015, 2014 and 2013 was $128.59, $113.58 and $77.12, respectively. The grant date fair value of the restricted stock unit awards is based on L-3 Holdings’ closing stock price at the date of grant, and is generally recognized as compensation expense on a straight-line basis over the vesting period. However, for employees who attain retirement eligibility status prior to the end of the three year cliff vesting period, and who have provided at least one year of service after the date of grant, compensation expense is recognized over the shorter period from the date of grant to the retirement eligibility date. Retirement eligible employees are those employees that have attained the age of 65 and have completed at least five years of service (which service must be continuous through the date of termination except for a single break in service that does not exceed one year in length).

The table below presents a summary of the Company’s nonvested restricted stock unit awards as of December 31, 2015 and changes during the year then ended.

	Number of         Shares	Weighted Average Grant Date         Fair Value
	(in thousands)
Nonvested balance at January 1, 2015	1,517.6	$          82.72
Granted	364.8	128.59
Vested	(616.7)	68.90
Forfeited	(93.8)	99.72
Nonvested balance at December 31, 2015	1,171.9	$        102.91

As of December 31, 2015, total unrecognized compensation costs related to nonvested restricted stock unit awards were $38 million ($24 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.1 years. The total fair value of restricted stock unit awards vested during the years ended December 31, 2015, 2014 and 2013 as of their vesting dates was $82 million, $66 million and $37 million, respectively.

Performance Units. The Company grants performance unit awards, with each unit having a value at the time of grant equal to a share of L-3 Holdings’ common stock. The number of units ultimately earned can range from zero to 200% of the original award based upon the level of performance achieved by the Company over the associated performance period in relation to pre-determined performance goals. Units earned under the program are converted into shares of L-3 Holdings’ common stock, or are paid in cash based on the closing price of L-3 Holdings’ common stock at the end of the performance period, as determined at the time of grant by the Compensation Committee of the Board of Directors of L-3 Holdings.

During the years ended December 31, 2015, 2014, and 2013, the Company granted performance unit awards with a weighted average grant date fair value per unit of $129.03, $113.67 and $77.00, respectively. All the awards granted in 2015, 2014, and 2013 have performance conditions based on L-3’s diluted EPS. The performance periods for the awards began on January 1 of the applicable grant year and end on December 31 of the year corresponding to a three-year performance period. Units earned under the awards are convertible into shares of L-3 Holdings’ common stock. As of December 31, 2015, total unrecognized compensation costs related to the awards were $4 million ($2 million after income taxes) and are expected to be recognized over a weighted average remaining period of 1.6 years.

The table below presents a summary of the Company’s performance unit awards based on expected performance as of December 31, 2015 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of     Units	Weighted Average     Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2015	85.2	$	96.53
Granted	41.1		129.03
Decrease due to expected performance	(52.3)		115.27
Vested	(32.9)		77.00
Forfeited	(1.5)		109.65
Outstanding at December 31, 2015	39.6	$	121.27

The performance period for awards granted in 2013 ended on December 31, 2015. Based on L-3’s cumulative diluted EPS during the performance period, a total of 32,911 performance units having a fair market value of $4 million as of their vesting date were earned by the participants on December 31, 2015.

Employee Stock Purchase Plan. Effective July 1, 2009, the Company adopted the 2009 Employee Stock Purchase Plan (2009 ESPP). Under the 2009 ESPP, eligible employees are offered options to purchase shares of L-3 Holdings’ common stock at the end of each six-month offering period at 95% of fair market value based on the average of the highest and lowest sales prices for the stock on the purchase date. Eligible employees generally include all employees of the Company and each subsidiary or affiliate of the Company that has been designated to participate in the 2009 ESPP. Offering periods begin on the first trading day in January and July of each calendar year and end on the last trading day in June and December of each calendar year. Share purchases are funded through payroll deductions of up to 10% of an employee’s eligible compensation for each payroll period, or $21,250 each calendar year.

As of December 31, 2015, 4.0 million shares were available for future issuance under the 2009 ESPP (i.e., excluding the effect of shares issued in January 2016 as described below). In July 2015, the Company issued 0.2 million shares under the 2009 ESPP at an average price of $107.98 per share, which covered employee contributions for the six months ended June 30, 2015. In January 2016, the Company issued 0.1 million shares under the 2009 ESPP at an average price of $113.93 per share, which covered employee contributions for the six months ended December 31, 2015. The 5% discount is not recognized as compensation expense in accordance with the accounting standard for share-based compensation expense.

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Commitments and Contingencies

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

18. Commitments and Contingencies

Non-Cancelable Operating Leases

The Company leases certain facilities and equipment under agreements expiring at various dates through 2033. Certain leases contain renewal options or escalation clauses providing for increased rental payments based upon maintenance, utility and tax increases. No lease agreement imposes a restriction on the Company’s ability to pay dividends, engage in debt or equity financing transactions, or enter into further lease agreements.

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2015.

	Real Estate		Equipment		Total
			(in millions)
2016	$	77	$	5	$	82
2017		78		4		82
2018		67		2		69
2019		53		1		54
2020		85		—		85
Thereafter		166		—		166
Total minimum payments required		526		12		538
Less: Sublease rentals under non-cancelable leases		11		—		11
Net minimum payments required	$	515	$	12	$	527

Rent expense was $104 million for 2015, $117 million for 2014, and $116 million for 2013. Sublease rental income was $2 million for 2015, and $1 million for each of 2014 and 2013, respectively.

Letters of Credit

The Company enters into standby letters of credit with financial institutions covering performance and financial guarantees pursuant to contractual arrangements with certain customers. The Company had total outstanding letters of credit aggregating to $425 million and $615 million at December 31, 2015 and 2014, respectively. The Company had the full availability of its $1 billion Credit Facility at December 31, 2015 and December 31, 2014. These letters of credit may be drawn upon in the event of the Company’s nonperformance.

Guarantees

The Company, from time to time, enters into contractual guarantees that arise in connection with its business acquisitions, dispositions, and other contractual arrangements in the normal course of business.

In connection with the spin-off of Engility in 2012, L-3 entered into a Distribution Agreement and several other agreements that govern certain aspects of L-3’s relationship with Engility, including employee matters, tax matters, transition services, and the future supplier/customer relationship between L-3 and Engility. These agreements generally provide cross-indemnities that, except as otherwise provided, are principally designed to place the financial responsibility for the obligations and liabilities of each entity with that respective entity. Engility has joint and several liability with L-3 to the U.S. Internal Revenue Service (IRS) for the consolidated U.S. Federal income taxes of L-3’s consolidated group for taxable periods in which Engility was a part of that group. However, the Tax Matters Agreement specifies the portion of this tax liability for which L-3 and Engility will each bear responsibility, and L-3 and Engility have agreed to indemnify each other against any amounts for which the other is not responsible. The Tax Matters Agreement also allocates responsibility between L-3 and Engility for other taxes, including special rules for allocating tax liabilities in the event that the spin-off is determined not to be tax-free. Though valid as between the parties, the Tax Matters Agreement is not binding on the IRS.

The Company has three existing real estate lease agreements, which include residual guarantee amounts, expiring on August 31, 2020 and are accounted for as operating leases. On or before the lease expiration date, the Company can exercise options under the lease agreements to renew the leases, purchase the properties for $45 million, or sell the properties on behalf of the lessor (the “Sale Option”). If the Company elects the Sale Option, the Company must pay the lessor a residual guarantee amount of $39 million for the properties, on or before the lease expiration date. In addition, at the time the properties are sold, the Company must pay the lessor a supplemental rent payment equal to the gross sales proceeds in excess of the residual guarantee, provided that such amount shall not exceed $6 million. For these real estate lease agreements, if the gross sales proceeds are less than the sum of the residual guarantee amount and the supplemental rent payment, the Company is required to pay a supplemental rent payment to the extent the reduction in the fair value of the properties is demonstrated by an independent appraisal to have been caused by the Company’s failure to properly maintain the properties. The aggregate residual guarantee amounts equal $39 million and are included in the future minimum payments under non-cancelable real estate operating lease payments relating to the expiration dates of such leases.

The Company has a contract to provide and operate a full-service training facility for the U.S. Air Force (USAF), including simulator systems adjacent to a USAF base in Oklahoma. The Company acted as the construction agent on behalf of the third-party owner-lessors for procurement and construction for the simulator systems, which were completed and delivered in August 2002. The Company, as lessee, entered into operating lease agreements for a term of 15 years for the simulator systems with the owner-lessors. At the end of the lease term, the Company may elect to purchase the simulator systems at fair market value, which can be no less than $7 million and no greater than $21 million. If the Company does not elect to purchase the simulator systems on the date of expiration (during the first quarter of 2018), the Company must pay to the lessor, as additional rent, $7 million and return the simulator systems to the lessors.

Environmental Matters

Management continually assesses the Company’s obligations with respect to applicable environmental protection laws, including those obligations assumed in connection with certain business acquisitions. While it is difficult to determine the timing and ultimate cost to be incurred by the Company in order to comply with these laws, based upon available internal and external assessments, with respect to those environmental loss contingencies of which management is aware, the Company believes that there are no environmental loss contingencies that, individually or in the aggregate, would be material to the Company’s consolidated results of operations. The Company accrues for these contingencies when it is probable that a liability has been incurred and the amount of the liability can be reasonably estimated.

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with U.S. Government and foreign government customers. U.S. Government contracts are subject to extensive legal and regulatory requirements, and, from time to time, agencies of the U.S. Government investigate whether such contracts were and are being conducted in accordance with these requirements. The Company is currently cooperating with the U.S. Government on several investigations from which civil, criminal or administrative proceedings have or could result and give rise to fines, penalties, compensatory and treble damages, restitution and/or forfeitures. In that regard, in November 2015 the Company paid $25.6 million in settlement of a complaint alleging violations of the False Claims Act in connection with the sale of EoTech’s holographic weapon sights. The Company has other ongoing government investigations, including investigations into the pricing of certain contracts entered into by the Communication Systems segment. The Company does not currently anticipate that any of these investigations will have a material adverse effect, individually or in the aggregate, on its consolidated financial position, results of operations or cash flows. However, under U.S. Government regulations, an indictment of the Company by a federal grand jury, or an administrative finding against the Company as to its present responsibility to be a U.S. Government contractor or subcontractor, could result in the Company being suspended for a period of time from eligibility for awards of new government contracts or task orders or in a loss of export privileges. A conviction, or an administrative finding against the Company that satisfies the requisite level of seriousness, could result in debarment from contracting with the federal government for a specified term. In addition, all of the Company’s U.S. Government contracts: (1) are subject to audit and various pricing and cost controls, (2) include standard provisions for termination for the convenience of the U.S. Government or for default, and (3) are subject to cancellation if funds for contracts become unavailable. Foreign government contracts generally include comparable provisions relating to terminations for convenience or default, as well as other procurement clauses relevant to the foreign government.

Litigation Matters

The Company is also subject to litigation, proceedings, claims or assessments and various contingent liabilities incidental to its businesses, including those specified below. Furthermore, in connection with certain business acquisitions, the Company has assumed some or all claims against, and liabilities of, such acquired businesses, including both asserted and unasserted claims and liabilities.

In accordance with the accounting standard for contingencies, the Company records a liability when management believes that it is both probable that a liability has been incurred and the Company can reasonably estimate the amount of the loss. Generally, the loss is recorded at the amount the Company expects to resolve the liability. The estimated amounts of liabilities recorded for pending and threatened litigation are disclosed in Note 7. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At December 31, 2015, the Company recorded approximately $4 million of receivables for recoveries from insurance contracts or third parties in connection with the Bashkirian Airways matter discussed below. Legal defense costs are expensed as incurred. The Company believes it has recorded adequate provisions for its litigation matters. The Company reviews these provisions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel and other information and events pertaining to a particular matter. While it is reasonably possible that an unfavorable outcome may occur in one or more of the following matters, unless otherwise stated below, the Company believes that it is not probable that a loss has been incurred in any of these matters. With respect to the litigation matters below for which it is reasonably possible that an unfavorable outcome may occur, an estimate of loss or range of loss is disclosed when such amount or amounts can be reasonably estimated. Although the Company believes that it has valid defenses with respect to legal matters and investigations pending against it, the results of litigation can be difficult to predict, particularly those involving jury trials. Accordingly, the Company’s current judgment as to the likelihood of loss (or our current estimate as to the potential range of loss, if any) with respect to any particular litigation matter may turn out to be wrong. Therefore, it is possible that one or more of the following or other contingencies could have a material impact on the financial position, results of operations or cash flows of the Company in future periods.

EoTech Class Actions. In December 2015 and February 2016, three putative class action complaints against the Company were filed in the United States District Court for the Western District of Missouri and the United States District Court of the District of Oregon. The complaints allege that the Company’s EoTech business unit knowingly sold defective holographic weapons sights, and seek monetary damages, pre- and post-judgment interest, and fees and expenses based on claims including breach of warranty, fraud, violation of state consumer protection statues and unjust enrichment. The Company believes it has valid defenses with respect to these actions and intends to defend against them vigorously. The Company is unable to reasonably estimate any amount or range of loss that may be incurred in connection with these matters because the proceedings are in their early stages.

Securities Class Action. In August 2014, three separate, putative class actions were filed in the United States District Court for the Southern District of New York (the District Court) against the Company and certain of its officers. These cases were consolidated into a single action on October 24, 2014. A consolidated amended complaint was filed in the District Court on December 22, 2014, which was further amended and restated on March 13, 2015. The complaint alleges violations of federal securities laws related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment, and seeks monetary damages, pre- and post-judgment interest, and fees and expenses. The Company believes the action lacks merit and intends to defend itself vigorously. On April 24, 2015, the Company moved to dismiss the amended and restated complaint. The motion has been fully briefed. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with this matter because the proceedings are in their early stages.

Government Inquiries. On July 30, 2014, the Company voluntarily contacted the Securities and Exchange Commission (SEC) to report information concerning its internal review related to misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The Company has received requests for interviews of current and former employees, and subpoenas for documents and other materials from the SEC and the Department of Justice concerning these self-reported matters. The Company is fully cooperating with both agencies. The Company is unable to reasonably estimate any amount or range of loss, if any, that may be incurred in connection with these inquiries based on the nature of the inquiries to date.

Bashkirian Airways. On July 1, 2004, lawsuits were filed on behalf of the estates of 31 Russian children in the state courts of Washington, Arizona, California, Florida, New York and New Jersey against Honeywell, Honeywell TCAS, Thales USA, Thales France, the Company and Aviation Communications & Surveillance Systems (ACSS), which is a joint venture of L-3 and Thales. The suits relate to the crash over southern Germany of a Bashkirian Airways Tupelov TU 154M aircraft and a DHL Boeing 757 cargo aircraft. On-board the Tupelov aircraft were 9 crew members and 60 passengers, including 45 children. The Boeing aircraft carried a crew of two. Both aircraft were equipped with Honeywell/ACSS Model 2000, Change 7 Traffic Collision and Avoidance Systems (TCAS). Sensing the other aircraft, the on-board DHL TCAS instructed the DHL pilot to descend, and the Tupelov on-board TCAS instructed the Tupelov pilot to climb. However, the Swiss air traffic controller ordered the Tupelov pilot to descend. The Tupelov pilot disregarded the on-board TCAS and put the Tupelov aircraft into a descent striking the DHL aircraft in midair at approximately 35,000 feet. All crew and passengers of both planes were lost. Investigations by the National Transportation Safety Board after the crash revealed that both TCAS units were performing as designed. The suits allege negligence and strict product liability based upon the design of the units and the training provided to resolve conflicting commands. The Company’s insurers accepted defense of these matters and retained counsel. The matters were consolidated in the U.S. District Court for the District of New Jersey, which then dismissed the actions on the basis of forum non conveniens. Plaintiffs representing 30 of the estates re-filed their complaint against ACSS on April 23, 2007 with the Barcelona Court’s Registry in Spain. On March 9, 2010, the court ruled in favor of the plaintiffs and entered judgment against ACSS in the amount of approximately $6.7 million, all of which represented compensatory damages. Both ACSS and the plaintiffs appealed the judgment. In May 2012, the appellate court ruled in favor of the plaintiffs and entered judgment against ACSS in the amount of $48 million. ACSS filed an appeal of the judgment with the Supreme Court of Spain (the Supreme Court) on September 28, 2012. During the Supreme Court’s consideration of the appeal, 18 of 30 plaintiffs released their claims against ACSS in consideration for payments made by the Company’s insurance carriers. On February 10, 2015, the Supreme Court issued a ruling that awarded the remaining 12 plaintiffs approximately $11 million in the aggregate (including interest), plus certain legal expenses incurred by the plaintiffs in connection with the appeal to the Supreme Court. The Company’s insurers have paid the $11 million award amount into an escrow account held by the Company’s legal representatives for payment to the plaintiffs if and when the award becomes due, and have confirmed that they will pay the plaintiffs’ legal expenses on behalf of the Company once they are certified and become due. On May 20, 2015, an appeal was filed on behalf of ACSS to annul the Supreme Court decision on constitutional grounds. In October 2015, eight of the remaining 12 plaintiffs released their claims against ACSS in consideration for approximately $7.0 million in aggregate payments made from the escrow account (representing a discount of approximately $0.1 million from the portion of the $11 million award attributable to these plaintiffs). On October 28, 2015, the appeal to annul the Supreme Court decision was denied. The amount owed to the remaining four plaintiffs (approximately $3.7 million) plus fees of plaintiffs’ counsel (approximately €30,000) is expected to be paid from the escrow account in the first quarter of 2016, and any remaining amount in the escrow account will be returned to the Company’s insurers.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our JovyAtlas business unit. The notice relates to losses resulting from a fire that occurred at an HVC Alkmaar bio-energy plant on July 21, 2013. The notice states that the fire resulted from the failure of an uninterruptible power supply (UPS) to provide sufficient power to act as a back-up energy supply, alleges that JovyAtlas was the manufacturer and service provider for the UPS and claims €11 million in estimated property damages and €35 million in estimated business interruption damages. The Company has tendered the notice of claim to its insurance carriers, who have commenced their own investigation.

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Pensions and Other Employee Benefits

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Pensions and Other Employee Benefits

19. Pensions and Other Employee Benefits

The Company maintains multiple pension plans, both contributory and non-contributory, covering employees at certain locations. Eligibility for participation in these plans varies and benefits are generally based on the participant’s compensation and/or years of service. The Company’s funding policy is generally to contribute in accordance with cost accounting standards that affect government contractors, subject to the Internal Revenue Code and regulations thereon. Plan assets are invested primarily in listed stocks, mutual funds, corporate bonds, U.S. Government obligations and U.S. Government agency obligations.

The Company also provides postretirement medical and life insurance benefits for retired employees and dependents at certain locations. Participants are eligible for these benefits when they retire from active service and meet the eligibility requirements for the Company’s pension plans. These benefits are funded primarily on a pay-as-you-go basis with the retiree generally paying a portion of the cost through contributions, deductibles and coinsurance provisions.

In accordance with accounting standards for employee pension and postretirement benefits, the Company recognizes the unfunded status of its pension and postretirement benefit plans in the consolidated financial statements and measures its pension and postretirement benefit plan assets and benefit obligations as of December 31.

The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement         Benefit Plans
	2015			2014			2015			2014
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,663		$	2,973		$	199		$	194
Service cost		123			106			3			3
Interest cost		149			147			7			8
Plan participants’ contributions		2			2			4			4
Amendments		—			1			—			(1	)
Actuarial (gain) loss		(261	)		579			(12	)		5
Foreign currency exchange rate changes		(53	)		(34	)		(4	)		(2	)
Curtailments, settlements and special termination benefits		3			1			—			—
Business divestiture		(59	)		—			—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Benefit obligation at the end of the year	$	3,448		$	3,663		$	184		$	199
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,570		$	2,403		$	60		$	55
Actual return on plan assets		54			205			—			6
Employer contributions		97			97			6			7
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		(52	)		(25	)		—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Fair value of plan assets at the end of the year	$	2,552		$	2,570		$	57		$	60
Unfunded status at the end of the year	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current assets	$	37		$	26		$	—		$	—
Current liabilities		(5	)		(4	)		(8	)		(8	)
Non-current liabilities		(928	)		(1,056	)		(119	)		(131	)
Liabilities held for sale(1)		—			(59	)		—			—
	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)

⁽¹⁾  Liabilities held for sale consists of $3 million of current liabilities and $56 million of non-current liabilities relating to L-3 MSI.

The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2015		2014		2015		2014
	(in millions)
Net loss (gain)	$	768	$	968	$	(10)	$	(6)
Prior service credit		—		—		(3)		(3)
Total amount recognized	$	768	$	968	$	(13)	$	(9)

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,120 million at December 31, 2015 and $3,272 million at December 31, 2014. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31. 2015 and 2014.

	Pension Plans
	2015	2014
	(in millions)
Projected benefit obligation	$  3,232	$	3,467
Accumulated benefit obligation	2,913		3,083
Fair value of plan assets	2,302		2,349

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2015 and 2014.

	Pension Plans						Postretirement Benefit Plans
	2015			2014			2015			2014
Benefit obligations:
Discount rate		4.63%	(1)		4.14%	(1)		4.23%	(2)		3.70%	(2)
Rate of compensation increase		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.7% and 4.2% for the U.S. based plans, respectively, 3.9% for the Canadian based plans and 2.2% for the German based plans at December 31, 2014.

⁽²⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.3% and 3.7% for the U.S. based plans, respectively, and 3.7% for the Canadian based plans.

⁽³⁾  The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2015 and 2014.

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Components of net periodic benefit cost:
Service cost	$    123	$    106	$    126	$        3	$        3	$        4
Interest cost	149	147	132	7	8	7
Expected return on plan assets	(205)	(193)	(164)	(5)	(4)	(4)
Amortization of prior service cost (credits)	1	2	1	(2)	(2)	(3)
Amortization of net loss (gain)	68	17	83	—	(2)	2
Curtailment or settlement loss (gain)	3	1	3	—	(1)	—
Net periodic benefit cost	$    139	$      80	$    181	$        3	$        2	$        6

At the end of fiscal 2015, the Company changed the approach used to measure service and interest costs for pension and other postretirement benefits. For fiscal 2015, the Company measured service and interest costs utilizing a single weighted-average discount rate derived from the yield curve used to measure the plan obligations. For fiscal 2016, the Company elected to measure service and interest costs by applying the specific spot rates along that yield curve to the plans’ liability cash flows. The Company believes the new approach provides a more precise measurement of service and interest costs by aligning the timing of the plans’ liability cash flows to the corresponding spot rates on the yield curve. This change does not affect the measurement of our plan obligations. The Company has accounted for this change as a change in accounting estimate and, accordingly, has accounted for it on a prospective basis.

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$    (132)	$    560	$    (637)	$    (7)	$      5	$    (29)
Prior service cost (credit)	—	1	14	—	(1)	—
Amortization of net (loss) gain	(68)	(17)	(83)	—	2	(2)
Amortization of prior service (cost) credit	(1)	(2)	(1)	2	2	3
Total recognized in other comprehensive income	(201)	542	(707)	(5)	8	(28)
Total recognized in net periodic benefit cost and other comprehensive income	$      (62)	$    622	$    (526)	$    (2)	$    10	$    (22)

The following table summarizes the amounts expected to be amortized from accumulated other comprehensive income (loss) and recognized as components of net periodic benefit costs during 2016.

	Pension Plans	Postretirement Benefit Plans	Total
		(in millions)
Net loss (gain)	$        53	$        (1)	$        52
Prior service credit	(1)	(1)	(2)
	$        52	$        (2)	$        50

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans									Postretirement Benefit Plans
	2015			2014			2013			2015			2014			2013
Discount rate		4.14%	(1)		5.03%	(1)		4.15%	(1)		3.70%	(4)		4.43%	(4)		3.37%	(4)
Expected long-term return on plan assets		8.14%	(2)		8.13%	(2)		8.13%	(2)		7.65%			7.64%			7.64%
Rate of compensation increase		3.50%	(3)		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014, and 2013 were comprised of separate assumptions determined by country of 4.2%, 5.1% and 4.2% for the U.S. based plans, 3.9%, 4.7% and 3.9% for the Canadian based plans and 2.2%, 3.5%, and 3.4% for the German based plans, respectively.

⁽²⁾  The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.25% for the U.S. based plans and 7.25% for the Canadian based plans for the years ended December 31, 2015, 2014 and 2013.

⁽³⁾  The weighted average rate of compensation increase assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.5% for both the U.S and Canadian based plans.

⁽⁴⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.7%, 4.4% and 3.3% for the U.S. based plans and 3.7%, 4.6% and 3.7% for the Canadian based plans, respectively.

The expected long-term return on plan assets assumption represents the average rate that the Company expects to earn over the long-term on the assets of the Company’s benefit plans, including those from dividends, interest income and capital appreciation. The Company utilizes a third-party consultant to assist in the development of the expected long-term return on plan assets, which is based on expectations regarding future long-term rates of return for the plans’ investment portfolio, with consideration given to the allocation of investments by asset class and historical rates of return for each individual asset class. The Company utilizes a building block methodology that utilizes historical and forward looking rates of return for each asset class and takes into account expected returns above inflation and risk premium. These long-term rates of return are then applied to the target portfolio allocations that are generally aligned with the actual asset allocations of our plans to develop the expected long-term rate of return.

The annual increase in cost of benefits (health care cost trend rate) for the Company’s U.S. based plans covering retirees under 65 years of age is assumed to be an average of 7.5% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2021 and thereafter. The health care cost trend rate for the Company’s U.S. based plans covering retirees over 65 years of age is assumed to be an average of 9.0% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2024 and thereafter. The health care cost trend rate for the Company’s Canadian based plans is assumed to be an average of 6.75% in 2016 and is assumed to gradually decrease to a rate of 5.0% in 2023 and thereafter. Health care cost trend assumptions are based on (1) observed or expected short term rates of increase for different types of health models based on actual claims experience and benchmarking, and (2) a reasonable estimate of an appropriate, sustainable level of health care cost trend in the future, weighting the factors that primarily influence trends, which are price inflation and cost leveraging benefit plan features. Assumed health care cost trend rates can have a significant effect on amounts reported for postretirement medical benefit plans. A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase	Decrease
	(in millions)
Effect on total service and interest cost	$            —	$            —
Effect on postretirement benefit obligations	7	(5)

Plan Assets. The Company’s Benefit Plan Committee (Committee) has the responsibility to formulate the investment policies and strategies for the plans’ assets. The Committee structures the investment of plan assets to achieve the following goals: (1) maximize the plans’ long-term rate of return on assets for an acceptable level of risk; and (2) limit the volatility of investment returns and consequent impact on the plans’ assets. In the pursuit of these goals, the Committee has formulated the following investment policies and objectives: (1) invest assets of the plans in a manner consistent with the fiduciary standards of the Employee Retirement Income Security Act of 1974 (ERISA); (2) preserve the plans’ assets; (3) maintain sufficient liquidity to fund benefit payments and pay plan expenses; (4) evaluate the performance of investment managers; and (5) achieve, on average, a minimum total rate of return equal to the established benchmarks for each asset category.

The Committee retains a professional investment consultant to advise the Committee and help ensure that the above policies and strategies are met. The Committee does not actively manage the day to day operations and selection process of individual securities and investments, as it retains the professional services of qualified investment management organizations to fulfill those tasks. Qualified investment management organizations are evaluated on several criteria for selection, with a focus on the investment management organizations’ demonstrated capability to achieve results that will meet or exceed the investment objectives they have been assigned and conform to the policies established by the Committee. While the investment management organizations have investment discretion over the assets placed under their management, the Committee provides each investment manager with specific investment guidelines relevant to its asset class.

The Committee has established the allowable range that the plans’ assets may be invested in for each major asset category. In addition, the Committee has established guidelines regarding diversification within asset categories to limit risk and exposure to a single or limited number of securities. The investments of the plans’ include a diversified portfolio of both equity and fixed income investments. Equity investments are further diversified across U.S. and non-U.S. stocks, small to large capitalization stocks, and growth and value stocks. Fixed income assets are diversified across U.S. and non-U.S. issuers, corporate and governmental issuers, and credit quality. The plan also invests in real estate through publicly traded real estate securities. Derivatives may be used only for hedging purposes or to create synthetic long positions. The plans are prohibited from directly owning commodities, unregistered securities, restricted stock, private placements, or interests in oil, gas, mineral exploration, or other development programs. Further, short selling or utilizing margin buying for investment purposes is prohibited.

The table below presents the allowable range for each major category of the plans’ assets at December 31, 2015 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2015 and 2014, by asset category.

	U.S.							Canada
Asset Category	Range	2015			2014			Range	2015			2014
Domestic equity(1)	30%-60%		52	%		52	%	—		13	%		15	%
International equity(2)	10%-20%		11			10		—		62			55
Total equities	45%-75%		63			62		40%-80%		75			70
Fixed income securities	20%-40%		22			22		—		16			20
Other, primarily cash and cash equivalents	0%-15%		8			9		—		9			10
Total fixed income securities and cash and cash equivalents	—		30			31		20%-60%		25			30
Real estate securities	0%-15%		7			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾  Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾  International equities for Canadian plans includes equities of U.S. companies.

The Committee regularly monitors the investment of the plans’ assets to ensure that the actual investment allocation remains within the established range. The Committee also regularly measures and monitors investment risk through ongoing performance reporting and investment manager reviews. Investment manager reviews include assessing the managers’ performance versus the appropriate benchmark index both in the short and long-term period, performance versus peers, and an examination of the risk the managers assumed in order to achieve rates of return.

