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

L-3 Communications is a 100% owned subsidiary of L-3 Holdings. The debt of L-3 Communications, including the Senior Notes and borrowings under amounts drawn against the Credit Facility 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 to the audited consolidated financial statements for the year ended December 31, 2015, included in the Company’s Annual Report on Form 10-K for additional information. The foreign subsidiaries and certain domestic subsidiaries of L-3 Communications (the “Non-Guarantor Subsidiaries”) do not guarantee the debt of L-3 Communications or L-3 Holdings. None of the debt of L-3 Communications has been issued by its subsidiaries. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L-3 Communications or from L-3 Communications to L-3 Holdings.

Under the terms of the indentures governing the Senior Notes, the guarantees of the Senior Notes will automatically and unconditionally be released and discharged: (1) upon the release of all guarantees of all other outstanding indebtedness of L-3 Communications Corporation, or (2) upon the determination that such guarantor is no longer a “domestic subsidiary.” In addition, the guarantees of the Senior Notes will be automatically and unconditionally released and discharged in the event of a sale or other disposition of all of the assets of any guarantor, by way of merger, consolidation or otherwise, or a sale of all of the capital stock of such guarantor.

The following unaudited condensed combining financial information presents the results of operations, financial position and cash flows of: (1) L-3 Holdings, excluding L-3 Communications and its consolidated subsidiaries (the Parent), (2) L-3 Communications, excluding its consolidated subsidiaries, (3) the Guarantor Subsidiaries, (4) the Non-Guarantor Subsidiaries, and (5) the eliminations to arrive at the information for L-3 on a consolidated basis.


	L-3 Holdings (Parent)			L-3 Communications			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L-3
	(in millions)
Condensed Combining Balance Sheets:
At March 25, 2016:
Current assets:
Cash and cash equivalents	$	—		$	349		$	3		$	189		$	(7	)	$	534
Billed receivables, net		—			276			256			247			—			779
Contracts in process		—			925			1,030			271			—			2,226
Other current assets		—			279			134			111			—			524

Total current assets		—			1,829			1,423			818			(7	)		4,063
Goodwill		—			2,339			2,974			993			—			6,306
Other assets		—			784			500			258			—			1,542
Investment in and amounts due from consolidated subsidiaries		4,378			5,393			4,312			—			(14,083	)		—

Total assets	$	4,378		$	10,345		$	9,209		$	2,069		$	(14,090	)	$	11,911

Current portion of long-term debt	$	—		$	499		$	—		$	—		$	—		$	499
Current liabilities		—			913			818			456			(7	)		2,180
Amounts due to consolidated subsidiaries		—			—			—			247			(247	)		—
Other long-term liabilities		—			1,428			195			31			—			1,654
Long-term debt		—			3,127			—			—			—			3,127

Total liabilities		—			5,967			1,013			734			(254	)		7,460

L-3 shareholders’ equity		4,378			4,378			8,196			1,335			(13,909	)		4,378
Noncontrolling interests		—			—			—			—			73			73

Total equity		4,378			4,378			8,196			1,335			(13,836	)		4,451

Total liabilities and equity	$	4,378		$	10,345		$	9,209		$	2,069		$	(14,090	)	$	11,911

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		—			798			496			260			—			1,554
Investment in and amounts due from consolidated subsidiaries		4,355			5,609			3,739			111			(13,814	)		—

Total assets	$	4,355		$	10,300		$	9,264		$	2,057		$	(13,909	)	$	12,067

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		—			3,125			—			—			—			3,125

Total liabilities		—			5,945			1,314			474			(95	)		7,638

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		$	10,300		$	9,264		$	2,057		$	(13,909	)	$	12,067

Condensed Combining Statements of Operations:
For the quarter ended March 25, 2016:
Total net sales	$	—		$	822		$	1,185		$	409		$	(63	)	$	2,353
Total cost of sales		(6	)		(739	)		(1,068	)		(357	)		69			(2,101	)

Operating (loss) income		(6	)		83			117			52			6			252
Interest expense		—			(41	)		—			—			—			(41	)
Interest and other income, net		—			3			—			1			—			4

(Loss) income from continuing operations before income taxes		(6	)		45			117			53			6			215
Benefit (provision) for income taxes		1			(10	)		(26	)		(12	)		(1	)		(48	)
Equity in net income of consolidated subsidiaries		232			192			—			—			(424	)		—

Income from continuing operations		227			227			91			41			(419	)		167
Income from discontinued operations, net of income tax		—			—			63			—			—			63

