10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended September 23, 2016

¨ 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

(Registrant’s telephone number, including area code)

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 registrants were 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 Web site, 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 whether the registrant, L-3 Communications Holdings, Inc., is a large accelerated filer, accelerated filer, 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	¨  (Do not check if a smaller reporting company)	Smaller reporting company	¨

Indicate by check mark whether the registrant, L-3 Communications Corporation, Inc., is a large accelerated filer, accelerated filer, 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  (Do not check if a smaller reporting company)	Smaller reporting company	¨

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

There were 77,308,876 shares of L-3 Communications Holdings, Inc. common stock with a par value of $0.01 outstanding as of the close of business on October 21, 2016.

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

INDEX TO QUARTERLY REPORT ON FORM 10-Q

For the quarterly period ended September 23, 2016

		Page No.
	PART I — FINANCIAL INFORMATION
ITEM 1.	Financial Statements
	Condensed Consolidated Balance Sheets as of September 23, 2016 (Unaudited) and December 31, 2015		1
	Unaudited Condensed Consolidated Statements of Operations for the Quarterly and Year- to-Date periods ended September 23, 2016 and September 25, 2015		2
	Unaudited Condensed Consolidated Statements of Comprehensive Income for the Quarterly and Year-to-Date periods ended September 23, 2016 and September 25, 2015		4
	Unaudited Condensed Consolidated Statements of Equity for the Year-to-Date periods ended September 23, 2016 and September 25, 2015		5
	Unaudited Condensed Consolidated Statements of Cash Flows for the Year-to-Date periods ended September 23, 2016 and September 25, 2015		6
	Notes to Unaudited Condensed Consolidated Financial Statements		7
ITEM 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations		40
ITEM 3.	Quantitative and Qualitative Disclosures About Market Risk		58
ITEM 4.	Controls and Procedures		58
	PART II — OTHER INFORMATION
ITEM 1.	Legal Proceedings		59
ITEM 1A.	Risk Factors		59
ITEM 2.	Unregistered Sales of Equity Securities and Use of Proceeds		60
ITEM 6.	Exhibits		60
Signature			61

PART I — FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

CONDENSED CONSOLIDATED BALANCE SHEETS

(in millions, except share data)

	(Unaudited) September 23, 2016			December 31, 2015
ASSETS
Current assets:
Cash and cash equivalents	$	411		$	207
Billed receivables, net of allowances of $13 in 2016 and $15 in 2015		812			746
Contracts in process		2,265			2,081
Inventories		361			333
Other current assets		160			201
Assets of discontinued operations		—			664
Total current assets		4,009			4,232
Property, plant and equipment, net		1,083			1,097
Goodwill		6,284			6,281
Identifiable intangible assets		181			199
Deferred income taxes		4			3
Other assets		250			255
Total assets	$	11,811		$	12,067
LIABILITIES AND EQUITY
Current liabilities:
Current portion of long-term debt	$	549		$	499
Accounts payable, trade		426			297
Accrued employment costs		519			504
Accrued expenses		391			390
Advance payments and billings in excess of costs incurred		453			562
Income taxes		8			13
Other current liabilities		404			394
Liabilities of discontinued operations		—			220
Total current liabilities		2,750			2,879
Pension and postretirement benefits		1,027			1,047
Deferred income taxes		286			219
Other liabilities		326			368
Long-term debt		2,782			3,125
Total liabilities		7,171			7,638
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, 77,355,596 shares outstanding at September 23, 2016 and 78,133,763 shares outstanding at December 31, 2015 (L-3 Communications Corporation’s common stock: $.01 par value, 100 shares authorized, issued and outstanding)		6,225			6,052
L-3 Communications Holdings, Inc.’s treasury stock (at cost), 82,052,903 shares at September 23, 2016 and 79,375,063 shares at December 31, 2015		(7,177	)		(6,851	)
Retained earnings		6,087			5,728
Accumulated other comprehensive loss		(567	)		(574	)
Total L-3 shareholders’ equity		4,568			4,355
Noncontrolling interests		72			74
Total equity		4,640			4,429
Total liabilities and equity	$	11,811		$	12,067

See notes to unaudited condensed consolidated financial statements.

1

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Third Quarter Ended
	September 23, 2016			September 25, 2015
Net sales:
Products	$	1,500		$	1,600
Services		1,005			964
Total net sales		2,505			2,564
Cost of sales:
Products		(1,355	)		(1,409	)
Services		(935	)		(880	)
Total cost of sales		(2,290	)		(2,289	)
Loss related to business divestitures		—			(9	)
Goodwill impairment charges		—			(35	)
Operating income		215			231
Interest expense		(41	)		(43	)
Interest and other income, net		6			3
Income from continuing operations before income taxes		180			191
Provision for income taxes		(29	)		(63	)
Income from continuing operations		151			128
Loss from discontinued operations, net of income taxes		—			(424	)
Net income (loss)		151			(296	)
Net income from continuing operations attributable to noncontrolling interests		(3	)		(3	)
Net income (loss) attributable to L-3	$	148		$	(299	)
Basic earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	1.91		$	1.56
Discontinued operations		—			(5.30	)
Basic earnings (loss) per share	$	1.91		$	(3.74	)
Diluted earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	1.88		$	1.54
Discontinued operations		—			(5.22	)
Diluted earnings (loss) per share	$	1.88		$	(3.68	)
Cash dividends declared per common share	$	0.70		$	0.65
L-3 Holdings’ weighted average common shares outstanding:
Basic		77.3			80.0
Diluted		78.8			81.2

See notes to unaudited condensed consolidated financial statements.

2

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(in millions, except per share data)

	Year-to-Date Ended
	September 23, 2016			September 25, 2015
Net sales:
Products	$	4,561		$	4,728
Services		2,961			2,867
Total net sales		7,522			7,595
Cost of sales:
Products		(4,095	)		(4,312	)
Services		(2,713	)		(2,648	)
Total cost of sales		(6,808	)		(6,960	)
Loss related to business divestitures		—			(29	)
Goodwill impairment charges		—			(35	)
Operating income		714			571
Interest expense		(125	)		(124	)
Interest and other income, net		15			11
Debt retirement charge		(5	)		—
Income from continuing operations before income taxes		599			458
Provision for income taxes		(130	)		(105	)
Income from continuing operations		469			353
Income (loss) from discontinued operations, net of income taxes		63			(416	)
Net income (loss)		532			(63	)
Net income from continuing operations attributable to noncontrolling interests		(10	)		(11	)
Net income (loss) attributable to L-3	$	522		$	(74	)
Basic earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	5.93		$	4.19
Discontinued operations		0.81			(5.10	)
Basic earnings (loss) per share	$	6.74		$	(0.91	)
Diluted earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	5.83		$	4.14
Discontinued operations		0.80			(5.03	)
Diluted earnings (loss) per share	$	6.63		$	(0.89	)
Cash dividends declared per common share	$	2.10		$	1.95
L-3 Holdings’ weighted average common shares outstanding:
Basic		77.4			81.5
Diluted		78.7			82.7

See notes to unaudited condensed consolidated financial statements.

3

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(in millions)

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
Net income (loss)	$	151		$	(296	)	$	532		$	(63	)
Other comprehensive income (loss):
Foreign currency translation adjustments		(31	)		(55	)		(27	)		(84	)
Unrealized (losses) gains on hedging instruments(1)		—			(7	)		10			(3	)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized(2)		8			10			24			32
Net gain arising during the period(3)		—			—			—			9
Total other comprehensive (loss) income		(23	)		(52	)		7			(46	)
Comprehensive income (loss)		128			(348	)		539			(109	)
Comprehensive income attributable to noncontrolling interests		(3	)		(3	)		(10	)		(11	)
Comprehensive income (loss) attributable to L-3	$	125		$	(351	)	$	529		$	(120	)

⁽¹⁾ Net of income tax benefits of $3 million for the quarterly period ended September 25, 2015, and income taxes of $4 million and income tax benefits of $2 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively.

⁽²⁾ Net of income taxes of $4 million and $7 million for the quarterly periods ended September 23, 2016 and September 25, 2015, respectively, and income taxes of $13 million and $18 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively.

⁽³⁾ Represents 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. Amount is net of income taxes of $5 million for the year-to-date period ended September 25, 2015.

4

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF EQUITY

(in millions, except per share data)

	L-3 Holdings’ Common Stock					Additional Paid-in Capital									Accumulated Other Comprehensive Loss
	Shares Outstanding			Par Value					Treasury Stock			Retained Earnings						Noncontrolling Interests			Total Equity
For the Year-to-Date Period Ended September 23, 2016:
Balance at December 31, 2015		78.1		$	1	$	6,051		$	(6,851	)	$	5,728		$	(574	)	$	74		$	4,429
Net income													522						10			532
Other comprehensive income																7						7
Distributions to noncontrolling interests																			(12	)		(12	)
Cash dividends declared on common stock ($2.10 per share)													(165	)								(165	)
Shares issued:
Employee savings plans		0.7					94															94
Exercise of stock options		0.6					49															49
Employee stock purchase plan		0.4					16															16
Vesting of restricted stock and performance units		0.5																				—
Repurchases of common stock to satisfy tax withholding obligations		(0.2	)				(20	)														(20	)
Stock-based compensation expense							34															34
Treasury stock purchased		(2.7	)							(326	)											(326	)
Other													2									2
Balance at September 23, 2016		77.4		$	1	$	6,224		$	(7,177	)	$	6,087		$	(567	)	$	72		$	4,640
For the Year-to-Date Period Ended September 25, 2015:
Balance at December 31, 2014		82.0		$	1	$	5,798		$	(6,111	)	$	6,181		$	(584	)	$	75		$	5,360
Net (loss) income													(74	)					11			(63	)
Other comprehensive loss																(46	)					(46	)
Distributions to noncontrolling interests																			(11	)		(11	)
Cash dividends declared on common stock ($1.95 per share)													(162	)								(162	)
Shares issued:
Employee savings plans		0.8					95															95
Exercise of stock options		0.6					65															65
Employee stock purchase plan		0.3					17															17
Vesting of restricted stock units		0.7																				—
Repurchases of common stock to satisfy tax withholding obligations		(0.2	)				(33	)														(33	)
Stock-based compensation expense							36															36
Treasury stock purchased		(5.2	)							(605	)											(605	)
Other							6															6
Balance at September 25, 2015		79.0		$	1	$	5,984		$	(6,716	)	$	5,945		$	(630	)	$	75		$	4,659

See notes to unaudited condensed consolidated financial statements.

5

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(in millions)

	Year-to-Date Ended
	September 23, 2016			September 25, 2015
Operating activities:
Net income (loss)	$	532		$	(63	)
Less: (Income) loss from discontinued operations, net of tax		(63	)		416
Income from continuing operations		469			353
Depreciation of property, plant and equipment		121			123
Amortization of intangibles and other assets		32			32
Deferred income tax provision		48			5
Stock-based employee compensation expense		34			35
Contributions to employee savings plans in L-3 Holdings’ common stock		92			87
Goodwill impairment charges		—			35
Amortization of pension and postretirement benefit plans net loss and prior service cost		37			50
Amortization of bond discounts and deferred debt issue costs (included in interest expense)		6			6
Loss related to business divestitures		—			29
Other non-cash items		8			(5	)
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures, and discontinued operations:
Billed receivables		(69	)		36
Contracts in process		(193	)		(181	)
Inventories		(31	)		(77	)
Other assets		21			(11	)
Accounts payable, trade		130			117
Accrued employment costs		8			41
Accrued expenses		3			(34	)
Advance payments and billings in excess of costs incurred		(102	)		6
Income taxes		—			(8	)
Other current liabilities		(3	)		(6	)
Pension and postretirement benefits		(19	)		(18	)
All other operating activities		(13	)		(18	)
Net cash from operating activities from continuing operations		579			597
Investing activities:
Business acquisitions, net of cash acquired		(27	)		(260	)
Proceeds from the sale of businesses, net of closing date cash balances		561			308
Capital expenditures		(126	)		(137	)
Dispositions of property, plant and equipment		15			2
Other investing activities		7			5
Net cash from (used in) investing activities from continuing operations		430			(82	)
Financing activities:
Borrowings under revolving credit facility		335			861
Repayment of borrowings under revolving credit facility		(335	)		(861	)
Redemption of senior notes		(298	)		—
Common stock repurchased		(326	)		(605	)
Dividends paid on L-3 Holdings’ common stock		(166	)		(163	)
Proceeds from exercises of stock options		49			41
Proceeds from employee stock purchase plan		23			26
Repurchases of common stock to satisfy tax withholding obligations		(20	)		(33	)
Other financing activities		(8	)		(1	)
Net cash used in financing activities from continuing operations		(746	)		(735	)
Effect of foreign currency exchange rate changes on cash and cash equivalents		(3	)		(14	)
Net cash (used in) from discontinued operations:
Operating activities		(56	)		58
Investing activities		—			(4	)
Net cash (used in) from discontinued operations		(56	)		54
Change in cash balance in assets held for sale		—			61
Net increase (decrease) in cash and cash equivalents		204			(119	)
Cash and cash equivalents, beginning of the period		207			442
Cash and cash equivalents, end of the period	$	411		$	323

See notes to unaudited condensed consolidated financial statements.

6

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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 7, 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 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. 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 Quarterly Report on Form 10-Q are to the Company’s continuing operations, unless specifically noted. See Note 5 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 the Company’s segments is included in Note 22 to the unaudited condensed consolidated financial statements and in Note 21 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

2.  Basis of Presentation

These unaudited condensed consolidated financial statements for the quarterly and year-to-date periods ended September 23, 2016 should be read in conjunction with the audited consolidated financial statements of L-3 Holdings and L-3 Communications included in their Annual Report on Form 10-K for the year ended December 31, 2015.

Principles of Consolidation and Reporting

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

7

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

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 unaudited financial information of L-3 Communications and its subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the disclosures required by U.S. GAAP for a complete set of annual audited financial statements. The December 31, 2015 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year.

It is generally the Company’s established practice to close its books for the quarters ending March, June and September on the Friday preceding the end of the calendar quarter. The interim unaudited condensed consolidated financial statements included herein have been prepared and are labeled based on that convention. The Company closes its books for annual periods on December 31 regardless of what day it falls on.

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

Accounting Estimates

The preparation of financial statements in conformity with 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 for L-3 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 valuation of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) 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 periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Sales and profits on 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. Approximately 49% of the Company’s net sales in 2015 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

8

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

accounting standards, sales and profits are recognized based on: (1) a POC method of accounting (fixed-price type contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus type contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material type contracts). 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 and profits on these fixed-price type contracts requires the preparation of estimates of: (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. 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. The profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to the current estimated total profit margin multiplied by the cumulative sales recognized, less the amount of cumulative profit previously recorded for the contract.

Sales and profits on cost-plus type contracts that are 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 arrangement types for the Company. 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.

Revisions or 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, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to POC accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s 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 $127 million, or 18%, of consolidated operating income ($1.03 per diluted share) for the year-to-date period ended September 23, 2016, and increases of $50 million, or 9%, of consolidated operating income ($0.49 per diluted share) for the year-to-date period ended September 25, 2015.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

As previously disclosed, during the fourth quarter of 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech 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 a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015, associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $36 million. The Company recorded the $16 million increase in the product returns allowance as a reduction to net sales during 2016. The product returns allowance, net of refund payments made to eligible owners, was $8 million at September 23, 2016, and is included in other current liabilities on the unaudited condensed consolidated balance sheets. As of October 20, 2016, the Company had approved refunds at a cost of approximately $32 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material. Furthermore, during the third quarter of 2016, the Company recorded a $14 million pre-tax charge in the Electronics Systems segment for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS. See Note 18, Commitments and Contingencies for further details regarding the class action litigation.

For a more complete discussion of these estimates and assumptions, see the Annual Report on Form 10-K for the year ended December 31, 2015.

3.  New Accounting Standards Implemented

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits will be classified as an operating activity on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 11 for additional information.

4.  Accounting Standards Issued and Not Yet Implemented

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The new standard will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early adoption permitted. The adoption of this standard will not have an impact on the Company’s financial position or results of operations, however, the Company expects that there may be an immaterial reclassification of items within the operating, investing and financing activities on its statement of cash flows. The Company plans to early adopt this standard in the fourth quarter of 2016.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires 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 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 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 with disclosure of results under the new and old standards for the first year of adoption.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. The Company has evaluated the impact of the standard on all of its revenue streams and most of its contracts. The Company expects to complete the contract evaluations and validate the results by the first quarter of 2017. The Company has also made significant progress on drafting its accounting policies and evaluating the new disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, design any changes to such business processes, controls and systems by the middle of 2017, and implement the changes over the remainder of 2017.

Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to the customer, either at a point in time or over time. The Company expects to

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

recognize revenue over time on most of its contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on certain of these contracts. The Company currently recognizes sales on fixed-priced production contracts that are covered by contract accounting standards, and under which units are produced and delivered in a continuous or sequential process as units are delivered, based on their contractual selling prices (units-of-delivery method). The Company expects to discontinue the use of the units-of-delivery method under the new standard. Approximately 50% of the Company’s net sales are generated from revenue arrangements accounted for under contract accounting standards, including approximately 15% that use the units-of-delivery method. While the Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements, related disclosures and the transition alternatives available, the Company will adopt the standard as of January 1, 2018. Furthermore, the Company expects to determine the transition method and the effect of this standard on the Company’s consolidated financial statements in the first quarter of 2017.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 are not expected to have an impact on the Company’s financial position, results of operations or cash flows.