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets						Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015						Fair Value Measured at December 31, 2015
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$1,200	$    —	$    —	$	1,200		$  73	$    —	$    —	$  73
International Equity	79	—	—		79		91	—	—	91
Fixed Income — Investment Grade(2)	237	163	—		400		—	—	—	—
Fixed Income — High Yield(3)	—	114	—		114		—	—	—	—
Real Estate Investment Trusts(4)	170	—	—		170		—	—	—	—
Other(5)	—	166	—		166		6	21	—	27
Total assets at fair value	$1,686	$  443	$    —	$	2,129		$170	$    21	$    —	$191
Liabilities for unsettled trades, net					(30	)				—
Other investments measured at net asset value(6)(7)					170					92
Total				$	2,269					$283
	Fair Value Measured at December 31, 2014						Fair Value Measured at December 31, 2014
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$  1,172	$    —	$    —	$	1,172		$    58	$    —	$    —	$    58
International Equity	87	—	—		87		107	—	—	107
Fixed Income — Investment Grade(2)	237	157	—		394		—	—	—	—
Fixed Income — High Yield(3)	—	120	—		120		—	—	—	—
Real Estate Investment Trusts(4)	159	—	—		159		—	—	—	—
Other(5)	—	208	—		208		4	26	—	30
Total assets at fair value	$  1,655	$  485	$    —	$	2,140		$  169	$    26	$    —	$  195
Liabilities for unsettled trades, net					(13	)				—
Other investments measured at net asset value(6)(7)					140					108
Total				$	2,267					$  303

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾  Approximately 59% at December 31, 2015 and 60% at December 31, 2014 of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the “Fund”) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 41% at December 31, 2015 and 40% at December 31, 2014 of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of: (1) money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾  All of the U.S. plans other investments measured using NAV at December 31, 2015 and 2014 and approximately 52% and 43% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 48% and 57% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2015								Fair Value Measured at December 31, 2014
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	35	$	—	$	—	$	35	$	36	$	—	$	—	$	36
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		10		2		—		12
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		2		—		—		2
Other(5)		—		2		—		2		—		4		—		4
Total assets at fair value	$	47	$	7	$	—	$	54	$	49	$	8	$	—	$	57
Other investments measured at net asset value(6)(7)								3								3
Total							$	57							$	60

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾  Approximately 73% at December 31, 2015 and 83% at December 31, 2014 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2015 and 17% at December 31, 2014 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  REITs consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2015 and 2014 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

Contributions. The funding policy for the Company’s pension and postretirement benefit plans is to contribute at least the minimum required by applicable laws and regulations or to directly make benefit payments where appropriate. The Company makes voluntary, additional contributions to the pension plans depending on a number of factors, including operating cash flow levels, alternative uses for excess cash and the plans’ funded status. At December 31, 2015, all legal funding requirements had been met. For the year ending December 31, 2016, the Company currently expects to contribute approximately $100 million to its pension plans, and approximately $10 million to its postretirement benefit plans.

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension                      Benefits		Benefit         Payments	Subsidy         Receipts
	(in millions)
2016	$	151	13	—
2017		151	14	—
2018		155	14	—
2019		162	14	—
2020		167	15	—
Years 2021-2025		1,012	70	1

Employee Savings Plans. Under its various employee savings plans, the Company matches the contributions of participating employees up to a designated level. The extent of the match, vesting terms and the form of the matching contributions vary among the plans. Under these plans, the Company’s matching contributions in L-3 Holdings’ common stock and cash were $131 million for 2015, $135 million for 2014 and $120 million for 2013. These matching contributions include amounts attributable to discontinued operations of $12 million for 2015, $11 million for 2014 and $9 million for 2013.

Multi-employer Benefit Plans. Certain of the Company’s businesses participate in multi-employer defined benefit pension plans. The Company makes cash contributions to these plans under the terms of collective-bargaining agreements that cover its union employees based on a fixed rate per hour of service worked by the covered employees. The risks of participating in these multi-employer plans are different from single-employer plans in the following aspects: (1) assets contributed to the multi-employer plan by one employer may be used to provide benefits to employees of other participating employers, (2) if a participating employer stops contributing to the plan, the unfunded obligations of the plan may be borne by the remaining participating employers and (3) if the Company chooses to stop participating in some of its multi-employer plans, the Company may be required to pay those plans an amount based on the underfunded status of the plan, referred to as a withdrawal liability.

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

Pension Fund	EIN/Pension         Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L-3 Communications			Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
		2015	2014		2015	2014	2013
					(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$23(3)	$19(4)	$21(4)	No	1/29/2016 to 5/25/2019(5)
Other Pension Funds(6)					—	—	—
			Total contributions		$23	$19	$21

⁽¹⁾  A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾  Funding improvement plan or rehabilitation plan.

⁽³⁾  At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2015 was not available.

⁽⁴⁾  Represents 5% and 6% of total plan contributions for the years ended December 31, 2014 and 2013, respectively, based on Form 5500.

⁽⁵⁾  The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 58% of 2015 contributions.

⁽⁶⁾  Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

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Supplemental Cash Flow Information

12 Months Ended

Dec. 31, 2015

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

20. Supplemental Cash Flow Information

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Interest paid on outstanding debt	$    182	$    176	$    171
Income tax payments	132	129	245
Income tax refunds	8	9	23

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Segment Information

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Segment Information

21. Segment Information

The Company has three reportable segments, which are described in Note 1. The Company evaluates the performance of its operating segments and reportable segments based on their sales and operating income. All corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, all costs and expenses, except for goodwill impairment charges and the loss related to business divestitures (which were not included in the Company’s segment performance measures) are included in the Company’s measure of segment profitability. Certain Corporate expenses of $15 million, $16 million and $15 million for the years ended December 31, 2015, 2014 and 2013, respectively, that had previously been allocated to the NSS business were retained by the Company and were allocated to L-3’s three reportable segments.

The tables below present net sales, operating income, depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Net Sales
Products
Electronic Systems	$	3,390	$	3,685	$	3,665
Aerospace Systems		1,661		1,722		1,827
Communication Systems		1,648		1,546		1,762
Elimination of intercompany sales		(110)		(114)		(125)
Total products sales		6,589		6,839		7,129
Services
Electronic Systems	$	999	$	1,057	$	1,092
Aerospace Systems		2,503		2,604		2,730
Communication Systems		441		539		517
Elimination of intercompany sales		(66)		(53)		(48)
Total services sales		3,877		4,147		4,291
Consolidated total	$	10,466	$	10,986	$	11,420
Operating income
Electronic Systems	$	489	$	533	$	529
Aerospace Systems		205		283		421
Communication Systems		196		196		167
Segment total		890		1,012		1,117
Loss related to business divestitures(1)		(31)		—		—
Impairment charges(2)		(384)		—		—
Consolidated total	$	475	$	1,012	$	1,117
Depreciation and amortization
Electronic Systems	$	110	$	123	$	117
Aerospace Systems		50		40		38
Communication Systems		50		51		47
Consolidated total	$	210	$	214	$	202
Capital Expenditures
Electronic Systems	$	99	$	80	$	71
Aerospace Systems		55		59		54
Communication Systems		37		29		59
Corporate		6		6		20
Consolidated total	$	197	$	174	$	204
Total Assets
Electronic Systems	$	6,426	$	6,281	$	6,933
Aerospace Systems		2,630		3,011		3,106
Communication Systems		1,984		2,025		2,161
Corporate		381		589		455
Assets held for sale		—		547		—
Assets of discontinued operations		664		1,262		1,213
Consolidated total	$	12,085	$	13,715	$	13,868

⁽¹⁾  See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾  Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, and (ii) $46 million related to a business retained by L-3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

Corporate assets not allocated to the reportable segments primarily include cash and cash equivalents, corporate office fixed assets, deferred income tax assets and liabilities and deferred debt issue costs. In addition, substantially all of the Company’s assets are located in North America.

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S.	$	7,908	$	8,051	$	8,630
International:
United Kingdom		336		335		435
Australia		321		254		218
Canada		281		289		357
South Korea		207		226		178
Saudi Arabia		201		160		132
Germany		113		243		272
Japan		95		124		67
Other		1,004		1,304		1,131
Total international		2,558		2,935		2,790
Consolidated	$	10,466	$	10,986	$	11,420
Net sales to principal customers are summarized in the table below.
	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S. Government agencies(1)	$	7,291	$	7,464	$	8,008
Commercial		1,376		1,656		1,689
Foreign governments(1)		1,799		1,866		1,723
Consolidated	$	10,466	$	10,986	$	11,420

⁽¹⁾  Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

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Employee Severance and Termination Costs

12 Months Ended

Dec. 31, 2015

Restructuring and Related Activities [Abstract]

Employee Severance and Termination Costs

22. Employee Severance and Termination Costs

Consistent with the Company’s strategy to continuously improve its cost structure and right-size its businesses, especially in view of U.S. defense budget constraints, L-3 is completing employment reduction actions across several of its businesses to reduce both direct and indirect costs, including overhead and general and administrative costs. As a result of these initiatives and due to the impact of U.S. defense budget constraints at certain affected business units, the Company recorded employee severance and other termination costs of $18 million with respect to approximately 800 employees during the year ended December 31, 2015 and $29 million with respect to approximately 1,800 employees during each of the years ended December 31, 2014 and 2013. Employee severance and other termination costs are reported within cost of sales on the consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $9 million at December 31, 2015, which is expected to be paid in 2016, and $11 million at December 31, 2014, which was paid during 2015. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2015	2014		2013
	(in millions)
Electronic Systems	$            8	$	16	$	16
Aerospace Systems	4		5		2
Communication Systems	6		8		11
Consolidated	$            18	$	29	$	29

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Unaudited Quarterly Financial Data

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Unaudited Quarterly Financial Data

23. Unaudited Quarterly Financial Data

Unaudited summarized financial data by quarter for the years ended December 31, 2015 and 2014 is presented in the table below. The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in millions, except per share data)
2015
Sales	$	2,488	$	2,543	$	2,564	$	2,871
Operating income (loss)		187		153		231		(96)
Income (loss) from continuing operations		105		120		128		(56)
Net income (loss)		109		124		(296)		(162)
Net income (loss) attributable to L-3		105		120		(299)		(166)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56		(0.76)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74)		(2.11)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54		(0.76)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68)		(2.11)
2014
Sales	$	2,670	$	2,702	$	2,653	$	2,961
Operating income		266		217		235		294
Income from continuing operations		163		131		146		205
Net income		172		141		157		207
Net income attributable to L-3		170		137		154		203
Basic EPS from continuing operations(1)		1.87		1.47		1.68		2.38
Basic EPS(1)		1.97		1.59		1.81		2.41
Diluted EPS from continuing operations(1)		1.80		1.42		1.65		2.34
Diluted EPS(1)		1.90		1.53		1.78		2.36

⁽¹⁾  EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

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Financial Information of L-3 Communications and Its Subsidiaries

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Financial Information of L-3 Communications and Its Subsidiaries

24. Financial Information of L-3 Communications and Its Subsidiaries

Total shareholders’ equity for L-3 Communications equals that of L-3 Holdings, but the components (common stock, additional paid-in capital, treasury stock and retained earnings) are different. The table below presents information regarding the balances and changes in common stock, additional paid-in capital, treasury stock and retained earnings of L-3 Communications for each of the three years ended December 31, 2015.

	L-3 Communications Common Stock				Additional Paid-in   Capital		Treasury     Stock		Retained Earnings     (Deficit)		Accumulated Other Comprehensive (Loss) Income		Total
	Shares   Issued		Par Value
	(in millions, except shares issued)
Balance at December 31, 2012		100	$	—	$	5,314	$	—	$	687	$	(550)	$	5,451
Net income attributable to L-3		—		—		—		—		751		—		751
Contributions from L-3 Holdings		—		—		339		—		—		—		339
Dividends to L-3 Holdings		—		—		—		—		(1,001)		—		(1,001)
Comprehensive income		—		—		—		—		—		440		440
Other		—		—		—		—		1		—		1
Balance at December 31, 2013		100	$	—	$	5,653	$	—	$	438	$	(110)	$	5,981
Net income attributable to L-3		—		—		—		—		664		—		664
Contributions from L-3 Holdings		—		—		146		—		—		—		146
Dividends to L-3 Holdings		—		—		—		—		(1,032)		—		(1,032)
Comprehensive loss		—		—		—		—		—		(474)		(474)
Balance at December 31, 2014		100	$	—	$	5,799	$	—	$	70	$	(584)	$	5,285
Net loss attributable to L-3		—		—		—		—		(240)		—		(240)
Contributions from L-3 Holdings		—		—		253		—		—		—		253
Dividends to L-3 Holdings		—		—		—		—		(953)		—		(953)
Comprehensive income		—		—		—		—		—		10		10
Balance at December 31, 2015		100	$	—	$	6,052	$	—	$	(1,123)	$	(574)	$	4,355

The net proceeds received by L-3 Holdings from (i) the sale of its common stock, (ii) exercise of L-3 Holdings’ employee and director stock options, and related tax benefits, and (iii) L-3 Holdings’ common stock contributed to the Company’s savings plans are contributed to L-3 Communications. The amounts paid by L-3 Holdings for dividends and share repurchases are generated from dividends received from L-3 Communications.

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 are 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 9 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.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

The following 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 December 31, 2015:
Current assets:
Cash and cash equivalents	$	—	$	137	$	—	$	165	$	(95)	$	207
Billed receivables, net		—		278		297		171		—		746
Contracts in process		—		872		958		251		—		2,081
Other current assets		—		288		137		109		—		534
Assets of discontinued operations		—		—		664		—		—		664
Total current assets		—		1,575		2,056		696		(95)		4,232
Goodwill		—		2,318		2,973		990		—		6,281
Other assets		—		816		496		260		—		1,572
Investment in and amounts due from consolidated subsidiaries		4,355		5,609		3,739		111		(13,814)		—
Total assets	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085
Current portion of long-term debt	$	—	$	499	$	—	$	—	$	—	$	499
Current liabilities		—		911		899		445		(95)		2,160
Liabilities of discontinued operations		—		—		220		—		—		220
Other long-term liabilities		—		1,410		195		29		—		1,634
Long-term debt		—		3,143		—		—		—		3,143
Total liabilities		—		5,963		1,314		474		(95)		7,656
L-3 shareholders’ equity		4,355		4,355		7,950		1,583		(13,888)		4,355
Noncontrolling interests		—		—		—		—		74		74
Total equity		4,355		4,355		7,950		1,583		(13,814)		4,429
Total liabilities and equity	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085

	L-3 Holdings   (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
At December 31, 2014:
Current assets:
Cash and cash equivalents	$	—	$	361	$	1	$	142	$	(62)	$	442
Billed receivables, net		—		320		281		202		—		803
Contracts in process		—		862		1,009		277		—		2,148
Other current assets		—		238		131		94		—		463
Assets held for sale		—		—		52		495		—		547
Assets of discontinued operations		—		—		1,262		—		—		1,262
Total current assets		—		1,781		2,736		1,210		(62)		5,665
Goodwill		—		2,309		3,331		872		—		6,512
Other assets		—		833		511		194		—		1,538
Investment in and amounts due from consolidated subsidiaries		5,285		6,747		3,196		—		(15,228)		—
Total assets	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715
Current liabilities	$	—	$	873	$	904	$	452	$	(62)	$	2,167
Liabilities held for sale		—		—		10		227		—		237
Liabilities of discontinued operations		—		—		230		—		—		230
Amounts due to consolidated subsidiaries		—		—		—		320		(320)		—
Other long-term liabilities		—		1,573		178		31		—		1 ,782
Long-term debt		—		3,939		—		—		—		3,939
Total liabilities		—		6,385		1,322		1,030		(382)		8,355
L-3 shareholders’ equity		5,285		5,285		8,452		1,246		(14,983)		5,285
Noncontrolling interests		—		—		—		—		75		75
Total equity		5,285		5,285		8,452		1,246		(14,908)		5,360
Total liabilities and equity	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
Condensed Combining Statements of Operations: For the year ended December 31, 2015:
Total net sales	$	—	$	3,580	$	5,265	$	1,935	$	(314)	$	10,466
Total cost of sales		(46)		(3,283)		(4,906)		(1,701)		360		(9,576)
(Loss) gain related to business divestitures		—		(13)		(31)		13		—		(31)
Impairment charge		—		—		(364)		(20)		—		(384)
Operating (loss) income		(46)		284		(36)		227		46		475
Interest expense		—		(167)		(1)		(1)		—		(169)
Interest and other income (expense), net		—		16		—		1		—		17
Debt retirement charge		—		(1)		—		—		—		(1)
(Loss) income from continuing operations before income taxes		(46)		132		(37)		227		46		322
Benefit (provision) for income taxes		4		(10)		3		(18)		(4)		(25)
Equity in net income of consolidated subsidiaries		(198)		(362)		—		—		560		—
Income from continuing operations		(240)		(240)		(34)		209		602		297
Income from discontinued operations, net of income tax		—		—		(522)		—		—		(522)
Net (loss) income		(240)		(240)		(556)		209		602		(225)
Net income attributable to noncontrolling interests		—		—		—		—		(15)		(15)
Net (loss) income attributable to L-3	$	(240)	$	(240)	$	(556)	$	209	$	587	$	(240)
Comprehensive (loss) income attributable to L-3	$	(230)	$	(230)	$	(560)	$	98	$	692	$	(230)
For the year ended December 31, 2014:
Total net sales	$	—	$	3,586	$	5,460	$	2,218	$	(278)	$	10,986
Total cost of sales		(50)		(3,255)		(5,017)		(1,980)		328		(9,974)
Operating (loss) income		(50)		331		443		238		50		1,012
Interest expense		(2)		(156)		(2)		—		2		(158)
Interest and other income (expense), net		—		15		—		3		—		18
(Loss) income from continuing operations before income taxes		(52)		190		441		241		52		872
Benefit (provision) for income taxes		14		(49)		(115)		(63)		(14)		(227)
Equity in net income of consolidated subsidiaries		702		523		—		—		(1,225)		—
Income from continuing operations		664		664		326		178		(1,187)		645
Income from discontinued operations, net of income tax		—		—		32		—		—		32
Net income		664		664		358		178		(1,187)		677
Net income attributable to noncontrolling interests		—		—		—		—		(13)		(13)
Net income attributable to L-3	$	664	$	664	$	358	$	178	$	(1,200)	$	664
Comprehensive income attributable to L-3	$	190	$	190	$	356	$	47	$	(593)	$	190
For the year ended December 31, 2013:
Total net sales	$	—	$	3,874	$	5,555	$	2,362	$	(371)	$	11,420
Total cost of sales		(56)		(3,595)		(4,971)		(2,108)		427		(10,303)
Operating (loss) income		(56)		279		584		254		56		1,117
Interest expense		(21)		(156)		—		(1)		21		(157)
Interest and other income, net		—		15		—		5		—		20
(Loss) income from continuing operations before income taxes		(77)		138		584		258		77		980
Benefit (provision) for income taxes		21		(38)		(157)		(69)		(21)		(264)
Equity in net income of consolidated subsidiaries		807		651		—		—		(1,458)		—
Income from continuing operations		751		751		427		189		(1,402)		716
Income from discontinued operations, net of income tax		—		—		44		—		—		44
Net income		751		751		471		189		(1,402)		760
Net income attributable to noncontrolling interests		—		—		—		—		(9)		(9)
Net income attributable to L-3	$	751	$	751	$	471	$	189	$	(1,411)	$	751
Comprehensive income attributable to L-3	$	1,191	$	1,191	$469		$	164	$	(1,824)	$	1,191

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	954	$	589	$	422	$	216	$	(1,139)	$	1,042
Investing activities:
Business acquisitions, net of cash acquired		—		(320)		—		—		—		(320)
Proceeds from sale of business, net of closing date cash balances		—		14		28		276		—		318
Investments in L-3 Communications		(49)		—		—		—		49		—
Other investing activities		—		(84)		(69)		(37)		—		(190)
Net cash used in investing activities from continuing operations		(49)		(390)		(41)		239		49		(192)
Financing activities:
Repurchases of senior notes		—		(296)		—		—		—		(296)
Common stock repurchased		(740)		—		—		—		—		(740)
Dividends paid on L-3 Holdings’ common stock		(214)		—		—		—		—		(214)
Dividends paid to L-3 Holdings		—		(954)		—		—		954		—
Investments from L-3 Holdings		—		49		—		—		(49)		—
Other financing activities		49		778		(434)		(473)		152		72
Net cash used in financing activities from continuing operations		(905)		(423)		(434)		(473)		1,057		(1,178)
Effect of foreign currency exchange rate changes on cash		—		—		—		(19)		—		(19)
Net increase in cash and cash equivalents of discontinued operations		—		—		51		—		—		51
Change in cash balance in assets held for sale		—		—		1		60		—		61
Net (decrease) increase in cash		—		(224)		(1)		23		(33)		(235)
Cash and cash equivalents, beginning of the year		—		361		1		142		(62)		442
Cash and cash equivalents, end of the year	$	—	$	137	$	—	$	165	$	(95)	$	207

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	1,966	$	450	$	571	$	143	$	(2,059)	$	1,071
Investing activities:
Business acquisitions, net of cash acquired		—		(57)		—		—		—		(57)
Investments in L-3 Communications		(102)		—		—		—		102		—
Other investing activities		—		(58)		(85)		(21)		—		(164)
Net cash used in investing activities from continuing operations		(102)		(115)		(85)		(21)		102		(221)
Financing activities:
Proceeds from sale of senior notes		—		996		—		—		—		996
Redemption of CODES		(935)		—				—		—		(935)
Common stock repurchased		(823)		—		—		—		—		(823)
Dividends paid on L-3 Holdings’ common stock		(208)		—		—		—		—		(208)
Dividends paid to L-3 Holdings		—		(1,966)		—		—		1,966		—
Investments from L-3 Holdings		—		102		—		—		(102)		—
Other financing activities		102		636		(530)		(164)		50		94
Net cash used in financing activities on continuing operations		(1,864)		(232)		(530)		(164)		1,914		(876)
Effect of foreign currency exchange rate changes on cash		—		—		—		(17)		—		(17)
Net increase in cash and cash equivalents of discontinued operations		—		—		46		—		—		46
Change in cash balance in assets held for sale		—		—		(1)		(60)		—		(61)
Net increase (decrease) in cash		—		103		1		(119)		(43)		(58)
Cash and cash equivalents, beginning of the year		—		258		—		261		(19)		500
Cash and cash equivalents, end of the year	$	—	$	361	$	1	$	142	$	(62)	$	442
For the year ended December 31, 2013:
Operating activities:
Net cash from operating activities from continuing operations	$	999	$	383	$	717	$	237	$	(1,180)	$	1,156
Investing activities:
Business acquisitions, net of cash acquired		—		(62)		—		—		—		(62)
Investments in L-3 Communications		(149)		—		—		—		149		—
Other investing activities		—		(89)		(84)		(21)		—		(194)
Net cash used in investing activities from continuing operations		(149)		(151)		(84)		(21)		149		(256)
Financing activities:
Common stock repurchased		(800)		—		—		—		—		(800)
Dividends paid on L-3 Holdings’ common stock		(199)		—		—		—		—		(199)
Dividends paid to L-3 Holdings		—		(999)		—		—		999		—
Investments from L-3 Holdings		—		149		—		—		(149)		—
Other financing activities		149		630		(735)		(195)		301		150
Net cash used in financing activities from continuing operations		(850)		(220)		(735)		(195)		1,151		(849)
Effect of foreign currency exchange rate changes on cash		—		—		—		(2)		—		(2)
Net increase in cash and cash equivalents of discontinued operations		—		—		102		—		—		102
Net increase in cash		—		12		—		19		120		151
Cash and cash equivalents, beginning of the year		—		246		—		242		(139)		349
Cash and cash equivalents, end of the year	$	—	$	258	$	—	$	261	$	(19)	$	500

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Basis of Presentation

Basis of Presentation: The accompanying financial statements comprise the consolidated financial statements of L-3 Holdings and L-3 Communications. L-3 Holdings’ only asset is its investment in the common stock of L-3 Communications, its wholly-owned subsidiary, and its only obligations are: (1) its guarantee of borrowings under the Amended and Restated Revolving Credit Facility (“Credit Facility”) of L-3 Communications and (2) its guarantee of other contractual obligations of L-3 Communications and its subsidiaries. All issuances of and conversions into L-3 Holdings’ equity securities, including grants of stock options, restricted stock units and performance units by L-3 Holdings to employees and directors of L-3 Communications and its subsidiaries, have been reflected in the consolidated financial statements of L-3 Communications. As a result, the consolidated financial positions, results of operations and cash flows of L-3 Holdings and L-3 Communications are substantially the same. See Note 24 for additional information regarding the audited financial information of L-3 Communications and its subsidiaries.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of sales and costs of sales during the reporting period. The most significant of these estimates and assumptions relate to contract revenue, profit and loss recognition, fair values of assets acquired and liabilities assumed in business combinations, market values for inventories reported at lower of cost or market, pension and post-retirement benefit obligations, stock-based employee compensation expense, income taxes, including the valuations of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapon sight products, and recoverability, useful lives and valuation of recorded amounts of long-lived assets, identifiable intangible assets and goodwill. Changes in estimates are reflected in the periods during which they become known. Actual amounts will differ from these estimates and could differ materially.

Certain reclassifications have been made to conform prior-year amounts to the current-year presentation.

Principles of Consolidation

Principles of Consolidation: The consolidated financial statements of the Company include all wholly-owned and majority-owned subsidiaries. All significant intercompany transactions are eliminated in consolidation. Investments in equity securities, joint ventures and limited liability corporations over which the Company has significant influence but does not have voting control are accounted for using the equity method. Investments over which the Company does not have significant influence are accounted for using the cost method.

Revenue Recognition

Revenue Recognition: Substantially all of the Company’s sales are generated from written contractual (revenue) arrangements. The sales price for the Company’s revenue arrangements are either fixed-price, cost-plus or time-and-material type. Depending on the contractual scope of work, the Company utilizes either contract accounting standards or accounting standards for revenue arrangements with commercial customers to account for these contracts. Approximately 49% of the Company’s 2015 sales were accounted for under contract accounting standards, of which approximately 41% were fixed-price type contracts and approximately 8% were cost-plus type contracts. For contracts that are accounted for under contract accounting standards, sales and profits are recognized based on: (1) a Percentage-of-Completion (POC) method of accounting (fixed-price contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material contracts). Aggregate net changes in contract estimates amounted to increases of $49 million, or 10% of consolidated operating income (6% of segment operating income) for the year ended December 31, 2015, increases of $72 million, or 7% of consolidated operating income for the year ended December 31, 2014, and increases of $106 million, or 9% of consolidated operating income for the year ended December 31, 2013.

Sales and profits on fixed-price type contracts covered by contract accounting standards are substantially recognized using POC methods of accounting. Sales and profits on fixed-price production contracts under which units are produced and delivered in a continuous or sequential process are recorded as units are delivered based on their contractual selling prices (the “units-of-delivery” method). Sales and profits on each fixed-price production contract under which units are not produced and delivered in a continuous or sequential process, or under which a relatively few number of units are produced, are recorded based on the ratio of actual cumulative costs incurred to the total estimated costs at completion of the contract, multiplied by the total estimated contract revenue, less cumulative sales recognized in prior periods (the “cost-to-cost” method). Under both POC methods of accounting, a single estimated total profit margin is used to recognize profit for each contract over its entire period of performance, which can exceed one year. Losses on contracts are recognized in the period in which they become evident. The impact of revisions of contract estimates, which may result from contract modifications, performance or other reasons, are recognized on a cumulative catch-up basis in the period in which the revisions are made.

Sales and profits on cost-plus type contracts covered by contract accounting standards are recognized as allowable costs are incurred on the contract, at an amount equal to the allowable costs plus the estimated profit on those costs. The estimated profit on a cost-plus type contract is fixed or variable based on the contractual fee arrangement. Incentive and award fees are the primary variable fee contractual arrangements. Incentive and award fees on cost-plus type contracts are included as an element of total estimated contract revenues and are recorded as sales when a basis exists for the reasonable prediction of performance in relation to established contractual targets and the Company is able to make reasonably dependable estimates for them.

Sales and profits on time-and-material type contracts are recognized on the basis of direct labor hours expended multiplied by the contractual fixed rate per hour, plus the actual costs of materials and other direct non-labor costs.

Sales on arrangements for (1) fixed-price type contracts that require us to perform services that are not related to the production of tangible assets (Fixed-Price Service Contracts) and (2) certain commercial customers are recognized in accordance with accounting standards for revenue arrangements with commercial customers. Sales for the Company’s businesses whose customers are primarily commercial business enterprises are substantially all generated from single element revenue arrangements. Sales are recognized when there is persuasive evidence of an arrangement, delivery has occurred or services have been performed, the selling price to the buyer is fixed or determinable and collectability is reasonably assured. Sales for Fixed-Price Service Contracts that do not contain measurable units of work performed are generally recognized on a straight-line basis over the contractual service period, unless evidence suggests that the revenue is earned, or obligations fulfilled, in a different manner. Sales for Fixed-Price Service Contracts that contain measurable units of work performed are generally recognized when the units of work are completed. Sales and profit on cost-plus and time-and-material type contracts to perform services are recognized in the same manner as those within the scope of contract accounting standards, except for incentive and award fees. Cost-based incentive fees are recognized when they are realizable in the amount that would be due under the contractual termination provisions as if the contract was terminated. Performance based incentive fees and award fees are recorded as sales when objective evidence exists that the fees have been earned.

For contracts with multiple deliverables, the Company applies the separation and allocation guidance under the accounting standard for revenue arrangements with multiple deliverables, unless all the deliverables are covered by contract accounting standards, in which case the Company applies the separation and allocation guidance under contract accounting standards. Revenue arrangements with multiple deliverables are evaluated to determine if the deliverables should be separated into more than one unit of accounting. The Company recognizes revenue for each unit of accounting based on the revenue recognition policies discussed above.

Sales and cost of sales in connection with contracts to provide services to the U.S. Government that contain collection risk because the contracts are incrementally funded and subject to the availability of funds appropriated, are deferred until a contract modification is obtained, indicating that adequate funds are available to the contract or task order.

Research and Development

Research and Development: Independent research and development (IRAD) costs sponsored by the Company and bid and proposal (B&P) costs relate to both U.S. Government contracts and those for international and commercial customers. The IRAD and B&P costs for certain of the Company’s businesses that are U.S. Government contractors are recoverable indirect contract costs that are allocated to U.S. Government contracts in accordance with U.S. Government procurement regulations, and are specifically excluded from research and development accounting standards. The Company includes the recoverable IRAD and B&P costs allocated to U.S. Government contracts in inventoried contract costs, and charges them to costs of sales when the related contract sales are recognized as revenue. Research and development costs that are not recoverable on U.S. Government contracts are accounted for in accordance with research and development accounting standards and are expensed to cost of sales as incurred.

Customer-funded research and development costs are incurred pursuant to contracts (revenue arrangements) to perform research and development activities according to customer specifications. These costs are not accounted for as research and development expenses, and are also not indirect contract costs. Instead, these costs are direct contract costs and are expensed to cost of sales when the corresponding revenue is recognized, which is generally as the research and development services are performed. Customer-funded research and development costs are substantially all incurred under cost-plus type contracts with the U.S. Government.

Product Warranties

Product Warranties: Product warranty costs are accrued when revenue is recognized for the covered products. Product warranty expense is recognized based on the terms of the product warranty and the related estimated costs. Accrued warranty costs are reduced as product warranty costs are incurred or as warranty periods expire.

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2015		2014
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	93	$	99
Acquisitions during this period		1		—
Accruals for product warranties issued during the period		75		71
Changes to accruals for product warranties existing before January 1		2		1
Foreign currency translation adjustments		(2)		(2)
Settlements made during the period		(64)		(67)
Liabilities held for sale(2)		—		(9)
Balance at December 31	$	105	$	93

⁽¹⁾  Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

⁽²⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

Deferred Debt Issue Costs

Deferred Debt Issue Costs: Costs to issue debt are capitalized and deferred when incurred, and subsequently amortized to interest expense over the term of the related debt using the effective interest rate method.