Net income		227			227			154			41			(419	)		230
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)

Net income attributable to L-3	$	227		$	227		$	154		$	41		$	(422	)	$	227

Comprehensive income attributable to L-3	$	243		$	243		$	162		$	41		$	(446	)	$	243

Condensed Combining Statements of Operations:
For the quarter ended March 27, 2015:
Total net sales	$	—		$	796		$	1,272		$	486		$	(66	)	$	2,488
Total cost of sales		(13	)		(729	)		(1,172	)		(444	)		79			(2,279	)
Loss related to business divestitures		—			—			(3	)		(19	)		—			(22	)

Operating (loss) income		(13	)		67			97			23			13			187
Interest expense		—			(39	)		—			—			—			(39	)
Interest and other income, net		—			3			—			—			—			3

(Loss) income from continuing operations before income taxes		(13	)		31			97			23			13			151
Benefit (provision) for income taxes		4			(10	)		(29	)		(7	)		(4	)		(46	)
Equity in net income of consolidated subsidiaries		114			84			—			—			(198	)		—

Income from continuing operations		105			105			68			16			(189	)		105
Income from discontinued operations, net of income tax		—			—			4			—			—			4

Net income		105			105			72			16			(189	)		109
Net income attributable to noncontrolling interests		—			—			—			—			(4	)		(4	)

Net income attributable to L-3	$	105		$	105		$	72		$	16			(193	)	$	105

Comprehensive income (loss) attributable to L-3	$	26		$	26		$	69		$	(73	)	$	(22	)	$	26

Condensed Combining Statements of Cash Flows
For the quarter ended March 25, 2016:
Operating activities:
Net cash from (used in) operating activities	$	256		$	46		$	117		$	(32	)	$	(275	)	$	112

Investing activities:
Business acquisitions, net of cash acquired		—			(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balances		—			576			—			—			—			576
Investments in L-3 Communications		(1	)		—			—			—			1			—
Other investing activities		—			3			(12	)		(10	)		—			(19	)

Net cash (used in) from investing activities from continuing operations		(1	)		552			(12	)		(10	)		1			530

Financing activities:
Common stock repurchased		(198	)		—			—			—			—			(198	)
Dividends paid on L-3 Holdings common stock		(58	)		—			—			—			—			(58	)
Dividends paid to L-3 Holdings		—			(256	)		—			—			256			—
Investments from L-3 Holdings		—			1			—			—			(1	)		—
Other financing activities		1			(131	)		(46	)		66			107			(3	)

Net cash (used in) from financing activities from continuing operations		(255	)		(386	)		(46	)		66			362			(259	)

Net decrease in cash and cash equivalents of discontinued operations		—			—			(56	)		—			—			(56	)

Net increase in cash		—			212			3			24			88			327
Cash and cash equivalents, beginning of the period		—			137			—			165			(95	)		207

Cash and cash equivalents, end of the period	$	—		$	349		$	3		$	189		$	(7	)	$	534

For the quarter ended March 27, 2015:
Operating activities:
Net cash from operating activities	$	158		$	107		$	4		$	1		$	(158	)	$	112

Investing activities:
Business acquisitions, net of cash acquired		—			(41	)		—			—			—			(41	)
Investments in L-3 Communications		(13	)		—			—			—			13			—
Other investing activities		—			(19	)		(5	)		(9	)		—			(33	)

Net cash used in investing activities from continuing operations		(13	)		(60	)		(5	)		(9	)		13			(74	)

Financing activities:
Common stock repurchased		(100	)		—			—			—			—			(100	)
Dividends paid on L-3 Holdings common stock		(58	)		—			—			—			—			(58	)
Dividends paid to L-3 Holdings		—			(158	)		—			—			158			—
Investments from L-3 Holdings		—			13			—			—			(13	)		—
Other financing activities		13			(53	)		4			(7	)		51			8

Net cash (used in) from financing activities from continuing operations		(145	)		(198	)		4			(7	)		196			(150	)

Effect of foreign currency exchange rate changes on cash		—			—			—			(11	)		—			(11	)
Net decrease in cash and cash equivalents of discontinued operations		—			—			(3	)		—			—			(3	)
Change in cash balance in assets held for sale		—			—			1			—			—			1

Net (decrease) increase in cash		—			(151	)		1			(26	)		51			(125	)
Cash and cash equivalents, beginning of the period		—			361			1			142			(62	)		442

Cash and cash equivalents, end of the period	$	—		$	210		$	2		$	116		$	(11	)	$	317