5.  Divestitures and Acquisitions

Discontinued Operations

As discussed in Note 1, on February 1, 2016, the Company completed the sale of its NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation 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.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net sales	$	—	$	271		$	86		$	773
Cost of sales		—		(260	)		(92	)		(736	)
Gain related to business divestiture(1)		—		—			64			—
Goodwill impairment charges		—		(456	)		—			(456	)
Operating (loss) income from discontinued operations		—		(445	)		58			(419	)
Interest expense allocated to discontinued operations		—		(4	)		—			(15	)
(Loss) income from discontinued operations before income taxes		—		(449	)		58			(434	)
Income tax benefit		—		25			5			18
(Loss) income from discontinued operations, net of income taxes	$	—	$	(424	)	$	63		$	(416	)

⁽¹⁾ The year-to-date period ended September 23, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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
	(in millions)
Assets
Current assets	$	201
Property, plant and equipment, net		25
Goodwill(1)		390
Other assets		48
Total assets of discontinued operations	$	664
Liabilities
Accounts payable, trade	$	48
Other current liabilities		78
Current liabilities		126
Long-term liabilities		94
Total liabilities of discontinued operations	$	220

⁽¹⁾ 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 NSS business sold.

Business Divestitures

2015 Business Divestitures

Marine Systems International (MSI) Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a sales 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 sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. The Company recorded a pre-tax loss of $17 million ($6 million after income taxes) for the year-to-date period ended September 25, 2015, related to the divestiture of MSI.

Broadcast Sports Inc. (BSI) Divestiture. On April 24, 2015, the Company divested its BSI business for a sales price of $26 million. BSI provided 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 Company recorded a pre-tax loss of $1 million (less than $1 million after income taxes) and $4 million ($6 million after income taxes) for the quarterly and year-to-date periods ended September 25, 2015, respectively, related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sales price of $4 million. Tinsley provided 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 and year-to-date periods ended September 25, 2015.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

Business Acquisitions

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

2016 Business Acquisitions

Advanced Technical Materials, Inc. (ATM) Acquisition. On January 22, 2016, the Company acquired the assets of ATM for a purchase price of $27 million, which was financed with cash on hand. The purchase price and purchase price allocation of ATM was finalized as of September 23, 2016, with no significant changes to preliminary amounts. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components. The aggregate goodwill recognized for this business was $20 million, which was assigned to the Communication Systems reportable segment, all of which is expected to be deductible for income tax purposes.

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. The purchase price and purchase price allocation of L-3 ForceX was finalized as of September 23, 2016, with no significant changes to preliminary amounts. 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 $53 million, which was assigned to the Electronic Systems reportable segment, of which $52 million is expected to be deductible for income tax purposes.

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. The purchase price and purchase price allocation of L-3 CTC was finalized as of June 24, 2016, with no significant changes to preliminary amounts. 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 $182 million, which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes.

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 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 provides 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.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

Business Acquisitions Completed or Agreements to Acquire Businesses Entered Into After September 23, 2016

Agreement to Acquire Certain Assets of Implant Sciences. On October 10, 2016, the Company entered into an asset purchase agreement (APA) to acquire the explosives trace detection (ETD) business of Implant Sciences Corporation (Implant) at a future date for a purchase price of $118 million, in addition to the assumption of specified liabilities. The Company intends to finance the asset purchase with cash on hand. Implant filed for bankruptcy protection pursuant to Chapter 11 of the U.S. Bankruptcy Code on October 10, 2016. Accordingly, the completion of this sale transaction is subject to approval by the U.S. Bankruptcy Court. Pursuant to the terms of the APA, the Company will be, subject to U.S. Bankruptcy Court approval, entitled to a breakup fee and expense reimbursement if it does not prevail as the successful bidder after concluding a bankruptcy auction process.

Micreo Limited and Aerosim Acquisitions. On September 30, 2016, the Company acquired Micreo Limited (Micreo) and Flight Training Acquisitions LLC (Aerosim), in separate transactions, for an aggregate purchase price of approximately $82 million, which was financed with cash on hand. The final purchase prices are subject to customary adjustments for final working capital. Micreo specializes in solutions that utilize high-performance microwave, millimeter wave and photonic technology that complements the Company’s wide range of sensor products and is expected to strengthen the development of the Company’s future products in the higher Electronic Warfare (EW) radio frequency (RF) bandwidth. Micreo currently supports a variety of airborne, land and security programs in Australia. Aerosim provides innovative, portable and flexible pilot and maintenance technician training products and provides a flight school for prospective airline pilots. Aerosim’s commercial training capabilities are complementary to those offered by L-3 Commercial Training Solutions.

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the year-to-date period ended September 23, 2016 and the year ended December 31, 2015, assuming that the business acquisitions completed during these periods had occurred on January 1, 2015.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016		September 25, 2015
	(in millions, except per share data)
Pro forma net sales	$	2,505	$	2,577		$	7,522	$	7,661
Pro forma income from continuing operations attributable to L-3		148		127			458		350
Pro forma net income (loss) attributable to L-3		148		(297	)		521		(66	)
Pro forma diluted earnings per share from continuing operations		1.88		1.56			5.82		4.23
Pro forma diluted earnings (loss) per share		1.88		(3.66	)		6.62		(0.80	)

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 January 1, 2015.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

6.  Contracts in Process

The components of contracts in process are presented in the table below.

	September 23, 2016			December 31, 2015
	(in millions)
Unbilled contract receivables, gross	$	2,180		$	2,097
Unliquidated progress payments		(886	)		(869	)
Unbilled contract receivables, net		1,294			1,228
Inventoried contract costs, gross		1,165			975
Unliquidated progress payments		(194	)		(122	)
Inventoried contract costs, net		971			853
Total contracts in process	$	2,265		$	2,081

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their general and administrative (G&A), independent research and development (IRAD) and bids and proposal (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.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Amounts included in inventoried contract costs at beginning of the period	$	163		$	126		$	137		$	117
Contract costs incurred:
IRAD and B&P		76			69			213			204
Other G&A		201			217			611			611
Total		277			286			824			815
Amounts charged to cost of sales		(270	)		(267	)		(791	)		(787	)
Amounts included in inventoried contract costs at end of the period	$	170		$	145		$	170		$	145

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

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 unaudited condensed consolidated statements of operations.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Selling, general and administrative expenses	$	53	$	53	$	164	$	200
Research and development expenses		16		13		40		38
Total	$	69	$	66	$	204	$	238

7.  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.

	September 23, 2016		December 31, 2015
	(in millions)
Raw materials, components and sub-assemblies	$	186	$	164
Work in process		107		103
Finished goods		68		66
Total	$	361	$	333

8.  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). 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)
Goodwill	$	3,994		$	1,691		$	1,038		$	6,723
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
Balance at December 31, 2015		3,925			1,353			1,003			6,281
Business acquisitions(1)		2			—			20			22
Foreign currency translation adjustments(2)		(31	)		12			—			(19	)
Balance at September 23, 2016	$	3,896		$	1,365		$	1,023		$	6,284
Goodwill	$	3,965		$	1,703		$	1,058		$	6,726
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	3,896		$	1,365		$	1,023		$	6,284

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

⁽¹⁾ The net increase in goodwill for the Electronic Systems segment was due to the final purchase price allocations for the ForceX, Inc. and CTC Aviation Group business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM, Inc. business acquisition.

⁽²⁾ The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, partially offset by the weakening of the U.S. dollar against the Canadian dollar and the Euro during the year-to-date period ended September 23, 2016. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during the year-to-date period ended September 23, 2016.

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.

Identifiable Intangible Assets. The table below presents information for the Company’s identifiable intangible assets that are subject to amortization.

			September 23, 2016						December 31, 2015
	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		17	$	376	$	263	$	113	$	370	$	246	$	124
Technology		11		158		99		59		156		91		65
Other		18		21		12		9		21		11		10
Total		15	$	555	$	374	$	181	$	547	$	348	$	199

The table below presents amortization expense recorded by the Company for its identifiable intangible assets.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Amortization expense	$	9	$	9	$	26	$	26

Based on gross carrying amounts at September 23, 2016, 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	$	35	$	32	$	27	$	24	$	20

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

9.  Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	84	$	82
Accrued product warranty costs		73		70
Accrued interest		43		45
Deferred revenues		39		32
Accruals for pending and threatened litigation (see Note 18)		15		6
Product returns allowance (see Note 2)		8		20
Other		142		139
Total other current liabilities	$	404	$	394

The table below presents the components of other liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 11)	$	117	$	161
Deferred compensation		48		45
Accrued product warranty costs		36		35
Accrued workers’ compensation		34		38
Notes payable and capital lease obligations		11		10
Other		80		79
Total other liabilities	$	326	$	368

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

	Year-to-Date Ended
	September 23, 2016			September 25, 2015
	(in millions)
Accrued product warranty costs:(1)
Balance at January 1	$	105		$	93
Acquisitions during the period		—			1
Accruals for product warranties issued during the period		38			46
Settlements made during the period		(33	)		(46	)
Foreign currency translation adjustments		(1	)		(1	)
Balance at end of period	$	109		$	93

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

⁽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.

10.  Debt

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

	September 23, 2016			December 31, 2015
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		200			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			350
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(6	)		(8	)
Deferred debt issue costs		(13	)		(18	)
Carrying amount of long-term debt		3,331			3,624
Current portion of long-term debt		(549	)		(499	)
Carrying amount of long-term debt, excluding current portion	$	2,782		$	3,125

⁽¹⁾ During the year-to-date period ended September 23, 2016, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were each $335 million. At September 23, 2016, L-3 Communications had the full availability of its $1 billion Credit Facility, which expires on February 3, 2017.

On March 24, 2016, the Company initiated a redemption of $300 million aggregate principal amount of its $500 million 3.95% Senior Notes due November 15, 2016 (the 2016 Notes). The redemption price was determined on May 17, 2016 at 101.475% of the principal amount thereof (Redemption Price). Interest on the 2016 Notes redeemed ceased to accrue on and after May 20, 2016 (Redemption Date) and the only remaining right of holders of such 2016 Notes was to receive payment of the Redemption Price and accrued interest. On May 20, 2016, the Company completed the partial redemption and recognized a debt retirement charge of $5 million. Following the partial redemption of the 2016 Notes, $200 million aggregate principal amount of the 2016 Notes remain outstanding.

In April 2015, the FASB issued ASU 2015-03 which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability. The Company adopted this standard during the first quarter of 2016.

11.  Income Taxes

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. At September 23, 2016, the

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2015 were open. 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.

The effective income tax rate for the year-to-date period ended September 23, 2016 decreased to 21.7% from 22.9% for the year-to-date period ended September 25, 2015. The year-to-date period ended September 23, 2016 includes: (1) a benefit from the reinstatement of the Federal Research and Experimentation tax credit, (2) tax benefits of $21 million for the reversal of previously accrued amounts related to various U.S. Federal, foreign and state tax matters and (3) $16 million due to the early adoption of a new accounting standard related to income tax benefits from employee stock-based compensation awards (see Note 3). The year-to-date period ended September 25, 2015 included $36 million of tax benefits, including: (1) $17 million related to a legal restructuring of the Company’s foreign entities, (2) $10 million related to the resolution of various outstanding income tax matters with U.S. and foreign tax authorities, and (3) $9 million primarily associated with the release of valuation allowance for certain deferred tax assets. As of September 23, 2016, the Company anticipates that unrecognized tax benefits will decrease by approximately $6 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount of the decrease over the next 12 months could vary significantly depending on the ultimate timing and nature of any settlements.

Current and non-current income taxes payable include accrued potential interest of $10 million ($6 million after income taxes) at September 23, 2016 and $18 million ($11 million after income taxes) at December 31, 2015, and potential penalties of $8 million at September 23, 2016 and $9 million at December 31, 2015.

12.  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 (losses) gains on hedging instruments			Unrecognized losses and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(27	)		2			—			(25	)
Amounts reclassified from AOCI, net of tax		—			8			24			32
Net current period other comprehensive income		(27	)		10			24			7
Balance at September 23, 2016	$	(128	)	$	2		$	(441	)	$	(567	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive loss before reclassifications, net of tax		(125	)		(13	)		—			(138	)
Amounts reclassified from AOCI, net of tax		41			10			41			92
Net current period other comprehensive (loss) income		(84	)		(3	)		41			(46	)
Balance at September 25, 2015	$	(65	)	$	(8	)	$	(557	)	$	(630	)

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NOTES TO UNAUDITED CONDENSED 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)												Affected Line Item in the Unaudited Condensed Consolidated Statements of Operations
	Third Quarter Ended						Year-to-Date Ended
Details About AOCI Components	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Foreign currency translation adjustment:
MSI divestiture	$	—		$	—		$	—		$	(41	)	Loss related to business divestitures
		—			—			—			(41	)	Income from continuing operations before income taxes
		—			—			—			—		Provision for income taxes
	$	—		$	—		$	—		$	(41	)	Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	—		$	—		$	(2	)	Loss related to business divestitures
Other		(4	)		(4	)		(8	)		(10	)	Cost of sales-products
		(4	)		(4	)		(8	)		(12	)	Income from continuing operations before income taxes
		—			—			—			2		Provision for income taxes
	$	(4	)	$	(4	)	$	(8	)	$	(10	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	—		$	—		$	(14	)	Loss related to business divestitures
Net loss		(12	)		(17	)		(37	)		(50	)	(b)
		(12	)		(17	)		(37	)		(64	)	Income from continuing operations before income taxes
		4			7			13			23		Provision for income taxes
	$	(8	)	$	(10	)	$	(24	)	$	(41	)	Income from continuing operations
Total reclassification for the period	$	(12	)	$	(14	)	$	(32	)	$	(92	)	Income from continuing operations

^(a)  Amounts in parenthesis indicate charges to the unaudited condensed 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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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

13.  Equity

On December 4, 2014, 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, 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 2,677,840 shares of its common stock at an average price of $121.58 per share for an aggregate amount of $326 million from January 1, 2016 through September 23, 2016. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares.

At September 23, 2016, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $480 million.

From September 24, 2016 through October 21, 2016, L-3 Holdings repurchased 112,846 shares of its common stock at an average price of $150.63 per share for an aggregate amount of $17 million.

On June 21, 2016, L-3 Holdings’ Board of Directors declared a cash dividend of $0.70 per share, paid on September 15, 2016 to shareholders of record at the close of business on August 17, 2016. During the year-to-date period ended September 23, 2016, the Company paid $166 million of cash dividends, including a $1 million net reduction of previously accrued dividends for employee held stock awards.

On October 18, 2016, L-3 Holdings’ Board of Directors declared a quarterly cash dividend of $0.70 per share, payable on December 15, 2016 to shareholders of record at the close of business on November 17, 2016.

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AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

14.  L-3 Holdings’ Earnings Per Common Share

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

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	151		$	(296	)	$	532		$	(63	)
Net income from continuing operations attributable to noncontrolling interests		(3	)		(3	)		(10	)		(11	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	148		$	125		$	459		$	342
Discontinued operations, net of income tax		—			(424	)		63			(416	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Basic earnings (loss) per share:
Continuing operations	$	1.91		$	1.56		$	5.93		$	4.19
Discontinued operations, net of income tax		—			(5.30	)		0.81			(5.10	)
Net income (loss)	$	1.91		$	(3.74	)	$	6.74		$	(0.91	)
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Assumed exercise of stock options		3.0			2.2			2.5			2.4
Unvested restricted stock awards		1.0			1.2			1.0			1.3
Employee stock purchase plan contributions		0.1			0.2			0.1			0.1
Performance unit awards		0.1			0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.7	)		(2.5	)		(2.4	)		(2.7	)
Common and potential common shares		78.8			81.2			78.7			82.7
Diluted earnings (loss) per share:
Continuing operations	$	1.88		$	1.54		$	5.83		$	4.14
Discontinued operations, net of income tax		—			(5.22	)		0.80			(5.03	)
Net income (loss)	$	1.88		$	(3.68	)	$	6.63		$	(0.89	)

The computation of diluted EPS excludes shares for stock options and employee stock purchase plan contributions of 0.6 million for the year-to-date period ended September 23, 2016, and 0.9 million and 0.6 million for the quarterly and year-to-date periods ended September 25, 2015, respectively, as they were anti-dilutive.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

15.  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.

	September 23, 2016						December 31, 2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	128	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		9		—		—		2		—
Total assets	$	128	$	9	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	8	$	—	$	—	$	16	$	—

⁽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.

16.  Financial Instruments

At September 23, 2016 and December 31, 2015, 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 the 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.

	September 23, 2016				December 31, 2015
	Carrying		Estimated		Carrying			Estimated
	Amount		Fair Value		Amount			Fair Value
	(in millions)
Senior Notes(1)	$	3,331	$	3,610	$	3,624		$	3,754
Foreign currency forward contracts(2)		1		1		(14	)		(14	)

⁽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 17 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

17.  Derivative Financial Instruments

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

Foreign Currency Forward Contracts. 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 condensed consolidated 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 AOCI 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. 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 at September 23, 2016.