Stock-Based Compensation

Stock-Based Compensation: The Company follows the fair value based method of accounting for stock-based employee compensation, which requires the Company to expense all stock-based employee compensation. Stock-based employee compensation is primarily a non-cash expense because the Company settles these obligations by issuing shares of L-3 Holdings common stock instead of settling such obligations with cash payments.

Compensation expense for all restricted stock unit and stock option awards is recognized on a straight-line basis over the requisite service period for the entire award based on the grant date fair value. All of the stock options granted to employees by the Company are non-qualified stock options under U.S. income tax regulations. Compensation expense for performance units payable in L-3 Holdings common stock is based on the fair value of the units at the grant date (measurement date), adjusted each reporting period for progress towards the target award, and recognized on a straight line basis over the requisite service period.

Income Taxes

Income Taxes: The Company provides for income taxes using the liability method. Deferred income tax assets and liabilities reflect tax carryforwards and the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting and income tax purposes, as determined under enacted tax laws and rates. The effect of changes in tax laws or rates is accounted for in the period of enactment. Valuation allowances for deferred tax assets are provided when it is more likely than not that the assets will not be realized, considering, when appropriate, tax planning strategies.

Income tax accounting standards prescribe: (1) a minimum recognition threshold that an income tax benefit arising from an uncertain income tax position taken, or expected to be taken, on an income tax return is required to meet before being recognized in the financial statements and (2) the measurement of the income tax benefits recognized from such positions. The Company’s accounting policy is to classify uncertain income tax positions that are not expected to be resolved in one year as non-current income tax liabilities and to classify potential interest and penalties on uncertain income tax positions as elements of the provision for income taxes on its financial statements.

In November 2015, the Financial Accounting Standards Board (FASB) issued ASU 2015-17, to simplify the presentation of deferred income taxes. The amendments in this update require that deferred tax liabilities and assets be classified as noncurrent in a classified statement of financial position. This update is effective for interim and annual periods beginning after December 15, 2016, with early adoption permitted, and may be applied retrospectively or prospectively. The Company has elected to early adopt this standard retrospectively, as reflected in the accompanying audited consolidated balance sheets.

Cash and Cash Equivalents

Cash and Cash Equivalents: Cash equivalents consist of highly liquid investments with an original maturity of three months or less at the time of purchase.

Contracts in Process

Contracts in Process: Contracts in Process include unbilled contract receivables and inventoried contract costs for which sales and profits are recognized primarily using a POC method of accounting. Unbilled Contract Receivables represent accumulated incurred costs and earned profits on contracts in process that have been recorded as sales, primarily using the cost-to-cost method, but have not been billed to customers. Inventoried Contract Costs primarily represent incurred costs on contracts using the units-of-delivery method of accounting and include direct costs and indirect costs, including overhead costs, and materials acquired for U.S. Government service contracts. As discussed in Note 4, the Company’s inventoried contract costs for U.S. Government contracts, and contracts with prime contractors or subcontractors of the U.S. Government include allocated general and administrative costs (G&A), IRAD costs and B&P costs. Contracts in Process contain amounts relating to contracts and programs with long performance cycles, a portion of which may not be realized within one year. For contracts in a loss position, the unrecoverable costs expected to be incurred in future periods are recorded in Estimated Costs in Excess of Estimated Contract Value to Complete Contracts in Process in a Loss Position, which is a component of Other Current Liabilities. Under the terms of certain revenue arrangements (contracts) with the U.S. Government, the Company is entitled to receive progress payments as costs are incurred or milestone payments as work is performed. The U.S. Government has a security interest in the Unbilled Contract Receivables and Inventoried Contract Costs to which progress payments have been applied, and such progress payments are reflected as a reduction of the related amounts. Milestone payments that have been received in excess of contract costs incurred and related estimated profits are reported on the Company’s balance sheet as Advance Payments and Billings in Excess of Costs Incurred.

The Company values its acquired contracts in process in connection with business acquisitions on the date of acquisition at contract value less the Company’s estimated costs to complete the contract and a reasonable profit allowance on the Company’s completion effort.

Inventories

Inventories: Inventories, other than Inventoried Contract Costs, are stated at cost (first-in, first-out or average cost), but not in excess of realizable value. A provision for excess or inactive inventory is recorded based upon an analysis that considers current inventory levels, historical usage patterns and future sales expectations.

Property, Plant and Equipment

Property, Plant and Equipment: Property, plant and equipment are stated at cost, less accumulated depreciation. Depreciation is computed by applying principally the straight-line method to the estimated useful lives of the related assets. Useful lives range substantially from 10 to 40 years for buildings and improvements and three to 10 years for machinery, equipment, furniture and fixtures. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful life of the improvements. When property or equipment is retired or otherwise disposed of, the net book value of the asset is removed from the Company’s balance sheet and the net gain or loss is included in the determination of operating income. Property, plant and equipment acquired as part of a business acquisition is valued at fair value.

Goodwill

Goodwill: The carrying value of goodwill and indefinite lived identifiable intangible assets are not amortized, but are tested for impairment annually as of November 30 and, additionally on an interim basis, whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable. The accounting standards for goodwill allow for the assessment of qualitative factors to determine whether it is more likely or not that the fair value of a reporting unit is less than its carrying amount. The Company did not utilize a qualitative assessment approach for the November 30, 2015 goodwill impairment test, as the Company chose instead to complete the quantitative two-step testing process for each reporting unit. The first step in the process is to identify any potential impairment by comparing the carrying value of a reporting unit to its fair value. The Company determines the fair value of its reporting units using a discounted cash flows valuation approach. If a potential impairment is identified, the second step is to measure the impairment loss by comparing the implied fair value of goodwill with the carrying value of goodwill of the reporting unit. The Company recorded goodwill impairment charges of $955 million during the year ended December 31, 2015, including $384 million classified in income from continuing operations and $571 million classified in income from discontinued operations. There were no impairment charges that resulted from the annual impairment assessment or change in circumstances during the years ended December 31, 2014 and 2013. See Note 6 for additional information on the goodwill impairment charges and accumulated goodwill impairment losses.

Identifiable Intangible Assets

Identifiable Intangible Assets: Identifiable intangible assets represent assets acquired as part of the Company’s business acquisitions and include customer contractual relationships, technology, favorable leasehold interests and trade names. The initial measurement of these intangible assets is based on their fair values. Identifiable intangible assets are: (1) tested for impairment whenever events or changes in circumstances indicate that the carrying amount of these assets may not be recoverable and (2) amortized over their estimated useful lives as the economic benefits are consumed. The Company reviews and updates its estimates of the duration of its customer contractual relationships. If such estimates indicate that the duration of the Company’s customer contractual relationships have decreased compared to the estimates made as of the date the Company acquired these intangible assets, then the Company accelerates the amortization period for its customer contractual relationships over their remaining useful economic life.

Derivative Financial Instruments

Derivative Financial Instruments: The Company’s derivative financial instruments include foreign currency forward contracts, which are entered into for risk management purposes.

The Company’s U.S. and foreign businesses enter into contracts with customers, subcontractors or vendors that are denominated in currencies other than their functional currencies. To protect the functional currency equivalent cash flows associated with certain of these contracts, the Company enters into foreign currency forward contracts. The Company’s activities involving foreign currency forward contracts are designed to hedge the changes in the functional currency equivalent cash flows due to movements in foreign exchange rates compared to the functional currency. The foreign currencies hedged are primarily the Canadian dollar, the U.S. dollar, the Euro and the British pound. The Company manages exposure to counterparty non-performance credit risk by entering into foreign currency forward contracts only with major financial institutions that are expected to fully perform under the terms of such contracts. Foreign currency forward contracts are recorded in the Company’s balance sheets at fair value and are generally designated and accounted for as cash flow hedges in accordance with the accounting standards for derivative instruments and hedging activities. Gains and losses on designated foreign currency forward contracts that are highly effective in offsetting the corresponding change in the cash flows of the hedged transactions are recorded net of income taxes in accumulated other comprehensive income (loss) (accumulated OCI) and then recognized in income when the underlying hedged transaction affects income. Gains and losses on foreign currency forward contracts that do not meet hedge accounting criteria are recognized in income immediately.

Translation of Foreign Currency and Foreign Currency Transactions

Translation of Foreign Currency and Foreign Currency Transactions: Transactions in foreign currencies are translated into the local (functional) currency of the respective business at the approximate prevailing rate at the time of the transaction. Foreign exchange transaction gains and losses in the years ended December 31, 2015, 2014 and 2013 are not material to the Company’s results of operations. The operations of the Company’s foreign subsidiaries are translated from the local (functional) currencies into U.S. dollars using weighted average rates of exchange during each reporting period. The rates of exchange at each balance sheet date are used for translating the assets and liabilities of the Company’s foreign subsidiaries. Gains or losses resulting from these translation adjustments are included in the balance sheets as a component of accumulated other comprehensive income (loss) and are only recognized in income when a foreign subsidiary is divested.

Accounting Standards Issued and Not Yet Implemented

Accounting Standards Issued and Not Yet Implemented: In February 2016, the FASB issued ASU 2016-02, Leases, which will update the existing guidance on accounting for leases and require new qualitative and quantitative disclosures about the Company’s leasing activities. The new standard requires the Company to recognize lease assets and lease liabilities on the balance sheet for all leases under which the Company is the lessee, including those classified as operating leases under previous accounting guidance. The new standard allows the Company to make an accounting policy election not to recognize on the balance sheet lease assets and liabilities for leases with a term of 12 months or less. The accounting applied by a lessor is largely unchanged from that applied under previous guidance. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2019, with early adoption permitted. In transition, lessees and lessors are required to recognize and measure leases at the beginning of the earliest period presented using a modified retrospective approach. The modified retrospective approach includes a number of optional practical expedients that the Company may elect to apply. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures.

In April 2015, the FASB issued ASU 2015-3, to simplify the presentation of debt issuance costs. This update requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability, consistent with the required presentation for debt discounts. This update is effective for interim and annual periods beginning after December 15, 2015 and early adoption is permitted. The adoption of this standard will change the Company’s current practice of presenting debt issuance costs as an asset and will result in a reduction of total assets and total liabilities in an amount equal to the balance of unamortized debt issuance costs at each balance sheet date. The Company has not elected to early adopt this standard and debt issuance costs amounted to $18 million at December 31, 2015 and $27 million at December 31, 2014.

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers, which will replace numerous requirements in U.S. GAAP, including industry-specific requirements, provide companies with a single revenue recognition model for recognizing revenue from contracts with customers and significantly expand the disclosure requirements for revenue arrangements. The new standard, as amended, will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early application permitted beginning on January 1, 2017. The two permitted transition methods under the new standard are the full retrospective method, in which case the standard would be applied to each prior reporting period presented, or the modified retrospective method, in which case the cumulative effect of applying the standard would be recognized at the date of initial application. The Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements and related disclosures and the transition alternatives available. As the new standard will supersede substantially all existing revenue guidance, it could impact revenue and cost recognition on substantially all of the Company’s contracts, in addition to the Company’s business processes and our information technology systems. As a result, the Company’s evaluation of the impact of the standard will extend over future periods.

Other accounting standard updates effective for interim and annual periods beginning after December 15, 2015 are not expected to have an impact on the Company’s financial position, results of operations or cash flows.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2015

Accounting Policies [Abstract]

Changes in Company's Accrued Product Warranty Costs

The table below presents the changes in the Company’s accrued product warranty costs.

	Year Ended December 31,
	2015		2014
	(in millions)
Accrued product warranty costs(1):
Balance at January 1	$	93	$	99
Acquisitions during this period		1		—
Accruals for product warranties issued during the period		75		71
Changes to accruals for product warranties existing before January 1		2		1
Foreign currency translation adjustments		(2)		(2)
Settlements made during the period		(64)		(67)
Liabilities held for sale(2)		—		(9)
Balance at December 31	$	105	$	93

⁽¹⁾  Warranty obligations incurred in connection with long-term production contracts that are accounted for under the POC cost-to-cost method are included within the contract estimates at completion and are excluded from the above amounts. The balances above include both the current and non-current amounts.

⁽²⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

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Divestitures and Acquisitions (Tables)

12 Months Ended

Dec. 31, 2015

Components of Loss of Business Divestitures, Related Sales Proceeds Received and Sales Included in Continuing Operations

The adjustments recorded by the Company related to the business divestitures are included in the loss related to business divestitures caption on the audited consolidated statements of operations and discussed below. Additionally, these adjustments, the proceeds received, and net sales included in continuing operations related to the Company’s business divestitures, are summarized in the table below.

	Year Ended December 31, 2015
	Loss Related to Business Divestiture		Proceeds Received		Net Sales
	(in millions)
MSI divestiture	$	(17)	$	318	$	185
BSI divestiture		(4)		26		7
Tinsley Product Line divestiture		(8)		4		9
Klein divestiture		(2)		10		8
Total	$	(31)	$	358	$	209

Schedule of Net Sales and Income Before Income Taxes for MSI, BSI, Tinsley Product Line and Klein

Net sales and income (loss) before income taxes for MSI, BSI, the Tinsley Product Line and Klein, included in L-3’s consolidated statements of operations, are presented in the table below on an aggregate basis, and are included in income from continuing operations for all periods presented.

	Year Ended December  31,
	2015		2014		2013
	(in millions)
Net sales	$	209	$	596	$	569
Income (loss) before income taxes	$	—	$	27	$	(3)

Schedule of Net Sales and Income before Income Taxes for L-3 ForceX, L-3 CTC and Miteq

Net sales and income before income taxes for L-3 ForceX, L-3 CTC and Miteq, included in L-3’s consolidated statement of operations for the year ended December 31, 2015, are presented in the table below.

	Year Ended December 31, 2015
	(in millions)
Net sales	$	103
Income before income taxes	$	5

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data presents the combined results of the Company and its business acquisitions completed during the years ended December 31, 2015 and 2014 assuming that the business acquisitions completed during 2015 and 2014 had occurred on January 1, 2014.

	Year Ended December 31,
	2015		2014
	(in millions, except per share data)
Pro forma net sales	$	10,523	$	11,146
Pro forma income from continuing operations	$	302	$	657
Pro forma net (loss) income attributable to L-3	$	(235)	$	676
Pro forma diluted earnings per share from continuing operations	$	3.50	$	7.34
Pro forma diluted (loss) earnings per share	$	(2.87)	$	7.70

NSS [Member]

Statement of Operations Data Classified as Discontinued Operations

The table below presents statement of operations data for NSS, which has been classified as discontinued operations and includes allocated interest expense for debt not directly attributable or related to L-3’s other operations. Interest expense was allocated in accordance with the accounting standards for discontinued operations and was based on the ratio of NSS’s net assets to the sum of: (1) total L-3 consolidated net assets and (2) L-3 consolidated total debt.

	Year Ended December 31,
	2015			2014			2013
	(in millions)
Product and service revenues	$	1,088		$	1,138		$	1,202
Operating (loss) income from discontinued operations(1)		(523	)		73			95
Interest expense allocated to discontinued operations		(20	)		(20	)		(20	)
(Loss) income from discontinued operations before income taxes(1)	$	(543	)	$	53		$	75
Income tax benefit (expense)		21			(21	)		(31	)
(Loss) income from discontinued operations, net of income taxes(1)	$	(522	)	$	32		$	44

⁽¹⁾ The year ended December 31, 2015, includes a goodwill impairment charge of $571 million ($537 million after income taxes).

Schedule of Major Classes of Assets and Liabilities Included as Discontinued Operations/Held For Sale

The major classes of assets and liabilities included in discontinued operations related to NSS are presented in the table below.

	December 31,             2015		December 31,             2014
	(in millions)
Assets
Current assets	$	201	$	198
Property, plant and equipment, net		25		27
Goodwill(1)		390		989
Other assets		48		48
Total assets of discontinued operations	$	664	$	1,262
Liabilities
Accounts payable, trade	$	48	$	36
Other current liabilities		78		75
Current liabilities		126		111
Long-term liabilities		94		119
Total liabilities of discontinued operations	$	220	$	230

⁽¹⁾  The goodwill balance at December 31, 2014 is based on the total goodwill attributable to the NSS reporting unit, less the historical goodwill attributable to the business retained by L-3. The goodwill balance at December 31, 2015 is based on an allocation of the goodwill attributable to the NSS reporting unit to discontinued operations based on the relative fair value of the NSS business retained by L-3 and the NSS business sold.

MSI [Member]

Schedule of Major Classes of Assets and Liabilities Included as Discontinued Operations/Held For Sale

The major classes of assets and liabilities included as held for sale related to MSI are presented in the table below.

	December 31,       2014
	(in millions)
Assets
Cash and cash equivalents	$	61
Billed receivables, net of allowances of $6		77
Contracts in process		70
Inventories		70
Other current assets		10
Total current assets		288
Goodwill		231
Other assets		28
Total assets classified as held for sale	$	547
Liabilities
Accounts payable, trade	$	31
Accrued employment costs		22
Accrued expenses		33
Advance payments and billings in excess of costs incurred		55
Other current liabilities		21
Total current liabilities		162
Pension and postretirement benefits		56
Other liabilities		19
Total liabilities classified as held for sale	$	237

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Contracts in Process (Tables)

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Components of Contracts in Process

The components of contracts in process are presented in the table below.  

	December 31,
	2015		2014
	(in millions)
Unbilled contract receivables, gross	$	2,097	$	2,149
Unliquidated progress payments		(869)		(887)
Unbilled contract receivables, net		1,228		1,262
Inventoried contract costs, gross		975		981
Unliquidated progress payments		(122)		(95)
Inventoried contract costs, net		853		886
Total contracts in process	$	2,081	$	2,148

General and Administrative, Independent Research and Development and Bid and Proposal Costs

The table below presents a summary of G&A, IRAD and B&P costs included in inventoried contract costs and the changes to them, including amounts charged to cost of sales by the Company’s U.S. Government contractor businesses for the periods presented.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amounts included in inventoried contract costs at beginning of the year	$	135	$	133	$	104
Contract costs incurred:
IRAD and B&P		280		266		279
Other G&A		812		805		817
Total		1,092		1,071		1,096
Amounts charged to cost of sales		(1,065)		(1,069)		(1,067)
Amounts included in inventoried contract costs at end of the year	$	162	$	135	$	133

Selling, General and Administrative Expenses and Research and Development Expenses

The table below presents a summary of selling, general and administrative expenses and research and development expenses for the Company’s commercial businesses, which are expensed as incurred and included in cost of sales on the Consolidated Statements of Operations.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Selling, general and administrative expenses	$	259	$	295	$	310
Research and development expenses		56		67		76
Total	$	315	$	362	$	386

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Inventories (Tables)

12 Months Ended

Dec. 31, 2015

Inventory Disclosure [Abstract]

Inventories at Lower of Cost or Market

Inventories at Lower of Cost or Market. The table below presents the components of inventories at the lower of cost (first-in, first-out or average cost) or realizable value.

	December 31,
	2015		2014
	(in millions)
Raw materials, components and sub-assemblies	$	164	$	127
Work in process		103		97
Finished goods		66		64
Total	$	333	$	288

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Goodwill and Identifiable Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2015

Goodwill and Intangible Assets Disclosure [Abstract]

Changes in Goodwill by Segment

The table below presents the changes in goodwill allocated to the Company’s reporting units in each reportable segment.

	Electronic Systems		Aerospace Systems		Communication Systems		Consolidated Total
	(in millions)
Balance at December 31, 2013
Goodwill	$	4,128	$	1,751	$	1,025	$	6,904
Accumulated impairment losses		(43)		—		(15)		(58)
		4,085		1,751		1,010		6,846
Business acquisitions(1)		(3)		—		—		(3)
Business divestitures		(1)		—		—		(1)
Foreign currency translation adjustments(2)		(77)		(21)		(1)		(99)
Assets held for sale(3)		(231)		—		—		(231)
Balance at December 31, 2014
Goodwill		3,816		1,730		1,024		6,570
Accumulated impairment losses		(43)		—		(15)		(58)
		3,773		1,730		1,009		6,512
Business acquisitions(1)		233		—		11		244
Business divestitures(4)		(20)		—		—		(20)
Business retained from NSS divestiture		26		—		2		28
Impairment charges		(26)		(338)		(20)		(384)
Foreign currency translation adjustments(2)		(61)		(39)		1		(99)
Balance at December 31, 2015
Goodwill		3,994		1,691		1,038		6,723
Accumulated impairment losses(5)		(69)		(338)		(35)		(442)
	$	3,925	$	1,353	$	1,003	$	6,281

⁽¹⁾  For the year ended December 31, 2015, the increase in goodwill for the Electronic Systems segment was due to the L-3 CTC and L-3 ForceX business acquisitions. The increase in goodwill for the Communication Systems segment was due to the Miteq business acquisition. For the year ended December 31, 2014, the decrease in goodwill for the Electronic Systems segment was due to the final purchase price allocation for the Mustang business acquisition.

⁽²⁾  During 2015 and 2014, the decreases in goodwill presented in the Electronic Systems segment were primarily due to the strengthening of the U.S. dollar against the Canadian dollar, the British pound and the Euro. During 2015 and 2014, the decreases in goodwill presented in the Aerospace Systems segment were due to the strengthening of the U.S. dollar against the Canadian dollar.

⁽³⁾  On December 16, 2014, the Company entered into a definitive agreement with Wärtsilä Corporation to sell its Marine Systems International business.

⁽⁴⁾  For the year ended December 31, 2015, the decrease in goodwill for the Electronic Systems segment was due to the divestitures of BSI, the Tinsley Product Line and Klein.

⁽⁵⁾  The accumulated impairment losses at December 31, 2015 exclude $571 million of impairment charges recorded during 2015 relating to the NSS reporting unit, which is reported in discontinued operations.

Schedule of Adjustments Related to Goodwill Impairment Charges

The adjustments the Company recorded related to goodwill impairment charges are presented in a separate caption on the audited consolidated statements of operations, and are summarized and further discussed below.

	Year Ended December 31, 2015
	Goodwill Impairment Charges
	Continuing Operations		Discontinued Operations		L-3 Consolidated
			(in millions)
Logistics Solutions reporting unit impairment	$	338	$	—	$	338
NSS reporting unit impairment		37		571		608
Re-allocation of goodwill for business retained from NSS		9		—		9
Total	$	384	$	571	$	955

Identifiable Intangible Assets

Information on the Company’s identifiable intangible assets that are subject to amortization is presented in the table below.

	December 31, 2015								December 31, 2014
	Weighted Average Amortization     Period		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount		Gross Carrying     Amount		Accumulated     Amortization		Net Carrying     Amount
	(in years)		(in millions)
Customer contractual relationships		16	$	370	$	246	$	124	$	355	$	221	$	134
Technology		11		156		91		65		132		82		50
Other		18		21		11		10		21		10		11
Total		15	$	547	$	348	$	199	$	508	$	313	$	195

Amortization Expense

Amortization expense recorded by the Company for its identifiable intangible assets is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Amortization expense	$	35	$	39	$	35

Estimated Amortization Expense

Based on gross carrying amounts at December 31, 2015, the Company’s estimate of amortization expense for identifiable intangible assets for the years ending December 31, 2016 through 2020 is presented in the table below.

	Year Ending December 31,
	2016		2017		2018		2019		2020
	(in millions)
Estimated amortization expense	$	33	$	31	$	26	$	23	$	20

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Other Current Liabilities and Other Liabilities (Tables)

12 Months Ended

Dec. 31, 2015

Text Block [Abstract]

Other Current Liabilities

The table below presents the components of other current liabilities.

	December 31,
	2015		2014
	(in millions)
Other Current Liabilities:
Accruals for pending and threatened litigation (see Note 18)	$	6	$	36
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position		82		75
Accrued product warranty costs		70		59
Accrued interest		45		46
Deferred revenues		32		30
Other(1)		159		143
Total other current liabilities	$	394	$	389

⁽¹⁾  In November 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech holographic weapons sight (HWS) products that may have been affected by certain performance issues. The return program gives eligible owners of such HWS products the option to return their products in exchange for the purchase price, including shipping costs. The Company recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the 2015 fourth quarter associated with establishing a product returns reserve to reflect the estimated cost of the return program. The Company’s estimated product returns reserve is based on several factors, including the number of HWS units that it anticipates purchasers will return. The Company’s product returns reserve estimate is based on: (1) its analysis of various factors, including an assumed product return rate consistent with claim rates in other circumstances, (2) its experience to date with the voluntary return program, and among other things, an assumption that only a very small percentage of the total number of HWS products sold by the Company and eligible for the voluntary return program will be returned and (3) an assumed average unit purchase price of approximately $500. The voluntary return program is in the early stages of implementation, and the Company will continue to evaluate the amount of the product returns reserve in connection with the voluntary return program. The Company’s evaluation, including as a result of its actual experience with the voluntary return program, may lead it to record an adjustment to the product returns reserve in future periods. Any such adjustment could be material.

Other Liabilities

The table below presents the components of other liabilities.

	December 31,
	2015		2014
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 16)	$	161	$	185
Deferred compensation		45		41
Accrued workers’ compensation		38		38
Accrued product warranty costs		35		34
Notes payable and capital lease obligations		10		1
Other		79		61
Total other liabilities	$	368	$	360

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Property, Plant and Equipment (Tables)

12 Months Ended

Dec. 31, 2015

Property, Plant and Equipment [Abstract]

Property, Plant and Equipment

The table below presents the components of Property, Plant and Equipment.

	December 31,
	2015		2014
	(in millions)
Land	$	60	$	62
Buildings and improvements		431		420
Machinery, equipment, furniture and fixtures		1,736		1,670
Leasehold improvements		343		309
Gross property, plant and equipment		2,570		2,461
Accumulated depreciation and amortization		(1,473)		(1,400)
Property, plant and equipment, net	$	1,097	$	1,061

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Debt (Tables)

12 Months Ended

Dec. 31, 2015

Debt Disclosure [Abstract]

Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt

The components of debt and a reconciliation to the carrying amount of current and long-term debt are presented in the table below.

	December 31,
	2015		2014
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—	$	—
3.95% Senior Notes due 2016		500		500
1.50% Senior Notes due 2017		350		350
5.20% Senior Notes due 2019		1,000		1,000
4.75% Senior Notes due 2020		800		800
4.95% Senior Notes due 2021		650		650
3.95% Senior Notes due 2024		350		650
Subtotal		3,650		3,950
Principal amount of long-term debt		3,650		3,950
Unamortized discounts		(8)		(11)
Carrying amount of long-term debt	$	3,642	$	3,939
Current portion of long-term debt		(499)		—
Carrying amount of long-term debt, excluding current portion		3,143		3,939

⁽¹⁾  During 2015, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were $1,194 million. L-3 Communications had the full availability of its $1 billion Credit Facility at December 31, 2015 and December 31, 2014.

Information Regarding Outstanding Senior Subordinated Notes

The Senior Notes are unsecured senior obligations of L-3 Communications. The terms of each outstanding Senior Note are presented in the table below.

Note	Date of Issuance		Amount Issued		Discount(1)		Net Cash   Proceeds			Effective Interest   Rate		Redemption at Treasury   Rate(2)(3)
			(in millions)
3.95% Senior Notes due November 15, 2016		November 22, 2011	$	500	$	4	$	491			4.11%		50 bps
1.50% Senior Notes due May 28, 2017		May 28, 2014	$	350	$	1	$	347	(4)		1.55%		10 bps
5.20% Senior Notes due October 15, 2019		October 2, 2009	$	1,000	$	4	$	987			5.25%		30 bps
4.75% Senior Notes due July 15, 2020		May 21, 2010	$	800	$	3	$	790			4.79%		25 bps
4.95% Senior Notes due February 15, 2021		February 7, 2011	$	650	$	4	$	639			5.02%		25 bps
3.95% Senior Notes due May 28, 2024		May 28, 2014	$	650	$	3	$	641	(4)		4.02%		20 bps

⁽¹⁾  Bond discounts are recorded as a reduction to the principal amount of the notes and are amortized as interest expense over the term of the notes.

⁽²⁾  The Senior Notes maturing in 2016, 2017, 2019, 2020 and 2021 may be redeemed at any time prior to their maturity and the Senior Notes maturing in 2024 may be redeemed at any time prior to February 28, 2024 (three months prior to their maturity) at the option of L-3 Communications, in whole or in part, at a redemption price equal to the greater of: (1) 100% of the principal amount, or (2) the present value of the remaining principal and interest payments discounted to the date of redemption, on a semi-annual basis, at the Treasury Rate (as defined in the indentures governing the Senior Notes), plus the spread indicated in the table above. In addition, if the Senior Notes maturing in 2024 are redeemed at any time on or after February 28, 2024, the redemption price would be equal to 100% of the principal amount.

⁽³⁾  Upon the occurrence of a change in control (as defined in the indentures governing the Senior Notes), each holder of the notes will have the right to require L-3 Communications to repurchase all or any part of such holder’s notes at an offer price in cash equal to 101% of the aggregate principal amount plus accrued and unpaid interest, if any, to the date of purchase.

⁽⁴⁾  The net cash proceeds of $988 million (after deduction of the bond discount, underwriting expenses and commissions and other related expenses) were used primarily to fund the CODES retirement as discussed below. The remaining net proceeds were used for general corporate purposes.

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Accumulated Other Comprehensive (Loss) Income (AOCI) (Tables)

12 Months Ended

Dec. 31, 2015

Equity [Abstract]

Summary of Amounts Reclassified from AOCI into Net Income

The changes in the AOCI balances, including amounts reclassified from AOCI into net income, are presented in the table below.

	Foreign currency   translation		Unrealized gains (losses) on hedging   instruments		Unrecognized (losses) gains and prior service cost, net		Total accumulated other comprehensive (loss) income
	(in millions)
Balance at December 31, 2012	$	167	$	3	$	(720)	$	(550)
Other comprehensive (loss) income before reclassifications, net of tax		(25)		(1)		414		388
Amounts reclassified from AOCI, net of tax		—		(1)		53		52
Net current period other comprehensive (loss) income		(25)		(2)		467		440
Balance at December 31, 2013	$	142	$	1	$	(253)	$	(110)
Other comprehensive loss before reclassifications, net of tax		(123)		(13)		(354)		(490)
Amounts reclassified from AOCI, net of tax		—		7		9		16
Net current period other comprehensive (loss)		(123)		(6)		(345)		(474)
Balance at December 31, 2014	$	19	$	(5)	$	(598)	$	(584)
Other comprehensive (loss) income before reclassifications, net of tax		(161)		(15)		81		(95)
Amounts reclassified from AOCI, net of tax		41		12		52		105
Net current period other comprehensive (loss) income		(120)		(3)		133		10
Balance at December 31, 2015	$	(101)	$	(8)	$	(465)	$	(574)

Further details regarding the amounts reclassified from AOCI into net income are presented in the table below.

	Amount Reclassified from AOCI(a)
	Year Ended December 31,						Affected Line Item in the Audited Consolidated Statements of Operations
Details About AOCI Components	2015		2014		2013(b)
	(in millions)
Foreign currency translation adjustments:
MSI divestiture	$	(41)	$	—	$	—	Loss related to business divestitures
		(41)		—		—	Income from continuing operations before income taxes
	$	(41)	$	—	$	—	Income from continuing operations
(Loss) gains on hedging instruments:
MSI divestiture	$	(2)	$	—	$	—	Loss related to business divestitures
Other		(16)		(8)		1	Cost of sales-products
		(18)		(8)		1	Income from continuing operations before income taxes
		6		1		—	Provision for income taxes
	$	(12)	$	(7)	$	1	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	(14)	$	—	$	—	Loss related to business divestitures
Net loss		(67)		(15)		(83)	(b)
		(81)		(15)		(83)	Income from continuing operations before income taxes
		29		6		30	Provision for income taxes
		$    (52)		$    (9)		$    (53)	Income from continuing operations
Total reclassification for the period	$	(105)	$	(16)	$	(52)	Income from continuing operations

^(a)  Amounts in parentheses indicate charges to the consolidated statements of operations.

^(b)  Amounts related to pension and postretirement benefit plans were reclassified from AOCI and recorded as a component of net periodic benefit cost (see Note 19 for additional information).

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2015

Fair Value Disclosures [Abstract]

Company's Assets and Liabilities at Fair Value on Recurring Basis

The following table presents the fair value hierarchy level for each of the Company’s assets and liabilities that are measured and recorded at fair value on a recurring basis.

	December 31,
	2015						2014
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	187	$	—	$	—	$	416	$	—	$	—
Derivatives (foreign currency forward contracts)		—		2		—		—		5		—
Total assets	$	187	$	2	$	—	$	416	$	5	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	16	$	—	$	—	$	11	$	—

⁽¹⁾  Level 1 is based on quoted market prices available in active markets for identical assets or liabilities as of the reporting date. Cash equivalents are primarily held in registered money market funds, which are valued using quoted market prices.

⁽²⁾  Level 2 is based on pricing inputs other than quoted prices in active markets, which are either directly or indirectly observable. The fair value is determined using a valuation model based on observable market inputs, including quoted foreign currency forward exchange rates and consideration of non-performance risk.

⁽³⁾  Level 3 is based on pricing inputs that are not observable and not corroborated by market data. The Company has no Level 3 assets or liabilities.

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Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Investments, All Other Investments [Abstract]

Carrying Amounts and Estimated Fair Values of Company's Long-Term Debt and Foreign Currency Forward Contracts

The carrying amounts and estimated fair values of the Company’s other financial instruments are presented in the table below.

	December 31, 2015						December 31, 2014
	Carrying Amount			Estimated Fair Value			Carrying Amount			Estimated Fair Value
	(in millions)
Senior Notes(1)	$	3,642		$	3,754		$	3,939		$	4,178
Foreign currency forward contracts(2)	$	(14	)	$	(14	)	$	(6	)	$	(6	)

⁽¹⁾  The Company measures the fair value of its Senior Notes using Level 2 inputs based primarily on current market yields for its existing debt traded in the secondary market.

⁽²⁾  The Company measures the fair values of foreign currency forward contracts based on forward exchange rates. See Note 14 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

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Derivative Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2015

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Notional Amounts of Company's Outstanding Foreign Currency Forward Contracts by Currency

The table below presents the notional amounts of the Company’s outstanding foreign currency forward contracts by currency as of December 31, 2015.

Currency	Notional Amount
	(in millions)
Canadian dollar	$	112
U.S. dollar		86
Euro		37
British pound		30
Total	$	265

Location of Company's Derivative Instruments Recorded at Fair Value on the Consolidated Balance Sheets

The table below presents the location of the Company’s derivative instruments recorded at fair value on the consolidated balance sheets.

	December 31, 2015								December 31, 2014
	Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities		Other Current Assets		Other Assets		Other Current Liabilities		Other Liabilities
	(in millions)
Derivatives designated as hedging instruments:
Foreign currency forward contracts(1) (2)	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1
Total derivative instruments	$	1	$	1	$	15	$	1	$	4	$	1	$	10	$	1

⁽¹⁾  See Note 12 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

⁽²⁾  Assets held for sale at December 31, 2014 include $2 million of other current assets relating to the fair value of derivative instruments and liabilities held for sale at December 31, 2014 include $2 million of other current liabilities relating to the fair value of derivative instruments.

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L-3 Holdings' Earnings Per Share (Tables)

12 Months Ended

Dec. 31, 2015

Earnings Per Share [Abstract]

Reconciliation of Basic and Diluted Earnings per Share (EPS)

A reconciliation of basic and diluted earnings per share (EPS) is presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions, except per share data)
Reconciliation of net (loss) income:
Net (loss) income	$	(225)	$	677	$	760
Net income from continuing operations attributable to noncontrolling interests		(15)		(13)		(9)
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	282	$	632	$	707
Discontinued operations, net of income tax		(522)		32		44
Net (loss) income attributable to L-3 Holdings common shareholders	$	(240)	$	664	$	751
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		80.7		85.4		89.4
Basic (loss) earnings per share:
Continuing operations	$	3.49	$	7.40	$	7.91
Discontinued operations, net of income tax		(6.46)		0.38		0.49
Net (loss) income	$	(2.97)	$	7.78	$	8.40
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		80.7		85.4		89.4
Assumed exercise of stock options		2.4		3.0		3.9
Unvested restricted stock awards		1.3		1.6		1.8
Employee stock purchase plan contributions		0.1		—		0.2
Performance unit awards		0.1		0.1		0.1
Assumed purchase of common shares for treasury		(2.7)		(3.1)		(4.5)
Assumed conversion of the CODES(1)		—		0.8		0.2
Common and potential common shares		81.9		87.8		91.1
Diluted (loss) earnings per share:
Continuing operations	$	3.44	$	7.20	$	7.76
Discontinued operations, net of income tax		(6.37)		0.36		0.48
Net (loss) income	$	(2.93)	$	7.56	$	8.24

⁽¹⁾  The CODES were retired on June 20, 2014 and were dilutive for the years ended December 31, 2014 and 2013 as the average market price of L-3 Holdings’ common stock during the periods that the CODES were outstanding was greater than the price at which the CODES would have been convertible into L-3 Holdings’ common stock. As of June 18, 2014, the final date of conversion, the conversion price was $88.71. As of December 31, 2013, the conversion price was $90.24.

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2015

Income Tax Disclosure [Abstract]

Income from Continuing Operations Before Income Taxes

Income from continuing operations before income taxes is summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Domestic	$	192	$	707	$	783
Foreign		130		165		197
Income from continuing operations before income taxes	$	322	$	872	$	980

Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations

The components of the Company’s current and deferred portions of the provision for income taxes on continuing operations are presented in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Current income tax provision:
Federal	$	60	$	78	$	159
State and local		5		1		29
Foreign		26		35		39
Subtotal		91		114		227
Deferred income tax provision/(benefit):
Federal		(67)		101		31
State and local		(1)		11		(1)
Foreign		2		1		7
Subtotal		(66)		113		37
Total provision for income taxes	$	25	$	227	$	264

Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations

A reconciliation of the statutory federal income tax rate to the effective income tax rate on continuing operations of the Company is presented in the table below.

	Year Ended December 31,
	2015			2014			2013
Statutory federal income tax rate		35.0	%		35.0	%		35.0	%
State and local income taxes, net of federal income tax benefit		2.0			2.1			1.9
Foreign income taxes		(14.2	)		(3.6	)		(1.8	)
Manufacturing benefits		(3.7	)		(1.7	)		(1.9	)
Research and experimentation and other tax credits		(12.9	)		(4.3	)		(3.8	)
Resolution of tax contingencies		(2.8	)		(1.0	)		(1.1	)
Tax deductible dividends		(2.3	)		(0.8	)		(0.3	)
Goodwill Impairment		6.6			—			—
Other, net		0.1			0.3			(1.1	)
Effective income tax rate on continuing operations		7.8	%(1)		26.0	%		26.9	%

⁽¹⁾  In 2015, the Company recorded non-cash goodwill impairment charges of $384 million, which resulted in a deferred tax benefit of $120 million. Excluding the goodwill impairment charge and the related deferred income tax benefit, the effective income tax rate for 2015 would have been 20.5%.

Components of Net Deferred Tax Assets and Liabilities

The significant components of the Company’s net deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Deferred tax assets:
Inventoried costs	$	56	$	87
Compensation and benefits		147		143
Pension and postretirement benefits		354		402
Loss carryforwards		12		15
Tax credit carryforwards		6		10
Other		79		80
Gross deferred tax assets		654		737
Less: valuation allowance		(9)		(9)
Net deferred tax assets		645		728
Deferred tax liabilities:
Goodwill and other intangible assets	$	(675)	$	(728)
Income recognition on contracts in process		(36)		(39)
Property, plant and equipment		(94)		(93)
Other		(56)		(88)
Gross deferred tax liabilities		(861)		(948)
Total net deferred tax liabilities	$	(216)	$	(220)

Classification of Deferred Tax Assets and Liabilities

The classification of the Company’s deferred tax assets and liabilities are presented in the table below.

	December 31,
	2015		2014
	(in millions)
Non-current deferred tax assets	$	3	$	15
Non-current deferred tax liabilities		(219)		(235)
Total net deferred tax liabilities	$	(216)	$	(220)

Summary of Loss and Tax Credit Carryforwards

The following table presents the Company’s loss and tax credit carryforwards as of December 31, 2015 on a tax return basis. The Company has established a valuation allowance as indicated in those instances in which it does not believe that it is more likely than not it will generate sufficient taxable income, of the appropriate character and in the applicable subsidiary, to utilize the carryforwards.

	Year Ended December 31, 2015
	Carryforwards		Valuation Allowances
	Gross	Tax   Effected	Gross	Tax   Effected	Expiration   Periods
	(in millions)		(in millions)
Capital loss carryforwards(1)	$            5	$            2	$            5	$            2	2016-2017
Federal net operating loss carryforwards	11	4	5	2	2026-2034
Foreign net operating loss carryforwards	16	4	4	1	Indefinite
State net operating loss carryforwards	118	2	50	1	2017-2035
Total loss carryforwards		$         12		$            6
State tax credit carryforwards	7	5	5	3	2017-2035
Foreign tax credit carryforwards	1	1	—	—	Indefinite
Total tax credit carryforwards		$           6		$           3

⁽¹⁾  During 2015, the Company reduced its valuation allowance for capital loss carryforwards by $3 million because it generated approximately $9 million of net capital gains in 2015 from business divestitures and the sale of other capital assets.

Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties

A reconciliation of the change in unrecognized income tax benefits, excluding potential interest and penalties, is presented in the table below.

	2015		2014		2013
	(in millions)
Balance at January 1	$	169	$	155	$	127
Additions for tax positions related to the current year		14		20		17
Additions for tax positions related to prior years		2		12		38
Reductions for tax positions related to prior years		(37)		(11)		(7)
Reductions for tax positions related to settlements with taxing authorities		(1)		(1)		—
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations		(7)		(6)		(20)
Balance at December 31	$	140	$	169	$	155

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Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation by Form of Award

The Company’s stock-based compensation by form of award, including stock-based compensation recorded in discontinued operations relating to the NSS business, is presented in the table below.

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Stock options	$          9	$          9	$        10
Restricted stock units	38	40	41
Performance units	2	3	7
Total before income taxes	49	52	58
Income taxes	(18)	(20)	(22)
Total after income taxes	31	32	36
Less: Stock based compensation recorded in discontinued operations, net of income taxes	1	1	1
Stock based compensation recorded in continuing operations, net of income taxes	$        30	$        31	$      35

Company's Stock Option Activity and Changes

The table below presents a summary of the Company’s stock option activity as of December 31, 2015 and changes during the year then ended.

	Number of Options	Weighted Average Exercise Price	Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
	(in thousands)		(in years)	(in millions)
Number of shares under option:
Outstanding at January 1, 2015	3,101.2	$83.02	6.2	$134
Options granted	504.3	128.78
Options exercised	(656.8)	74.97
Options forfeited	(17.2)	101.61
Outstanding at December 31, 2015	2,931.5	$92.59	6.0	$84
Vested and expected to vest at December 31, 2015(1)	2,921.2	$92.48	6.0	$84
Exercisable at December 31, 2015	1,930.1	$82.02	4.8	$72

⁽¹⁾  Represents outstanding options reduced by expected forfeitures for options not fully vested.

Weighted Average Assumptions in Valuation Model

The weighted average assumptions used in the valuation model are presented in the table below.

	2015     Grants	2014     Grants	2013     Grants
Expected holding period (in years)	5.0	5.5	5.6
Expected volatility	21.4%	24.4%	26.4%
Expected dividend yield	2.4%	2.7%	3.6%
Risk-free interest rate	1.5%	1.7%	1.0%

Company's Nonvested Restricted Stock Unit Awards and Changes

The table below presents a summary of the Company’s nonvested restricted stock unit awards as of December 31, 2015 and changes during the year then ended.

	Number of         Shares	Weighted Average Grant Date         Fair Value
	(in thousands)
Nonvested balance at January 1, 2015	1,517.6	$          82.72
Granted	364.8	128.59
Vested	(616.7)	68.90
Forfeited	(93.8)	99.72
Nonvested balance at December 31, 2015	1,171.9	$        102.91

Company's Performance Unit Awards Based on Expected Performance

The table below presents a summary of the Company’s performance unit awards based on expected performance as of December 31, 2015 and changes during the year then ended.

	Payable in Shares (EPS)
	Number of     Units	Weighted Average     Grant Date Fair Value
	(in thousands)
Outstanding at January 1, 2015	85.2	$	96.53
Granted	41.1		129.03
Decrease due to expected performance	(52.3)		115.27
Vested	(32.9)		77.00
Forfeited	(1.5)		109.65
Outstanding at December 31, 2015	39.6	$	121.27

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Commitments and Contingencies (Tables)

12 Months Ended

Dec. 31, 2015

Commitments and Contingencies Disclosure [Abstract]

Future Minimum Payments under Non-Cancelable Operating Leases

The following table presents future minimum payments under non-cancelable operating leases with initial or remaining terms in excess of one year at December 31, 2015.

	Real Estate		Equipment		Total
			(in millions)
2016	$	77	$	5	$	82
2017		78		4		82
2018		67		2		69
2019		53		1		54
2020		85		—		85
Thereafter		166		—		166
Total minimum payments required		526		12		538
Less: Sublease rentals under non-cancelable leases		11		—		11
Net minimum payments required	$	515	$	12	$	527

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Pensions and Other Employee Benefits (Tables)

12 Months Ended

Dec. 31, 2015

Compensation and Retirement Disclosure [Abstract]

Changes in Benefit Obligations, Plan Assets and Funded Status and Aggregate Balance Sheet Impact

The following table summarizes changes in the benefit obligations, the plan assets and funded status for all of the Company’s pension and postretirement benefit plans, as well as the aggregate balance sheet impact.

	Pension Plans						Postretirement         Benefit Plans
	2015			2014			2015			2014
	(in millions)
Change in benefit obligation:
Benefit obligation at the beginning of the year	$	3,663		$	2,973		$	199		$	194
Service cost		123			106			3			3
Interest cost		149			147			7			8
Plan participants’ contributions		2			2			4			4
Amendments		—			1			—			(1	)
Actuarial (gain) loss		(261	)		579			(12	)		5
Foreign currency exchange rate changes		(53	)		(34	)		(4	)		(2	)
Curtailments, settlements and special termination benefits		3			1			—			—
Business divestiture		(59	)		—			—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Benefit obligation at the end of the year	$	3,448		$	3,663		$	184		$	199
Change in plan assets:
Fair value of plan assets at the beginning of the year	$	2,570		$	2,403		$	60		$	55
Actual return on plan assets		54			205			—			6
Employer contributions		97			97			6			7
Plan participants’ contributions		2			2			4			4
Foreign currency exchange rate changes		(52	)		(25	)		—			—
Benefits paid		(119	)		(112	)		(13	)		(12	)
Fair value of plan assets at the end of the year	$	2,552		$	2,570		$	57		$	60
Unfunded status at the end of the year	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current assets	$	37		$	26		$	—		$	—
Current liabilities		(5	)		(4	)		(8	)		(8	)
Non-current liabilities		(928	)		(1,056	)		(119	)		(131	)
Liabilities held for sale(1)		—			(59	)		—			—
	$	(896	)	$	(1,093	)	$	(127	)	$	(139	)

⁽¹⁾  Liabilities held for sale consists of $3 million of current liabilities and $56 million of non-current liabilities relating to L-3 MSI.

Net Loss and Prior Service Cost Balances in Accumulated Other Comprehensive Loss Account

The table below summarizes the net loss and prior service cost balances at December 31, in the accumulated other comprehensive loss account, before related tax effects, for all of the Company’s pension and postretirement benefit plans.

	Pension Plans				Postretirement Benefit Plans
	2015		2014		2015		2014
	(in millions)
Net loss (gain)	$	768	$	968	$	(10)	$	(6)
Prior service credit		—		—		(3)		(3)
Total amount recognized	$	768	$	968	$	(13)	$	(9)

Pension Plans with an Accumulated Benefit Obligation in Excess of Fair Value of Plan Assets

The aggregate accumulated benefit obligation (ABO) for all of the Company’s pension plans was $3,120 million at December 31, 2015 and $3,272 million at December 31, 2014. The table below presents information for the pension plans with an ABO in excess of the fair value of plan assets at December 31. 2015 and 2014.

	Pension Plans
	2015	2014
	(in millions)
Projected benefit obligation	$  3,232	$	3,467
Accumulated benefit obligation	2,913		3,083
Fair value of plan assets	2,302		2,349

Weighted Average Assumptions Used to Determine Benefit Obligations

The table below summarizes the weighted average assumptions used to determine the benefit obligations for the Company’s pension and postretirement plans disclosed at December 31, 2015 and 2014.

	Pension Plans						Postretirement Benefit Plans
	2015			2014			2015			2014
Benefit obligations:
Discount rate		4.63%	(1)		4.14%	(1)		4.23%	(2)		3.70%	(2)
Rate of compensation increase		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.7% and 4.2% for the U.S. based plans, respectively, 3.9% for the Canadian based plans and 2.2% for the German based plans at December 31, 2014.

⁽²⁾  The weighted average discount rate assumptions used at December 31, 2015 and 2014 were comprised of separate assumptions determined by country of 4.3% and 3.7% for the U.S. based plans, respectively, and 3.7% for the Canadian based plans.

⁽³⁾  The weighted average rate of compensation increase assumptions were comprised of separate assumptions determined by country of 3.5% for both the U.S. based plans and Canadian based plans at December 31, 2015 and 2014.

Components of Net Periodic Benefit Cost

The following table summarizes the components of net periodic benefit cost for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Components of net periodic benefit cost:
Service cost	$    123	$    106	$    126	$        3	$        3	$        4
Interest cost	149	147	132	7	8	7
Expected return on plan assets	(205)	(193)	(164)	(5)	(4)	(4)
Amortization of prior service cost (credits)	1	2	1	(2)	(2)	(3)
Amortization of net loss (gain)	68	17	83	—	(2)	2
Curtailment or settlement loss (gain)	3	1	3	—	(1)	—
Net periodic benefit cost	$    139	$      80	$    181	$        3	$        2	$        6

Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income

The following table summarizes the other changes in plan assets and benefit obligations recognized in other comprehensive income for the Company’s pension and postretirement benefit plans for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans			Postretirement Benefit Plans
	2015	2014	2013	2015	2014	2013
	(in millions)
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$    (132)	$    560	$    (637)	$    (7)	$      5	$    (29)
Prior service cost (credit)	—	1	14	—	(1)	—
Amortization of net (loss) gain	(68)	(17)	(83)	—	2	(2)
Amortization of prior service (cost) credit	(1)	(2)	(1)	2	2	3
Total recognized in other comprehensive income	(201)	542	(707)	(5)	8	(28)
Total recognized in net periodic benefit cost and other comprehensive income	$      (62)	$    622	$    (526)	$    (2)	$    10	$    (22)

Amounts Expected to be Amortized from Accumulated Other Comprehensive Income (Loss) and Recognized as Components of Net Periodic Benefit Costs

The following table summarizes the amounts expected to be amortized from accumulated other comprehensive income (loss) and recognized as components of net periodic benefit costs during 2016.

	Pension Plans	Postretirement Benefit Plans	Total
		(in millions)
Net loss (gain)	$        53	$        (1)	$        52
Prior service credit	(1)	(1)	(2)
	$        52	$        (2)	$        50

Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost

The table below summarizes the weighted average assumptions used to determine the net periodic benefit cost for the years ended December 31, 2015, 2014 and 2013.

	Pension Plans									Postretirement Benefit Plans
	2015			2014			2013			2015			2014			2013
Discount rate		4.14%	(1)		5.03%	(1)		4.15%	(1)		3.70%	(4)		4.43%	(4)		3.37%	(4)
Expected long-term return on plan assets		8.14%	(2)		8.13%	(2)		8.13%	(2)		7.65%			7.64%			7.64%
Rate of compensation increase		3.50%	(3)		3.50%	(3)		3.50%	(3)

⁽¹⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014, and 2013 were comprised of separate assumptions determined by country of 4.2%, 5.1% and 4.2% for the U.S. based plans, 3.9%, 4.7% and 3.9% for the Canadian based plans and 2.2%, 3.5%, and 3.4% for the German based plans, respectively.

⁽²⁾  The weighted average expected long-term return on plan assets assumptions used were comprised of separate assumptions determined by country of 8.25% for the U.S. based plans and 7.25% for the Canadian based plans for the years ended December 31, 2015, 2014 and 2013.

⁽³⁾  The weighted average rate of compensation increase assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.5% for both the U.S and Canadian based plans.

⁽⁴⁾  The weighted average discount rate assumptions used for the years ended December 31, 2015, 2014 and 2013 were comprised of separate assumptions determined by country of 3.7%, 4.4% and 3.3% for the U.S. based plans and 3.7%, 4.6% and 3.7% for the Canadian based plans, respectively.

Effect of One Percentage Point Change in Assumed Health Care Cost Trend Rates

A one percentage point change in the assumed health care cost trend rates would have the following effects:

	1 percentage point
	Increase	Decrease
	(in millions)
Effect on total service and interest cost	$            —	$            —
Effect on postretirement benefit obligations	7	(5)

Allowable Range for Each Major Category of the Plans' Assets and Weighted-Average Asset Allocations by Asset Category

The table below presents the allowable range for each major category of the plans’ assets at December 31, 2015 as well as the Company’s pension plan and postretirement benefit plan weighted-average asset allocations at December 31, 2015 and 2014, by asset category.

	U.S.							Canada
Asset Category	Range	2015			2014			Range	2015			2014
Domestic equity(1)	30%-60%		52	%		52	%	—		13	%		15	%
International equity(2)	10%-20%		11			10		—		62			55
Total equities	45%-75%		63			62		40%-80%		75			70
Fixed income securities	20%-40%		22			22		—		16			20
Other, primarily cash and cash equivalents	0%-15%		8			9		—		9			10
Total fixed income securities and cash and cash equivalents	—		30			31		20%-60%		25			30
Real estate securities	0%-15%		7			7		—		—			—
Total			100	%		100	%			100	%		100	%

⁽¹⁾  Domestic equities for Canadian plans refers to equities of Canadian companies.

⁽²⁾  International equities for Canadian plans includes equities of U.S. companies.

Fair Value of the Company's Pension Plans' and Postretirement Benefit Plans' Assets

The table below presents the fair value of the Company’s pension plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	U.S. Pension Plans’ Assets						Canadian Pension Plans’ Assets
	Fair Value Measured at December 31, 2015						Fair Value Measured at December 31, 2015
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$1,200	$—	$—	$	1,200		$73	$—	$—	$73
International Equity	79	—	—		79		91	—	—	91
Fixed Income — Investment Grade(2)	237	163	—		400		—	—	—	—
Fixed Income — High Yield(3)	—	114	—		114		—	—	—	—
Real Estate Investment Trusts(4)	170	—	—		170		—	—	—	—
Other(5)	—	166	—		166		6	21	—	27
Total assets at fair value	$1,686	$443	$ —	$	2,129		$170	$21	$ —	$191
Liabilities for unsettled trades, net					(30	)				—
Other investments measured at net asset value(6)(7)					170					92
Total				$	2,269					$283
	Fair Value Measured at December 31, 2014						Fair Value Measured at December 31, 2014
Asset Category	Level 1	Level 2	Level 3	Total			Level 1	Level 2	Level 3	Total
	(in millions)
Equity securities(1):
U.S. Equity	$1,172	$—	$—	$	1,172		$58	$—	$—	$58
International Equity	87	—	—		87		107	—	—	107
Fixed Income — Investment Grade(2)	237	157	—		394		—	—	—	—
Fixed Income — High Yield(3)	—	120	—		120		—	—	—	—
Real Estate Investment Trusts(4)	159	—	—		159		—	—	—	—
Other(5)	—	208	—		208		4	26	—	30
Total assets at fair value	$1,655	$485	$ —	$	2,140		$169	$26	$ —	$195
Liabilities for unsettled trades, net					(13	)				—
Other investments measured at net asset value(6)(7)					140					108
Total				$	2,267					$303

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the New York Stock Exchange (NYSE), National Association of Securities Dealers Automated Quotations (NASDAQ), and various international exchanges.

⁽²⁾  Approximately 59% at December 31, 2015 and 60% at December 31, 2014 of U.S. plan assets that are invested in the Fixed Income — Investment Grade asset category consist of a mutual fund offered by a registered investment company (the “Fund”) and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy, as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 41% at December 31, 2015 and 40% at December 31, 2014 of U.S. plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  Real Estate Investment Trusts (REITs) consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of: (1) money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit, and are classified as Level 2, and (2) cash, which is classified as Level 1.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the net asset value (NAV) per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾  All of the U.S. plans other investments measured using NAV at December 31, 2015 and 2014 and approximately 52% and 43% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV consist of a regulated commingled equity trust fund, for which fair value is based on the NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV. Approximately 48% and 57% at December 31, 2015 and 2014, respectively, of the Canadian plans other investments measured using NAV are invested in regulated commingled bond funds (the “Bond Funds”). As these Bond Funds do not trade in an active market, the fair value is based on NAVs calculated by fund managers based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs as a practical expedient to estimating fair value and classified as Level 2. Withdrawals are permitted monthly, with notice between 0 and 3 days of the transaction date, based on NAV.

The table below presents the fair value of the Company’s postretirement benefit plans’ assets by asset category segregated by level within the fair value hierarchy, as described below.

	Postretirement Benefit Plans’ Assets
	Fair Value Measured at December 31, 2015								Fair Value Measured at December 31, 2014
Asset Category	Level 1		Level 2		Level 3		Total		Level 1		Level 2		Level 3		Total
	(in millions)
Equity securities(1):
U.S. Equity	$	35	$	—	$	—	$	35	$	36	$	—	$	—	$	36
International Equity		1		—		—		1		1		—		—		1
Fixed Income — Investment Grade(2)		8		3		—		11		10		2		—		12
Fixed Income — High Yield(3)		—		2		—		2		—		2		—		2
Real Estate Investment Trusts(4)		3		—		—		3		2		—		—		2
Other(5)		—		2		—		2		—		4		—		4
Total assets at fair value	$	47	$	7	$	—	$	54	$	49	$	8	$	—	$	57
Other investments measured at net asset value(6)(7)								3								3
Total							$	57							$	60

⁽¹⁾  Equity securities consist of investments in common stock of U.S. and international companies. The fair value of equity securities is based on quoted market prices available in active markets at the close of a trading day, primarily the NYSE, NASDAQ, and various international exchanges.

⁽²⁾  Approximately 73% at December 31, 2015 and 83% at December 31, 2014 of the postretirement benefit plan assets that are invested in the Fixed Income — Investment Grade asset category consist of the Fund and fixed income securities. The Fund invests in investment grade fixed income securities, mortgaged-backed securities, U.S. treasury and agency bonds and corporate bonds. These investments are classified by the Company as a Level 1 measurement within the fair value hierarchy as the mutual fund trades on an active market and daily, quoted prices are available. The remaining 27% at December 31, 2015 and 17% at December 31, 2014 of the postretirement benefit plan assets are fixed income securities, primarily investment grade corporate bonds from various industries held directly by the plan. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs and are classified as Level 2.

⁽³⁾  Fixed Income — High Yield consists of investments in corporate high-yield bonds from various industries. The fair values of these investments are based on yields currently available on comparable bonds of issuers with similar credit ratings, quoted prices of similar bonds in an active market, or cash flows based on observable inputs.

⁽⁴⁾  REITs consist of securities that trade on the major exchanges and invest directly in real estate, either through properties or mortgages.

⁽⁵⁾  Other consists primarily of money market accounts, which invest primarily in short term, high quality money market securities such as government obligations, commercial paper, time deposits and certificates of deposit.

⁽⁶⁾  In accordance with ASU 2015-7, certain investments that are measured at fair value using the NAV per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the statements of financial position.

⁽⁷⁾ All of the postretirement benefit plans other investments measured using NAV at December 31, 2015 and 2014 consist of a regulated commingled equity trust fund, which fair value is based on NAV at the end of each month. The NAV is calculated by the fund manager based on the fair value of the fund’s holdings, primarily equity securities traded in active markets, determined as of the end of each month as a practical expedient to estimating fair value. This practical expedient is not used when it is determined to be probable that the fund will sell the investment for an amount different than the reported NAV. Withdrawals are permitted, with notice by the 20th day of each month, based on NAV.

Estimated Future Benefit Payments

Estimated Future Benefit Payments. The following table presents expected pension and postretirement benefit payments and expected postretirement subsidies due to the Medicare Prescription Drug Improvement and Modernization Act of 2003, which reflect expected future service, as appropriate.

			Postretirement Benefits
	Pension                      Benefits		Benefit         Payments	Subsidy         Receipts
	(in millions)
2016	$	151	13	—
2017		151	14	—
2018		155	14	—
2019		162	14	—
2020		167	15	—
Years 2021-2025		1,012	70	1

Cash Contributions and Expenses under Multi-Employer Benefit Plans

Under these plans, the Company contributed cash and recorded expenses for each of its individually significant plans and all of its other plans in aggregate as noted in the table below.

Pension Fund	EIN/Pension         Plan Number	Pension Protection Act Zone Status(1)		FIP/RP(2) Status Pending/ Implemented	Contributions by L-3 Communications			Surcharge Imposed	Expiration Date of Collective- Bargaining Agreement
		2015	2014		2015	2014	2013
					(in millions)
IAM National Pension Fund	51-6031295/002	Green	Green	No	$23(3)	$19(4)	$21(4)	No	1/29/2016 to 5/25/2019(5)
Other Pension Funds(6)					—	—	—
			Total contributions		$23	$19	$21

⁽¹⁾  A zone status rating of green indicates the plan is at least 80% funded.