Currency	Notional Amounts
	(in millions)
Canadian dollar	$	128
U.S. dollar		69
Euro		42
British pound		5
Other		13
Total	$	257

At September 23, 2016, the Company’s foreign currency forward contracts had maturities through 2020.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

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

	September 23, 2016								December 31, 2015
	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)	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1

⁽¹⁾  See Note 15 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

The effects from foreign currency forward contracts on the unaudited condensed consolidated statements of operations were pre-tax losses of $4 million for each of the quarterly periods ended September 23, 2016 and September 25, 2015, and $8 million and $12 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively. At September 23, 2016, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months is $1 million.

18.  Commitments and Contingencies

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with the U.S. Government, foreign government customers and state and local governments. 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, 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.

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

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 9. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At September 23, 2016, the Company did not record any amounts for recoveries from insurance contracts or third parties in connection with the amount of liabilities recorded for pending and threatened litigation. 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. 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. In March 2016, two additional putative class action complaints were filed in the United States District Court for the Eastern District of Michigan, which assert similar claims against the Company. In August of 2016, all five cases were consolidated into a single, putative class action in the United States District Court for the Western District of Missouri. 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 statutes and unjust enrichment. In October 2016, the parties reached a settlement in principle to resolve the allegations in these cases. The proposed settlement is subject to court approval. The anticipated costs of this settlement are reflected in the Company’s financial results.

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-

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NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

judgment interest, and fees and expenses. On March 30, 2016, the District Court dismissed with prejudice all claims against the Company’s officers and allowed the claim against the Company to proceed to discovery. Discovery has commenced. On June 30, 2016, the plaintiffs filed a motion for class certification, which is pending before the District Court. The Company believes the suit lacks merit and intends to defend itself vigorously. 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 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 and is currently in discussions with the government regarding a possible settlement. The Company does not currently believe that any such settlement will have a material financial impact on its financial position, results of operations or cash flows in future periods.

401(k) Plan Class Action. On June 24, 2016, a putative class action was filed in the United States District Court for the Southern District of New York on behalf of participants in and beneficiaries of a Company-sponsored 401(k) plan. An amended complaint was filed on September 29, 2016. As amended, the complaint alleges that certain of the Company’s officers breached fiduciary duties owed under the Employee Retirement Income Security Act by making the Company’s stock available as an investment alternative under the plan during a period prior to the disclosure of misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks, among other things, monetary damages, equitable relief, pre-judgment interest, and fees and expenses. The Company believes the suit lacks merit and intends to defend against it vigorously. 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.

Derivative Action. On July 13, 2016, a shareholder derivative complaint was filed in the Supreme Court of New York, County of New York, against certain of the Company’s current and former directors and officers. The complaint alleges, among other things, that the defendants breached fiduciary duties, caused corporate waste and were unjustly enriched in connection with misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks monetary damages, pre- and post-judgment interest, equitable relief and fees and expenses on behalf of the Company. The Company believes the suit lacks merit and intends to defend itself vigorously. 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.

Bashkirian Airways. In March 2016, approximately $3.7 million was paid from the escrow account on behalf of the remaining four plaintiffs in full satisfaction of the amounts awarded to them. The remaining escrow balance was returned to the Company’s insurers.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our former 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.

29

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

19.  Pension and Other Postretirement Benefits

The following table summarizes the components of net periodic benefit cost for the Company’s pension and other postretirement benefit plans.

	Pension Plans												Postretirement Benefit Plans
	Third Quarter Ended						Year-to-Date Ended						Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Components of net periodic benefit cost:
Service cost	$	25		$	29		$	80		$	93		$	—		$	—		$	1		$	2
Interest cost		32			38			101			112			1			1			4			5
Expected return on plan assets		(47	)		(51	)		(149	)		(155	)		(1	)		(1	)		(3	)		(3	)
Amortization of prior service costs (credits)		—			—			—			1			—			—			(1	)		(2	)
Amortization of net loss (gains)		13			17			39			51			(1	)		—			(1	)		—
Curtailment loss		—			3			—			3			—			—			—			—
Net periodic benefit cost	$	23		$	36		$	71		$	105		$	(1	)	$	—		$	—		$	2

Contributions. The Company contributed cash of $49 million to its pension plans and $4 million to its other postretirement benefit plans during the year-to-date period ended September 23, 2016. The Company expects to contribute an additional $51 million to its pension plans and $6 million to its other postretirement benefit plans during the remainder of 2016.

20.  Stock-Based Compensation

On May 3, 2016, the stockholders of L-3 Holdings approved an amendment to its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP) to increase the number of shares authorized for issuance by 6.8 million shares to approximately 26.0 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 23, 2016 is counted as 4.26 shares for purposes of the share limit. Each share issued under full value awards granted between February 26, 2013 and February 22, 2016 is counted as 3.69 shares for purposes of the share limit.

During the year-to-date period ended September 23, 2016, the Company granted stock-based compensation under the 2008 LTPP in the form of stock options, restricted stock units and performance units. The stock-based compensation awards granted during the year-to-date period ended September 23, 2016 are further discussed below.

30

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

Stock Options. The Company granted 617,575 stock options with a weighted average exercise price of $116.68 per option, which was equal to the closing price of L-3 Holdings’ common stock on the date of grant. The 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. The options granted to our Chairman and Chief Executive Officer are also subject to performance-based vesting conditions. The weighted average grant date fair value for the options of $15.90 per option was estimated using the Black-Scholes option-pricing model. The weighted average assumptions used in the valuation model for this grant are presented in the table below.

Expected holding period (in years)	5.0
Expected volatility	21.3	%
Expected dividend yield	2.8	%
Risk-free interest rate	1.1	%

Restricted Stock Units. The Company granted 394,086 restricted stock units with a weighted average grant date fair value of $116.72 per share. Restricted stock units typically vest three years after the grant date for employees and one year after the grant date for non-employee directors, or if earlier, on the date of the first annual stockholders meeting held after the grant date. The restricted stock units automatically convert into shares of L-3 Holdings’ common stock upon vesting.

Performance Units. The Company granted 51,892 performance units with a weighted average grant date fair value per unit of $116.20. The final payout for these units is based on the achievement of pre-determined EPS goals established by the compensation committee of the Company’s Board of Directors for the three-year period ending December 31, 2018. Units earned under the award can range from zero to 200% of the original number of units awarded, which are converted into shares of L-3 Holdings’ common stock.

Award Modifications. As disclosed in Note 5, the Company completed the sale of NSS on February 1, 2016. In connection with the divestiture of NSS, the Company modified unvested restricted stock unit and stock option awards held by approximately 300 NSS employees by converting each award into a right to receive a cash payment. The cash payment was based on the original number of units awarded, the closing price of L-3’s common stock on the closing date of the sale, and the portion of the three-year vesting period for the award that had been satisfied through the closing date, and additionally in the case of stock options, the exercise price of the options. As a result of the award modification, the Company reversed $4 million of previously recorded stock compensation expense relating to the original awards as a reduction to shareholders equity and recorded $5 million of expense based on the cash payments made to NSS employees in connection with the modified awards, each of which is included in the Company’s results from discontinued operations.

21.  Supplemental Cash Flow Information

	Year-to-Date Ended
	September 23, 2016		September 25, 2015
	(in millions)
Interest paid on outstanding debt	$	120	$	127
Income tax payments		85		114
Income tax refunds		4		6

31

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

22.  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, operating income and operating margin. Corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges, gains or losses related to business divestitures, and certain other items that are excluded by management for purposes of evaluating the operating performance of the Company’s business segments. Certain corporate expenses of $4 million and $11 million for the quarterly and year-to-date periods ended September 25, 2015, 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 (loss), depreciation and amortization and total assets by reportable segment.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net Sales:
Electronic Systems	$	1,024		$	1,023		$	2,970		$	3,138
Aerospace Systems		1,012			1,068			3,167			3,092
Communication Systems		509			518			1,485			1,490
Elimination of intercompany sales		(40	)		(45	)		(100	)		(125	)
Consolidated total	$	2,505		$	2,564		$	7,522		$	7,595
Operating Income:
Electronic Systems	$	119		$	121		$	339		$	352
Aerospace Systems		56			102			232			144
Communication Systems		40			52			143			139
Segment total		215			275			714			635
Loss related to business divestitures(1)		—			(9	)		—			(29	)
Goodwill impairment charges(2)		—			(35	)		—			(35	)
Consolidated total	$	215		$	231		$	714		$	571
Depreciation and amortization:
Electronic Systems	$	26		$	26		$	78		$	81
Aerospace Systems		13			13			40			37
Communication Systems		12			12			35			37
Consolidated total	$	51		$	51		$	153		$	155

⁽¹⁾ See Note 5 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015 related to a business retained by L-3 in connection with the sale of the NSS business. See Note 6 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.

32

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

	September 23, 2016		December 31, 2015
	(in millions)
Total Assets:
Electronic Systems	$	6,636	$	6,426
Aerospace Systems		2,704		2,630
Communication Systems		2,113		1,984
Corporate		358		363
Assets of discontinued operations		—		664
Consolidated total	$	11,811	$	12,067

23.  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 a total of $5 million and $11 million of employee severance and other termination costs, with respect to approximately 600 employees, during the quarterly and year-to-date periods ended September 23, 2016, respectively. During the year ended December 31, 2015, the Company recorded a total of $18 million of employee severance and other termination costs with respect to approximately 800 employees. Employee severance and other termination costs are reported within cost of sales on the unaudited condensed consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $8 million at September 23, 2016 and $9 million at December 31, 2015, which is expected to be paid primarily by the second quarter of 2017. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Reportable Segment
Electronic Systems	$	3	$	2	$	7	$	4
Aerospace Systems		1		1		1		3
Communication Systems		1		1		3		3
Consolidated	$	5	$	4	$	11	$	10

24.  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

33

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED CONSOLIDATED

FINANCIAL STATEMENTS — (continued)

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 September 23, 2016:
Current assets:
Cash and cash equivalents	$	—	$	188	$	—	$	239	$	(16	)	$	411
Billed receivables, net		—		319		277		216		—			812
Contracts in process		—		959		1,053		253		—			2,265
Other current assets		—		273		139		109		—			521
Total current assets		—		1,739		1,469		817		(16	)		4,009
Goodwill		—		2,338		2,973		973		—			6,284
Other assets		—		765		490		263		—			1,518
Investment in and amounts due from consolidated subsidiaries		4,568		5,368		4,433		—		(14,369	)		—
Total assets	$	4,568	$	10,210	$	9,365	$	2,053	$	(14,385	)	$	11,811
Current portion of long-term debt	$	—	$	549	$	—	$	—	$	—		$	549
Current liabilities		—		892		856		469		(16	)		2,201
Amounts due to consolidated subsidiaries		—		—		—		159		(159	)		—
Other long-term liabilities		—		1,419		191		29		—			1,639
Long-term debt		—		2,782		—		—		—			2,782
Total liabilities		—		5,642		1,047		657		(175	)		7,171
L-3 shareholders’ equity		4,568		4,568		8,318		1,396		(14,282	)		4,568
Noncontrolling interests		—		—		—		—		72			72
Total equity		4,568		4,568		8,318		1,396		(14,210	)		4,640
Total liabilities and equity	$	4,568	$	10,210	$	9,365	$	2,053	$	(14,385	)	$	11,811

34

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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, 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

35

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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 quarter ended September 23, 2016:
Total net sales	$	—		$	877		$	1,258		$	444		$	(74	)	$	2,505
Total cost of sales		(15	)		(801	)		(1,182	)		(381	)		89			(2,290	)
Operating (loss) income		(15	)		76			76			63			15			215
Interest expense		—			(40	)		—			(1	)		—			(41	)
Interest and other income, net		—			4			—			2			—			6
(Loss) income from continuing operations before income taxes		(15	)		40			76			64			15			180
Benefit (provision) for income taxes		2			(7	)		(12	)		(10	)		(2	)		(29	)
Equity in net income of consolidated subsidiaries		161			115			—			—			(276	)		—
Net income		148			148			64			54			(263	)		151
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net income attributable to L-3	$	148		$	148		$	64		$	54		$	(266	)	$	148
Comprehensive income attributable to L-3	$	125		$	125		$	64		$	24		$	(213	)	$	125
For the quarter ended September 25, 2015:
Total net sales	$	—		$	873		$	1,334		$	443		$	(86	)	$	2,564
Total cost of sales		(12	)		(793	)		(1,201	)		(381	)		98			(2,289	)
Loss related to business divestitures		—			(8	)		(1	)		—			—			(9	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(12	)		72			106			53			12			231
Interest expense		—			(43	)		—			—			—			(43	)
Interest and other income, net		—			2			—			1			—			3
(Loss) income from continuing operations before income taxes		(12	)		31			106			54			12			191
Benefit (provision) for income taxes		4			(11	)		(30	)		(22	)		(4	)		(63	)
Equity in net loss of consolidated subsidiaries		(291	)		(319	)		—			—			610			—
(Loss) income from continuing operations		(299	)		(299	)		76			32			618			128
Loss from discontinued operations, net of income tax		—			—			(424	)		—			—			(424	)
Net (loss) income		(299	)		(299	)		(348	)		32			618			(296	)
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net (loss) income attributable to L-3	$	(299	)	$	(299	)	$	(348	)	$	32		$	615		$	(299	)
Comprehensive loss attributable to L-3	$	(351	)	$	(351	)	$	(354	)	$	(25	)	$	730		$	(351	)

36

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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-to-date period ended September 23, 2016:
Total net sales	$	—		$	2,602		$	3,817		$	1,307		$	(204	)	$	7,522
Total cost of sales		(34	)		(2,343	)		(3,545	)		(1,124	)		238			(6,808	)
Operating (loss) income		(34	)		259			272			183			34			714
Interest expense		—			(124	)		—			(1	)		—			(125	)
Interest and other income, net		—			10			—			5			—			15
Debt retirement charge		—			(5	)		—			—			—			(5	)
(Loss) income from continuing operations before income taxes		(34	)		140			272			187			34			599
Benefit (provision) for income taxes		7			(31	)		(59	)		(40	)		(7	)		(130	)
Equity in net income of consolidated subsidiaries		549			413			—			—			(962	)		—
Income from continuing operations		522			522			213			147			(935	)		469
Income from discontinued operations, net of income tax		—			—			63			—			—			63
Net income		522			522			276			147			(935	)		532
Net income attributable to noncontrolling interests		—			—			—			—			(10	)		(10	)
Net income attributable to L-3	$	522		$	522		$	276		$	147		$	(945	)	$	522
Comprehensive income attributable to L-3	$	529		$	529		$	287		$	120		$	(936	)	$	529
For the year-to-date period ended September 25, 2015:
Total net sales	$	—		$	2,548		$	3,849		$	1,423		$	(225	)	$	7,595
Total cost of sales		(35	)		(2,332	)		(3,601	)		(1,252	)		260			(6,960	)
(Loss) gain related to business divestitures		—			(13	)		(29	)		13			—			(29	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(35	)		203			193			175			35			571
Interest expense		—			(123	)		(1	)		—			—			(124	)
Interest and other income, net		—			9			—			2			—			11
(Loss) income from continuing operations before income taxes		(35	)		89			192			177			35			458
Benefit (provision) for income taxes		8			(20	)		(44	)		(41	)		(8	)		(105	)
Equity in net loss of consolidated subsidiaries		(47	)		(143	)		—			—			190			—
(Loss) income from continuing operations		(74	)		(74	)		148			136			217			353
Loss from discontinued operations, net of income tax		—			—			(416	)		—			—			(416	)
Net (loss) income		(74	)		(74	)		(268	)		136			217			(63	)
Net income attributable to noncontrolling interests		—			—			—			—			(11	)		(11	)
Net (loss) income attributable to L-3	$	(74	)	$	(74	)	$	(268	)	$	136		$	206		$	(74	)
Comprehensive (loss) income attributable to L-3	$	(120	)	$	(120	)	$	(273	)	$	62		$	331		$	(120	)

37

L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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-to-date period ended September 23, 2016:
Operating activities:
Net cash from operating activities	$	492		$	196		$	301		$	159		$	(569	)	$	579
Investing activities:
Business acquisitions, net of cash acquired		—			(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balances		—			563			—			(2	)		—			561
Investments in L-3 Communications		(52	)		—			—			—			52			—
Other investing activities		—			(27	)		(47	)		(30	)		—			(104	)
Net cash (used in) from investing activities from continuing operations		(52	)		509			(47	)		(32	)		52			430
Financing activities:
Redemption of senior notes		—			(298	)		—			—			—			(298	)
Common stock repurchased		(326	)		—			—			—			—			(326	)
Dividends paid on L-3 Holdings common stock		(166	)		—			—			—			—			(166	)
Dividends paid to L-3 Holdings		—			(492	)		—			—			492			—
Investments from L-3 Holdings		—			52			—			—			(52	)		—
Other financing activities		52			84			(198	)		(50	)		156			44
Net cash used in financing activities from continuing operations		(440	)		(654	)		(198	)		(50	)		596			(746	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(3	)		—			(3	)
Net decrease in cash and cash equivalents of discontinued operations		—			—			(56	)		—			—			(56	)
Net increase in cash		—			51			—			74			79			204
Cash and cash equivalents, beginning of the period		—			137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	—		$	188		$	—		$	239		$	(16	)	$	411

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L-3 COMMUNICATIONS HOLDINGS, INC.

AND L-3 COMMUNICATIONS CORPORATION

NOTES TO UNAUDITED CONDENSED 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-to-date period ended September 25, 2015:
Operating activities:
Net cash from operating activities	$	768		$	370		$	282		$	65		$	(888	)	$	597
Investing activities:
Business acquisitions, net of cash acquired		—			(260	)		—			—			—			(260	)
Proceeds from sale of business, net of closing date cash balance		—			4			27			277			—			308
Investments in L-3 Communications		(34	)		—			—			—			34			—
Other investing activities		—			(62	)		(42	)		(26	)		—			(130	)
Net cash (used in) from investing activities from continuing operations		(34	)		(318	)		(15	)		251			34			(82	)
Financing activities:
Common stock repurchased		(605	)		—			—			—			—			(605	)
Dividends paid on L-3 Holdings common stock		(163	)		—			—			—			—			(163	)
Dividends paid to L-3 Holdings		—			(768	)		—			—			768			—
Investments from L-3 Holdings		—			34			—			—			(34	)		—
Other financing activities		34			491			(322	)		(337	)		167			33
Net cash used in financing activities from continuing operations		(734	)		(243	)		(322	)		(337	)		901			(735	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(14	)		—			(14	)
Net increase in cash and cash equivalents of discontinued operations		—			—			54			—			—			54
Change in cash balance in assets held for sale		—			—			1			60			—			61
Net (decrease) increase in cash		—			(191	)		—			25			47			(119	)
Cash and cash equivalents, beginning of the period		—			361			1			142			(62	)		442
Cash and cash equivalents, end of the period	$	—		$	170		$	1		$	167		$	(15	)	$	323

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ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS

Overview and Outlook

L-3’s Business

L-3 Holdings derives all of its operating income and cash flows from its wholly-owned subsidiary, L-3 Communications. L-3 Communications 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 7, 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 provided 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. 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 Quarterly Report on Form 10-Q 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. 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 our segments is included in Results of Operations within this section, Note 22 to our unaudited condensed consolidated financial statements and Note 21 to our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2015.

For the year ended December 31, 2015, we generated sales of $10,466 million and our primary end customer was the DoD. The table below presents a summary of our consolidated 2015 sales by major category of end customer and the percent contributed by each to our consolidated 2015 sales.

	2015 Sales		% of 2015 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	%

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We currently expect the composition of our 2016 consolidated sales to the U.S. Government and to international and commercial customers to remain approximately the same as compared to 2015.

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 consolidated sales. Therefore, our annual sales are generally highly correlated to changes in U.S. Government spending levels, especially DoD budget levels.

The total DoD 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 billion. The total DoD budget for FY 2016 is $581 billion, an increase of 4% compared to FY 2015. The increase is due to a base budget of $522 billion, higher by $25 billion compared to FY 2015. The FY 2016 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), which suspended the debt ceiling through March 15, 2017 and raised spending caps previously enacted by Congress under the Budget Control Act of 2011 (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.

On December 18, 2015, the President signed the Consolidated Appropriations Act of 2016, which funded the U.S. Government through September 30, 2016. On February 9, 2016, the Obama Administration submitted its FY 2017 DoD Proposed Budget Request (PBR). The total FY 2017 DoD budget request is $583 billion ($524 billion base budget, $59 billion OCO), which is substantially unchanged compared to the appropriated FY 2016 DoD budget. The FY 2017 PBR complies with the BBA. However, the FY 2017 DoD budget was not approved or appropriated by Congress before October 1, 2016 and FY 2017 began with a Continuing Resolution (CR) to fund the government through December 9, 2016. The CR will maintain funding at the current FY 2016 appropriated level resulting in a prohibition on new program starts and multi-year contract awards.

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, the U.S. Government’s overall fiscal challenges remain and we expect members of Congress and the Obama Administration to continue to discuss various options throughout the budget appropriations process for FY 2017, and 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 our Annual Report on Form 10-K for the year ended December 31, 2015).

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. 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.

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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 generation. 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.

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 continue 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 Trend. For the quarter ended September 23, 2016 (2016 Third Quarter), consolidated net sales of $2,505 million decreased by $59 million, or 2%, compared to the quarter ended September 25, 2015 (2015 Third Quarter). Organic sales decreased by $65 million, or 2.5%, for the 2016 Third Quarter. Organic sales exclude $2 million of sales declines related to business divestitures and $8 million of sales increases related to business acquisitions.

For the year-to-date period ended September 23, 2016 (2016 Year-to-Date Period), consolidated net sales of $7,522 million decreased by $73 million, or 1%, compared to the year-to-date period ended September 25, 2015 (2015 Year-to-Date Period). Organic sales increased by $70 million, or 1%, for the 2016 Year-to-Date Period. Organic sales exclude $206 million of sales declines related to business divestitures and $63 million of sales increases related to business acquisitions. See “Results of Operations,” including segment results below for a further discussion of sales.

For the year ended December 31, 2015, 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 5% of our sales in the 2016 Year-to-Date Period and 4% of our sales in 2015, 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 expect the U.S. Army to re-compete this contract over the next year.

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,

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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 2% compared to 2015, including an organic sales decline of 0.3%. We expect organic international sales to decline by approximately 12% due to the completion of certain contracts with foreign governments, and organic sales to the DoD and U.S. Government to increase by approximately 3%. We expect organic commercial sales to decline by approximately 1% 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 Trend. For the 2016 Third Quarter, our consolidated and segment operating income was $215 million and our consolidated operating margin was 8.6%. Our consolidated operating income and consolidated operating margin for the 2015 Third Quarter were impacted by a pre-tax goodwill impairment charge of $35 million and pre-tax losses of $9 million related to business divestitures, which are further discussed below. The pre-tax goodwill impairment charge and pre-tax losses related to business divestitures are excluded from segment operating income because they are excluded by management for purposes of evaluating the operating performance of our business segments. Our segment operating income decreased 22% compared to $275 million for the 2015 Third Quarter, and our segment operating income as a percentage of sales (segment operating margin) was 8.6% for the 2016 Third Quarter, a decrease of 210 basis points from 10.7% for the 2015 Third Quarter.

For the 2016 Year-to-Date Period, our consolidated and segment operating income was $714 million and our consolidated operating margin was 9.5%. Our consolidated operating income and consolidated operating margin for the 2015 Year-to-Date Period were reduced by a pre-tax goodwill impairment charge of $35 million and pre-tax losses of $29 million related to business divestitures. Our segment operating income increased 12% compared to $635 million for the 2015 Year-to-Date Period, and our segment operating margin was 9.5% for the 2016 Year-to-Date Period, an increase of 110 basis points from 8.4% for the 2015 Year-to-Date Period. See “Results of Operations”, including segment results below for a further discussion of operating margin.

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 Trend. Operating Cash Flow of $579 million for the 2016 Year-to-Date Period decreased by $18 million compared to $597 million for the 2015 Year-to-Date Period. The decrease of Operating Cash Flow was due to higher uses of cash for working capital in the 2016 Year-to-Date Period compared to the 2015 Year-to-Date Period, primarily related to liquidations of advanced payments and billings in excess of costs incurred, partially offset by higher net income adjusted for non-cash expenses.

43

Business Divestitures

Discontinued Operations. On February 1, 2016, we completed the sale of our NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents statement of operations data for NSS, which was previously a reportable segment, and 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 5 to the unaudited condensed consolidated financial statements for additional information.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net sales	$	—	$	271		$	86		$	773
Cost of sales		—		(260	)		(92	)		(736	)
Gain related to business divestiture(1)		—		—			64			—
Goodwill impairment charges		—		(456	)		—			(456	)
Operating (loss) income from discontinued operations		—		(445	)		58			(419	)
Interest expense allocated to discontinued operations		—		(4	)		—			(15	)
(Loss) income from discontinued operations before income taxes		—		(449	)		58			(434	)
Income tax benefit		—		25			5			18
(Loss) income from discontinued operations, net of income taxes	$	—	$	(424	)	$	63		$	(416	)

⁽¹⁾ The 2016 Year-to-Date Period includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

MSI Divestiture. On May 29, 2015, we completed the sale of our MSI business to Wärtsilä Corporation for a sales 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 sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within our Electronic Systems segment, primarily selling to the commercial shipbuilding industry. We recorded a pre-tax loss of $17 million ($6 million after income taxes) for the 2015 Year-to-Date Period, related to the divestiture of MSI.

Broadcast Sports Inc. (BSI) Divestiture. On April 24, 2015, we divested our BSI business for a sales price of $26 million. BSI provided 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. We recorded a pre-tax loss of $1 million (less than $1 million after income taxes) and $4 million ($6 million after income taxes) for the 2015 Third Quarter and 2015 Year-to-Date Period, respectively, related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, we divested our Tinsley Product Line for a sales price of $4 million. Tinsley provided 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 2015 Third Quarter and 2015 Year-to-Date Period.

Business Acquisitions

Our Annual Report on Form 10-K summarizes the business acquisitions that we completed during the three years ended December 31, 2015. During the 2016 Year-to-Date Period, we acquired the assets of Advanced

44

Technical Materials, Inc. (ATM), with $27 million of cash on hand. Business acquisitions are included in our consolidated results of operations from their dates of acquisition. See Note 5 to our unaudited condensed consolidated financial statements contained in this quarterly report for a further discussion of our business acquisitions during the 2016 Year-to-Date Period.

Results of Operations

The following information should be read in conjunction with our unaudited condensed consolidated financial statements contained in this quarterly report. Our results of operations for the periods presented are affected by our business acquisitions and divestitures.

Consolidated Results of Operations

The table below provides L-3’s selected financial data, excluding discontinued operations, for the 2016 Third Quarter compared with the 2015 Third Quarter and the 2016 Year-to-Date Period compared to the 2015 Year-to-Date Period.

	Third Quarter Ended									Year-to-Date Ended
(in millions, except per share data)	September 23, 2016			September 25, 2015			Increase/ (decrease)			September 23, 2016			September 25, 2015			Increase/ (decrease)
Net sales	$	2,505		$	2,564			(2	)%	$	7,522		$	7,595			(1	)%
Operating income		215			231			(7	)%		714			571			25	%
Loss related to business divestitures		—			9			nm			—			29			nm
Goodwill impairment charges		—			35			nm			—			35			nm
Segment operating income	$	215		$	275			(22	)%	$	714		$	635			12	%
Operating margin		8.6	%		9.0	%		(40	)bpts		9.5	%		7.5	%		200	bpts
Segment operating margin		8.6	%		10.7	%		(210	)bpts		9.5	%		8.4	%		110	bpts
Interest expense and other	$	(35	)	$	(40	)		(13	)%	$	(115	)	$	(113	)		2	%
Effective income tax rate		16.1	%		33.0	%		nm			21.7	%		22.9	%		(120	)bpts
Net income from continuing operations attributable to L-3	$	148		$	125			18	%	$	459		$	342			34	%
Adjusted net income from continuing operations attributable to L-3(1)	$	148		$	165			(10	)%	$	459		$	394			16	%
Diluted earnings per share from continuing operations	$	1.88		$	1.54			22	%	$	5.83		$	4.14			41	%
Adjusted diluted earnings per share from continuing operations (1)	$	1.88		$	2.03			(7	)%	$	5.83		$	4.76			22	%
Diluted weighted average common shares outstanding		78.8			81.2			(3	)%		78.7			82.7			(5	)%
(1)     Non-GAAP metric that excludes goodwill impairment charges and the aggregate loss related to business divestitures. See the table on page 48 for a reconciliation and a discussion of why this information is presented. nm – not meaningful

Net Sales: For the 2016 Third Quarter, consolidated net sales of $2,505 million decreased $59 million, or 2%, compared to the 2015 Third Quarter. Organic sales decreased by 2.5%, or $65 million, for the 2016

45

Third Quarter. Organic sales exclude $2 million of sales declines related to business divestitures and $8 million of sales increases related to business acquisitions. For the 2016 Third Quarter, organic sales to the U.S. Government increased $84 million, or 5%, and organic sales to international and commercial customers decreased $149 million, or 19%.

Sales from products decreased by $100 million to $1,500 million for the 2016 Third Quarter, compared to $1,600 million for the 2015 Third Quarter. Sales from products represented approximately 60% of consolidated net sales for the 2016 Third Quarter, compared to 62% for the 2015 Third Quarter. Sales from products decreased by: (1) $45 million primarily for ISR aircraft systems for foreign military customers as contracts near completion, (2) $28 million for Aviation Products and Security due to lower cargo sales and the timing of deliveries on airport security screening systems for international customers and (3) $27 million for Space & Power Systems primarily due to reduced demand for power devices for commercial satellites.

Sales from services increased by $41 million to $1,005 million for the 2016 Third Quarter, compared to $964 million for the 2015 Third Quarter. Sales from services represented approximately 40% of consolidated net sales for the 2016 Third Quarter, compared to 38% for the 2015 Third Quarter. Sales from services increased by: (1) $22 million for Broadband Communication Systems due to increased volume for logistics support services for the DoD, (2) $12 million for Vertex Aerospace due to higher volume for U.S. Navy training aircraft and the U.S. Army C-12 contract and (3) $7 million primarily due to the CTC Aviation Group (L-3 CTC) and ForceX business acquisitions.

For the 2016 Year-to-Date Period, consolidated net sales of $7,522 million decreased $73 million, or 1%, compared to the 2015 Year-to-Date Period. Organic sales increased by $70 million, or 1%, for the 2016 Year-to-Date Period. Organic sales exclude $206 million of sales declines related to business divestitures and $63 million of sales increases related to business acquisitions. For the 2016 Year-to-Date Period, organic sales to the U.S. Government increased $250 million, or 5%, and organic sales to international and commercial customers decreased $180 million, or 8%.

Sales from products decreased by $167 million to $4,561 million for the 2016 Year-to-Date Period, compared to $4,728 million for the 2015 Year-to-Date Period. Sales from products represented approximately 61% of consolidated net sales for the 2016 Year-to-Date Period, compared to 62% for the 2015 Year-to-Date Period. Sales from products decreased by: (1) $156 million primarily related to the divestiture of MSI on May 29, 2015, (2) $67 million for Space & Power Systems primarily due to reduced demand for power devices for commercial satellites and (3) $11 million primarily for Precision Engagement & Training due to lower volume of: (i) ordnance products for the U.S. military and (ii) civil aviation simulation and training devices for commercial customers as contracts near completion. These decreases were partially offset by increases of: (1) $42 million for Aircraft Systems primarily due to unfavorable contract performance adjustments in the 2015 Year-to-Date Period that did not recur in the 2016 Year-to-Date Period on international head-of-state aircraft modification contracts and (2) $25 million primarily for Broadband Communication Systems due to increased volume and deliveries of secure networked communication systems for the DoD.

Sales from services increased by $94 million to $2,961 million for the 2016 Year-to-Date Period, compared to $2,867 million for the 2015 Year-to-Date Period. Sales from services represented approximately 39% of consolidated net sales for the 2016 Year-to-Date Period, compared to 38% for the 2015 Year-to-Date Period. Sales from services increased due to trends similar to the 2016 Third Quarter. See the reportable segment results below for additional discussion of our segment sales trends.

Operating income and operating margin: Segment operating income for the 2016 Third Quarter decreased by $60 million, or 22%, compared to the 2015 Third Quarter. Segment operating margin decreased by 210 basis

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points to 8.6% for the 2016 Third Quarter, compared to 10.7% for the 2015 Third Quarter. Segment operating margins were lower in all three segments. The 2016 Third Quarter included a $14 million pre-tax charge in the Electronic Systems segment for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech holographic weapons sight (HWS). Pension expense declined by $15 million compared to the 2015 Third Quarter.

Segment operating income for the 2016 Year-to-Date Period increased by $79 million, or 12%, compared to the 2015 Year-to-Date Period. Segment operating margin increased by 110 basis points to 9.5% for the 2016 Year-to-Date Period, compared to 8.4% for the 2015 Year-to-Date Period. Segment operating margin increased by: (1) 100 basis points primarily due to unfavorable contract performance adjustments related to cost growth in 2015 that did not recur in 2016 at Aerospace Systems on international head-of-state aircraft modification contracts and (2) 50 basis points due to lower pension expense of $36 million. These increases were partially offset by charges in the Electronic Systems segment for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS and increases to the HWS product returns allowance, which, together, decreased operating margin by 40 basis points. See the reportable segment results below for additional discussion of our operating margin trends.

Interest expense and other: Interest expense and other for the 2016 Third Quarter declined by $5 million, primarily due to lower outstanding debt as a result of the redemption of: (1) $300 million aggregate principal amount of 3.95% Senior Notes due November 15, 2016 in the second quarter of 2016 and (2) $300 million aggregate principal amount of 3.95% Senior Notes due May 28, 2024 in the fourth quarter of 2015.

Interest expense and other for the 2016 Year-to-Date Period includes a $5 million debt retirement charge related to the redemption of $300 million aggregate principal amount of 3.95% Senior Notes due November 15, 2016.