⁽²⁾  Funding improvement plan or rehabilitation plan.

⁽³⁾  At the date the audited financial statements for the Company were issued, the Form 5500 for the plan year ended December 31, 2015 was not available.

⁽⁴⁾  Represents 5% and 6% of total plan contributions for the years ended December 31, 2014 and 2013, respectively, based on Form 5500.

⁽⁵⁾  The Company is a party to multiple bargaining agreements for multiple projects that require contributions into the IAM National Pension Fund. The most significant of these agreements, expiring April 28, 2019, covers multiple programs in the Company’s Aerospace Systems reportable segment and represents 58% of 2015 contributions.

⁽⁶⁾  Consists of three pension funds in which the Company’s contributions are individually, and in the aggregate, insignificant.

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Supplemental Cash Flow Information (Tables)

12 Months Ended

Dec. 31, 2015

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

	Year Ended December 31,
	2015	2014	2013
	(in millions)
Interest paid on outstanding debt	$    182	$    176	$    171
Income tax payments	132	129	245
Income tax refunds	8	9	23

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Segment Information (Tables)

12 Months Ended

Dec. 31, 2015

Segment Reporting [Abstract]

Summary of Segment Information

The tables below present net sales, operating income, depreciation and amortization, capital expenditures and total assets by reportable segment.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
Net Sales
Products
Electronic Systems	$	3,390	$	3,685	$	3,665
Aerospace Systems		1,661		1,722		1,827
Communication Systems		1,648		1,546		1,762
Elimination of intercompany sales		(110)		(114)		(125)
Total products sales		6,589		6,839		7,129
Services
Electronic Systems	$	999	$	1,057	$	1,092
Aerospace Systems		2,503		2,604		2,730
Communication Systems		441		539		517
Elimination of intercompany sales		(66)		(53)		(48)
Total services sales		3,877		4,147		4,291
Consolidated total	$	10,466	$	10,986	$	11,420
Operating income
Electronic Systems	$	489	$	533	$	529
Aerospace Systems		205		283		421
Communication Systems		196		196		167
Segment total		890		1,012		1,117
Loss related to business divestitures(1)		(31)		—		—
Impairment charges(2)		(384)		—		—
Consolidated total	$	475	$	1,012	$	1,117
Depreciation and amortization
Electronic Systems	$	110	$	123	$	117
Aerospace Systems		50		40		38
Communication Systems		50		51		47
Consolidated total	$	210	$	214	$	202
Capital Expenditures
Electronic Systems	$	99	$	80	$	71
Aerospace Systems		55		59		54
Communication Systems		37		29		59
Corporate		6		6		20
Consolidated total	$	197	$	174	$	204
Total Assets
Electronic Systems	$	6,426	$	6,281	$	6,933
Aerospace Systems		2,630		3,011		3,106
Communication Systems		1,984		2,025		2,161
Corporate		381		589		455
Assets held for sale		—		547		—
Assets of discontinued operations		664		1,262		1,213
Consolidated total	$	12,085	$	13,715	$	13,868

⁽¹⁾  See Note 3 for information regarding the Company’s business divestitures.

⁽²⁾  Represents non-cash goodwill impairment charges recorded during 2015, including (i) $338 million related to a decline in the estimated fair value of the Logistics Solutions reporting unit, and (ii) $46 million related to a business retained by L-3 in connection with the sale of the NSS business, comprised of (i) $37 million related to the re-allocation of impairment charges recorded for the NSS reporting unit in 2015, and (ii) $9 million related to the re-allocation of goodwill. See Note 6 for additional information.

Company's Sales Attributable to U.S. Customers and International Customers

The Company’s sales attributable to U.S. and international customers, based on location of the customer, are summarized in the table below.

	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S.	$	7,908	$	8,051	$	8,630
International:
United Kingdom		336		335		435
Australia		321		254		218
Canada		281		289		357
South Korea		207		226		178
Saudi Arabia		201		160		132
Germany		113		243		272
Japan		95		124		67
Other		1,004		1,304		1,131
Total international		2,558		2,935		2,790
Consolidated	$	10,466	$	10,986	$	11,420

Net Sales to Principal Customers

Net sales to principal customers are summarized in the table below.
	Year Ended December 31,
	2015		2014		2013
	(in millions)
U.S. Government agencies(1)	$	7,291	$	7,464	$	8,008
Commercial		1,376		1,656		1,689
Foreign governments(1)		1,799		1,866		1,723
Consolidated	$	10,466	$	10,986	$	11,420

⁽¹⁾  Includes sales for which the Company is the prime contractor as well as sales based on the ultimate end customer for which the Company is a subcontractor.

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Employee Severance and Termination Costs (Tables)

12 Months Ended

Dec. 31, 2015

Restructuring and Related Activities [Abstract]

Employee Severance and Other Termination Costs Incurred by Reportable Segment

 Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Year Ended December 31,
	2015	2014		2013
	(in millions)
Electronic Systems	$            8	$	16	$	16
Aerospace Systems	4		5		2
Communication Systems	6		8		11
Consolidated	$            18	$	29	$	29

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Unaudited Quarterly Financial Data (Tables)

12 Months Ended

Dec. 31, 2015

Quarterly Financial Information Disclosure [Abstract]

Company's Unaudited Quarterly Results of Operations

The Company’s unaudited quarterly results of operations are affected, significantly in some periods, by our business acquisitions and divestitures. See Note 3.

	First Quarter		Second Quarter		Third Quarter		Fourth Quarter
	(in millions, except per share data)
2015
Sales	$	2,488	$	2,543	$	2,564	$	2,871
Operating income (loss)		187		153		231		(96)
Income (loss) from continuing operations		105		120		128		(56)
Net income (loss)		109		124		(296)		(162)
Net income (loss) attributable to L-3		105		120		(299)		(166)
Basic earnings (loss) per share from continuing operations(1)		1.23		1.41		1.56		(0.76)
Basic earnings (loss) per share(1)		1.28		1.46		(3.74)		(2.11)
Diluted earnings (loss) per share from continuing operations(1)		1.20		1.39		1.54		(0.76)
Diluted earnings (loss) per share(1)		1.25		1.44		(3.68)		(2.11)
2014
Sales	$	2,670	$	2,702	$	2,653	$	2,961
Operating income		266		217		235		294
Income from continuing operations		163		131		146		205
Net income		172		141		157		207
Net income attributable to L-3		170		137		154		203
Basic EPS from continuing operations(1)		1.87		1.47		1.68		2.38
Basic EPS(1)		1.97		1.59		1.81		2.41
Diluted EPS from continuing operations(1)		1.80		1.42		1.65		2.34
Diluted EPS(1)		1.90		1.53		1.78		2.36

⁽¹⁾  EPS in each quarter is computed using the weighted-average number of shares outstanding during that quarter, while EPS for the full year is computed using the weighted-average number of shares outstanding during the year. Therefore, the sum of the four quarters’ EPS may not equal the full year computed EPS.

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

12 Months Ended

Dec. 31, 2015

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Combining Statements of Equity

The table below presents information regarding the balances and changes in common stock, additional paid-in capital, treasury stock and retained earnings of L-3 Communications for each of the three years ended December 31, 2015.

	L-3 Communications Common Stock				Additional Paid-in   Capital		Treasury     Stock		Retained Earnings     (Deficit)		Accumulated Other Comprehensive (Loss) Income		Total
	Shares   Issued		Par Value
	(in millions, except shares issued)
Balance at December 31, 2012		100	$	—	$	5,314	$	—	$	687	$	(550)	$	5,451
Net income attributable to L-3		—		—		—		—		751		—		751
Contributions from L-3 Holdings		—		—		339		—		—		—		339
Dividends to L-3 Holdings		—		—		—		—		(1,001)		—		(1,001)
Comprehensive income		—		—		—		—		—		440		440
Other		—		—		—		—		1		—		1
Balance at December 31, 2013		100	$	—	$	5,653	$	—	$	438	$	(110)	$	5,981
Net income attributable to L-3		—		—		—		—		664		—		664
Contributions from L-3 Holdings		—		—		146		—		—		—		146
Dividends to L-3 Holdings		—		—		—		—		(1,032)		—		(1,032)
Comprehensive loss		—		—		—		—		—		(474)		(474)
Balance at December 31, 2014		100	$	—	$	5,799	$	—	$	70	$	(584)	$	5,285
Net loss attributable to L-3		—		—		—		—		(240)		—		(240)
Contributions from L-3 Holdings		—		—		253		—		—		—		253
Dividends to L-3 Holdings		—		—		—		—		(953)		—		(953)
Comprehensive income		—		—		—		—		—		10		10
Balance at December 31, 2015		100	$	—	$	6,052	$	—	$	(1,123)	$	(574)	$	4,355

Condensed Combining Balance Sheets

The following 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 December 31, 2015:
Current assets:
Cash and cash equivalents	$	—	$	137	$	—	$	165	$	(95)	$	207
Billed receivables, net		—		278		297		171		—		746
Contracts in process		—		872		958		251		—		2,081
Other current assets		—		288		137		109		—		534
Assets of discontinued operations		—		—		664		—		—		664
Total current assets		—		1,575		2,056		696		(95)		4,232
Goodwill		—		2,318		2,973		990		—		6,281
Other assets		—		816		496		260		—		1,572
Investment in and amounts due from consolidated subsidiaries		4,355		5,609		3,739		111		(13,814)		—
Total assets	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085
Current portion of long-term debt	$	—	$	499	$	—	$	—	$	—	$	499
Current liabilities		—		911		899		445		(95)		2,160
Liabilities of discontinued operations		—		—		220		—		—		220
Other long-term liabilities		—		1,410		195		29		—		1,634
Long-term debt		—		3,143		—		—		—		3,143
Total liabilities		—		5,963		1,314		474		(95)		7,656
L-3 shareholders’ equity		4,355		4,355		7,950		1,583		(13,888)		4,355
Noncontrolling interests		—		—		—		—		74		74
Total equity		4,355		4,355		7,950		1,583		(13,814)		4,429
Total liabilities and equity	$	4,355	$	10,318	$	9,264	$	2,057	$	(13,909)	$	12,085

	L-3 Holdings   (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
At December 31, 2014:
Current assets:
Cash and cash equivalents	$	—	$	361	$	1	$	142	$	(62)	$	442
Billed receivables, net		—		320		281		202		—		803
Contracts in process		—		862		1,009		277		—		2,148
Other current assets		—		238		131		94		—		463
Assets held for sale		—		—		52		495		—		547
Assets of discontinued operations		—		—		1,262		—		—		1,262
Total current assets		—		1,781		2,736		1,210		(62)		5,665
Goodwill		—		2,309		3,331		872		—		6,512
Other assets		—		833		511		194		—		1,538
Investment in and amounts due from consolidated subsidiaries		5,285		6,747		3,196		—		(15,228)		—
Total assets	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715
Current liabilities	$	—	$	873	$	904	$	452	$	(62)	$	2,167
Liabilities held for sale		—		—		10		227		—		237
Liabilities of discontinued operations		—		—		230		—		—		230
Amounts due to consolidated subsidiaries		—		—		—		320		(320)		—
Other long-term liabilities		—		1,573		178		31		—		1 ,782
Long-term debt		—		3,939		—		—		—		3,939
Total liabilities		—		6,385		1,322		1,030		(382)		8,355
L-3 shareholders’ equity		5,285		5,285		8,452		1,246		(14,983)		5,285
Noncontrolling interests		—		—		—		—		75		75
Total equity		5,285		5,285		8,452		1,246		(14,908)		5,360
Total liabilities and equity	$	5,285	$	11,670	$	9,774	$	2,276	$	(15,290)	$	13,715

Condensed Combining Statements of Operations

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
Condensed Combining Statements of Operations: For the year ended December 31, 2015:
Total net sales	$	—	$	3,580	$	5,265	$	1,935	$	(314)	$	10,466
Total cost of sales		(46)		(3,283)		(4,906)		(1,701)		360		(9,576)
(Loss) gain related to business divestitures		—		(13)		(31)		13		—		(31)
Impairment charge		—		—		(364)		(20)		—		(384)
Operating (loss) income		(46)		284		(36)		227		46		475
Interest expense		—		(167)		(1)		(1)		—		(169)
Interest and other income (expense), net		—		16		—		1		—		17
Debt retirement charge		—		(1)		—		—		—		(1)
(Loss) income from continuing operations before income taxes		(46)		132		(37)		227		46		322
Benefit (provision) for income taxes		4		(10)		3		(18)		(4)		(25)
Equity in net income of consolidated subsidiaries		(198)		(362)		—		—		560		—
Income from continuing operations		(240)		(240)		(34)		209		602		297
Income from discontinued operations, net of income tax		—		—		(522)		—		—		(522)
Net (loss) income		(240)		(240)		(556)		209		602		(225)
Net income attributable to noncontrolling interests		—		—		—		—		(15)		(15)
Net (loss) income attributable to L-3	$	(240)	$	(240)	$	(556)	$	209	$	587	$	(240)
Comprehensive (loss) income attributable to L-3	$	(230)	$	(230)	$	(560)	$	98	$	692	$	(230)
For the year ended December 31, 2014:
Total net sales	$	—	$	3,586	$	5,460	$	2,218	$	(278)	$	10,986
Total cost of sales		(50)		(3,255)		(5,017)		(1,980)		328		(9,974)
Operating (loss) income		(50)		331		443		238		50		1,012
Interest expense		(2)		(156)		(2)		—		2		(158)
Interest and other income (expense), net		—		15		—		3		—		18
(Loss) income from continuing operations before income taxes		(52)		190		441		241		52		872
Benefit (provision) for income taxes		14		(49)		(115)		(63)		(14)		(227)
Equity in net income of consolidated subsidiaries		702		523		—		—		(1,225)		—
Income from continuing operations		664		664		326		178		(1,187)		645
Income from discontinued operations, net of income tax		—		—		32		—		—		32
Net income		664		664		358		178		(1,187)		677
Net income attributable to noncontrolling interests		—		—		—		—		(13)		(13)
Net income attributable to L-3	$	664	$	664	$	358	$	178	$	(1,200)	$	664
Comprehensive income attributable to L-3	$	190	$	190	$	356	$	47	$	(593)	$	190
For the year ended December 31, 2013:
Total net sales	$	—	$	3,874	$	5,555	$	2,362	$	(371)	$	11,420
Total cost of sales		(56)		(3,595)		(4,971)		(2,108)		427		(10,303)
Operating (loss) income		(56)		279		584		254		56		1,117
Interest expense		(21)		(156)		—		(1)		21		(157)
Interest and other income, net		—		15		—		5		—		20
(Loss) income from continuing operations before income taxes		(77)		138		584		258		77		980
Benefit (provision) for income taxes		21		(38)		(157)		(69)		(21)		(264)
Equity in net income of consolidated subsidiaries		807		651		—		—		(1,458)		—
Income from continuing operations		751		751		427		189		(1,402)		716
Income from discontinued operations, net of income tax		—		—		44		—		—		44
Net income		751		751		471		189		(1,402)		760
Net income attributable to noncontrolling interests		—		—		—		—		(9)		(9)
Net income attributable to L-3	$	751	$	751	$	471	$	189	$	(1,411)	$	751
Comprehensive income attributable to L-3	$	1,191	$	1,191	$469		$	164	$	(1,824)	$	1,191

Condensed Combining Statements of Cash Flows

L-3 Holdings (Parent)			L-3 Communications			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	954		$	589		$	422		$	216		$	(1,139)		$	1,042
Investing activities:
Business acquisitions, net of cash acquired		—			(320)			—			—			—			(320)
Proceeds from sale of business, net of closing date cash balances		—			14			28			276			—			318
Investments in L-3 Communications		(49)			—			—			—			49			—
Other investing activities		—			(84)			(69)			(37)			—			(190)
Net cash used in investing activities from continuing operations		(49)			(390)			(41)			239			49			(192)
Financing activities:
Repurchases of senior notes		—			(296)			—			—			—			(296)
Common stock repurchased		(740)			—			—			—			—			(740)
Dividends paid on L-3 Holdings’ common stock		(214)			—			—			—			—			(214)
Dividends paid to L-3 Holdings		—			(954)			—			—			954			—
Investments from L-3 Holdings		—			49			—			—			(49)			—
Other financing activities		49			778			(434)			(473)			152			72
Net cash used in financing activities from continuing operations		(905)			(423)			(434)			(473)			1,057			(1,178)
Effect of foreign currency exchange rate changes on cash		—			—			—			(19)			—			(19)
Net increase in cash and cash equivalents of discontinued operations		—			—			51			—			—			51
Change in cash balance in assets held for sale		—			—			1			60			—			61
Net (decrease) increase in cash		—			(224)			(1)			23			(33)			(235)
Cash and cash equivalents, beginning of the year		—			361			1			142			(62)			442
Cash and cash equivalents, end of the year	$	—		$	137		$	—		$	165		$	(95)		$	207

	L-3 Holdings (Parent)		L-3 Communications		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations		Consolidated L-3
	(in millions)
For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	1,966	$	450	$	571	$	143	$	(2,059)	$	1,071
Investing activities:
Business acquisitions, net of cash acquired		—		(57)		—		—		—		(57)
Investments in L-3 Communications		(102)		—		—		—		102		—
Other investing activities		—		(58)		(85)		(21)		—		(164)
Net cash used in investing activities from continuing operations		(102)		(115)		(85)		(21)		102		(221)
Financing activities:
Proceeds from sale of senior notes		—		996		—		—		—		996
Redemption of CODES		(935)		—				—		—		(935)
Common stock repurchased		(823)		—		—		—		—		(823)
Dividends paid on L-3 Holdings’ common stock		(208)		—		—		—		—		(208)
Dividends paid to L-3 Holdings		—		(1,966)		—		—		1,966		—
Investments from L-3 Holdings		—		102		—		—		(102)		—
Other financing activities		102		636		(530)		(164)		50		94
Net cash used in financing activities on continuing operations		(1,864)		(232)		(530)		(164)		1,914		(876)
Effect of foreign currency exchange rate changes on cash		—		—		—		(17)		—		(17)
Net increase in cash and cash equivalents of discontinued operations		—		—		46		—		—		46
Change in cash balance in assets held for sale		—		—		(1)		(60)		—		(61)
Net increase (decrease) in cash		—		103		1		(119)		(43)		(58)
Cash and cash equivalents, beginning of the year		—		258		—		261		(19)		500
Cash and cash equivalents, end of the year	$	—	$	361	$	1	$	142	$	(62)	$	442
For the year ended December 31, 2013:
Operating activities:
Net cash from operating activities from continuing operations	$	999	$	383	$	717	$	237	$	(1,180)	$	1,156
Investing activities:
Business acquisitions, net of cash acquired		—		(62)		—		—		—		(62)
Investments in L-3 Communications		(149)		—		—		—		149		—
Other investing activities		—		(89)		(84)		(21)		—		(194)
Net cash used in investing activities from continuing operations		(149)		(151)		(84)		(21)		149		(256)
Financing activities:
Common stock repurchased		(800)		—		—		—		—		(800)
Dividends paid on L-3 Holdings’ common stock		(199)		—		—		—		—		(199)
Dividends paid to L-3 Holdings		—		(999)		—		—		999		—
Investments from L-3 Holdings		—		149		—		—		(149)		—
Other financing activities		149		630		(735)		(195)		301		150
Net cash used in financing activities from continuing operations		(850)		(220)		(735)		(195)		1,151		(849)
Effect of foreign currency exchange rate changes on cash		—		—		—		(2)		—		(2)
Net increase in cash and cash equivalents of discontinued operations		—		—		102		—		—		102
Net increase in cash		—		12		—		19		120		151
Cash and cash equivalents, beginning of the year		—		246		—		242		(139)		349
Cash and cash equivalents, end of the year	$	—	$	258	$	—	$	261	$	(19)	$	500

XML

Description of Business - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2015 Segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	3

XML

Summary of Significant Accounting Policies - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Summary Of Significant Accounting Policies [Line Items]
Percentage of sales accounted for under contract accounting standards		49.00%
Percentage of fixed-price type contracts		41.00%
Percentage of cost-plus type contracts		8.00%
Increase in operating income due to changes in contract estimates		$ 49	$ 72	$ 106
Percentage of increase in consolidated operating income due to changes in contract estimates		10.00%	7.00%	9.00%
Percentage of increase in segment operating income due to changes in contract estimates		6.00%
Period of performance for contracts accounted for under the percentage-of-completion method of accounting, minimum		1 year
Goodwill impairment charges	$ 455	$ 384	$ 0	$ 0
Debt issuance costs	$ 18	18	$ 27
NSS and Logistics Solutions [Member]
Summary Of Significant Accounting Policies [Line Items]
Goodwill impairment charges		955
NSS and Logistics Solutions [Member] | Discontinued Operations [Member]
Summary Of Significant Accounting Policies [Line Items]
Goodwill impairment charges		571
NSS and Logistics Solutions [Member] | Continuing Operations [Member]
Summary Of Significant Accounting Policies [Line Items]
Goodwill impairment charges		$ 384
Minimum [Member] | Buildings and Improvements [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful life		10 years
Minimum [Member] | Machinery, Equipment, Furniture and Fixtures [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful life		3 years
Maximum [Member] | Buildings and Improvements [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful life		40 years
Maximum [Member] | Machinery, Equipment, Furniture and Fixtures [Member]
Summary Of Significant Accounting Policies [Line Items]
Property, plant and equipment, estimated useful life		10 years

XML

Summary of Significant Accounting Policies - Changes in Company's Accrued Product Warranty Costs (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Accrued product warranty costs:
Balance at January 1	$ 93	$ 99
Acquisitions during this period	1
Accruals for product warranties issued during the period	75	71
Changes to accruals for product warranties existing before January 1	2	1
Foreign currency translation adjustments	(2)	(2)
Settlements made during the period	(64)	(67)
Liabilities held for sale		(9)
Balance at December 31	$ 105	$ 93

XML

Divestitures and Acquisitions - Additional Information (Detail) € in Millions, £ in Millions, $ in Millions			3 Months Ended				12 Months Ended
	Feb. 01, 2016 USD ($)	May. 29, 2015 USD ($)	Dec. 31, 2015 USD ($)	Sep. 25, 2015 USD ($)	Jun. 26, 2015 USD ($)	Mar. 27, 2015 USD ($)	Dec. 31, 2015 USD ($)	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	Jan. 22, 2016 USD ($)	Oct. 13, 2015 USD ($)	Jul. 27, 2015 USD ($)	May. 29, 2015 EUR (€)	May. 27, 2015 USD ($)	May. 27, 2015 GBP (£)	Apr. 24, 2015 USD ($)	Mar. 27, 2015 EUR (€) € / $	Jan. 21, 2015 USD ($)	Jun. 27, 2014 USD ($)	Mar. 04, 2014 USD ($)	Dec. 19, 2013 USD ($)
Business Acquisition [Line Items]
Preliminary purchase price							$ 358
Gain (loss) related to business divestiture							(31)
Impairment loss of assets held for sale			$ 455				384	$ 0	$ 0
Amount of goodwill recognized			6,281				6,281	6,512	6,846
Subsequent Event [Member] | CACI International Inc [Member]
Business Acquisition [Line Items]
Preliminary purchase price	$ 561
Foreign Exchange Forward [Member]
Business Acquisition [Line Items]
Pre-tax gain (loss) on Derivatives							(18)	$ (8)	$ 1
MSI [Member]
Business Acquisition [Line Items]
Preliminary purchase price							318
Sale of business, base sale price		$ 318											€ 295
Estimated employee pension related liabilities | €													€ 60
Gain (loss) related to business divestiture		$ (4)			$ 4		(17)
Gain (loss) related to business divestiture after income taxes					8		(6)
Non-cash impairment charge							17
Gain on sale of assets							4
Impairment loss of assets held for sale						$ 17
Impairment loss of assets held for sale after income taxes						12
Unrealized loss related to business divestiture after income taxes						3
MSI [Member] | Foreign Currency Forward Contracts [Member]
Business Acquisition [Line Items]
Gain (loss) related to business divestiture					1
Gain (loss) related to business divestiture after income taxes					$ 1
Forward contract to sell the estimated Euro proceeds | €																	€ 285
Forward contract exchange rate | € / $																	1.0782
Unrealized pre-tax loss related to business divestiture						$ 5
MSI [Member] | Foreign Exchange Forward [Member]
Business Acquisition [Line Items]
Pre-tax gain (loss) on Derivatives							(4)
Broadcast Sports International, LLC [Member]
Business Acquisition [Line Items]
Preliminary purchase price							26
Sale of business, base sale price																$ 26
Gain (loss) related to business divestiture							(4)
Gain (loss) related to business divestiture after income taxes							(6)
Tinsley Product Line [Member]
Business Acquisition [Line Items]
Preliminary purchase price							4
Sale of business, base sale price												$ 4
Gain (loss) related to business divestiture				$ (8)			(8)
Gain (loss) related to business divestiture after income taxes				$ (6)
Klein [Member]
Business Acquisition [Line Items]
Preliminary purchase price							10
Sale of business, base sale price			10				10
Gain (loss) related to business divestiture			(2)				$ (2)
Gain (loss) related to business divestiture after income taxes			$ (2)
MITEQ, Inc. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition																		$ 41
Acquisition date							Jan. 21, 2015
Amount of goodwill recognized																		11
Goodwill deductible for income tax purposes																		$ 4
Data Tactics Corporation [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition																				$ 57
Acquisition date							Mar. 04, 2014
Mustang Technology Group, L.P. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition																					$ 54
Amount of goodwill recognized																			$ 41
Goodwill deductible for income tax purposes																			$ 41
ForceX, Inc. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition											$ 61
Acquisition date							Oct. 13, 2015
Amount of goodwill recognized											48
Goodwill deductible for income tax purposes											$ 47
CTC Aviation Group [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition														$ 236	£ 153
Acquisition date							May 27, 2015
Amount of goodwill recognized														$ 185
Advanced Technical Materials, Inc. [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition										$ 27

XML

Divestitures and Acquisitions - Statement of Operations Data Classified as Discontinued Operations (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Loss) income from discontinued operations, net of income taxes	$ (522)	$ 32	$ 44
NSS [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Product and service revenues	1,088	1,138	1,202
Operating (loss) income from discontinued operations	(523)	73	95
Interest expense allocated to discontinued operations	(20)	(20)	(20)
(Loss) income from discontinued operations before income taxes	(543)	53	75
Income tax benefit (expense)	21	(21)	(31)
(Loss) income from discontinued operations, net of income taxes	$ (522)	$ 32	$ 44

XML

Divestitures and Acquisitions - Statement of Operations Data Classified as Discontinued Operations (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Goodwill impairment charges	$ 455		$ 384	$ 0	$ 0
NSS [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Goodwill impairment charges	117	$ 491	608
NSS [Member] | Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Goodwill impairment charges	$ 115	$ 456	571
Goodwill impairment charges, after income taxes			$ 537

XML

Divestitures and Acquisitions - Schedule of Major Classes of Assets and Liabilities Included as Discontinued Operations/Held For Sale (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Assets
Current assets		$ 547
Liabilities
Current liabilities		237
Discontinued Operations, Held-for-sale [Member]
Assets
Current assets	$ 664	1,262	$ 1,213
Liabilities
Current liabilities	220	230
MSI [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Assets
Cash and cash equivalents		61
Billed receivables, net of allowances of $6		77
Contracts in process		70
Inventories		70
Other current assets		10
Current assets		288
Goodwill		231
Other assets		28
Total assets of discontinued operations/held for sale		547
Liabilities
Accounts payable, trade		31
Accrued employment costs		22
Accrued expenses		33
Advance payments and billings in excess of costs incurred		55
Other current liabilities		21
Current liabilities		162
Pension and postretirement benefits		56
Other liabilities		19
Total liabilities of discontinued operations/held for sale		237
NSS [Member] | Discontinued Operations, Held-for-sale [Member]
Assets
Current assets	201	198
Property, plant and equipment, net	25	27
Goodwill	390	989
Other assets	48	48
Total assets of discontinued operations/held for sale	664	1,262
Liabilities
Accounts payable, trade	48	36
Other current liabilities	78	75
Current liabilities	126	111
Long-term liabilities	94	119
Total liabilities of discontinued operations/held for sale	$ 220	$ 230

XML

Divestitures and Acquisitions - Components of Loss of Business Divestitures, Related Sales Proceeds Received and Sales Included in Continuing Operations (Detail) - USD ($) $ in Millions		3 Months Ended			12 Months Ended
	May. 29, 2015	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total, Loss Related to Business Divestiture					$ (31)
Total, Sale Proceeds Received					358
Total, Sales					209
MSI [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total, Loss Related to Business Divestiture	$ (4)			$ 4	(17)
Total, Sale Proceeds Received					318
Total, Sales					185
Broadcast Sports International, LLC [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total, Loss Related to Business Divestiture					(4)
Total, Sale Proceeds Received					26
Total, Sales					7
Tinsley Product Line [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total, Loss Related to Business Divestiture			$ (8)		(8)
Total, Sale Proceeds Received					4
Total, Sales					9
Klein [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Total, Loss Related to Business Divestiture		$ (2)			(2)
Total, Sale Proceeds Received					10
Total, Sales					$ 8

XML

Divestitures and Acquisitions - Schedule of Major Classes of Assets and Liabilities Included as Discontinued Operations/Held For Sale (Parenthetical) (Detail) $ in Millions	Dec. 31, 2014 USD ($)
MSI [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Billed receivables, allowances	$ 6

XML

Divestitures and Acquisitions - Schedule of Net Sales and Income Before Income Taxes for MSI, BSI, Tinsley Product Line and Klein (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales	$ 209
MSI, BSI, Tinsley Product Line and Klein [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales	$ 209	$ 596	$ 569
Income (loss) before income taxes		$ 27	$ (3)

XML

Divestitures and Acquisitions - Schedule of Net Sales and Income before Income Taxes for L-3 ForceX, L-3 CTC and Miteq (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Business Acquisition [Line Items]
Net sales	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	$ 10,466	$ 10,986	$ 11,420
Income before income taxes									322	$ 872	$ 980
ForceX Inc L3 CTC Ltd L3 Miteq [Member]
Business Acquisition [Line Items]
Net sales									103
Income before income taxes									$ 5

XML

Divestitures and Acquisitions - Unaudited Pro Forma Statements of Operations Data (Detail) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Business Combinations [Abstract]
Pro forma net sales	$ 10,523	$ 11,146
Pro forma income from continuing operations	302	657
Pro forma net (loss) income attributable to L-3	$ (235)	$ 676
Pro forma diluted earnings per share from continuing operations	$ 3.50	$ 7.34
Pro forma diluted (loss) earnings per share	$ (2.87)	$ 7.70