Effective income tax rate: The effective tax rate for the 2016 Third Quarter decreased to 16.1% from 33.0% for the same period last year. The 2016 Third Quarter includes: (1) tax benefits of $17 million for the reversal of previously accrued amounts related to various U.S. Federal, foreign and state tax matters, (2) a benefit from the reinstatement of the Federal Research and Experimentation (R&E) tax credit and (3) $4 million due to the early adoption of a new accounting standard related to income tax benefits from employee stock-based compensation awards.

The effective tax rate for the 2016 Year-to-Date Period decreased to 21.7% from 22.9% for the same period last year. The 2016 Year-to-Date Period includes: (1) a benefit from the reinstatement of the Federal R&E tax credit, (2) tax benefits of $21 million for the reversal of previously accrued amounts related to various U.S. Federal, foreign and state tax matters and (3) $16 million due to the early adoption of a new accounting standard related to income tax benefits from employee stock-based compensation awards.

Diluted EPS from continuing operations: Diluted EPS from continuing operations decreased 7% to $1.88 compared to adjusted diluted EPS of $2.03 for the 2015 Third Quarter. The 2015 Third Quarter adjusted diluted EPS from continuing operations excludes after tax losses of: (1) $34 million, or $0.42 per share, related to goodwill impairment charges and (2) $6 million, or $0.07 per share, related to business divestitures.

Diluted EPS from continuing operations increased 22% to $5.83 compared to adjusted diluted EPS of $4.76 for the 2015 Year-to-Date Period. The 2015 Year-to-Date Period adjusted diluted EPS from continuing operations excludes after tax losses of: (1) $34 million, or $0.40 per share, related to goodwill impairment charges and (2) $18 million, or $0.22 per share, related to business divestitures.

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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.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016		September 25, 2015
	(in millions)
Net income from continuing operations attributable to L-3	$	148	$	125		$	459	$	342
Loss on business divestitures(1)		—		6			—		18
Goodwill impairment charges(2)		—		34			—		34
Adjusted net income from continuing operations attributable to L-3(3)	$	148	$	165		$	459	$	394
Diluted EPS from continuing operations attributable to L-3 Holdings’ common stockholders	$	1.88	$	1.54		$	5.83	$	4.14
EPS impact of loss on business divestitures(1)		—		0.07			—		0.22
EPS impact of goodwill impairment charges(2)		—		0.42			—		0.40
Adjusted diluted EPS from continuing operations(3)	$	1.88	$	2.03		$	5.83	$	4.76
(1)      Loss on business divestitures			$	(9	)			$	(29	)
Tax benefit				3					11
After-tax impact				(6	)				(18	)
Diluted weighted average common shares outstanding				81.2					82.7
Per share impact			$	(0.07	)			$	(0.22	)
(2)      Goodwill impairment charges			$	(35	)			$	(35	)
Tax benefit				1					1
After-tax impact				(34	)				(34	)
Diluted weighted average common shares outstanding				81.2					82.7
Per share impact(4)			$	(0.42	)			$	(0.40	)
(3)    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 of 2015 to the results of operations for 2016. 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 2016 results to the 2015 results. However, these measures may not be defined or calculated by other companies in the same manner.
(4)    Amounts may not calculate directly due to rounding.

Diluted weighted average common shares outstanding: Diluted weighted average common shares outstanding for the 2016 Third Quarter and 2016 Year-to-Date Period declined by 3% and 5%, respectively, compared to the same periods last year, primarily due to repurchases of L-3 common stock in connection with our share repurchase program authorized by our Board of Directors.

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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 22 to our unaudited condensed consolidated financial statements contained in this quarterly report for additional reportable segment data.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(dollars in millions)
Net sales:(1)
Electronic Systems	$	989		$	991		$	2,887		$	3,052
Aerospace Systems		1,012			1,066			3,165			3,087
Communication Systems		504			507			1,470			1,456
Consolidated net sales	$	2,505		$	2,564		$	7,522		$	7,595
Operating income:
Electronic Systems	$	119		$	121		$	339		$	352
Aerospace Systems		56			102			232			144
Communication Systems		40			52			143			139
Total segment operating income		215			275			714			635
Loss related to business divestitures		—			(9	)		—			(29	)
Goodwill impairment charges		—			(35	)		—			(35	)
Consolidated operating income	$	215		$	231		$	714		$	571
Operating margin:
Electronic Systems		12.0	%		12.2	%		11.7	%		11.5	%
Aerospace Systems		5.5	%		9.6	%		7.3	%		4.7	%
Communication Systems		7.9	%		10.3	%		9.7	%		9.5	%
Total segment operating margin		8.6	%		10.7	%		9.5	%		8.4	%
Loss related to business divestitures		—	%		(0.3	)%		—	%		(0.4	)%
Goodwill impairment charges		—	%		(1.4	)%		—	%		(0.5	)%
Consolidated operating margin		8.6	%		9.0	%		9.5	%		7.5	%

⁽¹⁾  Net sales after intercompany eliminations.

Electronic Systems

	Third Quarter Ended									Year-to-Date Ended
	September 23, 2016			September 25, 2015			Decrease			September 23, 2016			September 25, 2015			Increase/ (decrease)
	(dollars in millions)
Net sales	$	989		$	991			(0.2	)%	$	2,887		$	3,052			(5.4)%
Operating income	$	119		$	121			(1.7	)%	$	339		$	352			(3.7)%
Operating margin		12.0	%		12.2	%		(20	) bpts		11.7	%		11.5	%		20 bp	ts

Electronic Systems net sales for the 2016 Third Quarter decreased by $2 million compared to the 2015 Third Quarter. Organic sales decreased by $5 million, or 0.5%, compared to the 2015 Third Quarter. Organic sales exclude $2 million of sales declines related to business divestitures and $5 million of sales increases related to business acquisitions. Sales decreased by $28 million for Aviation Products and Security due to lower

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cargo sales and the timing of deliveries on airport security screening systems for international customers, partially offset by $23 million primarily for Sensor Systems due to increased deliveries of airborne EO/IR turrets to foreign militaries.

Electronic Systems operating income for the 2016 Third Quarter decreased by $2 million, or 2%, compared to the 2015 Third Quarter. Operating margin decreased by 20 basis points to 12.0%. A $14 million pre-tax charge for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS lowered operating margin by 140 basis points. Sales mix changes, primarily for Warrior Systems, lowered operating margin 80 basis points. These decreases were partially offset by 150 basis points for improved contract performance and 50 basis points due to lower pension expense of $5 million.

Electronic Systems net sales for the 2016 Year-to-Date Period decreased by $165 million, or 5%, compared to the 2015 Year-to-Date Period. Organic sales decreased by $10 million, or 0.3%, compared to the 2015 Year-to-Date Period. Organic sales exclude $206 million of sales declines related to business divestitures (primarily MSI in May 2015) and $51 million of sales increases related to business acquisitions. The decrease was driven by $16 million for Warrior Systems related to an increase in the products returns allowance for EoTech HWS products and $13 million for Precision Engagement & Training due to lower volume of: (i) ordnance products for the U.S. military and (ii) civil aviation simulation and training devices for commercial customers as contracts near completion. These decreases were partially offset by an increase of $19 million primarily for Sensor Systems due to increased deliveries of airborne EO/IR turrets and electronic warfare products to foreign militaries.

Electronic Systems operating income for the 2016 Year-to-Date Period decreased by $13 million, or 4%, compared to the 2015 Year-to-Date Period. Operating margin increased by 20 basis points to 11.7%. Operating margin increased by: (1) 70 basis points due to higher margins related to acquisitions and divestitures, (2) 40 basis points due to lower pension expense of $11 million, and (3) 10 basis points primarily due to higher net aggregate favorable contract performance adjustments in the 2016 Year-To-Date Period compared to the 2015 Year-To-Date Period. These increases were offset by a decrease of 100 basis points due to $30 million of pre-tax charges for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS and increases to the HWS product returns allowance.

Aerospace Systems

	Third Quarter Ended									Year-to-Date Ended
	September 23, 2016			September 25, 2015			Decrease			September 23, 2016			September 25, 2015			Increase
	(dollars in millions)
Net sales	$	1,012		$	1,066			(5.1	)%	$	3,165		$	3,087			2.5%
Operating income	$	56		$	102			(45.1	)%	$	232		$	144			61.1%
Operating margin		5.5	%		9.6	%		(410	) bpts		7.3	%		4.7	%		260 b	pts

Aerospace Systems net sales for the 2016 Third Quarter decreased by $54 million, or 5%, compared to the 2015 Third Quarter. Sales decreased $64 million for ISR Systems and $2 million for Aircraft Systems, partially offset by a $12 million increase for Vertex Aerospace. Sales decreased for ISR Systems by: (1) $46 million for small ISR aircraft fleet management services to the U.S. Air Force due to reduced demand resulting from the U.S. military drawdown in Afghanistan and (2) $42 million for ISR aircraft systems for foreign military customers as contracts near completion. These decreases were partially offset by higher volume of $12 million for large ISR aircraft systems for the U.S. Government and $12 million for small ISR aircraft systems for the U.S. Army. Sales increased for Vertex Aerospace due to higher volume for U.S. Navy training aircraft and the U.S. Army C-12 contract.

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Aerospace Systems operating income for the 2016 Third Quarter decreased by $46 million, compared to the 2015 Third Quarter. Operating margin decreased by 410 basis points to 5.5%. Operating margin decreased by: (1) 200 basis points primarily due to lower favorable contract performance adjustments in the 2016 Third Quarter compared to the 2015 Third Quarter for ISR Systems primarily on contracts that are nearing completion, (2) 100 basis points due to lower sales and changes in sales mix for ISR Systems, (3) 90 basis points due to lower incentive fees and increases in lower margin task orders on the Fort Rucker Maintenance Support contract and (4) 80 basis points due to an $8 million contract price adjustment in the 2015 Third Quarter for a recovery of cost overruns on the previous U.S. Army C-12 contract that did not recur in the 2016 Third Quarter. These decreases were partially offset by 60 basis points due to lower pension expense of $6 million.

Aerospace Systems net sales for the 2016 Year-to-Date Period increased by $78 million, or 3%, compared to the 2015 Year-to-Date Period. Sales increased $62 million for Aircraft Systems and $35 million for Vertex Aerospace, partially offset by a $19 million decrease for ISR Systems. Sales increased for Aircraft Systems primarily due to unfavorable contract performance adjustments in the 2015 Year-to-Date Period that did not recur in the 2016 Year-to-Date Period on international head-of-state aircraft modification contracts. Sales increased for Vertex Aerospace due to higher volume and pre-production activities for U.S. Navy training aircraft and the U.S. Army C-12 contract. Sales decreases for ISR Systems were due to trends similar to the 2016 Third Quarter, partially offset by an increase in sales due to the procurement and delivery of two business jets to a foreign military customer in the second quarter of 2016.

Aerospace Systems operating income for the 2016 Year-to-Date Period increased by $88 million, or 61%, compared to the 2015 Year-to-Date Period. Operating margin increased by 260 basis points to 7.3%. Operating margin increased by: (1) 210 basis points primarily due to net aggregate unfavorable contract performance adjustments in the 2015 Year-to-Date Period, which included $101 million of cost growth on international head-of-state aircraft modification contracts, that did not recur in the 2016 Year-to-Date Period and (2) 50 basis points due to lower pension expense of $15 million.

Communication Systems

	Third Quarter Ended									Year-to-Date Ended
	September 23, 2016			September 25, 2015			Decrease			September 23, 2016			September 25, 2015			Increase
	(dollars in millions)
Net sales	$	504		$	507			(0.6	)%	$	1,470		$	1,456			1.0%
Operating income	$	40		$	52			(23.1	)%	$	143		$	139			2.9%
Operating margin		7.9	%		10.3	%		(240	) bpts		9.7	%		9.5	%		20 b	pts

Communication Systems net sales for the 2016 Third Quarter decreased by $3 million compared to the 2015 Third Quarter. Organic sales decreased by $6 million, or 1%, compared to the 2015 Third Quarter. Organic sales exclude $3 million of sales increases related to business acquisitions. Sales decreased by $30 million in the Tactical Satcom sector due to fewer deliveries on a satellite communications (Satcom) land terminals contract for the Australian Defence Force (ADF), which was completed in the second quarter of 2016. In the Space & Power Systems sector, sales declined by $22 million due to reduced demand for power devices for commercial satellites. These decreases were largely offset by increased volume and deliveries to the U.S. DoD of secure networked communication systems in the Broadband Communication Systems sector and mobile and ground-based Satcom systems in the Tactical Satcom sector.

Communication Systems operating income for the 2016 Third Quarter decreased by $12 million, or 23%, compared to the 2015 Third Quarter. Operating margin decreased by 240 basis points to 7.9%. The lower sales on the ADF Satcom land terminals contract and power devices for commercial satellites reduced operating margin by 220 basis points. Increased design and production costs on new commercial ground-based power amplifier products partially offset by sales growth and favorable contract performance, primarily in Broadband Communication Systems sector, reduced operating margin by 100 basis points. Lower pension expense of $4 million increased operating margin by 80 basis points.

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Communication Systems net sales for the 2016 Year-to-Date Period increased by $14 million, or 1%, compared to the 2015 Year-to-Date Period. Organic sales increased by $2 million, or 0.1%, compared to the 2015 Year-to-Date Period. Organic sales exclude $12 million of sales increases related to business acquisitions. The increase was due to: (1) $62 million for Broadband Communication Systems, primarily due to increased volume and deliveries of secure networked communication systems for the DoD and (2) $7 million primarily for Advanced Communications products due to increased deliveries of secure mission data storage systems for the Joint Strike Fighter program. These increases were largely offset by a decrease of $67 million for Space & Power Systems, primarily due to reduced demand for power devices for commercial satellites.

Communication Systems operating income for the 2016 Year-to-Date Period increased by $4 million, or 3%, compared to the 2015 Year-to-Date Period. Operating margin increased by 20 basis points to 9.7%. Operating margin increased by 70 basis points due to lower pension expense of $10 million, partially offset by a decrease of 50 basis points primarily due to sales mix changes.

Liquidity and Capital Resources

Anticipated Sources and Uses of Cash Flow

At September 23, 2016, we had total cash and cash equivalents of $411 million as compared to $207 million at December 31, 2015. While no amounts of the cash and cash equivalents are considered restricted, $231 million of cash was held by the Company’s foreign subsidiaries at September 23, 2016. The repatriation of cash held in non-U.S. jurisdictions is subject to local capital requirements, as well as income tax considerations. Our primary sources of liquidity are cash flow generated from operations, cash on hand and our $1 billion Amended and Restated Revolving Credit Facility (Credit Facility), which expires on February 3, 2017. At September 23, 2016, we had the full availability of our Credit Facility, which we expect will be renewed for a period of five years prior to its expiration. We generated $579 million of net cash from operating activities from continuing operations during the 2016 Year-to-Date Period. Significant cash uses during the 2016 Year-to-Date Period included $298 million to partially redeem our 3.95% Senior Notes due in November 2016 (the 2016 Notes), $326 million to repurchase shares of our common stock, $166 million related to the payment of dividends, $126 million related to capital expenditures and $27 million related to the ATM business acquisition. Additionally, L-3 received net cash proceeds of $561 million primarily for the NSS divestiture.

We currently believe that our cash from operating activities generated during the year, 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, the repayment of the remaining $200 million aggregate principal amount of the 2016 Notes and the repayment of $350 million aggregate principal amount of our 1.50% Senior Notes due May 2017 (if the Notes are not refinanced).

Balance Sheet

Billed receivables increased by $66 million to $812 million at September 23, 2016, from $746 million at December 31, 2015 primarily due to the timing of billings and collections for Power & Propulsion Systems, Broadband Communication Systems, and Precision Engagement & Training. These increases were partially offset by decreases for Warrior Systems and ISR Systems.

Contracts in process increased by $184 million to $2,265 million at September 23, 2016, from $2,081 million at December 31, 2015. During the 2016 Year-to-Date Period, contracts in process increased by $193 million comprised of:

• increases of $72 million in unbilled contract receivables primarily due to sales exceeding billings for ISR Systems & Aircraft Systems and Power and Propulsion Systems, and

• increases of $121 million in inventoried contract costs primarily due to the timing of deliveries for Warrior Systems, Space & Power Systems, Broadband Communication Systems and Precision Engagement & Training.

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These increases were partially offset by a decrease of $9 million for foreign currency translation adjustments.

L-3’s receivables days sales outstanding (DSO) was 74 at September 23, 2016, compared with 70 at December 31, 2015 and 78 at September 25, 2015. 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 (364 days at September 23, 2016, 365 days at December 31, 2015 and 364 days at September 25, 2015). Our trailing 12 month pro forma sales were $10,393 million at September 23, 2016, $10,314 million at December 31, 2015 and $10,257 million at September 25, 2015. The increase in DSO during the 2016 Year-to-Date Period was primarily due to an increase in billed and unbilled receivables, which is discussed above.

Inventories increased by $28 million to $361 million at September 23, 2016, from $333 million at December 31, 2015, primarily for Aviation Products & Security and Advanced Communications to support customer demand.

The decrease in other current assets was primarily due to lower prepaid taxes caused by the timing of income tax payments.

The decrease in assets and liabilities of discontinued operations is due to the completion of the NSS divestiture during the 2016 Year-to-Date Period.

Goodwill increased by $3 million to $6,284 million at September 23, 2016 from $6,281 million at December 31, 2015. The table below presents the changes in goodwill by segment.

	Electronic Systems			Aerospace Systems		Communication Systems		Consolidated Total
	(in millions)
Balance at December 31, 2015	$	3,925		$	1,353	$	1,003	$	6,281
Business acquisitions(1)		2			—		20		22
Foreign currency translation adjustments(2)		(31	)		12		—		(19	)
Balance at September 23, 2016	$	3,896		$	1,365	$	1,023	$	6,284

⁽¹⁾ The net increase in goodwill for the Electronic Systems segment was due to the final purchase price allocations for the ForceX, Inc. and CTC Aviation Group business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM business acquisition.

⁽²⁾  The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, partially offset by the weakening of the U.S. dollar against the Canadian dollar and the Euro during the 2016 Year-to-Date Period. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during the 2016 Year-to-Date Period.

The increase in accounts payable was primarily due to the timing of when invoices for purchases from third party vendors and subcontractors were received and payments were made.

The decrease in advance payments and billings in excess of costs incurred was primarily due to the liquidation of balances on contracts for Aircraft Systems, ISR Systems and Aviation Products & Security.

The increase in deferred tax liabilities was primarily due to the tax amortization of certain goodwill and other identifiable intangible assets during the 2016 Year-to-Date Period.

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Statement of Cash Flows

2016 Year-to-Date Period Compared with 2015 Year-to-Date Period

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

	Year-to-Date Ended
	September 23, 2016			September 25, 2015			Cash Flow Increase/ (Decrease)
	(in millions)
Net cash from operating activities from continuing operations	$	579		$	597		$	(18	)
Net cash from (used in) investing activities from continuing operations		430			(82	)		512
Net cash used in financing activities from continuing operations		(746	)		(735	)		(11	)

Operating Activities

We generated $579 million of cash from operating activities during the 2016 Year-to-Date Period, a decrease of $18 million compared to the 2015 Year-to-Date Period. The decrease of cash from operating activities is due to higher uses of cash for working capital in the 2016 Year-to-Date Period compared to the 2015 Year-to-Date Period, primarily related to liquidations of advanced payments and billings in excess of costs incurred, partially offset by higher net income adjusted for non-cash expenses. The net cash from changes in operating assets and liabilities is further discussed above under “Liquidity and Capital Resources — Balance Sheet”.

Investing Activities

During the 2016 Year-to-Date Period, we generated $430 million of cash from investing activities, which included $561 million of cash received from business divestitures (primarily NSS), partially offset by cash used of $27 million for the acquisition of ATM and $126 million for capital expenditures. During the 2015 Year-to-Date Period, we used $82 million of cash, which included $260 million for the acquisitions of L-3 CTC and MITEQ, Inc. and $137 million for capital expenditures, partially offset by $308 million of net proceeds received from the MSI, BSI and Tinsley divestitures.

Financing Activities

Debt

At September 23, 2016, total outstanding debt was $3,331 million, compared to $3,624 million at December 31, 2015, all of which was senior debt. On March 24, 2016, we initiated a redemption of $300 million aggregate principal amount of the 2016 Notes. The redemption price was determined on May 17, 2016 at 101.475% of the principal amount thereof (Redemption Price). Interest on the 2016 Notes redeemed ceased to accrue on and after May 20, 2016 (Redemption Date) and the only remaining right of holders of such 2016 Notes was to receive payment of the Redemption Price and accrued interest. On May 20, 2016, we completed the partial redemption and recognized a debt retirement charge of $5 million. Following the partial redemption of the 2016 Notes, $200 million aggregate principal amount of the 2016 Notes remain outstanding. At September 23, 2016, there were no borrowings or letters of credit outstanding under our Credit Facility. Accordingly, we had the full availability of our $1 billion facility for future borrowings. We also had $395 million of outstanding standby letters of credit with financial institutions covering performance and financial guarantees per contractual requirements with certain customers at September 23, 2016. These standby letters of credit may be drawn upon in the event that we do not perform on certain of our contractual requirements. At September 23, 2016, our outstanding debt matures between November 15, 2016 and May 28, 2024. See Note 10 to our unaudited condensed consolidated financial statements contained in this quarterly report for the components of our debt at September 23, 2016.

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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. On April 8, 2016, Standard and Poor’s changed our rating outlook to stable from negative and affirmed our BBB- senior unsecured rating.

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 the year ended December 31, 2015, included in our Annual Report on Form 10-K, for a description of our debt, related financial covenants and cross default provisions. At September 23, 2016, we were in compliance with our financial and other restrictive covenants.

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.

Equity

Repurchases of L-3 Holdings’ common stock, under the share repurchase program approved by the Board of Directors, 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 our financial position, earnings, legal requirements, other investment opportunities (including acquisitions), market conditions and other factors. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares.

The table below presents our repurchases of L-3 Holdings’ common stock during the 2016 Year-to-Date Period.

	Total Number of Shares Purchased		Average Price Paid Per Share		Treasury Stock
					(at cost in millions)
January 1 — March 25, 2016		1,708,185	$	115.80	$	198
March 26 — June 24, 2016		629,254	$	123.57	$	78
June 25 — September 23, 2016		340,401	$	146.92	$	50

At September 23, 2016, the remaining dollar value under share repurchase programs authorized by our Board of Directors was $480 million. From September 24, 2016 through October 21, 2016, we repurchased 112,846 shares of our common stock at an average price of $150.63 per share for an aggregate amount of $17 million.

During the 2016 Year-to-Date Period, our Board of Directors authorized the quarterly cash dividends in the table below.

Date Declared	Record Date		Cash Dividend Per Share		Total Cash Dividends Declared			Date Paid
					(in millions)
February 9, 2016		March 1, 2016	$	0.70	$	55	(1)		March 15, 2016
May 3, 2016		May 17, 2016	$	0.70	$	55	(1)		June 15, 2016
June 21, 2016		August 17, 2016	$	0.70	$	55	(1)		September 15, 2016

⁽¹⁾  During the 2016 Year-to-Date Period, we paid $166 million of cash dividends, including a $1 million net reduction of previously accrued dividends for employee held stock awards.

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On October 18, 2016, our Board of Directors declared a quarterly cash dividend of $0.70 per share, payable on December 15, 2016 to shareholders of record at the close of business on November 17, 2016.

Legal Proceedings and Contingencies

For a discussion of legal proceedings and contingencies that could impact our results of operations, financial condition or cash flows, see Note 18 to our unaudited condensed consolidated financial statements contained in this quarterly report.

Forward-Looking Statements

Certain of the matters discussed in this report, including information regarding the Company’s 2016 financial outlook, are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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; the outcome of litigation matters; results of audits by U.S. Government agencies and of ongoing governmental investigations, including the Aerospace Systems segment; 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 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; 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 “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 31, 2015 and in this quarterly report on Form 10-Q, and any material updates to these factors contained in any of our future filings.

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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.

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ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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,” of our Annual Report on Form 10-K for the year ended December 31, 2015 for a discussion of our exposure to market risks. There were no material changes to our disclosure about market risks during the 2016 Year-to-Date Period. See Notes 15 and 17 to our unaudited condensed consolidated financial statements contained in this quarterly report for the aggregate fair values and notional amounts of our foreign currency forward contracts at September 23, 2016.

ITEM 4.

CONTROLS AND PROCEDURES

Conclusions Regarding Effectiveness of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in our reports 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, as appropriate, 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 September 23, 2016. Based upon that evaluation, our Chairman and Chief Executive Officer, and our Senior Vice President and Chief Financial Officer concluded that, as of September 23, 2016, the design and operation of our disclosure controls and procedures were effective to accomplish their objectives at the reasonable assurance level.

There were no changes in our internal control over financial reporting that occurred during the quarter ended September 23, 2016 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II — OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

The information required with respect to this item can be found in Note 18 to our unaudited condensed consolidated financial statements contained in this quarterly report and is incorporated by reference into this Item 1.

ITEM 1A.

RISK FACTORS

In addition to the other information set forth in this report, you should carefully consider the factors discussed in “Part I — Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015, and “Part II — Item 7 — Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview and Outlook — Business Environment”, in our Annual Report on Form 10-K which could materially affect our business, financial condition or future results. There have been no material changes to the risk factors disclosed in “Part I — Item 1A — Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2015. The risks described in our Annual Report on Form 10-K are not the only risks we face. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition and/or operating results.

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ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Issuer Purchases of Equity Securities

The following table provides information about share repurchases made by L-3 Holdings of its common stock during the 2016 Third Quarter. Repurchases are made from time to time at management’s discretion in accordance with applicable U.S. 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 Plans or Programs(1)
							(in millions)
June 25 — July 31, 2016		195,026	$	145.51		195,026	$	502
August 1 — August 31, 2016		141,975		148.82		141,975		481
September 1 — September 23, 2016		3,400		148.16		3,400		480
Total		340,401		146.92		340,401

⁽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 expires on June 30, 2017.

ITEM 6.

EXHIBITS

For a list of exhibits, see the Exhibit Index in this Form 10-Q.

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SIGNATURE

Pursuant to the requirements 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
	(Principal Financial Officer and Authorized Signatory)

Date: October 27, 2016

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EXHIBIT INDEX

Exhibits identified in parentheses below are on file with the SEC and are incorporated herein by reference to such previous filings.

Exhibit No.		Description of Exhibit
	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)).

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Exhibit No.		Description of Exhibit
	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)).
	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)).
	**11	L-3 Communications Holdings, Inc. Computation of Basic Earnings Per Share and Diluted Earnings Per Common Share.
	*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.
	*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 14 to the unaudited condensed consolidated financial statements as of September 23, 2016 contained in this quarterly report in accordance with the provisions of ASC 260, Earnings Per Share.

*** Filed electronically with this report.

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

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 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 as of the date they were made or at any other time.

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EX-3.2

Exhibit 3.2

AMENDED AND RESTATED BYLAWS

OF

L-3 COMMUNICATIONS HOLDINGS, INC.

(hereinafter called the “Corporation”)

Dated October 18, 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.

Section 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

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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.

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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

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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

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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, (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 or (d) in the case of stockholder nominations to be included in the Corporation’s proxy statement for an annual meeting of stockholders, by a Nominator or Nominator Group (each, as defined below) who satisfies the notice, ownership and other requirements of Section 2.9 of these Bylaws.

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(2)    For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to Section 2.8(A)(1)(c), 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, delayed by more than seventy (70) days, from such anniversary date, or if no such meeting was held in the preceding year, 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 14 of 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

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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 or pursuant to Section 2.9) 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 or pursuant to Section 2.9, as applicable, shall be eligible

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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 or Section 2.9, as applicable. Except as otherwise provided by law, with respect to nominations and other business proposed to be brought pursuant to Section 2.8(A)(1)(c), 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 and Section 2.9, 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 and Section 2.9, “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 or the provisions of Section 2.9 below, 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, Section 2.9 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) and (A)(1)(d) hereof), Section 2.9 and Section 2.2 (as applicable), and compliance with paragraphs (A)(1)(c) and (A)(1)(d) of this Section 2.8 and

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Section 2.2 (as applicable) shall be the exclusive means for a stockholder to make nominations or submit other business (as applicable). Nothing in this Section 2.8, Section 2.9 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    Proxy Access.

(A)    Whenever the Board of Directors solicits proxies with respect to the election of directors at an annual meeting of stockholders, in addition to any persons nominated for election to the Board of Directors by or at the direction of the Board of Directors, subject to the provisions of this Section 2.9, the Corporation shall (1) include in its notice of annual meeting and proxy materials, as applicable, for any annual meeting of stockholders (a) the name of any person nominated for election (the “Stockholder Nominee”) by a stockholder who (i) is a stockholder of record of the Corporation as of the date that the Notice of Proxy Access Nomination (as defined below) is received by the Corporation in accordance with this Section 2.9, (ii) is entitled to vote for the election of directors at the annual meeting and (iii) satisfies the notice, ownership and other requirements of this Section 2.9 (such stockholder, together with the beneficial owner of such shares, a “Nominator”) or by a group of no more than 20 such stockholders (such stockholders, together with the beneficial owners of such shares, a “Nominator Group”) that, collectively as a Nominator Group, satisfies the notice, ownership and other requirements of this Section 2.9 applicable to a Nominator Group; provided that, in the case of a Nominator Group, each member thereof (each a “Group Member”) shall have satisfied the notice, ownership and other requirements of this Section 2.9 applicable to Group Members, and (b) subject to paragraph (I) of this Section 2.9, if the Nominator or the Nominator Group, as applicable, so elects, the Nomination Statement (as defined below) furnished by such Nominator or Nominator Group; and (2) include such Stockholder Nominee’s name on any ballot distributed at such annual meeting and on the Corporation’s proxy card (or any other format through which the Corporation permits proxies to be submitted) distributed in connection with such annual meeting. Nothing in this Section 2.9 shall limit the Corporation’s ability to solicit against, and include in its proxy materials its own statements relating to, any Stockholder Nominee, Nominator or Nominator Group, or to include such Stockholder Nominee as a nominee of the Board.

(B)    Maximum Number of Stockholder Nominees. At each annual meeting of stockholders, a Nominator or Nominator Group may nominate one or more Stockholder Nominees for election at such meeting pursuant to this Section 2.9; provided that the maximum number of Stockholder Nominees nominated by all Nominators and Nominator Groups (including Stockholder Nominees that were submitted by a Nominator or Nominator Group for inclusion in the Corporation’s proxy materials pursuant to this Section 2.9 but either are subsequently withdrawn, disregarded, declared invalid or ineligible pursuant to this Section 2.9 or that the Board of Directors determines to nominate as Board of Directors nominees) appearing in the Corporation’s proxy materials with respect to an annual meeting of stockholders shall not exceed 20% of the total number of independent directors in office as of the Final Proxy Access Deadline (as defined below), or if such number is not a whole number, the closest whole number below 20% (the “Maximum Number”). The Maximum Number shall be reduced, but not below zero, by the sum of (x) the number of persons that the Board of Directors decides to nominate

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pursuant to an agreement, arrangement or other understanding with one or more stockholders of record or beneficial owners, as the case may be, in lieu of such person being formally nominated as a director pursuant to this Section 2.9; and (y) the number of persons that the Board of Directors decides to nominate for re-election who were previously elected to the Board of Directors based on a nomination made pursuant to this Section 2.9 or pursuant to an agreement, arrangement or other understanding with one or more stockholders of record or beneficial owners, as the case may be, in lieu of such person being formally nominated as a director pursuant to this Section 2.9, in each case, at one of the previous two annual meetings. If one or more vacancies for any reason occurs on the Board of Directors at any time after the Final Proxy Access Deadline but before the date of the applicable annual meeting of stockholders and the Board of Directors determines to reduce the size of the Board of Directors in connection therewith, the Maximum Number shall be calculated based on the number of directors in office as so reduced. Any Nominator or Nominator Group submitting more than one Stockholder Nominee for inclusion in the Corporation’s proxy materials pursuant to this Section 2.9 shall rank in its Notice of Proxy Access Nomination such Stockholder Nominees based on the order that the Nominator or Nominator Group desires such Stockholder Nominees to be selected for inclusion in the Corporation’s proxy materials in the event that the total number of Stockholder Nominees submitted by Nominators or Nominator Groups pursuant to this Section 2.9 exceeds the Maximum Number. In the event that the number of Stockholder Nominees submitted by Nominators or Nominator Groups pursuant to this Section 2.9 exceeds the Maximum Number, the highest ranking Stockholder Nominee who meets the requirements of this Section 2.9 from each Nominator and Nominator Group will be selected for inclusion in the Corporation’s proxy materials until the Maximum Number is reached, beginning with the Nominator or Nominator Group with the largest number of shares disclosed as owned (as defined below) in its respective Notice of Proxy Access Nomination submitted to the Corporation and proceeding through each Nominator or Nominator Group in descending order of ownership. If the Maximum Number is not reached after the highest ranking Stockholder Nominee who meets the requirements of this Section 2.9 from each Nominator and Nominator Group has been selected, this process will continue as many times as necessary, following the same order each time, until the Maximum Number is reached. If, after the Final Proxy Access Deadline, whether before or after the mailing of the Corporation’s definitive proxy statement, (i) a Stockholder Nominee who satisfies the requirements of this Section 2.9 is thereafter nominated by the Board of Directors, (ii) a Stockholder Nominee who satisfies the requirements of this Section 2.9 becomes ineligible for inclusion in the Corporation’s proxy materials pursuant to this Section 2.9, becomes unwilling to serve on the Board of Directors, dies, becomes disabled or is otherwise disqualified from being nominated for election or serving as a director of the Corporation or (iii) a Nominator or Nominator Group withdraws its nomination or becomes ineligible, in the case of clauses (ii) or (iii) as determined by the Board of Directors or the chairman of the meeting, then the Stockholder Nominee shall be disregarded, no replacement nominee or nominees shall be included in the Corporation’s proxy materials or otherwise submitted for election as a director in substitution thereof and the Corporation (1) may omit from its proxy materials information concerning such Stockholder Nominee and (2) may otherwise communicate to its stockholders, including without limitation by amending or supplementing its proxy materials, that the Stockholder Nominee will not be eligible for election at the annual meeting of stockholders and will not, or will no longer, be included as a Stockholder Nominee in the proxy materials.