XML

Contracts in Process - Components of Contracts in Process (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Components of contracts in process
Unbilled contract receivables, gross	$ 2,097	$ 2,149
Unliquidated progress payments	(869)	(887)
Unbilled contract receivables, net	1,228	1,262
Inventoried contract costs, gross	975	981
Unliquidated progress payments	(122)	(95)
Inventoried contract costs, net	853	886
Total contracts in process	$ 2,081	$ 2,148

XML

Contracts in Process - Additional Information (Detail)	Dec. 31, 2015
Contractors [Abstract]
Percentage of unbilled contract receivables, net billed and collected within one year	92.00%
Percentage of incurred costs billed, minimum	75.00%
Percentage of incurred costs billed, maximum	80.00%

XML

Contracts in Process - General and Administrative, Independent Research and Development and Bids and Proposal Costs (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Amounts included in inventoried contract costs at beginning of the year	$ 135	$ 133	$ 104
Contract costs incurred:
IRAD and B&P	280	266	279
Other G&A	812	805	817
Total	1,092	1,071	1,096
Amounts charged to cost of sales	(1,065)	(1,069)	(1,067)
Amounts included in inventoried contract costs at end of the year	$ 162	$ 135	$ 133

XML

Contracts in Process - Selling, General and Administrative Expenses and Research and Development Expenses (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Inventory Disclosure [Abstract]
Selling, general and administrative expenses	$ 259	$ 295	$ 310
Research and development expenses	56	67	76
Total	$ 315	$ 362	$ 386

XML

Inventories - Inventories at Lower of Cost or Market (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Inventory Disclosure [Abstract]
Raw materials, components and sub-assemblies	$ 164	$ 127
Work in process	103	97
Finished goods	66	64
Total	$ 333	$ 288

XML

Goodwill and Identifiable Intangible Assets - Additional Information (Detail) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015 USD ($) Employees	Sep. 30, 2015 USD ($)	Dec. 31, 2015 USD ($) Employees	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Goodwill [Line Items]
Approximate number of employees | Employees	38,000		38,000
Goodwill impairment charges	$ 455		$ 384	$ 0	$ 0
Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Continuing Operations [Member] | Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges	117	$ 491	608
NSS [Member] | Continuing Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges	9		37
NSS [Member] | Discontinued Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges	115	$ 456	571
NSS and Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			955
NSS and Logistics Solutions [Member] | Continuing Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges			384
NSS and Logistics Solutions [Member] | Discontinued Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges			571
Aerospace Systems [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Aerospace Systems [Member] | Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges	$ 338		$ 338

XML

Goodwill and Identifiable Intangible Assets - Changes in Goodwill by Segment (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill [Line Items]
Goodwill			$ 6,570	$ 6,904
Accumulated impairment losses			(58)	(58)
Balance, Beginning			6,512	6,846
Business acquisitions			244	(3)
Business divestitures			(20)	(1)
Impairment charges	$ (455)		(384)	0	$ 0
Foreign currency translation adjustments			(99)	(99)
Assets held for sale				(231)
Goodwill	6,723		6,723	6,570	6,904
Accumulated impairment losses	(442)		(442)	(58)	(58)
Balance, Ending	6,281		6,281	6,512	6,846
NSS [Member]
Goodwill [Line Items]
Business retained from NSS divestiture			28
Impairment charges	(117)	$ (491)	(608)
Electronic Systems [Member]
Goodwill [Line Items]
Goodwill			3,816	4,128
Accumulated impairment losses			(43)	(43)
Balance, Beginning			3,773	4,085
Business acquisitions			233	(3)
Business divestitures			(20)	(1)
Impairment charges			(26)
Foreign currency translation adjustments			(61)	(77)
Assets held for sale				(231)
Goodwill	3,994		3,994	3,816	4,128
Accumulated impairment losses	(69)		(69)	(43)	(43)
Balance, Ending	3,925		3,925	3,773	4,085
Electronic Systems [Member] | NSS [Member]
Goodwill [Line Items]
Business retained from NSS divestiture			26
Aerospace Systems [Member]
Goodwill [Line Items]
Goodwill			$ 1,730	$ 1,751
Accumulated impairment losses
Balance, Beginning			$ 1,730	$ 1,751
Business acquisitions
Business divestitures
Impairment charges			$ (338)
Foreign currency translation adjustments			(39)	$ (21)
Assets held for sale
Goodwill	1,691		1,691	$ 1,730	$ 1,751
Accumulated impairment losses	(338)		(338)
Balance, Ending	1,353		$ 1,353	$ 1,730	$ 1,751
Aerospace Systems [Member] | NSS [Member]
Goodwill [Line Items]
Business retained from NSS divestiture
Communication Systems [Member]
Goodwill [Line Items]
Goodwill			$ 1,024	1,025
Accumulated impairment losses			(15)	(15)
Balance, Beginning			1,009	$ 1,010
Business acquisitions			$ 11
Business divestitures
Impairment charges			$ (20)
Foreign currency translation adjustments			1	$ (1)
Assets held for sale
Goodwill	1,038		1,038	$ 1,024	1,025
Accumulated impairment losses	(35)		(35)	(15)	(15)
Balance, Ending	$ 1,003		1,003	$ 1,009	$ 1,010
Communication Systems [Member] | NSS [Member]
Goodwill [Line Items]
Business retained from NSS divestiture			$ 2

XML

Goodwill and Identifiable Intangible Assets - Changes in Goodwill by Segment (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill [Line Items]
Goodwill impairment charges	$ 455		$ 384	$ 0	$ 0
NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges	117	$ 491	608
NSS [Member] | Discontinued Operations [Member]
Goodwill [Line Items]
Goodwill impairment charges	$ 115	$ 456	$ 571

XML

Goodwill and Identifiable Intangible Assets - Schedule of Adjustments Related to Goodwill Impairment Charges (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill [Line Items]
Goodwill impairment charges	$ 455		$ 384	$ 0	$ 0
NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges	117	$ 491	608
Re-Allocation of Goodwill for Business Retained National Security Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			9
NSS and Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			955
Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Continuing Operations [Member] | NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges	9		37
Continuing Operations [Member] | Re-Allocation of Goodwill for Business Retained National Security Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			9
Continuing Operations [Member] | NSS and Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			384
Continuing Operations [Member] | Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			338
Discontinued Operations [Member] | NSS [Member]
Goodwill [Line Items]
Goodwill impairment charges	$ 115	$ 456	571
Discontinued Operations [Member] | NSS and Logistics Solutions [Member]
Goodwill [Line Items]
Goodwill impairment charges			$ 571

XML

Goodwill and Identifiable Intangible Assets - Identifiable Intangible Assets (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	15 years
Gross Carrying Amount	$ 547	$ 508
Accumulated Amortization	348	313
Net Carrying Amount	$ 199	195
Customer Contractual Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	16 years
Gross Carrying Amount	$ 370	355
Accumulated Amortization	246	221
Net Carrying Amount	$ 124	134
Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	11 years
Gross Carrying Amount	$ 156	132
Accumulated Amortization	91	82
Net Carrying Amount	$ 65	50
Other [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	18 years
Gross Carrying Amount	$ 21	21
Accumulated Amortization	11	10
Net Carrying Amount	$ 10	$ 11

XML

Goodwill and Identifiable Intangible Assets - Amortization Expense (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 35	$ 39	$ 35

XML

Goodwill and Identifiable Intangible Assets - Estimated Amortization Expense (Detail) $ in Millions	Dec. 31, 2015 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Estimated amortization expense, 2016	$ 33
Estimated amortization expense, 2017	31
Estimated amortization expense, 2018	26
Estimated amortization expense, 2019	23
Estimated amortization expense, 2020	$ 20

XML

Other Current Liabilities and Other Liabilities - Other Current Liabilities (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Other Current Liabilities:
Accruals for pending and threatened litigation	$ 6	$ 36
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	82	75
Accrued product warranty costs	70	59
Accrued interest	45	46
Deferred revenues	32	30
Other	159	143
Total other current liabilities	$ 394	$ 389

XML

Other Current Liabilities and Other Liabilities - Other Current Liabilities (Parenthetical) (Detail) $ in Millions	1 Months Ended	3 Months Ended
	Nov. 30, 2015 $ / Product	Dec. 31, 2015 USD ($)
Accrued Liabilities And Deferred Credits [Line Items]
Assumed average unit purchase price to estimate product returns reserve | $ / Product	500
Electronic Systems [Member]
Accrued Liabilities And Deferred Credits [Line Items]
Reduction to net sales | $		$ 20

XML

Other Current Liabilities and Other Liabilities - Other Liabilities (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Other Liabilities:
Non-current income taxes payable	$ 161	$ 185
Deferred compensation	45	41
Accrued workers' compensation	38	38
Accrued product warranty costs	35	34
Notes payable and capital lease obligations	10	1
Other	79	61
Total other liabilities	$ 368	$ 360

XML

Property, Plant and Equipment - Property, Plant and Equipment (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Property, Plant and Equipment [Abstract]
Land	$ 60	$ 62
Buildings and improvements	431	420
Machinery, equipment, furniture and fixtures	1,736	1,670
Leasehold improvements	343	309
Gross property, plant and equipment	2,570	2,461
Accumulated depreciation and amortization	(1,473)	(1,400)
Property, plant and equipment, net	$ 1,097	$ 1,061

XML

Debt - Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Carrying amount of long-term debt	$ 3,642	$ 3,939
Long-term debt, current and noncurrent
Current portion of long-term debt	(499)
Carrying amount of long-term debt, excluding current portion	3,143	3,939
Carrying amount of long-term debt	$ 3,642	$ 3,939
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Borrowings under Amended and Restated Revolving Credit Facility
3.95% Senior Notes due 2016	$ 500	$ 500
1.50% Senior Notes due 2017	350	350
5.20% Senior Notes due 2019	1,000	1,000
4.75% Senior Notes due 2020	800	800
4.95% Senior Notes due 2021	650	650
3.95% Senior Notes due 2024	350	650
Subtotal	3,650	3,950
Long-term debt, current and noncurrent
Current portion of long-term debt	(499)
Carrying amount of long-term debt, excluding current portion	3,143	3,939
L-3 Communications Holdings, Inc. [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	3,650	3,950
Unamortized discounts	(8)	(11)
Carrying amount of long-term debt	3,642	3,939
Long-term debt, current and noncurrent
Current portion of long-term debt	(499)
Carrying amount of long-term debt, excluding current portion	3,143	3,939
Carrying amount of long-term debt	$ 3,642	$ 3,939

XML

Debt - Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt (Parenthetical) (Detail) - USD ($) $ in Millions			12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Debt Instrument [Line Items]
Repayments under the Credit Facility			$ 1,194	$ 1,367	$ 1,893
Proceeds under the Credit Facility			1,194	1,367	$ 1,893
Available borrowings under Credit Facility	$ 1,000	$ 1,000	1,000	1,000
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Repayments under the Credit Facility			1,194
Proceeds under the Credit Facility			1,194
Available borrowings under Credit Facility	$ 1,000	$ 1,000	$ 1,000	$ 1,000
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2016 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	3.95%	3.95%	3.95%	3.95%
Debt instrument maturity period	2016	2016
L-3 Communications Corporation [Member] | 1.50% Senior Notes due 2017 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	1.50%	1.50%	1.50%	1.50%
Debt instrument maturity period	2017	2017
L-3 Communications Corporation [Member] | 5.20% Senior Notes due 2019 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	5.20%	5.20%	5.20%	5.20%
Debt instrument maturity period	2019	2019
L-3 Communications Corporation [Member] | 4.75% Senior Notes due 2020 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	4.75%	4.75%	4.75%	4.75%
Debt instrument maturity period	2020	2020
L-3 Communications Corporation [Member] | 4.95% Senior Notes due 2021 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	4.95%	4.95%	4.95%	4.95%
Debt instrument maturity period	2021	2021
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	3.95%	3.95%	3.95%	3.95%
Debt instrument maturity period	2024	2024

XML

Debt - Additional Information (Detail) - USD ($)				12 Months Ended
	Dec. 22, 2015	May. 13, 2014	Feb. 03, 2012	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 18, 2015	Dec. 07, 2015	Jul. 29, 2005
Debt Instrument [Line Items]
Uncommitted incremental revolving facilities and additional term loan facilities			$ 500,000,000
Base rate above the latest federal funds rate			0.50%
Base rate above a Eurodollar Rate			1.00%
Repurchases of senior notes				$ 296,000,000
Debt retirement charge				$ (1,000,000)
Conversion of converted securities					$ 161,000,000
Maximum consolidated senior leverage ratio under revolving credit facility covenants				400.00%
Minimum consolidated interest coverage ratio under revolving credit facility covenants				300.00%
Maximum consolidated interest coverage ratio under revolving credit facility covenants				350.00%
Minimum aggregate amount of indebtedness, swap contracts or guarantees to trigger cross default provisions				$ 50,000,000
Maximum days to cure defaults triggering cross default provisions				10 days
Minimum aggregate amount of senior notes accelerated to trigger cross default provisions				$ 100,000,000
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Repurchases of senior notes				296,000,000
Debt retirement charge				$ (1,000,000)
Ownership percentage				100.00%
L-3 Communications Holdings, Inc. [Member]
Debt Instrument [Line Items]
Interest expense recognized					$ 2,000,000	$ 21,000,000
3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 [Member]
Debt Instrument [Line Items]
Debt instrument, early tender offering date				Dec. 18, 2015
3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Redemption price for CODES							$ 986.57
Principal amount of CODES							$ 1,000
Repurchases of senior notes	$ 296,000,000
Debt retirement charge				$ 1,000,000
3.95% Senior Notes due 2024 [Member] | L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Principal amount of CODES				$ 650,000,000
Interest rate on Senior Notes				3.95%	3.95%
Redemption date				May 28, 2024
CODES Due 2035 [Member]
Debt Instrument [Line Items]
Redemption price for CODES		$ 1,000
Principal amount of CODES		1,000
Sale of 3% Convertible Contingent Debt Securities by L-3 Holdings									$ 700,000,000
Interest rate on Senior Notes				3.00%
Conversion of converted securities		935,000,000
Redemption date				Jun. 02, 2014
Excess of conversion value over fair value of the debt component		$ 161,000,000
Minimum [Member]
Debt Instrument [Line Items]
Applicable spread on base rate option			0.25%
Applicable spread on Eurodollar Rate option			1.25%
Commitment fees calculated on the daily amounts of the available unused commitments			0.15%
Letter of credit fees for performance and commercial letters of credit			0.675%
Letter of credit fees for financial letters of credit			1.25%
Minimum [Member] | 3.95% Senior Notes due 2024 [Member] | L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Redemption date				Feb. 28, 2024
Maximum [Member]
Debt Instrument [Line Items]
Applicable spread on base rate option			1.00%
Applicable spread on Eurodollar Rate option			2.00%
Commitment fees calculated on the daily amounts of the available unused commitments			0.325%
Letter of credit fees for performance and commercial letters of credit			1.20%
Letter of credit fees for financial letters of credit			2.00%
Maximum [Member] | 3.95% Notes due 2024, 1.50% Notes due 2017 and 3.95% Notes due 2016 [Member]
Debt Instrument [Line Items]
Debt instrument cash tender offer aggregate principal amount								$ 300,000,000
Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Total aggregate borrowings under revolving credit facility			$ 1,000,000,000
Revolving credit facility expiration date				Feb. 03, 2017

XML

Debt - Information Regarding Outstanding Senior Subordinated Notes (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 18, 2015
Debt Instrument [Line Items]
Net Cash Proceeds		$ 996,000,000
3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Amount Issued			$ 1,000
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Net Cash Proceeds		$ 996,000,000
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2016 [Member]
Debt Instrument [Line Items]
Date of Issuance	Nov. 22, 2011
Amount Issued	$ 500,000,000
Discount	4,000,000
Net Cash Proceeds	$ 491,000,000
Effective Interest Rate	4.11%
Redemption at Treasury Rate	0.50%
L-3 Communications Corporation [Member] | 1.50% Senior Notes due 2017 [Member]
Debt Instrument [Line Items]
Date of Issuance	May 28, 2014
Amount Issued	$ 350,000,000
Discount	1,000,000
Net Cash Proceeds	$ 347,000,000
Effective Interest Rate	1.55%
Redemption at Treasury Rate	0.10%
L-3 Communications Corporation [Member] | 5.20% Senior Notes due 2019 [Member]
Debt Instrument [Line Items]
Date of Issuance	Oct. 02, 2009
Amount Issued	$ 1,000,000,000
Discount	4,000,000
Net Cash Proceeds	$ 987,000,000
Effective Interest Rate	5.25%
Redemption at Treasury Rate	0.30%
L-3 Communications Corporation [Member] | 4.75% Senior Notes due 2020 [Member]
Debt Instrument [Line Items]
Date of Issuance	May 21, 2010
Amount Issued	$ 800,000,000
Discount	3,000,000
Net Cash Proceeds	$ 790,000,000
Effective Interest Rate	4.79%
Redemption at Treasury Rate	0.25%
L-3 Communications Corporation [Member] | 4.95% Senior Notes due 2021 [Member]
Debt Instrument [Line Items]
Date of Issuance	Feb. 07, 2011
Amount Issued	$ 650,000,000
Discount	4,000,000
Net Cash Proceeds	$ 639,000,000
Effective Interest Rate	5.02%
Redemption at Treasury Rate	0.25%
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Date of Issuance	May 28, 2014
Amount Issued	$ 650,000,000
Discount	3,000,000
Net Cash Proceeds	$ 641,000,000
Effective Interest Rate	4.02%
Redemption at Treasury Rate	0.20%

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Debt - Information Regarding Outstanding Senior Subordinated Notes (Parenthetical) (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Debt Instrument [Line Items]
Net cash proceeds from senior unsecured notes	$ 988
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Redemption price as percentage of principal amount	101.00%
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2016 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	3.95%	3.95%
Senior Notes due	Nov. 15, 2016
L-3 Communications Corporation [Member] | 1.50% Senior Notes due 2017 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	1.50%	1.50%
Senior Notes due	May 28, 2017
L-3 Communications Corporation [Member] | 5.20% Senior Notes due 2019 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	5.20%	5.20%
Senior Notes due	Oct. 15, 2019
L-3 Communications Corporation [Member] | 4.75% Senior Notes due 2020 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	4.75%	4.75%
Senior Notes due	Jul. 15, 2020
L-3 Communications Corporation [Member] | 4.95% Senior Notes due 2021 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	4.95%	4.95%
Senior Notes due	Feb. 15, 2021
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Interest rate on Senior Notes	3.95%	3.95%
Senior Notes due	May 28, 2024
L-3 Communications Corporation [Member] | Minimum [Member]
Debt Instrument [Line Items]
Redemption price as percentage of principal amount	100.00%
L-3 Communications Corporation [Member] | Minimum [Member] | 3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Senior Notes due	Feb. 28, 2024

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Accumulated Other Comprehensive (Loss) Income (AOCI) - Summary of Amounts Reclassified from AOCI into Net Income (Detail) - USD ($) $ in Millions		3 Months Ended								12 Months Ended
	May. 29, 2015	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance					$ (584)				$ (110)	$ (584)	$ (110)	$ (550)
Other comprehensive (loss) income before reclassifications, net of tax										(95)	(490)	388
Amounts reclassified from AOCI, net of tax										105	16	52
Total other comprehensive income (loss)										10	(474)	440
Ending Balance		$ (574)				$ (584)				(574)	$ (584)	$ (110)
Loss related to business divestitures										(31)
Cost of sales-products										(6,007)	$ (6,161)	$ (6,366)
Income from continuing operations before income taxes										322	872	980
Provision for income taxes										(25)	(227)	(264)
Income from continuing operations		(56)	$ 128	$ 120	105	205	$ 146	$ 131	163	297	645	716
MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures	$ (4)			$ 4						(17)
Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations										(105)	(16)	(52)
Foreign Currency Translation Adjustment [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance					19				142	19	142	167
Other comprehensive (loss) income before reclassifications, net of tax										(161)	$ (123)	$ (25)
Amounts reclassified from AOCI, net of tax										41
Total other comprehensive income (loss)										(120)	$ (123)	$ (25)
Ending Balance		(101)				19				(101)	19	142
Foreign Currency Translation Adjustment [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations before income taxes										(41)
Income from continuing operations										(41)
Foreign Currency Translation Adjustment [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures										(41)
Unrealized Gains (Losses) on Hedging Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance					(5)				1	(5)	1	3
Other comprehensive (loss) income before reclassifications, net of tax										(15)	(13)	(1)
Amounts reclassified from AOCI, net of tax										12	7	(1)
Total other comprehensive income (loss)										(3)	(6)	(2)
Ending Balance		(8)				(5)				(8)	(5)	1
Unrealized Gains (Losses) on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations before income taxes										(18)	(8)	1
Provision for income taxes										6	1
Income from continuing operations										(12)	(7)	1
Unrealized Gains (Losses) on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures										(2)
Unrealized Gains (Losses) on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member] | Other [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of sales-products										(16)	(8)	1
Unrecognized (Losses) Gains and Prior Service Cost, Net [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance					$ (598)				$ (253)	(598)	(253)	(720)
Other comprehensive (loss) income before reclassifications, net of tax										81	(354)	414
Amounts reclassified from AOCI, net of tax										52	9	53
Total other comprehensive income (loss)										133	(345)	467
Ending Balance		$ (465)				$ (598)				(465)	(598)	(253)
Amortization of Defined Benefit Pension Items [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net loss										(67)	(15)	(83)
Income from continuing operations before income taxes										(81)	(15)	(83)
Provision for income taxes										29	6	30
Income from continuing operations										(52)	$ (9)	$ (53)
Amortization of Defined Benefit Pension Items [Member] | Amount Reclassified from AOCI [Member] | MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures										$ (14)

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Equity - Additional Information (Detail) - USD ($)	2 Months Ended	12 Months Ended
	Feb. 19, 2016	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 04, 2014	Feb. 05, 2013
Class of Stock [Line Items]
Aggregate amount of repurchased shares		$ 740,000,000	$ 823,000,000	$ 800,000,000
Treasury Stock [Member]
Class of Stock [Line Items]
Aggregate amount of repurchased shares		$ 740,000,000	$ 823,000,000	$ 800,000,000
Share Repurchase Program February 5, 2013 [Member]
Class of Stock [Line Items]
Amount of shares authorized to be repurchased						$ 1,500,000,000
Average price per share of repurchased shares		$ 116.13
Aggregate amount of repurchased shares		$ 740,000,000
Share Repurchase Program February 5, 2013 [Member] | Treasury Stock [Member]
Class of Stock [Line Items]
Number of common shares repurchased		6,400,000
Share Repurchase Program December 4, 2014 [Member]
Class of Stock [Line Items]
Amount of shares authorized to be repurchased					$ 1,500,000,000
Remaining authorized amount of share repurchase programs		$ 806,000,000
Share Repurchase Program December 4, 2014 [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Average price per share of repurchased shares	$ 114.60
Aggregate amount of repurchased shares	$ 130,000,000
Remaining authorized amount of share repurchase programs	$ 676,000,000
Share Repurchase Program December 4, 2014 [Member] | Treasury Stock [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Number of common shares repurchased	1,133,885

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Fair Value Measurements - Company's Assets and Liabilities at Fair Value on Recurring Basis (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Level 1 [Member]
Assets
Cash equivalents	$ 187	$ 416
Derivatives (foreign currency forward contracts)
Total assets	$ 187	$ 416
Liabilities
Derivatives (foreign currency forward contracts)
Level 2 [Member]
Assets
Cash equivalents
Derivatives (foreign currency forward contracts)	$ 2	$ 5
Total assets	2	5
Liabilities
Derivatives (foreign currency forward contracts)	$ 16	$ 11
Level 3 [Member]
Assets
Cash equivalents
Derivatives (foreign currency forward contracts)
Total assets
Liabilities
Derivatives (foreign currency forward contracts)

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Financial Instruments - Carrying Amounts and Estimated Fair Values of Company's Long-Term Debt and Foreign Currency Forward Contracts (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Carrying Amount	$ 3,642	$ 3,939
Senior Notes, Estimated Fair Value	3,754	4,178
Estimated Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency forward contracts	(14)	(6)
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency forward contracts	$ (14)	$ (6)

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Derivative Financial Instruments - Notional Amounts of Company's Outstanding Foreign Currency Forward Contracts by Currency (Detail)	Dec. 31, 2015 USD ($)
Derivative [Line Items]
Notional amount of foreign currency forward contracts	$ 265,000,000
Canadian Dollar [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	112,000,000
U.S. Dollar [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	86,000,000
Euro [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	37,000,000
British Pound [Member]
Derivative [Line Items]
Notional amount of foreign currency forward contracts	$ 30,000,000

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Derivative Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Derivative [Line Items]
Estimated net amount of existing (losses) expected to be reclassified into income within the next 12 months	$ 12
Foreign Exchange Forward [Member]
Derivative [Line Items]
Pre-tax gain (loss) on Derivatives	$ (18)	$ (8)	$ 1
Foreign Currency Forward Contracts [Member]
Derivative [Line Items]
Foreign currency forward contracts, maturity year	2020

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Derivative Financial Instruments - Location of Company's Derivative Instruments Recorded at Fair Value on the Consolidated Balance Sheets (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Other Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	$ 15	$ 10
Other Current Liabilities [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	15	10
Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	1	1
Other Liabilities [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	1	1
Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	1	4
Other Current Assets [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	1	4
Other Assets [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	1	1
Other Assets [Member] | Foreign Currency Forward Contracts [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	$ 1	$ 1

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Derivative Financial Instruments - Location of Company's Derivative Instruments Recorded at Fair Value on the Consolidated Balance Sheets (Parenthetical) (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Other Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative liabilities held for sale	$ 15	$ 10
Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative assets held for sale	$ 1	4
Designated as Hedging Instruments [Member] | Other Current Liabilities [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Derivatives, Fair Value [Line Items]
Derivative liabilities held for sale		2
Designated as Hedging Instruments [Member] | Other Current Assets [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Derivatives, Fair Value [Line Items]
Derivative assets held for sale		$ 2

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L-3 Holdings' Earnings (Loss) Per Common Share - Reconciliation of Basic and Diluted Earnings per Share (EPS) (Detail) - USD ($) $ / shares in Units, shares in Millions, $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Reconciliation of net (loss) income:
Net (loss) income	$ (162)	$ (296)	$ 124	$ 109	$ 207	$ 157	$ 141	$ 172	$ (225)	$ 677	$ 760
Net income from continuing operations attributable to noncontrolling interests									(15)	(13)	(9)
Net (loss) income attributable to L-3 Holdings common shareholders	$ (166)	$ (299)	$ 120	$ 105	$ 203	$ 154	$ 137	$ 170	(240)	664	751
Earnings (loss) attributable to L-3 Holdings' common shareholders:
Continuing operations									282	632	707
Discontinued operations, net of income tax									(522)	32	44
Net (loss) income attributable to L-3 Holdings common shareholders									$ (240)	$ 664	$ 751
Basic:
Weighted average common shares outstanding									80.7	85.4	89.4
Basic (loss) earnings per share:
Continuing operations	$ (0.76)	$ 1.56	$ 1.41	$ 1.23	$ 2.38	$ 1.68	$ 1.47	$ 1.87	$ 3.49	$ 7.40	$ 7.91
Discontinued operations, net of income tax									(6.46)	0.38	0.49
Net (loss) income	(2.11)	(3.74)	1.46	1.28	2.41	1.81	1.59	1.97	$ (2.97)	$ 7.78	$ 8.40
Common and potential common shares:
Weighted average common shares outstanding									80.7	85.4	89.4
Assumed purchase of common shares for treasury									(2.7)	(3.1)	(4.5)
Assumed conversion of the CODES										0.8	0.2
Common and potential common shares									81.9	87.8	91.1
Diluted (loss) earnings per share:
Continuing operations	(0.76)	1.54	1.39	1.20	2.34	1.65	1.42	1.80	$ 3.44	$ 7.20	$ 7.76
Discontinued operations, net of income tax									(6.37)	0.36	0.48
Net (loss) income	$ (2.11)	$ (3.68)	$ 1.44	$ 1.25	$ 2.36	$ 1.78	$ 1.53	$ 1.90	$ (2.93)	$ 7.56	$ 8.24
Stock Options [Member]
Common and potential common shares:
Common and potential common shares									2.4	3.0	3.9
Unvested Restricted Stock Awards [Member]
Common and potential common shares:
Common and potential common shares									1.3	1.6	1.8
Performance Unit Awards [Member]
Common and potential common shares:
Common and potential common shares									0.1	0.1	0.1
Employee Stock Purchase Plan Contributions [Member]
Common and potential common shares:
Common and potential common shares									0.1		0.2

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L-3 Holdings' Earnings (Loss) Per Common Share - Reconciliation of Basic and Diluted Earnings per Share (EPS) (Parenthetical) (Detail) - CODES Due 2035 [Member] - $ / shares	12 Months Ended
	Dec. 31, 2015	Jun. 18, 2014	Dec. 31, 2013
Subsidiary, Sale of Stock [Line Items]
Conversion price of L-3 Holdings' CODES		$ 88.71	$ 90.24
Debt instruments, retired date	Jun. 20, 2014

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L-3 Holdings' Earnings (Loss) Per Common Share - Additional Information (Detail) - shares shares in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Earnings Per Share [Abstract]
Shares excluded from computation of diluted earnings per share	0.6	0.5	0.9

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Income Taxes - Income from Continuing Operations Before Income Taxes (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Domestic	$ 192	$ 707	$ 783
Foreign	130	165	197
Income from continuing operations before income taxes	$ 322	$ 872	$ 980

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Income Taxes - Components of Current and Deferred Portions of Provision for Income Taxes on Continuing Operations (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Current income tax provision:
Federal	$ 60	$ 78	$ 159
State and local	5	1	29
Foreign	26	35	39
Subtotal	91	114	227
Deferred income tax provision/(benefit):
Federal	(67)	101	31
State and local	(1)	11	(1)
Foreign	2	1	7
Subtotal	(66)	113	37
Total provision for income taxes	$ 25	$ 227	$ 264

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Income Taxes - Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Statutory federal income tax rate	35.00%	35.00%	35.00%
State and local income taxes, net of federal income tax benefit	2.00%	2.10%	1.90%
Foreign income taxes	(14.20%)	(3.60%)	(1.80%)
Manufacturing benefits	(3.70%)	(1.70%)	(1.90%)
Research and experimentation and other tax credits	(12.90%)	(4.30%)	(3.80%)
Resolution of tax contingencies	(2.80%)	(1.00%)	(1.10%)
Tax deductible dividends	(2.30%)	(0.80%)	(0.30%)
Goodwill Impairment	6.60%
Other, net	0.10%	0.30%	(1.10%)
Effective income tax rate on continuing operations	7.80%	26.00%	26.90%

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Income Taxes - Reconciliation of Statutory Federal Income Tax Rate to Effective Income Tax Rate on Continuing Operations (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Non-cash goodwill impairment charges	$ 455	$ 384	$ 0	$ 0
Deferred tax benefit		$ (66)	$ 113	$ 37
Effective income tax rate excluding goodwill impairment charge and related income tax benefit		20.50%