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(C)    Notice of Proxy Access Nomination. To nominate a Stockholder Nominee, the Nominator or Nominator Group shall submit to the Secretary the information required by this Section 2.9 on a timely basis. To be timely, the Notice of Proxy Access Nomination must be addressed to and received by the Secretary not less than 120 nor more than 150 days prior to the first anniversary of the date on which the Corporation’s definitive proxy statement was released to stockholders in connection with the prior year’s annual meeting; provided, however, that if the annual meeting is convened more than 20 days prior to or delayed by more than 70 days after the first anniversary of the preceding year’s annual meeting, or if no annual meeting was held in the preceding year, the Notice of Proxy Access Nomination must be so received not earlier than 120 days prior to such annual meeting and not later than the close of business on the later of (x) the 90th day prior to such annual meeting or (y) the 10th day following the day on which a public announcement of the date of the annual meeting is first made (the last day on which a Notice of Proxy Access Nomination may be delivered pursuant to and in accordance with this Section 2.9, the “Final Proxy Access Deadline”); provided further that in no event shall any adjournment or postponement of an annual meeting, or the public announcement thereof, commence a new time period or extend any time period for the receipt of the information required by this Section 2.9. The written notice required by this Section 2.9 ( the “Notice of Proxy Access Nomination”) shall include:

(1)    a written notice of the nomination by such Nominator or Nominator Group expressly requesting to have its Stockholder Nominee included in the Corporation’s proxy materials pursuant to this Section 2.9 that includes, with respect to the Stockholder Nominee and the Nominator (including any beneficial owner on whose behalf the nomination is made) or, in the case of a Nominator Group, with respect to each Group Member (including any beneficial owner on whose behalf the nomination is made), all of the representations, agreements and other information required in a stockholder’s notice submitted pursuant to Section 2.8(A)(1)(c);

(2)    if the Nominator or Nominator Group so elects, a written statement of the Nominator or Nominator Group for inclusion in the Corporation’s proxy statement in support of the election of the Stockholder Nominee(s) to the Board of Directors, which statement shall not exceed 500 words with respect to each Stockholder Nominee (the “Nomination Statement”);

(3)    in the case of a nomination by a Nominator Group, the designation by all Group Members of one specified Group Member (or a qualified representative thereof) that is authorized to act on behalf of all Group Members with respect to the nomination and matters related thereto, including withdrawal of the nomination;

(4)    a representation by the Stockholder Nominee and the Nominator or, in the case of a Nominator Group, each Group Member (including any beneficial owner on whose behalf the nomination is made), that such person has provided and will provide facts, statements and other information in all communications with the Corporation and its stockholders and beneficial owners, including without limitation the Notice of Proxy Access Nomination and the Nomination Statement, that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made in light of the circumstances under which they were made, not misleading;

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(5)    a statement of the Nominator (including any beneficial owner on whose behalf the nomination is made), or, in the case of a Nominator Group, each Group Member (including any beneficial owner on whose behalf the nomination is made), setting forth and certifying the number of shares such Nominator or Nominator Group is deemed to own (as determined in accordance with paragraph (D) of this Section 2.9) continuously for at least three years as of the date of the Notice of Proxy Access Nomination and one or more written statements from the stockholder of record of the Required Shares (as defined below), and from each intermediary through which such shares are or have been held during the requisite three-year holding period, verifying that, as of a date within seven days prior to the date that the Notice of Proxy Access Nomination is received by the Secretary, the Nominator or the Nominator Group, as the case may be, owns, and has owned continuously for the preceding three years, the Required Shares, and the Nominator’s or, in the case of a Nominator Group, each Group Member’s, agreement to provide (a) within seven days after the record date for the applicable annual meeting, written statements from the stockholder of record and intermediaries verifying the Nominator’s or the Nominator Group’s, as the case may be, continuous ownership of the Required Shares through the record date; provided that if and to the extent that a stockholder of record is acting on behalf of one or more beneficial owners, such written statements shall also be submitted by any such beneficial owner or owners, and (b) immediate notice if the Nominator or the Nominator Group, as the case may be, ceases to own any of the Required Shares prior to the date of the applicable annual meeting of stockholders;

(6)    a copy of any Schedule 14N that has been filed with the Securities and Exchange Commission as required by Rule 14a-18 under the Exchange Act;

(7)    a representation by the Nominator (including any beneficial owner on whose behalf the nomination is made), or, in the case of a Nominator Group, each Group Member (including any beneficial owner on whose behalf the nomination is made): (a) that the Required Shares were acquired in the ordinary course of business and not with intent to change or influence control of the Corporation, and each such person does not presently have such intent, (b) that each such person will maintain ownership (as defined in this Section 2.9) of the Required Shares through the date of the applicable annual meeting of stockholders along with a further representation as to what such person’s intentions are with respect to continuing to own the Required Shares for at least one year thereafter (which representation the Nominator or Nominator Group shall include in its Nomination Statement, it being understood that the inclusion of such representation shall not count towards the Nomination Statement’s 500-word limit) and intends to maintain qualifying ownership for at least one year following the meeting, (c) that each such person has not nominated, and will not nominate, for election to the Board of Directors at the applicable annual meeting any person other than its Stockholder Nominee(s) pursuant to this Section 2.9, (d) that each such person has not distributed, and will not distribute, to any stockholder or beneficial owner any form of proxy for the applicable annual meeting other than the form distributed by the Corporation, (e) that each such person has not engaged, and during the period commencing with the submission of the Notice of Proxy Access Nomination and ending on the later of (i) the first anniversary of the annual meeting to which the Notice of Proxy Access Nomination related or (ii) the date on which no Stockholder Nominee previously nominated by each such person is currently serving on the board, will not directly or indirectly engage in, and has not been and will not be a participant (as defined in Schedule 14A under the Exchange Act) in, a “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting other than a nominee of the Board of Directors and (f) that each such person consents to the public disclosure of the information provided pursuant to this Section 2.9;

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(8)    an executed agreement, in a form deemed satisfactory by the Board of Directors, pursuant to which the Nominator and any beneficial owner on whose behalf the nomination is made or, in the case of a Nominator Group, each Group Member (including any beneficial owner on whose behalf the nomination is made) agrees to (a) comply with all applicable laws, rules and regulations arising out of or relating to the nomination of each Stockholder Nominee pursuant to this Section 2.9, including, without limitation, with respect to any solicitation in connection with the annual meeting of stockholders or applicable to the filing and use, if any, of soliciting material, (b) assume all liability stemming from any legal or regulatory violation arising out of the communications and information provided by such person(s) to the Corporation and its stockholders and beneficial owners, including without limitation the Notice of Proxy Access Nomination and the Nomination Statement, (c) indemnify and hold harmless the Corporation and each of its directors, officers, employees, agents and affiliates individually against any liability, loss or damages in connection with any threatened or pending action, suit or proceeding, whether legal, administrative or investigative, arising out of or relating to any nomination submitted by such person(s) pursuant to this Section 2.9, (d) file with the Securities and Exchange Commission any solicitation or other communication with the Corporation’s stockholders and beneficial owners relating to the meeting at which the Stockholder Nominee will be nominated, regardless of whether any such filing is required by Regulation 14A under the Exchange Act or whether any exemption from filing is available for such solicitation or other communication under Regulation 14A under the Exchange Act, (e) furnish to the Corporation all updated information required by this Section 2.9, including, without limitation, the information required by paragraph (E) of this Section 2.9 and (f) upon request, provide to the Corporation within five business days after such request, but in any event prior to the day of the annual meeting of stockholders, such additional information as reasonably requested by the Corporation; and

(9)    a letter of resignation signed by each Stockholder Nominee, which letter shall specify that such Stockholder Nominee’s resignation is irrevocable and that it shall become effective upon a determination by the Board of Directors or any committee thereof that (a) any of the information provided to the Corporation by the Nominator, the Nominator Group, any Group Member, any beneficial owner on whose behalf the nomination was made or the Stockholder Nominee in respect of the nomination of such Stockholder Nominee pursuant to this Section 2.9 is or was untrue in any material respect (or omitted to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading) or (b) the Stockholder Nominee, the Nominator, the Nominator Group or any Group Member, any beneficial owner on whose behalf the nomination was made or any affiliate thereof shall have breached any of its representations, obligations or agreements under this Section 2.9.

(D)    Ownership. To nominate any such Stockholder Nominee pursuant to this Section 2.9, the Nominator shall have owned or, in the case of a Nominator Group, collectively as a Nominator Group owned shares representing 3% or more of the voting power entitled to vote generally in the election of directors (the “Required Shares”) continuously for at least three

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years as of both the date the Notice of Proxy Access Nomination is submitted to the Corporation and the record date for determining stockholders eligible to vote at the annual meeting of stockholders and must continue to own the Required Shares at all times between the date the Notice of Proxy Access Nomination is submitted to the Corporation and the date of the applicable annual meeting; provided that if and to the extent a stockholder of record is acting on behalf of one or more beneficial owners (i) only the shares owned by such beneficial owner or owners, and not any other shares owned by any such stockholder, shall be counted for purposes of satisfying the foregoing ownership requirement; (ii) the aggregate number of stockholders and all such beneficial owners whose share ownership is counted for the purposes of satisfying the foregoing ownership requirement shall not exceed 20; and (iii) in the case of nominations submitted by a Nominator Group, at least one Group Member shall have owned shares representing 1% or more of the voting power entitled to vote generally in the election of directors. Two or more funds that are (i) under common management and investment control, (ii) under common management and funded primarily by the same employer or (iii) a “group of investment companies,” as such term is defined in the Investment Corporation Act of 1940, as amended, shall be treated as one stockholder or beneficial owner, as the case may be, for the purpose of satisfying the foregoing ownership requirements; provided that each fund otherwise meets the requirements set forth in this Section 2.9; and provided further that any such funds for which shares are aggregated for the purpose of satisfying the foregoing ownership requirements provide documentation reasonably satisfactory to the Corporation that demonstrates that the funds satisfy the criteria for being treated as one stockholder within seven days after the Notice of Proxy Access Nomination is delivered to the Corporation. No shares may be attributed to more than one Nominator or Nominator Group, and no stockholder or beneficial owner may be a member of more than one Nominator Group (other than a stockholder directed to act by more than one beneficial owner) for the purposes of this Section 2.9.

For purposes of calculating the Required Shares under this Section 2.9, “ownership” shall be deemed to consist of and include only the outstanding shares as to which a person possesses both (i) the full voting and investment rights pertaining to such shares and (ii) the full economic interest in (including the opportunity for profit and risk of loss on) such shares; provided that the ownership of shares calculated in accordance with clauses (i) and (ii) above shall not include any shares (1) that a person or any of its affiliates has sold in any transaction that has not been settled or closed, including any short sale, (2) that a person or any of its affiliates has borrowed for any purposes or purchased pursuant to an agreement to resell or (3) that are subject to any “derivative security” (as such term is defined in Rule 16a-1(c) under the Exchange Act) or similar agreement entered into by a person or any of its affiliates, whether any such security, instrument or agreement is to be settled with shares or with cash based on the notional amount or value of shares, in any case in which such security, instrument or agreement has, or is intended to have, or if exercised by either party would have, the purpose or effect of (x) reducing in any manner, to any extent or at any time in the future, the person’s or such person’s affiliates’ full right to vote or direct the voting of any such shares, and/or (y) hedging, offsetting or altering to any degree gain or loss arising from the full economic ownership of such person’s or such person’s affiliates’ shares. “Ownership” shall include shares held in the name of a nominee or other intermediary so long as the person claiming ownership of such shares retains the right to instruct how the shares are voted with respect to the election of directors and possesses the full economic interest in the shares. A person’s ownership of shares shall be deemed to continue during any period in which the person has delegated any voting power by means of a proxy, power of

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attorney or other instrument or arrangement that is revocable at any time by the person. A person’s ownership of shares shall be deemed to continue during any period in which the person has loaned such shares provided that the person has the power to recall such loaned shares on five business days’ notice, will vote such shares at the annual meeting of stockholders and will hold such shares through the date of the annual meeting. The determination of whether the requirements of “ownership” of shares for purposes of this Section 2.9 are met shall be made by the Board of Directors or chairman of the meeting, which determination shall be conclusive and binding on the Corporation, its stockholders, beneficial owners and all other parties. For the purposes of this Section 2.9, the terms “owned,” “owning” and other variations of the word “own” shall have correlative meanings. For the purposes of this Section 2.9, the term “affiliate” or “affiliates” shall have the meaning ascribed thereto under the rules and regulations of the Exchange Act.

(E)    Notice of Defect. For the avoidance of doubt, with respect to any nomination submitted by a Nominator Group pursuant to this Section 2.9, the information required by paragraphs (C) and (F) of this Section 2.9 to be included in the Notice of Proxy Access Nomination shall be provided by each Group Member (including any beneficial owner on whose behalf the nomination is made) and each such Group Member (including any beneficial owner on whose behalf the nomination is made) shall execute and deliver to the Secretary the representations and agreements required under paragraph (C) of this Section 2.9 at the time the Notice of Proxy Access Nomination is submitted to the Corporation. In the event that the Nominator, Nominator Group or any Group Member shall have breached any of their agreements with the Corporation or any information included in the Nomination Statement or the Notice of Proxy Access Nomination, or any other communications by the Nominator, Nominator Group or any Group Member (including any beneficial owner on whose behalf the nomination is made) with the Corporation or its stockholders, ceases to be true and correct in all material respects (or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made and as of such later date, not misleading), each Nominator, Nominator Group or Group Member (including any beneficial owner on whose behalf the nomination is made), as the case may be, shall promptly (and in any event within 48 hours of discovering such breach or that such information has ceased to be true and correct in all material respects (or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made and as of such later date, not misleading)) notify the Secretary of any such breach, inaccuracy or omission in such previously provided information and shall provide the information that is required to correct any such defect, if applicable, it being understood that providing any such notification shall not be deemed to cure any defect or limit the Corporation’s rights to omit a Stockholder Nominee from its proxy materials as provided in this Section 2.9. All such information required to be included in the Notice of Proxy Access Nomination shall be updated and supplemented, if necessary, in accordance with Section 2.8(C)(1). Notwithstanding anything to the contrary set forth herein, if any Nominator, Nominator Group or Group Member (including any beneficial owner on whose behalf the nomination is made) has failed to comply with the requirements of this Section 2.9, the Board of Directors or the chairman of the meeting shall declare the nomination by such Nominator or Nominator Group to be invalid, and such nomination shall be disregarded.

(F)    Stockholder Nominee Requirements.

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(1)    Within the time period specified in this Section 2.9 for delivering the Notice of Proxy Access Nomination, each Stockholder Nominee must deliver to the Secretary a written representation and agreement, which shall be deemed a part of the Notice of Proxy Access Nomination for purposes of this Section 2.9, that such person: (1) consents to be named in the proxy statement as a nominee, to serve as a director on the Corporation’s Board of Directors if elected and to the public disclosure of the information provided pursuant to this Section 2.9; (2) understands his or her duties as a director under the General Corporation Law of the State of Delaware and agrees to act in accordance with those duties while serving as a director; (3) is not and will not become a party to (x) any agreement, arrangement or other understanding with, and has not given any commitment or assurance to, any person or entity as to how such nominee, if elected as a director of the Corporation, will act or vote on any issue or question to be decided by the Board of Directors or that otherwise relates to the Corporation or the Stockholder Nominee’s service on the Board of Directors (a “Voting Commitment”) that has not been disclosed to the Corporation or (y) any Voting Commitment that could limit or interfere with such person’s ability to comply, if elected as a director of the Corporation, with such person’s fiduciary duties under applicable law; (4) is not and will not become a party to any compensatory, payment or other financial agreement, arrangement or other understanding with any person other than with the Corporation that has not been disclosed to the Corporation, including any agreement to indemnify such Stockholder Nominee for obligations arising as a result of his or her service as a director of the Corporation, and has not and will not receive any such compensation or other payment from any person other than the Corporation that has not been disclosed to the Corporation, in each case, in connection with such nominee’s nomination, service or action as a director of the Corporation; (5) if elected as a director of the Corporation, will comply with all applicable laws and stock exchange listing standards and the Corporation’s policies, guidelines and principles applicable to directors, including, without limitation, the Corporation’s Corporate Governance Guidelines, Code of Ethics and Business Conduct, confidentiality, share ownership and trading policies and guidelines, and any other codes, policies and guidelines of the Corporation or any rules, regulations and listing standards, in each case, as applicable to directors; and (6) will provide facts, statements and other information in all communications with the Corporation and its stockholders and beneficial owners that are and will be true and correct in all material respects and do not and will not omit to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

(2)    At the request of the Corporation, each Stockholder Nominee must promptly submit (but in no event later than seven days after receipt of the request) to the Secretary all completed and signed questionnaires required of directors. The Corporation may request such additional information as necessary to permit the Board of Directors to determine if each nominee is independent, including for purposes of serving on the committees of the Board, under the listing standards of each principal securities exchange upon which the shares are listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Corporation’s directors and to determine whether the nominee otherwise meets all other publicly disclosed standards applicable to directors.