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Income Taxes - Components of Net Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Deferred tax assets:
Inventoried costs	$ 56	$ 87
Compensation and benefits	147	143
Pension and postretirement benefits	354	402
Loss carryforwards	12	15
Tax credit carryforwards	6	10
Other	79	80
Gross deferred tax assets	654	737
Less: valuation allowance	(9)	(9)
Net deferred tax assets	645	728
Deferred tax liabilities:
Goodwill and other intangible assets	(675)	(728)
Income recognition on contracts in process	(36)	(39)
Property, plant and equipment	(94)	(93)
Other	(56)	(88)
Gross deferred tax liabilities	(861)	(948)
Total net deferred tax liabilities	$ (216)	$ (220)

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Income Taxes - Classification of Deferred Tax Assets and Liabilities (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Income Tax Disclosure [Abstract]
Non-current deferred tax assets	$ 3	$ 15
Non-current deferred tax liabilities	(219)	(235)
Total net deferred tax liabilities	$ (216)	$ (220)

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Income Taxes - Summary of Loss and Tax Credit Carryforwards (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Capital loss carryforwards, Tax Effected	$ 12	$ 15
Capital loss carryforwards, Valuation Allowance, Tax Effected	9	9
Total loss carryforwards, Tax Effected	12
Tax credit carryforwards, Tax Effected	6	$ 10
Tax credit carryforwards, Valuation Allowances Tax Effected	3
Net capital gains from business divestitures	(31)
Federal [Member]
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Net operating loss carryforwards, Gross	11
Capital loss carryforwards, Tax Effected	4
Capital loss carryforwards, Valuation Allowance, Gross	5
Capital loss carryforwards, Valuation Allowance, Tax Effected	$ 2
Net operating loss carryforwards, Expiration Period, Start	2026
Net operating loss carryforwards, Expiration Period, End	2034
Foreign [Member]
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Net operating loss carryforwards, Gross	$ 16
Capital loss carryforwards, Tax Effected	4
Capital loss carryforwards, Valuation Allowance, Gross	4
Capital loss carryforwards, Valuation Allowance, Tax Effected	1
Tax credit carryforwards, Gross	1
Tax credit carryforwards, Tax Effected	1
State [Member]
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Net operating loss carryforwards, Gross	118
Capital loss carryforwards, Tax Effected	2
Capital loss carryforwards, Valuation Allowance, Gross	50
Capital loss carryforwards, Valuation Allowance, Tax Effected	$ 1
Net operating loss carryforwards, Expiration Period, Start	2017
Net operating loss carryforwards, Expiration Period, End	2035
Tax credit carryforwards, Gross	$ 7
Tax credit carryforwards, Tax Effected	5
Tax credit carryforwards, Valuation Allowances Gross	5
Tax credit carryforwards, Valuation Allowances Tax Effected	$ 3
Tax credit carryforwards, Expiration Periods, Start	2017
Tax credit carryforwards, Expiration Periods, End	2035
Capital Loss Carryforwards [Member]
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Net operating loss carryforwards, Gross	$ 5
Capital loss carryforwards, Tax Effected	2
Capital loss carryforwards, Valuation Allowance, Gross	5
Capital loss carryforwards, Valuation Allowance, Tax Effected	$ 2
Net operating loss carryforwards, Expiration Period, Start	2016
Net operating loss carryforwards, Expiration Period, End	2017
Net capital gains from business divestitures	$ 9

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Income Taxes - Summary of Loss and Tax Credit Carryforwards (Parenthetical) (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($)
Capital Loss Carryforwards [Member]
Summary Of Losses And Tax Credit Carryforwards [Line Items]
Reduction in valuation allowance for capital loss carryforwards	$ 3

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Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Income Tax Disclosure [Abstract]
Unrecognized tax benefits	$ 140	$ 169	$ 155	$ 127
Unrecognized tax benefits that would reduce the effective income tax rate	93
Anticipated decrease in unrecognized tax benefits over the next 12 months	8
Reversal of previously accrued income tax expense, including interest and penalties	9
Change in previously accrued income tax expenses related to tax returns		8	$ 10
Accrued potential interest included within current and non-current income taxes payable	18	15
Accrued potential interest included within current and non-current income taxes payable after income taxes	11	9
Potential penalties	9	9
Expense for interest related items included in income taxes expenses	2	$ 2
Undistributed earnings of non-U.S. Companies	661
Deferred taxes for the repatriation of earnings from certain subsidiaries	$ 17

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Income Taxes - Reconciliation of Change in Unrecognized Income Tax Benefits, Excluding Interest and Penalties (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Income Tax Disclosure [Abstract]
Balance at January 1	$ 169	$ 155	$ 127
Additions for tax positions related to the current year	14	20	17
Additions for tax positions related to prior years	2	12	38
Reductions for tax positions related to prior years	(37)	(11)	$ (7)
Reductions for tax positions related to settlements with taxing authorities	(1)	(1)
Reduction for tax positions related to prior years as a result of a lapse of statute of limitations	(7)	(6)	$ (20)
Balance at December 31	$ 140	$ 169	$ 155

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Stock-Based Compensation - Additional Information (Detail) - USD ($)	1 Months Ended		12 Months Ended
	Jan. 31, 2016	Jul. 31, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of L-3 Holdings common stock available to be awarded			3.69	2.60
Weighted average grant date fair value			$ 128.59
Total performance units earned			32,911
Employee discount on the purchase of common stock			5.00%
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expiration period of stock options granted from date of grant			10 years
Vesting period			3 years
Weighted average grant date fair value of stock options			$ 19.76	$ 20.02	$ 12.09
Intrinsic value of stock options exercised			$ 35,000,000	$ 43,000,000	$ 32,000,000
Unrecognized compensation costs related to equity awards after income taxes			11,000,000
Unrecognized compensation costs related to stock awards			$ 7,000,000
Weighted average remaining period for recognition of unrecognized costs related to equity awards			1 year 2 months 12 days
Actual income tax benefit realized related to compensation deductions arising from the exercise of stock options			$ 13,000,000	$ 14,000,000	$ 10,000,000
Unvested Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Unrecognized compensation costs related to equity awards after income taxes			$ 24,000,000
Unrecognized compensation costs related to stock awards			$ 38,000,000
Weighted average remaining period for recognition of unrecognized costs related to equity awards			1 year 1 month 6 days
Weighted average grant date fair value			$ 128.59	$ 113.58	$ 77.12
Length of service after grant date			1 year
Age of retirement eligible employees			65 years
Length of service for retirement eligible employees, minimum			At least five years
Fair value of restricted stock unit awards vested			$ 82,000,000	$ 66,000,000	$ 37,000,000
Unvested Restricted Stock Awards [Member] | Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unrecognized compensation costs related to equity awards after income taxes			$ 2,000,000
Unrecognized compensation costs related to stock awards			$ 4,000,000
Weighted average remaining period for recognition of unrecognized costs related to equity awards			1 year 7 months 6 days
Weighted average grant date fair value			$ 129.03	$ 113.67	$ 77.00
Length of service after grant date			3 years	3 years	3 years
Minimum payout range			0.00%
Maximum payout range			200.00%
Fair market value of total performance units earned as of their vesting date			$ 4,000,000
2008 Long Term Performance Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares authorized for issuance under the amendment			19,200,000
Maximum number of shares of L-3 Holdings common stock may be issued pursuant to "full value" awards under the amendment			4,200,000
2009 Employee Stock Purchase Plan [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares authorized for issuance under the amendment			4,000,000
Percentage of fair market value for offering period			95.00%
Term of plans			Eligible employees are offered options to purchase shares of L-3 Holdings' common stock at the end of each six-month offering period at 95% of fair market value based on the average of the highest and lowest sales prices for the stock on the purchase date.
Offering period to purchase shares			6 months
Share purchases funded through payroll deductions up to a maximum percentage			10.00%
Share purchases funded through payroll deductions up to a maximum value			$ 21,250
Issued shares under the ESPP, per share		200,000
Issued shares under the ESPP, value		$ 107.98
2009 Employee Stock Purchase Plan [Member] | Subsequent Event [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Issued shares under the ESPP, per share	100,000
Issued shares under the ESPP, value	$ 113.93

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Stock-Based Compensation - Stock-Based Compensation by Form of Award (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 49	$ 52	$ 58
Income taxes	(18)	(20)	(22)
Total after income taxes	31	32	36
Less: Stock based compensation recorded in discontinued operations, net of income taxes	1	1	1
Stock based compensation recorded in continuing operations, net of income taxes	30	31	35
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	9	9	10
Unvested Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	38	40	41
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock based compensation	$ 2	$ 3	$ 7

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Stock-Based Compensation - Company's Stock Option Activity and Changes (Detail) - USD ($) $ / shares in Units, $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Beginning Balance, Number of Options Outstanding	3,101,200
Options granted, Number of Options	504,300
Options exercised, Number of Options	(656,800)
Options forfeited, Number of Options	(17,200)
Ending Balance, Number of Options Outstanding	2,931,500	3,101,200
Vested and expected to vest, Number of Options	2,921,200
Exercisable, Number of Options	1,930,100
Beginning Balance, Weighted Average Exercise Price Outstanding	$ 83.02
Options granted, Weighted Average Exercise Price	128.78
Options exercised, Weighted Average Exercise Price	74.97
Options forfeited, Weighted Average Exercise Price	101.61
Ending Balance, Weighted Average Exercise Price Outstanding	92.59	$ 83.02
Vested and expected to vest, Weighted Average Exercise Price	92.48
Exercisable, Weighted Average Exercise Price	$ 82.02
Weighted Average Remaining Contractual Term Outstanding	6 years	6 years 2 months 12 days
Vested and expected to vest, Weighted Average Remaining Contractual Term	6 years
Exercisable, Weighted Average Remaining Contractual Term	4 years 9 months 18 days
Beginning Balance, Aggregate Intrinsic Value Outstanding	$ 134
Ending Balance, Aggregate Intrinsic Value Outstanding	84	$ 134
Vested and expected to Vest, Aggregate Intrinsic Value	84
Exercisable, Aggregate Intrinsic Value	$ 72

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Stock-Based Compensation - Weighted Average Assumptions in Valuation Model (Detail) - Stock Options [Member]	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected holding period (in years)	5 years	5 years 6 months	5 years 7 months 6 days
Expected volatility	21.40%	24.40%	26.40%
Expected dividend yield	2.40%	2.70%	3.60%
Risk-free interest rate	1.50%	1.70%	1.00%

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Stock-Based Compensation - Company's Nonvested Restricted Stock Unit Awards and Changes (Detail)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Beginning Balance, Number of Shares | shares	1,517,600
Granted, Number of Shares | shares	364,800
Vested, Number of Shares | shares	(616,700)
Forfeited, Number of Shares | shares	(93,800)
Ending Balance, Number of Shares | shares	1,171,900
Beginning Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 82.72
Granted, Weighted Average Grant Date Fair Value | $ / shares	128.59
Vested, Weighted Average Grant Date Fair Value | $ / shares	68.90
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	99.72
Ending Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 102.91

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Stock-Based Compensation - Company's Performance Unit Awards Based on Expected Performance (Detail)	12 Months Ended
	Dec. 31, 2015 $ / shares shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Number of Shares | shares	1,517,600
Granted, Number of Shares | shares	364,800
Vested, Number of Shares | shares	(616,700)
Forfeited, Number of Shares | shares	(93,800)
Ending Balance, Number of Shares | shares	1,171,900
Beginning Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 82.72
Granted, Weighted Average Grant Date Fair Value | $ / shares	128.59
Vested, Weighted Average Grant Date Fair Value | $ / shares	68.90
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	99.72
Ending Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 102.91
EPS [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Beginning Balance, Number of Shares | shares	85,200
Granted, Number of Shares | shares	41,100
Decrease due to expected performance, Number of Shares | shares	(52,300)
Vested, Number of Shares | shares	(32,900)
Forfeited, Number of Shares | shares	(1,500)
Ending Balance, Number of Shares | shares	39,600
Beginning Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 96.53
Granted, Weighted Average Grant Date Fair Value | $ / shares	129.03
Decrease due to expected performance, Weighted Average Grant Date Fair Value | $ / shares	115.27
Vested, Weighted Average Grant Date Fair Value | $ / shares	77.00
Forfeited, Weighted Average Grant Date Fair Value | $ / shares	109.65
Ending Balance, Weighted Average Grant Date Fair Value | $ / shares	$ 121.27

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Commitments and Contingencies - Future Minimum Payments under Non-Cancelable Operating Leases (Detail) $ in Millions	Dec. 31, 2015 USD ($)
Operating Leased Assets [Line Items]
2016	$ 82
2017	82
2018	69
2019	54
2020	85
Thereafter	166
Total minimum payments required	538
Less: Sublease rentals under non-cancelable leases	11
Net minimum payments required	527
Real Estate Securities [Member]
Operating Leased Assets [Line Items]
2016	77
2017	78
2018	67
2019	53
2020	85
Thereafter	166
Total minimum payments required	526
Less: Sublease rentals under non-cancelable leases	11
Net minimum payments required	515
Equipment [Member]
Operating Leased Assets [Line Items]
2016	5
2017	4
2018	2
2019	$ 1
2020
Thereafter
Total minimum payments required	$ 12
Less: Sublease rentals under non-cancelable leases
Net minimum payments required	$ 12

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Commitments and Contingencies - Additional Information (Detail)						1 Months Ended		3 Months Ended		12 Months Ended
	Dec. 31, 2015 USD ($)	Feb. 10, 2015 USD ($) Plaintiff	Jul. 21, 2013 EUR (€)	Sep. 28, 2012 Plaintiff	Apr. 23, 2007 Plaintiff	Nov. 30, 2015 USD ($)	Oct. 31, 2015 USD ($) Plaintiff	Mar. 31, 2016 USD ($) Plaintiff	Mar. 31, 2016 EUR (€) Plaintiff	Dec. 31, 2015 USD ($) Agreement	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)	May. 31, 2012 USD ($)	Mar. 09, 2010 USD ($)
Contingencies And Commitments [Line Items]
Rent expense, net of sublease income										$ 104,000,000	$ 117,000,000	$ 116,000,000
Sublease rental income										2,000,000	1,000,000	$ 1,000,000
Total outstanding letters of credit	$ 425,000,000									425,000,000	615,000,000
Available borrowings under Credit Facility	1,000,000,000									$ 1,000,000,000	$ 1,000,000,000
Number of existing real estate lease agreements | Agreement										3
Real estate lease agreements, expiry date										Aug. 31, 2020
Purchase price of property on or before expiration date										$ 45,000,000
Residual guarantee amount										39,000,000
Maximum amount of supplemental rent payment										6,000,000
Aggregate residual guarantee amount										39,000,000
Fair market value simulator systems, maximum										7,000,000
Fair market value simulator systems, minimum										21,000,000
Payments for legal settlements						$ 25,600,000	$ 7,000,000
Recoveries from insurance contracts in connection with Bashkirian Airways	$ 4,000,000
Number of plaintiffs re-filed their complaint against ACSS | Plaintiff					30
Compensatory damages													$ 48,000,000	$ 6,700,000
Number of plaintiffs released their claims against ACSS | Plaintiff				18
Number of plaintiffs settled their claims against ACSS | Plaintiff		12
Aggregate expenses incurred by plaintiff		$ 11,000,000
Award amount paid by insurer into escrow account										$ 11,000,000
Discount on litigation settlement							$ 100,000
Simulator Systems [Member]
Contingencies And Commitments [Line Items]
Operating lease agreements, term of contract										15 years
Operating lease, additional rent										$ 7,000,000
Operating lease, date of expiration										2018-03
Scenario, Forecast [Member] | Bashkirian Airways [Member]
Contingencies And Commitments [Line Items]
Number of plaintiffs re-filed their complaint against ACSS | Plaintiff								4	4
Claims for estimated damages								$ 3,700,000
Fees of plaintiffs' counsel | €									€ 30,000
Settled Litigation [Member]
Contingencies And Commitments [Line Items]
Number of plaintiffs settled their claims against ACSS | Plaintiff							8
Pending Litigation [Member]
Contingencies And Commitments [Line Items]
Number of plaintiffs settled their claims against ACSS | Plaintiff							12
Property Damages [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages | €			€ 11,000,000
Business Interruption [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages | €			€ 35,000,000

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Pensions and Other Employee Benefits - Changes in Benefit Obligations, Plan Assets and Funded Status and Aggregate Balance Sheet Impact (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current liabilities	$ (1,047)	$ (1,187)
Pension Plans [Member]
Change in benefit obligation:
Benefit obligation at the beginning of the year	3,663	2,973
Service cost	123	106	$ 126
Interest cost	149	147	132
Plan participants' contributions	$ 2	2
Amendments		1
Actuarial (gain) loss	$ (261)	579
Foreign currency exchange rate changes	(53)	(34)
Curtailments, settlements and special termination benefits	3	$ 1
Business divestiture	(59)
Benefits paid	(119)	$ (112)
Benefit obligation at the end of the year	3,448	3,663	2,973
Change in plan assets:
Fair value of plan assets at the beginning of the year	2,570	2,403
Actual return on plan assets	54	205
Employer contributions	97	97
Plan participants' contributions	2	2
Foreign currency exchange rate changes	(52)	(25)
Benefits paid	(119)	(112)
Fair value of plan assets at the end of the year	2,552	2,570	2,403
Unfunded status at the end of the year	(896)	(1,093)
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current assets	37	26
Current liabilities	(5)	(4)
Non-current liabilities	$ (928)	(1,056)
Liabilities held for sale		(59)
Total	$ (896)	(1,093)
Postretirement Benefit Plans [Member]
Change in benefit obligation:
Benefit obligation at the beginning of the year	199	194
Service cost	3	3	4
Interest cost	7	8	7
Plan participants' contributions	$ 4	4
Amendments		(1)
Actuarial (gain) loss	$ (12)	5
Foreign currency exchange rate changes	$ (4)	$ (2)
Curtailments, settlements and special termination benefits
Business divestiture
Benefits paid	$ (13)	$ (12)
Benefit obligation at the end of the year	184	199	194
Change in plan assets:
Fair value of plan assets at the beginning of the year	$ 60	55
Actual return on plan assets		6
Employer contributions	$ 6	7
Plan participants' contributions	$ 4	$ 4
Foreign currency exchange rate changes
Benefits paid	$ (13)	$ (12)
Fair value of plan assets at the end of the year	57	60	$ 55
Unfunded status at the end of the year	$ (127)	$ (139)
Assets and (liabilities) recognized in the consolidated balance sheets consist of:
Non-current assets
Current liabilities	$ (8)	$ (8)
Non-current liabilities	$ (119)	$ (131)
Liabilities held for sale
Total	$ (127)	$ (139)

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Pensions and Other Employee Benefits - Changes in Benefit Obligations, Plan Assets and Funded Status and Aggregate Balance Sheet Impact (Parenthetical) (Detail) - MSI [Member] - Pension Plans [Member] $ in Millions	Dec. 31, 2015 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Liabilities held for sale, current	$ 3
Liabilities held for sale, non-current	$ 56

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Pensions and Other Employee Benefits - Net Loss and Prior Service Cost Balances in Accumulated Other Comprehensive Loss Account (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	$ 768	$ 968
Prior service credit
Total amount recognized	$ 768	$ 968
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	(10)	(6)
Prior service credit	(3)	(3)
Total amount recognized	$ (13)	$ (9)

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Pensions and Other Employee Benefits - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Continuing Operations [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's matching contributions in L-3 Holdings' common stock and cash	$ 131	$ 135	$ 120
Discontinued Operations [Member]
Defined Benefit Plan Disclosure [Line Items]
Company's matching contributions in L-3 Holdings' common stock and cash	12	11	$ 9
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Aggregate accumulated benefit obligation (ABO)	3,120	$ 3,272
Expected contributions to plans in 2016	$ 100
U.S. Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend rate, covering retirees under 65 years of age in 2016	7.50%
Health care cost trend rate, covering retirees over 65 years of age in 2016	9.00%
U.S. Based Pension Plans [Member] | 2021 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend rate, covering retirees under 65 years of age	5.00%
U.S. Based Pension Plans [Member] | 2024 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend rate, covering retirees over 65 years of age	5.00%
Canadian Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend in 2016	6.75%
Canadian Based Pension Plans [Member] | 2023 and Thereafter [Member]
Defined Benefit Plan Disclosure [Line Items]
Health care cost trend	5.00%
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Expected contributions to plans in 2016	$ 10

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Pensions and Other Employee Benefits - Pension Plans with an Accumulated Benefit Obligation in Excess of Fair Value of Plan Assets (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
Compensation and Retirement Disclosure [Abstract]
Projected benefit obligation	$ 3,232	$ 3,467
Accumulated benefit obligation	2,913	3,083
Fair value of plan assets	$ 2,302	$ 2,349

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Pensions and Other Employee Benefits - Weighted Average Assumptions Used to Determine Benefit Obligations (Detail)	Dec. 31, 2015	Dec. 31, 2014
Pension Plans [Member]
Benefit obligations:
Discount rate	4.63%	4.14%
Rate of compensation increase	3.50%	3.50%
Postretirement Benefit Plans [Member]
Benefit obligations:
Discount rate	4.23%	3.70%

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Pensions and Other Employee Benefits - Weighted Average Assumptions Used to Determine Benefit Obligations (Parenthetical) (Detail)	Dec. 31, 2015	Dec. 31, 2014
U.S. Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine benefit obligations, weighted average discount rate	4.70%	4.20%
Canadian Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine benefit obligations, weighted average discount rate		3.90%
U.S. Based Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine benefit obligations, weighted average discount rate	4.30%	3.70%
Rate of compensation increase	3.50%	3.50%
Canadian Based Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine benefit obligations, weighted average discount rate	3.70%	3.70%
Rate of compensation increase	3.50%	3.50%
German Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine benefit obligations, weighted average discount rate		2.20%

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Pensions and Other Employee Benefits - Components of Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Pension Plans [Member]
Components of net periodic benefit cost:
Service cost	$ 123	$ 106	$ 126
Interest cost	149	147	132
Expected return on plan assets	(205)	(193)	(164)
Amortization of prior service cost (credits)	1	2	1
Amortization of net loss (gain)	68	17	83
Curtailment or settlement loss (gain)	3	1	3
Net periodic benefit cost	139	80	181
Postretirement Benefit Plans [Member]
Components of net periodic benefit cost:
Service cost	3	3	4
Interest cost	7	8	7
Expected return on plan assets	(5)	(4)	(4)
Amortization of prior service cost (credits)	$ (2)	(2)	(3)
Amortization of net loss (gain)		(2)	$ 2
Curtailment or settlement loss (gain)		(1)
Net periodic benefit cost	$ 3	$ 2	$ 6

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Pensions and Other Employee Benefits - Other Changes in Plan Assets and Benefit Obligations Recognized in Other Comprehensive Income (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Pension Plans [Member]
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$ (132)	$ 560	$ (637)
Prior service cost (credit)		1	14
Amortization of net (loss) gain	$ (68)	(17)	(83)
Amortization of prior service (cost) credit	(1)	(2)	(1)
Total recognized in other comprehensive income	(201)	542	(707)
Total recognized in net periodic benefit cost and other comprehensive income	(62)	622	(526)
Postretirement Benefit Plans [Member]
Other changes in plan assets and benefit obligations recognized in other comprehensive income:
Net (gain) loss	$ (7)	5	$ (29)
Prior service cost (credit)		(1)
Amortization of net (loss) gain		2	$ (2)
Amortization of prior service (cost) credit	$ 2	2	3
Total recognized in other comprehensive income	(5)	8	(28)
Total recognized in net periodic benefit cost and other comprehensive income	$ (2)	$ 10	$ (22)

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Pensions and Other Employee Benefits - Amounts Expected to be Amortized from Accumulated Other Comprehensive Income (Loss) and Recognized as Components of Net Periodic Benefit Costs (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($)
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	$ 52
Prior service credit	(2)
Total amount expected to be amortized	50
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	53
Prior service credit	(1)
Total amount expected to be amortized	52
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Net loss (gain)	(1)
Prior service credit	(1)
Total amount expected to be amortized	$ (2)

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Pensions and Other Employee Benefits - Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	4.14%	5.03%	4.15%
Expected long-term return on plan assets	8.14%	8.13%	8.13%
Rate of compensation increase	3.50%	3.50%	3.50%
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Discount rate	3.70%	4.43%	3.37%
Expected long-term return on plan assets	7.65%	7.64%	7.64%

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Pensions and Other Employee Benefits - Weighted Average Assumptions Used to Determine Net Periodic Benefit Cost (Parenthetical) (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
U.S. Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine net periodic benefit cost, weighted average discount rate	4.20%	5.10%	4.20%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets	8.25%	8.25%	8.25%
Assumptions used to determine net periodic benefit cost, Rate of compensation increase	3.50%	3.50%	3.50%
Canadian Based Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine net periodic benefit cost, weighted average discount rate	3.70%	4.60%	3.70%
Assumptions used to determine net periodic benefit cost, weighted average expected long-term return on plan assets	7.25%	7.25%	7.25%
Assumptions used to determine net periodic benefit cost, Rate of compensation increase	3.50%	3.50%	3.50%
U.S. Based Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine net periodic benefit cost, weighted average discount rate	3.70%	4.40%	3.30%
Canadian Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine net periodic benefit cost, weighted average discount rate	3.90%	4.70%	3.90%
German Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Assumptions used to determine net periodic benefit cost, weighted average discount rate	2.20%	3.50%	3.40%

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Pensions and Other Employee Benefits - Effect of One Percentage Point Change in Assumed Health Care Cost Trend Rates (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($)
Defined Benefit Pension Plans and Defined Benefit Postretirement Plans Disclosure [Abstract]
Effect of one percentage point increase on total service and interest cost
Effect of one percentage point decrease on total service and interest cost
Effect of one percentage point increase on postretirement benefit obligations	$ 7
Effect of one percentage point decrease on postretirement benefit obligations	$ (5)

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Pensions and Other Employee Benefits - Allowable Range for Each Major Category of the Plans' Assets and Weighted-Average Asset Allocations by Asset Category (Detail)	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014
U.S. [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	100.00%	100.00%
U.S. [Member] | Domestic Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	30.00%	30.00%
Percentage of plan assets, maximum range	60.00%	60.00%
Weighted-average asset allocations	52.00%	52.00%
U.S. [Member] | International Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	10.00%	10.00%
Percentage of plan assets, maximum range	20.00%	20.00%
Weighted-average asset allocations	11.00%	10.00%
U.S. [Member] | Total Equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	45.00%	45.00%
Percentage of plan assets, maximum range	75.00%	75.00%
Weighted-average asset allocations	63.00%	62.00%
U.S. [Member] | Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	20.00%	20.00%
Percentage of plan assets, maximum range	40.00%	40.00%
Weighted-average asset allocations	22.00%	22.00%
U.S. [Member] | Other, Primarily Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	0.00%	0.00%
Percentage of plan assets, maximum range	15.00%	15.00%
Weighted-average asset allocations	8.00%	9.00%
U.S. [Member] | Total Fixed Income Securities and Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	30.00%	31.00%
U.S. [Member] | Real Estate Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	0.00%	0.00%
Percentage of plan assets, maximum range	15.00%	15.00%
Weighted-average asset allocations	7.00%	7.00%
Canada [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	100.00%	100.00%
Canada [Member] | Domestic Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	13.00%	15.00%
Canada [Member] | International Equity [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	62.00%	55.00%
Canada [Member] | Total Equities [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	40.00%	40.00%
Percentage of plan assets, maximum range	80.00%	80.00%
Weighted-average asset allocations	75.00%	70.00%
Canada [Member] | Fixed Income Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	16.00%	20.00%
Canada [Member] | Other, Primarily Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations	9.00%	10.00%
Canada [Member] | Total Fixed Income Securities and Cash and Cash Equivalents [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of plan assets, minimum range	20.00%	20.00%
Percentage of plan assets, maximum range	60.00%	60.00%
Weighted-average asset allocations	25.00%	30.00%
Canada [Member] | Real Estate Securities [Member]
Defined Benefit Plan Disclosure [Line Items]
Weighted-average asset allocations

XML

Pensions and Other Employee Benefits - Fair Value of the Company's Pension Plans' and Postretirement Benefit Plans' Assets (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014
U.S. Based Pension Plans [Member]
Equity securities:
Liabilities for unsettled trades, net	$ (30)	$ (13)
Fair value of company's plan assets	2,269	2,267
U.S. Based Pension Plans [Member] | U.S. Equity [Member]
Equity securities:
Fair value of company's plan assets	1,200	1,172
U.S. Based Pension Plans [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 1,200	$ 1,172
U.S. Based Pension Plans [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | International Equity [Member]
Equity securities:
Fair value of company's plan assets	$ 79	$ 87
U.S. Based Pension Plans [Member] | International Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 79	$ 87
U.S. Based Pension Plans [Member] | International Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | International Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Fixed Income - Investment Grade [Member]
Equity securities:
Fair value of company's plan assets	$ 400	$ 394
U.S. Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	237	237
U.S. Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 163	$ 157
U.S. Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Fixed Income - High Yield [Member]
Equity securities:
Fair value of company's plan assets	$ 114	$ 120
U.S. Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 114	$ 120
U.S. Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Real Estate Investment Trusts [Member]
Equity securities:
Fair value of company's plan assets	$ 170	$ 159
U.S. Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 170	$ 159
U.S. Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Other Plan Assets [Member]
Equity securities:
Fair value of company's plan assets	$ 166	$ 208
U.S. Based Pension Plans [Member] | Other Plan Assets [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Other Plan Assets [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 166	$ 208
U.S. Based Pension Plans [Member] | Other Plan Assets [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Total Assets at Fair Value [Member]
Equity securities:
Fair value of company's plan assets	$ 2,129	$ 2,140
U.S. Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	1,686	1,655
U.S. Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 443	$ 485
U.S. Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
U.S. Based Pension Plans [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities:
Fair value of company's plan assets	$ 170	$ 140
Canadian Based Pension Plans [Member]
Equity securities:
Liabilities for unsettled trades, net
Fair value of company's plan assets	$ 283	$ 303
Canadian Based Pension Plans [Member] | U.S. Equity [Member]
Equity securities:
Fair value of company's plan assets	73	58
Canadian Based Pension Plans [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 73	$ 58
Canadian Based Pension Plans [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | International Equity [Member]
Equity securities:
Fair value of company's plan assets	$ 91	$ 107
Canadian Based Pension Plans [Member] | International Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 91	$ 107
Canadian Based Pension Plans [Member] | International Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | International Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - Investment Grade [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - High Yield [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Real Estate Investment Trusts [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Other Plan Assets [Member]
Equity securities:
Fair value of company's plan assets	$ 27	$ 30
Canadian Based Pension Plans [Member] | Other Plan Assets [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	6	4
Canadian Based Pension Plans [Member] | Other Plan Assets [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 21	$ 26
Canadian Based Pension Plans [Member] | Other Plan Assets [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Total Assets at Fair Value [Member]
Equity securities:
Fair value of company's plan assets	$ 191	$ 195
Canadian Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	170	169
Canadian Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 21	$ 26
Canadian Based Pension Plans [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Canadian Based Pension Plans [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities:
Fair value of company's plan assets	$ 92	$ 108
Postretirement Benefit Plans Assets [Member]
Equity securities:
Fair value of company's plan assets	57	60
Postretirement Benefit Plans Assets [Member] | U.S. Equity [Member]
Equity securities:
Fair value of company's plan assets	35	36
Postretirement Benefit Plans Assets [Member] | U.S. Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 35	$ 36
Postretirement Benefit Plans Assets [Member] | U.S. Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | U.S. Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | International Equity [Member]
Equity securities:
Fair value of company's plan assets	$ 1	$ 1
Postretirement Benefit Plans Assets [Member] | International Equity [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 1	$ 1
Postretirement Benefit Plans Assets [Member] | International Equity [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | International Equity [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Fixed Income - Investment Grade [Member]
Equity securities:
Fair value of company's plan assets	$ 11	$ 12
Postretirement Benefit Plans Assets [Member] | Fixed Income - Investment Grade [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	8	10
Postretirement Benefit Plans Assets [Member] | Fixed Income - Investment Grade [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 3	$ 2
Postretirement Benefit Plans Assets [Member] | Fixed Income - Investment Grade [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Fixed Income - High Yield [Member]
Equity securities:
Fair value of company's plan assets	$ 2	$ 2
Postretirement Benefit Plans Assets [Member] | Fixed Income - High Yield [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Fixed Income - High Yield [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 2	$ 2
Postretirement Benefit Plans Assets [Member] | Fixed Income - High Yield [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Real Estate Investment Trusts [Member]
Equity securities:
Fair value of company's plan assets	$ 3	$ 2
Postretirement Benefit Plans Assets [Member] | Real Estate Investment Trusts [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	$ 3	$ 2
Postretirement Benefit Plans Assets [Member] | Real Estate Investment Trusts [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Real Estate Investment Trusts [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Other Plan Assets [Member]
Equity securities:
Fair value of company's plan assets	$ 2	$ 4
Postretirement Benefit Plans Assets [Member] | Other Plan Assets [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Other Plan Assets [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 2	$ 4
Postretirement Benefit Plans Assets [Member] | Other Plan Assets [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Total Assets at Fair Value [Member]
Equity securities:
Fair value of company's plan assets	$ 54	$ 57
Postretirement Benefit Plans Assets [Member] | Total Assets at Fair Value [Member] | Level 1 [Member]
Equity securities:
Fair value of company's plan assets	47	49
Postretirement Benefit Plans Assets [Member] | Total Assets at Fair Value [Member] | Level 2 [Member]
Equity securities:
Fair value of company's plan assets	$ 7	$ 8
Postretirement Benefit Plans Assets [Member] | Total Assets at Fair Value [Member] | Level 3 [Member]
Equity securities:
Fair value of company's plan assets
Postretirement Benefit Plans Assets [Member] | Other Investments Measured at Net Asset Value [Member]
Equity securities:
Fair value of company's plan assets	$ 3	$ 3

XML

Pensions and Other Employee Benefits - Fair Value of the Company's Pension Plans' and Postretirement Benefit Plans' Assets (Parenthetical) (Detail)	Dec. 31, 2015	Dec. 31, 2014
U.S. Based Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of mutual fund in total investment in fixed income - investment grade securities	59.00%	60.00%
Percentage of pooled bond funds in total investment in fixed income - investment grade securities	41.00%	40.00%
Canadian Based Pension Plans [Member] | Other Investments Measured at Net Asset Value [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of mutual fund investment in equity trust funds	52.00%	43.00%
Percentage of pooled bond fund investment in equity trust funds	48.00%	57.00%
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Percentage of mutual fund in total investment in fixed income - investment grade securities	73.00%	83.00%
Percentage of pooled bond funds in total investment in fixed income - investment grade securities	27.00%	17.00%

XML

Pensions and Other Employee Benefits - Estimated Future Benefit Payments (Detail) $ in Millions	Dec. 31, 2015 USD ($)
Pension Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2016	$ 151
2017	151
2018	155
2019	162
2020	167
Years 2021-2025	1,012
Postretirement Benefit Plans [Member]
Defined Benefit Plans and Other Postretirement Benefit Plans Table Text Block [Line Items]
2016	13
2017	14
2018	14
2019	14
2020	15
Years 2021-2025	$ 70
Subsidy Receipts, 2016
Subsidy Receipts, 2017
Subsidy Receipts, 2018
Subsidy Receipts, 2019
Subsidy Receipts, 2020
Subsidy Receipts, Years 2021-2025	$ 1

XML

Pensions and Other Employee Benefits - Cash Contributions and Expenses under Multi-Employer Benefit Plans (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Multiemployer Plans [Line Items]
Contributions by L-3 Communications	$ 23	$ 19	$ 21
IAM National Pension Fund [Member]
Multiemployer Plans [Line Items]
Contributions by L-3 Communications	$ 23	$ 19	$ 21
EIN/Pension Plan Number	51-6031295/002
Pension Protection Act Zone Status	Green	Green
FIP/RP Status Pending/Implemented	No
Surcharge Imposed	No
Expiration Date of Collective-Bargaining Agreement, First	Jan. 29, 2016
Expiration Date of Collective-Bargaining Agreement, Last	May 25, 2019
Other Pension Funds [Member]
Multiemployer Plans [Line Items]
Contributions by L-3 Communications

XML

Pensions and Other Employee Benefits - Cash Contributions and Expenses under Multi-Employer Benefit Plans (Parenthetical) (Detail) - Funds	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Compensation and Retirement Disclosure [Abstract]
Minimum percentage funded to have green zone status rating	80.00%
Percentage of total plan contributions		5.00%	6.00%
Percentage of contributions from reportable segment	58.00%
Expiration date of multiple bargaining agreements	Apr. 28, 2019
Number of pension funds included in Other Pension Funds	3

XML

Supplemental Cash Flow Information - Supplemental Cash Flow Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Additional Cash Flow Elements and Supplemental Cash Flow Information [Abstract]
Interest paid on outstanding debt	$ 182	$ 176	$ 171
Income tax payments	132	129	245
Income tax refunds	$ 8	$ 9	$ 23

XML

Segment Information - Additional Information (Detail) $ in Millions	12 Months Ended
	Dec. 31, 2015 USD ($) Segment	Dec. 31, 2014 USD ($)	Dec. 31, 2013 USD ($)
Segment Reporting [Abstract]
Number of reportable segments | Segment	3
Corporate expenses | $	$ 15	$ 16	$ 15

XML

Segment Information - Summary of Segment Information (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Net Sales
Net products sales									$ 6,589	$ 6,839	$ 7,129
Net services sales									3,877	4,147	4,291
Consolidated total	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	10,466	$ 10,986	$ 11,420
Operating income
Loss related to business divestitures									(31)
Impairment charges	(455)								(384)	$ 0	$ 0
Operating income	(96)	$ 231	$ 153	$ 187	294	$ 235	$ 217	$ 266	475	1,012	1,117
Depreciation and amortization
Depreciation and amortization									210	214	202
Capital Expenditures
Capital Expenditures									197	174	204
Total Assets
Total Assets	$ 12,085				13,715				$ 12,085	13,715	$ 13,868
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Total Assets
Assets held for sale					547					547
Discontinued Operations, Held-for-sale [Member]
Total Assets
Assets held for sale	$ 664				1,262				$ 664	1,262	$ 1,213
Electronic Systems [Member]
Operating income
Impairment charges									(26)
Aerospace Systems [Member]
Operating income
Impairment charges									(338)
Communication Systems [Member]
Operating income
Impairment charges									(20)
Operating Segments [Member]
Operating income
Operating income									890	1,012	1,117
Operating Segments [Member] | Electronic Systems [Member]
Net Sales
Net products sales									3,390	3,685	3,665
Net services sales									999	1,057	1,092
Operating income
Operating income									489	533	529
Depreciation and amortization
Depreciation and amortization									110	123	117
Capital Expenditures
Capital Expenditures									99	80	71
Total Assets
Total Assets	6,426				6,281				6,426	6,281	6,933
Operating Segments [Member] | Aerospace Systems [Member]
Net Sales
Net products sales									1,661	1,722	1,827
Net services sales									2,503	2,604	2,730
Operating income
Operating income									205	283	421
Depreciation and amortization
Depreciation and amortization									50	40	38
Capital Expenditures
Capital Expenditures									55	59	54
Total Assets
Total Assets	2,630				3,011				2,630	3,011	3,106
Operating Segments [Member] | Communication Systems [Member]
Net Sales
Net products sales									1,648	1,546	1,762
Net services sales									441	539	517
Operating income
Operating income									196	196	167
Depreciation and amortization
Depreciation and amortization									50	51	47
Capital Expenditures
Capital Expenditures									37	29	59
Total Assets
Total Assets	1,984				2,025				1,984	2,025	2,161
Corporate [Member]
Capital Expenditures
Capital Expenditures									6	6	20
Total Assets
Total Assets	$ 381				$ 589				381	589	455
Elimination of Intercompany Sales [Member]
Net Sales
Net products sales									(110)	(114)	(125)
Net services sales									$ (66)	$ (53)	$ (48)

XML

Segment Information - Summary of Segment Information (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		12 Months Ended
	Dec. 31, 2015	Sep. 30, 2015	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges	$ 455		$ 384	$ 0	$ 0
Aerospace Systems [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges			338
Logistics Solutions [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges			338
Logistics Solutions [Member] | Continuing Operations [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges			338
Logistics Solutions [Member] | Aerospace Systems [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges	338		338
NSS [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges	117	$ 491	608
NSS [Member] | Continuing Operations [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges	$ 9		37
Business Retained from NSS [Member] | Continuing Operations [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges			9
NSS including Business Retained [Member] | Continuing Operations [Member]
Segment Reporting Information [Line Items]
Non-cash goodwill impairment charges			$ 46

XML

Segment Information - Company's Sales Attributable to U.S. Customers and International Customers (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Net sales	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	$ 10,466	$ 10,986	$ 11,420
Operating Segments [Member] | U.S. [Member]
Segment Reporting Information [Line Items]
Net sales									7,908	8,051	8,630
Operating Segments [Member] | United Kingdom [Member]
Segment Reporting Information [Line Items]
Net sales									336	335	435
Operating Segments [Member] | Australia [Member]
Segment Reporting Information [Line Items]
Net sales									321	254	218
Operating Segments [Member] | Canada [Member]
Segment Reporting Information [Line Items]
Net sales									281	289	357
Operating Segments [Member] | South Korea [Member]
Segment Reporting Information [Line Items]
Net sales									207	226	178
Operating Segments [Member] | Saudi Arabia (Member)
Segment Reporting Information [Line Items]
Net sales									201	160	132
Operating Segments [Member] | Germany [Member]
Segment Reporting Information [Line Items]
Net sales									113	243	272
Operating Segments [Member] | JAPAN
Segment Reporting Information [Line Items]
Net sales									95	124	67
Operating Segments [Member] | Other [Member]
Segment Reporting Information [Line Items]
Net sales									1,004	1,304	1,131
Operating Segments [Member] | Total International [Member]
Segment Reporting Information [Line Items]
Net sales									$ 2,558	$ 2,935	$ 2,790

XML

Segment Information - Net Sales to Principal Customers (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Segment Reporting Information [Line Items]
Net sales	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	$ 10,466	$ 10,986	$ 11,420
Operating Segments [Member] | U.S. Government Agencies [Member]
Segment Reporting Information [Line Items]
Net sales									7,291	7,464	8,008
Operating Segments [Member] | Commercial [Member]
Segment Reporting Information [Line Items]
Net sales									1,376	1,656	1,689
Operating Segments [Member] | Foreign Governments [Member]
Segment Reporting Information [Line Items]
Net sales									$ 1,799	$ 1,866	$ 1,723

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Employee Severance and Termination Costs - Additional Information (Detail) $ in Millions		12 Months Ended
	Dec. 31, 2015 USD ($)	Dec. 31, 2015 USD ($) Employees	Dec. 31, 2014 USD ($) Employees	Dec. 31, 2013 USD ($) Employees
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs		$ 18	$ 29	$ 29
Number of employees terminated | Employees		800	1,800	1,800
Remaining balance of employee termination costs	$ 9
Employee Severance [Member]
Restructuring Cost and Reserve [Line Items]
Payments for employee termination costs			$ 11

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Employee Severance and Termination Costs - Employee Severance and Other Termination Costs Incurred by Reportable Segment (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 18	$ 29	$ 29
Electronic Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	8	16	16
Aerospace Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	4	5	2
Communication Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 6	$ 8	$ 11

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Unaudited Quarterly Financial Data - Company's Unaudited Quarterly Results of Operations (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Statement of Financial Position [Abstract]
Sales	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	$ 10,466	$ 10,986	$ 11,420
Operating income (loss)	(96)	231	153	187	294	235	217	266	475	1,012	1,117
Income (loss) from continuing operations	(56)	128	120	105	205	146	131	163	297	645	716
Net income (loss)	(162)	(296)	124	109	207	157	141	172	(225)	677	760
Net income (loss) attributable to L-3	$ (166)	$ (299)	$ 120	$ 105	$ 203	$ 154	$ 137	$ 170	$ (240)	$ 664	$ 751
Basic earnings (loss) per share from continuing operations	$ (0.76)	$ 1.56	$ 1.41	$ 1.23	$ 2.38	$ 1.68	$ 1.47	$ 1.87	$ 3.49	$ 7.40	$ 7.91
Basic earnings (loss) per share	(2.11)	(3.74)	1.46	1.28	2.41	1.81	1.59	1.97	(2.97)	7.78	8.40
Diluted earnings (loss) per share from continuing operations	(0.76)	1.54	1.39	1.20	2.34	1.65	1.42	1.80	3.44	7.20	7.76
Diluted earnings (loss) per share	$ (2.11)	$ (3.68)	$ 1.44	$ 1.25	$ 2.36	$ 1.78	$ 1.53	$ 1.90	$ (2.93)	$ 7.56	$ 8.24

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Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Statements of Equity (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ 5,360				$ 6,056	$ 5,360	$ 6,056	$ 5,527
Net income (loss) attributable to L-3	$ (166)	$ (299)	$ 120	105	$ 203	$ 154	$ 137	170	(240)	664	751
Comprehensive income (loss)									10	(474)	440
Other									9	8	11
Ending Balance	4,429				5,360				4,429	5,360	6,056
Common Stock [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ 1				$ 1	$ 1	$ 1	$ 1
Beginning Balance, Shares				82,000,000				85,800,000	82,000,000	85,800,000	90,400,000
Ending Balance	$ 1				$ 1				$ 1	$ 1	$ 1
Ending Balance, Shares	78,100,000				82,000,000				78,100,000	82,000,000	85,800,000
Additional Paid-in Capital [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ 5,798				$ 5,652	$ 5,798	$ 5,652	$ 5,313
Other									9	8	10
Ending Balance	$ 6,051				$ 5,798				6,051	5,798	5,652
Retained Earnings [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				6,181				5,726	6,181	5,726	5,175
Other											1
Ending Balance	5,728				6,181				5,728	6,181	5,726
Accumulated Other Comprehensive Loss [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				(584)				(110)	(584)	(110)	(550)
Comprehensive income (loss)									10	(474)	440
Ending Balance	(574)				(584)				(574)	(584)	(110)
L-3 Communications Corporation [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ 5,285				$ 5,981	5,285	5,981	5,451
Net income (loss) attributable to L-3									(240)	664	751
Contributions from L-3 Holdings									253	146	339
Dividends to L-3 Holdings									(953)	(1,032)	(1,001)
Comprehensive income (loss)									10	(474)	440
Other											1
Ending Balance	$ 4,355				$ 5,285				$ 4,355	$ 5,285	$ 5,981
L-3 Communications Corporation [Member] | Common Stock [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance, Shares				100				100	100	100	100
Ending Balance, Shares	100				100				100	100	100
L-3 Communications Corporation [Member] | Additional Paid-in Capital [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ 5,799				$ 5,653	$ 5,799	$ 5,653	$ 5,314
Contributions from L-3 Holdings									253	146	339
Ending Balance	$ 6,052				$ 5,799				6,052	5,799	5,653
L-3 Communications Corporation [Member] | Retained Earnings [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				70				438	70	438	687
Net income (loss) attributable to L-3									(240)	664	751
Dividends to L-3 Holdings									(953)	(1,032)	(1,001)
Other											1
Ending Balance	(1,123)				70				(1,123)	70	438
L-3 Communications Corporation [Member] | Accumulated Other Comprehensive Loss [Member]
Condensed Financial Statements, Captions [Line Items]
Beginning Balance				$ (584)				$ (110)	(584)	(110)	(550)
Comprehensive income (loss)									10	(474)	440
Ending Balance	$ (574)				$ (584)				$ (574)	$ (584)	$ (110)

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Financial Information of L-3 Communications and Its Subsidiaries - Additional Information (Detail)	Dec. 31, 2015
L-3 Communications Corporation [Member]
Condensed Financial Statements, Captions [Line Items]
Ownership percentage	100.00%

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Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Balance Sheets (Detail) - USD ($) $ in Millions	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013	Dec. 31, 2012
Current assets:
Cash and cash equivalents	$ 207	$ 442	$ 500	$ 349
Billed receivables, net	746	803
Contracts in process	2,081	2,148
Other current assets	534	463
Total current assets	4,232	5,665
Goodwill	6,281	6,512	6,846
Other assets	1,572	1,538
Total assets	12,085	13,715	13,868
Current portion of long-term debt	499
Current liabilities	2,160	2,167
Other long-term liabilities	1,634	1,782
Long-term debt	3,143	3,939
Total liabilities	7,656	8,355
L-3 shareholders' equity	4,355	5,285
Noncontrolling interests	74	75
Total equity	4,429	5,360	$ 6,056	5,527
Total liabilities and equity	$ 12,085	13,715
Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Current assets:
Assets held for sale		547
Liabilities held for sale		237
Discontinued Operations, Held-for-sale [Member]
Current assets:
Assets held for sale	$ 664	1,262	$ 1,213
Liabilities held for sale	220	230
L-3 Communications Holdings, Inc. [Member]
Current assets:
Investment in and amounts due from consolidated subsidiaries	4,355	5,285
Total assets	4,355	5,285
Current portion of long-term debt	499
Long-term debt	3,143	3,939
L-3 shareholders' equity	4,355	5,285
Total equity	4,355	5,285
Total liabilities and equity	4,355	5,285
L-3 Communications Corporation [Member]
Current assets:
Cash and cash equivalents	137	361	258	246
Billed receivables, net	278	320
Contracts in process	872	862
Other current assets	288	238
Total current assets	1,575	1,781
Goodwill	2,318	2,309
Other assets	816	833
Investment in and amounts due from consolidated subsidiaries	5,609	6,747
Total assets	10,318	11,670
Current portion of long-term debt	499
Current liabilities	911	873
Other long-term liabilities	1,410	1,573
Long-term debt	3,143	3,939
Total liabilities	5,963	6,385
L-3 shareholders' equity	4,355	5,285
Total equity	4,355	5,285	5,981	5,451
Total liabilities and equity	10,318	11,670
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents		1
Billed receivables, net	297	281
Contracts in process	958	1,009
Other current assets	137	131
Total current assets	2,056	2,736
Goodwill	2,973	3,331
Other assets	496	511
Investment in and amounts due from consolidated subsidiaries	3,739	3,196
Total assets	9,264	9,774
Current liabilities	899	904
Other long-term liabilities	195	178
Total liabilities	1,314	1,322
L-3 shareholders' equity	7,950	8,452
Total equity	7,950	8,452
Total liabilities and equity	9,264	9,774
Guarantor Subsidiaries [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Current assets:
Assets held for sale		52
Liabilities held for sale		10
Guarantor Subsidiaries [Member] | Discontinued Operations, Held-for-sale [Member]
Current assets:
Assets held for sale	664	1,262
Liabilities held for sale	220	230
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	165	142	261	242
Billed receivables, net	171	202
Contracts in process	251	277
Other current assets	109	94
Total current assets	696	1,210
Goodwill	990	872
Other assets	260	194
Investment in and amounts due from consolidated subsidiaries	111
Total assets	2,057	2,276
Current liabilities	445	452
Amounts due to consolidated subsidiaries		320
Other long-term liabilities	29	31
Total liabilities	474	1,030
L-3 shareholders' equity	1,583	1,246
Total equity	1,583	1,246
Total liabilities and equity	2,057	2,276
Non-Guarantor Subsidiaries [Member] | Disposal Group, Held-for-sale, Not Discontinued Operations [Member]
Current assets:
Assets held for sale		495
Liabilities held for sale		227
Eliminations [Member]
Current assets:
Cash and cash equivalents	(95)	(62)	$ (19)	$ (139)
Total current assets	(95)	(62)
Investment in and amounts due from consolidated subsidiaries	(13,814)	(15,228)
Total assets	(13,909)	(15,290)
Current liabilities	(95)	(62)
Amounts due to consolidated subsidiaries		(320)
Total liabilities	(95)	(382)
L-3 shareholders' equity	(13,888)	(14,983)
Noncontrolling interests	74	75
Total equity	(13,814)	(14,908)
Total liabilities and equity	$ (13,909)	$ (15,290)

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Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Statements of Operations (Detail) - USD ($) $ in Millions	3 Months Ended								12 Months Ended
	Dec. 31, 2015	Sep. 25, 2015	Jun. 26, 2015	Mar. 27, 2015	Dec. 31, 2014	Sep. 26, 2014	Jun. 27, 2014	Mar. 28, 2014	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Condensed Financial Statements, Captions [Line Items]
Total net sales	$ 2,871	$ 2,564	$ 2,543	$ 2,488	$ 2,961	$ 2,653	$ 2,702	$ 2,670	$ 10,466	$ 10,986	$ 11,420
Total cost of sales									(9,576)	$ (9,974)	$ (10,303)
(Loss) gain related to business divestitures									(31)
Impairment charge	(455)								(384)	$ 0	$ 0
Operating (loss) income	(96)	231	153	187	294	235	217	266	475	1,012	1,117
Interest expense									(169)	(158)	(157)
Interest and other income (expense), net									17	18	20
Debt retirement charge									(1)
(Loss) income from continuing operations before income taxes									322	872	980
Benefit (provision) for income taxes									(25)	(227)	(264)
Income from continuing operations	(56)	128	120	105	205	146	131	163	297	645	716
Income from discontinued operations, net of income tax									(522)	32	44
Net (loss) income	(162)	(296)	124	109	207	157	141	172	(225)	677	760
Net income attributable to noncontrolling interests									(15)	(13)	(9)
Net (loss) income attributable to L-3	$ (166)	$ (299)	$ 120	$ 105	$ 203	$ 154	$ 137	$ 170	(240)	664	751
Comprehensive (loss) income attributable to L-3									(230)	190	1,191
L-3 Communications Holdings, Inc. [Member]
Condensed Financial Statements, Captions [Line Items]
Total cost of sales									(46)	(50)	(56)
Operating (loss) income									(46)	(50)	(56)
Interest expense										(2)	(21)
(Loss) income from continuing operations before income taxes									(46)	(52)	(77)
Benefit (provision) for income taxes									4	14	21
Equity in net income of consolidated subsidiaries									(198)	702	807
Income from continuing operations									(240)	664	751
Net (loss) income									(240)	664	751
Net (loss) income attributable to L-3									(240)	664	751
Comprehensive (loss) income attributable to L-3									(230)	190	1,191
L-3 Communications Corporation [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales									3,580	3,586	3,874
Total cost of sales									(3,283)	(3,255)	(3,595)
(Loss) gain related to business divestitures									(13)
Operating (loss) income									284	331	279
Interest expense									(167)	(156)	(156)
Interest and other income (expense), net									16	15	15
Debt retirement charge									(1)
(Loss) income from continuing operations before income taxes									132	190	138
Benefit (provision) for income taxes									(10)	(49)	(38)
Equity in net income of consolidated subsidiaries									(362)	523	651
Income from continuing operations									(240)	664	751
Net (loss) income									(240)	664	751
Net (loss) income attributable to L-3									(240)	664	751
Comprehensive (loss) income attributable to L-3									(230)	190	1,191
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales									5,265	5,460	5,555
Total cost of sales									(4,906)	(5,017)	(4,971)
(Loss) gain related to business divestitures									(31)
Impairment charge									(364)
Operating (loss) income									(36)	443	584
Interest expense									(1)	(2)
(Loss) income from continuing operations before income taxes									(37)	441	584
Benefit (provision) for income taxes									3	(115)	(157)
Income from continuing operations									(34)	326	427
Income from discontinued operations, net of income tax									(522)	32	44
Net (loss) income									(556)	358	471
Net (loss) income attributable to L-3									(556)	358	471
Comprehensive (loss) income attributable to L-3									(560)	356	469
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales									1,935	2,218	2,362
Total cost of sales									(1,701)	(1,980)	(2,108)
(Loss) gain related to business divestitures									13
Impairment charge									(20)
Operating (loss) income									227	238	254
Interest expense									(1)		(1)
Interest and other income (expense), net									1	3	5
(Loss) income from continuing operations before income taxes									227	241	258
Benefit (provision) for income taxes									(18)	(63)	(69)
Income from continuing operations									209	178	189
Net (loss) income									209	178	189
Net (loss) income attributable to L-3									209	178	189
Comprehensive (loss) income attributable to L-3									98	47	164
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales									(314)	(278)	(371)
Total cost of sales									360	328	427
Operating (loss) income									46	50	56
Interest expense										2	21
(Loss) income from continuing operations before income taxes									46	52	77
Benefit (provision) for income taxes									(4)	(14)	(21)
Equity in net income of consolidated subsidiaries									560	(1,225)	(1,458)
Income from continuing operations									602	(1,187)	(1,402)
Net (loss) income									602	(1,187)	(1,402)
Net income attributable to noncontrolling interests									(15)	(13)	(9)
Net (loss) income attributable to L-3									587	(1,200)	(1,411)
Comprehensive (loss) income attributable to L-3									$ 692	$ (593)	$ (1,824)

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Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Statements of Cash Flows (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Dec. 31, 2013
Operating activities:
Net cash from operating activities from continuing operations	$ 1,042	$ 1,071	$ 1,156
Investing activities:
Business acquisitions, net of cash acquired	(320)	(57)	(62)
Proceeds from sale of business, net of closing date cash balances	318	1	4
Other investing activities	(190)	(164)	(194)
Net cash used in investing activities from continuing operations	(192)	(221)	(256)
Financing activities:
Repurchases of senior notes	(296)
Proceeds from sale of senior notes		996
Redemption of CODES		(935)
Common stock repurchased	(740)	(823)	(800)
Dividends paid on L-3 Holdings' common stock	(214)	(208)	(199)
Other financing activities	72	94	150
Net cash used in financing activities from continuing operations	(1,178)	(876)	(849)
Effect of foreign currency exchange rate changes on cash	(19)	(17)	(2)
Net increase in cash and cash equivalents of discontinued operations	51	46	102
Change in cash balance in assets held for sale	61	(61)
Net (decrease) increase in cash	(235)	(58)	151
Cash and cash equivalents, beginning of the year	442	500	349
Cash and cash equivalents, end of the year	207	442	500
L-3 Communications Holdings, Inc. [Member]
Operating activities:
Net cash from operating activities from continuing operations	954	1,966	999
Investing activities:
Investments in L-3 Communications	(49)	(102)	(149)
Net cash used in investing activities from continuing operations	(49)	(102)	(149)
Financing activities:
Redemption of CODES		(935)
Common stock repurchased	(740)	(823)	(800)
Dividends paid on L-3 Holdings' common stock	(214)	(208)	(199)
Other financing activities	49	102	149
Net cash used in financing activities from continuing operations	(905)	(1,864)	(850)
L-3 Communications Corporation [Member]
Operating activities:
Net cash from operating activities from continuing operations	589	450	383
Investing activities:
Business acquisitions, net of cash acquired	(320)	(57)	(62)
Proceeds from sale of business, net of closing date cash balances	14
Other investing activities	(84)	(58)	(89)
Net cash used in investing activities from continuing operations	(390)	(115)	(151)
Financing activities:
Repurchases of senior notes	(296)
Proceeds from sale of senior notes		996
Dividends paid to L-3 Holdings	(954)	(1,966)	(999)
Investments from L-3 Holdings	49	102	149
Other financing activities	778	636	630
Net cash used in financing activities from continuing operations	(423)	(232)	(220)
Net (decrease) increase in cash	(224)	103	12
Cash and cash equivalents, beginning of the year	361	258	246
Cash and cash equivalents, end of the year	137	361	258
Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities from continuing operations	422	571	717
Investing activities:
Proceeds from sale of business, net of closing date cash balances	28
Other investing activities	(69)	(85)	(84)
Net cash used in investing activities from continuing operations	(41)	(85)	(84)
Financing activities:
Other financing activities	(473)	(530)	(735)
Net cash used in financing activities from continuing operations	(473)	(530)	(735)
Net increase in cash and cash equivalents of discontinued operations	51	46	102
Change in cash balance in assets held for sale	1	(1)
Net (decrease) increase in cash	(1)	1
Cash and cash equivalents, beginning of the year	1
Cash and cash equivalents, end of the year		1
Non-Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities from continuing operations	216	143	237
Investing activities:
Proceeds from sale of business, net of closing date cash balances	276
Other investing activities	(37)	(21)	(21)
Net cash used in investing activities from continuing operations	239	(21)	(21)
Financing activities:
Other financing activities	(471)	(164)	(195)
Net cash used in financing activities from continuing operations	(471)	(164)	(195)
Effect of foreign currency exchange rate changes on cash	(19)	(17)
Change in cash balance in assets held for sale	60	(60)
Net (decrease) increase in cash	23	(119)	19
Cash and cash equivalents, beginning of the year	142	261	242
Cash and cash equivalents, end of the year	165	142	261
Eliminations [Member]
Operating activities:
Net cash from operating activities from continuing operations	(1,139)	(2,059)	(1,180)
Investing activities:
Investments in L-3 Communications	49	102	149
Net cash used in investing activities from continuing operations	49	102	149
Financing activities:
Dividends paid to L-3 Holdings	954	1,966	999
Investments from L-3 Holdings	(49)	(102)	(149)
Other financing activities	152	50	301
Net cash used in financing activities from continuing operations	1,057	1,914	1,151
Effect of foreign currency exchange rate changes on cash			(2)
Net (decrease) increase in cash	(33)	(43)	120
Cash and cash equivalents, beginning of the year	(62)	(19)	(139)
Cash and cash equivalents, end of the year	$ (95)	$ (62)	$ (19)