(3)    In the event that the Stockholder Nominee shall have breached any of their agreements with the Corporation or any information or communications provided by a

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Stockholder Nominee to the Corporation or its stockholders and beneficial owners ceases to be true and correct in any respect or omits a fact necessary to make the statements made, in light of the circumstances under which they were made, not misleading, such nominee shall promptly (and in any event within 48 hours of discovering such breach or that such information has ceased to be true and correct in all material respects (or omits a material fact necessary to make the statements made, in light of the circumstances under which they were made and as of such later date, not misleading)) notify the Secretary of any such breach, inaccuracy or omission in such previously provided information and shall provide the information that is required to make such information or communication true and correct, if applicable, it being understood that providing any such notification shall not be deemed to cure any defect or limit the Corporation’s rights to omit a Stockholder Nominee from its proxy materials as provided in this Section 2.9.

(G)    Exclusions. In the event any Nominator or Nominator Group (or any beneficial owner on whose behalf the nomination is made) submits a nomination at an annual meeting of stockholders pursuant to this Section 2.9 and either (a) such Nominator or any Group Member of such Nominator Group (or any beneficial owner on whose behalf the nomination is made) had nominated (or been a Group Member (or a beneficial owner on whose behalf the nomination is made) of a nominator group that had nominated) a nominee for election to the Board of Directors pursuant to this Section 2.9 at any of the previous two annual meetings and such nominee shall not have received at least 10% of the votes cast in favor of such nominee’s election or such nominee withdrew from or became ineligible or unavailable for election to the Board of Directors, or (b) such Stockholder Nominee shall have been nominated for election pursuant to this Section 2.9 at any of the previous two annual meetings of stockholders and such Stockholder Nominee shall not have received at least 25% of the votes cast in favor of such nominee’s election or such nominee withdrew from or became ineligible or unavailable for election to the Board of Directors, then such nomination shall be disregarded. Any Nominator, Nominator Group or Group Member (including any beneficial owner on whose behalf the nomination is made) whose Stockholder Nominee is elected as a director at the annual meeting of stockholders will not be eligible to nominate or participate in the nomination of a Stockholder Nominee for the following two annual meetings of stockholders other than the nomination of such previously elected Stockholder Nominee.

(H)    Disqualification. Notwithstanding anything to the contrary contained in this Section 2.9, the Corporation shall not be required to include, pursuant to this Section 2.9, a Stockholder Nominee in its proxy materials for any annual meeting of stockholders, or, if the proxy statement already has been filed, to submit the nomination of a Stockholder Nominee to a vote at the annual meeting of stockholders, notwithstanding that proxies in respect of such vote may have been received by the Corporation:

(1)    for any meeting for which the Secretary receives notice that any stockholder or beneficial owner, as the case may be, intends to nominate one or more persons for election to the Board of Directors pursuant to Section 2.8(A)(1)(c);

(2)    if any person is nominated pursuant to an agreement, arrangement or other understanding with one or more stockholders or beneficial owners, as the case may be, in lieu of such person being formally proposed as a nominee for election to the Board of

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Directors pursuant to Section 2.8(A)(1)(c) or if any director then in office was previously nominated by a stockholder or pursuant to Section 2.8(A)(1)(c) or pursuant to an agreement, arrangement or other understanding with one or more stockholders or beneficial owners, as the case may be, in lieu of such person being formally proposed as a nominee for election to the Board of Directors pursuant to Section 2.8(A)(1)(c), in each case, at one of the previous two annual meetings of stockholders;

(3)    who is not determined by the Board of Directors in its sole discretion to be independent under the listing standards of each principal securities exchange upon which the shares of the Corporation are listed, any applicable rules of the Securities and Exchange Commission and any publicly disclosed standards used by the Board of Directors in determining and disclosing the independence of the Corporation’s directors, Company’s Directors, including those applicable to a Director’s service on any of the committees of the Board of Directors, in each case, as determined by the Board of Directors or any committee thereof, in its sole discretion;

(4)    whose election as a member of the Board of Directors would cause the Corporation to be in violation of these Bylaws, the Corporation’s Certificate of Incorporation, the rules and listing standards of the principal securities exchanges upon which the shares of the Corporation are listed, or any applicable law, rule or regulation or of any publicly disclosed standards of the Corporation applicable to directors, in each case, as determined by the Board of Directors in its sole discretion;

(5)    who is or has been, within the past three years, an officer or director of a competitor, as defined in Section 8 of the Clayton Antitrust Act of 1914, as amended;

(6)    whose business or personal interests place such Stockholder Nominee in a conflict of interest with the Corporation or any of its subsidiaries that would cause such Stockholder Nominee to violate any fiduciary duties of directors established pursuant to the General Corporation Law of the State of Delaware, including but not limited to, the duty of loyalty and duty of care, as determined by the Board of Directors in its sole discretion;

(7)    who is a named subject of a pending criminal proceeding (excluding traffic violations and other minor offenses) or has been convicted in such a criminal proceeding within the past ten years;

(8)    who is subject to any order of the type specified in Rule 506(d) of Regulation D under the Securities Act of 1933, as amended;

(9)    if the Stockholder Nominee or Nominator (or any beneficial owner on whose behalf the nomination is made), or, in the case of a Nominator Group, any Group Member (or any beneficial owner on whose behalf the nomination is made) shall have provided information to the Corporation in connection with such nomination that was untrue in any material respect or omitted to state a material fact necessary in order to make any statement made, in light of the circumstances under which it was made, not misleading, as determined by the Board of Directors or any committee thereof in its sole discretion;

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(10)    the Nominator (or a qualified representative thereof) or, in the case of a Nominator Group, the representative designated by the Nominator Group in accordance with subparagraph (3) of paragraph (C) of this Section 2.9 (or a qualified representative thereof), or the Stockholder Nominee does not appear at the applicable annual meeting of stockholders to present the Stockholder Nominee for election;

(11)    if the Nominator (or any beneficial owner on whose behalf the nomination is made), or, in the case of a Nominator Group, any Group Member (or any beneficial owner on whose behalf the nomination is made) has engaged in or is currently engaged in, or has been or is a participant (as defined in Schedule 14A under the Exchange Act) in, a “solicitation” within the meaning of Rule 14a-1(l) under the Exchange Act in support of the election of any individual as a director at the applicable annual meeting other than a nominee of the Board; or

(12)    the Nominator or, in the case of a Nominator Group, any Group Member, or applicable Stockholder Nominee otherwise breaches or fails to comply with its representations or obligations pursuant to these Bylaws, including, without limitation, this Section 2.9.

For the purpose of this paragraph (H), subparagraphs (3) through (12) will result in the exclusion from the proxy materials pursuant to this Section 2.9 of the specific Stockholder Nominee to whom the ineligibility applies, or, if the proxy statement already has been filed, the ineligibility of the Stockholder Nominee and, in either case, the inability of the Nominator or Nominator Group that nominated such Stockholder Nominee to substitute another Stockholder Nominee therefor; however, subparagraphs (1) and (2) will result in the exclusion from the proxy materials pursuant to this Section 2.9 of all Stockholder Nominees for the applicable annual meeting of stockholders, or, if the proxy statement already has been filed, the ineligibility of all Stockholder Nominees.

(I)    Nomination Statement. Notwithstanding anything to the contrary contained in this Section 2.9, the Corporation may omit from its proxy materials any information, including all or any portion of the Nomination Statement, if the Board of Directors determines that the disclosure of such information would violate any applicable law or regulation or that such information is not true and correct in all material respects or omits to state a material fact necessary in order to make the statements made, in light of the circumstances under which they were made, not misleading.

(J)     Exclusivity. The Board of Directors (or any other person or body authorized by the Board of Directors) shall have the exclusive power and authority to interpret the provisions of this Section 2.9 and make all determinations deemed necessary or advisable in connection with this Section 2.9 to any person, facts or circumstances. All such actions, interpretations and determinations that are done or made by the Board of Directors (or any other person or body authorized by the Board of Directors) shall be final, conclusive and binding on the Corporation, its stockholders and beneficial owners and all other parties. This Section 2.9 shall be the exclusive method for stockholders to include nominees for director in the Corporation’s proxy materials.

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Section 2.10    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. Directors shall be elected by stockholders at their annual meeting, and the term of each director shall be as set forth in the Certificate of Incorporation.

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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

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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.

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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

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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

25

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

26

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.

27

(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.

28

EX-31.1

Exhibit 31.1

CERTIFICATION

I, Michael T. Strianese, certify that:

1. I have reviewed this report on Form 10-Q for the quarter ended September 23, 2016 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: October 27, 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-Q for the quarter ended September 23, 2016 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: October 27, 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 Quarterly 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-Q for the quarter ended September 23, 2016 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: October 27, 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 - shares	9 Months Ended
	Sep. 23, 2016	Oct. 21, 2016
Document And Entity Information [Abstract]
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 23, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Trading Symbol	LLL
Entity Registrant Name	L 3 COMMUNICATIONS HOLDINGS INC
Entity Central Index Key	0001056239
Current Fiscal Year End Date	--12-31
Entity Filer Category	Large Accelerated Filer
Entity Common Stock, Shares Outstanding		77,308,876

XML

Condensed Consolidated Balance Sheets - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Current assets:
Cash and cash equivalents	$ 411	$ 207
Billed receivables, net of allowances of $13 in 2016 and $15 in 2015	812	746
Contracts in process	2,265	2,081
Inventories	361	333
Other current assets	160	201
Assets of discontinued operations		664
Total current assets	4,009	4,232
Property, plant and equipment, net	1,083	1,097
Goodwill	6,284	6,281
Identifiable intangible assets	181	199
Deferred income taxes	4	3
Other assets	250	255
Total assets	11,811	12,067
Current liabilities:
Current portion of long-term debt	549	499
Accounts payable, trade	426	297
Accrued employment costs	519	504
Accrued expenses	391	390
Advance payments and billings in excess of costs incurred	453	562
Income taxes	8	13
Other current liabilities	404	394
Liabilities of discontinued operations		220
Total current liabilities	2,750	2,879
Pension and postretirement benefits	1,027	1,047
Deferred income taxes	286	219
Other liabilities	326	368
Long-term debt	2,782	3,125
Total liabilities	7,171	7,638
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, 77,355,596 shares outstanding at September 23, 2016 and 78,133,763 shares outstanding at December 31, 2015 (L-3 Communications Corporation's common stock: $.01 par value, 100 shares authorized, issued and outstanding)	6,225	6,052
L-3 Communications Holdings, Inc.'s treasury stock (at cost), 82,052,903 shares at September 23, 2016 and 79,375,063 shares at December 31, 2015	(7,177)	(6,851)
Retained earnings	6,087	5,728
Accumulated other comprehensive loss	(567)	(574)
Total L-3 shareholders' equity	4,568	4,355
Noncontrolling interests	72	74
Total equity	4,640	4,429
Total liabilities and equity	$ 11,811	$ 12,067

XML

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Class of Stock [Line Items]
Allowances for billed receivables	$ 13	$ 15
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	77,355,596	78,133,763
Treasury stock (at cost), shares	82,052,903	79,375,063
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

Condensed Consolidated Statements of Operations - USD ($) shares in Millions, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Net sales:
Products	$ 1,500	$ 1,600	$ 4,561	$ 4,728
Services	1,005	964	2,961	2,867
Total net sales	2,505	2,564	7,522	7,595
Cost of sales:
Products	(1,355)	(1,409)	(4,095)	(4,312)
Services	(935)	(880)	(2,713)	(2,648)
Total cost of sales	(2,290)	(2,289)	(6,808)	(6,960)
Loss related to business divestitures		(9)		(29)
Goodwill impairment charges		(35)		(35)
Operating income	215	231	714	571
Interest expense	(41)	(43)	(125)	(124)
Interest and other income, net	6	3	15	11
Debt retirement charge			(5)
Income from continuing operations before income taxes	180	191	599	458
Provision for income taxes	(29)	(63)	(130)	(105)
Income from continuing operations	151	128	469	353
Income (loss) from discontinued operations, net of income taxes		(424)	63	(416)
Net income (loss)	151	(296)	532	(63)
Net income from continuing operations attributable to noncontrolling interests	(3)	(3)	(10)	(11)
Net income (loss) attributable to L-3	$ 148	$ (299)	$ 522	$ (74)
Basic earnings (loss) per share attributable to L-3 Holdings' common shareholders:
Continuing operations	$ 1.91	$ 1.56	$ 5.93	$ 4.19
Discontinued operations		(5.30)	0.81	(5.10)
Basic earnings (loss) per share	1.91	(3.74)	6.74	(0.91)
Diluted earnings (loss) per share attributable to L-3 Holdings' common shareholders:
Continuing operations	1.88	1.54	5.83	4.14
Discontinued operations		(5.22)	0.80	(5.03)
Diluted earnings (loss) per share	1.88	(3.68)	6.63	(0.89)
Cash dividends declared per common share	$ 0.70	$ 0.65	$ 2.10	$ 1.95
L-3 Holdings' weighted average common shares outstanding:
Basic	77.3	80.0	77.4	81.5
Diluted	78.8	81.2	78.7	82.7

XML

Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Millions		3 Months Ended		9 Months Ended
		Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Statement of Comprehensive Income [Abstract]
Net income (loss)		$ 151	$ (296)	$ 532	$ (63)
Other comprehensive income (loss):
Foreign currency translation adjustments		(31)	(55)	(27)	(84)
Unrealized (losses) gains on hedging instruments	[1]		(7)	10	(3)
Pension and postretirement benefit plans:
Amortization of net loss and prior service cost previously recognized	[2]	8	10	24	32
Net gain arising during the period	[3]				9
Total other comprehensive (loss) income		(23)	(52)	7	(46)
Comprehensive income (loss)		128	(348)	539	(109)
Comprehensive income attributable to noncontrolling interests		(3)	(3)	(10)	(11)
Comprehensive income (loss) attributable to L-3		$ 125	$ (351)	$ 529	$ (120)

[1] Net of income tax benefits of $3 million for the quarterly period ended September 25, 2015, and income taxes of $4 million and income tax benefits of $2 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively.

[2] Net of income taxes of $4 million and $7 million for the quarterly periods ended September 23, 2016 and September 25, 2015, respectively, and income taxes of $13 million and $18 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively.

[3] Represents 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. Amount is net of income taxes of $5 million for the year-to-date period ended September 25, 2015.

XML

Condensed Consolidated Statements of Comprehensive Income (Parenthetical) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Statement of Comprehensive Income [Abstract]
Income tax expense (benefit) on unrealized gains (losses) on hedging instruments		$ (3)	$ 4	$ (2)
Income taxes on amortization of net loss and prior service cost previously recognized	$ 4	$ 7	$ 13	18
Income tax expense on net gain arising during the period				$ 5

XML

Condensed Consolidated Statements of Equity - USD ($) shares in Millions, $ 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, 2014	$ 5,360	$ 1	$ 5,798	$ (6,111)	$ 6,181	$ (584)	$ 75
Beginning Balance, Shares at Dec. 31, 2014		82.0
Class of Stock [Line Items]
Net income (loss)	(63)				(74)		11
Other comprehensive income (loss)	(46)					(46)
Distributions to noncontrolling interests	(11)						(11)
Cash dividends declared on common stock	(162)				(162)
Shares issued:
Employee savings plans	95		95
Employee savings plans, Shares		0.8
Exercise of stock options	65		65
Exercise of stock options, Shares		0.6
Employee stock purchase plan	17		17
Employee stock purchase plan, Shares		0.3
Vesting of restricted stock and performance units
Vesting of restricted stock and performance units, Shares		0.7
Repurchases of common stock to satisfy tax withholding obligations	(33)		(33)
Repurchases of common stock to satisfy tax withholding obligations, Shares		(0.2)
Stock-based compensation expense	36		36
Treasury stock purchased	(605)			(605)
Treasury stock purchased, Shares		(5.2)
Other	6		6
Other, Shares
Ending Balance at Sep. 25, 2015	4,659	$ 1	5,984	(6,716)	5,945	(630)	75
Ending Balance, Shares at Sep. 25, 2015		79.0
Beginning Balance at Dec. 31, 2015	4,429	$ 1	6,051	(6,851)	5,728	(574)	74
Beginning Balance, Shares at Dec. 31, 2015		78.1
Class of Stock [Line Items]
Net income (loss)	532				522		10
Other comprehensive income (loss)	7					7
Distributions to noncontrolling interests	(12)						(12)
Cash dividends declared on common stock	(165)				(165)
Shares issued:
Employee savings plans	94		94
Employee savings plans, Shares		0.7
Exercise of stock options	49		49
Exercise of stock options, Shares		0.6
Employee stock purchase plan	16		16
Employee stock purchase plan, Shares		0.4
Vesting of restricted stock and performance units
Vesting of restricted stock and performance units, Shares		0.5
Repurchases of common stock to satisfy tax withholding obligations	(20)		(20)
Repurchases of common stock to satisfy tax withholding obligations, Shares		(0.2)
Stock-based compensation expense	34		34
Treasury stock purchased	(326)			(326)
Treasury stock purchased, Shares		(2.7)
Other	2				2
Other, Shares
Ending Balance at Sep. 23, 2016	$ 4,640	$ 1	$ 6,224	$ (7,177)	$ 6,087	$ (567)	$ 72
Ending Balance, Shares at Sep. 23, 2016		77.4

XML

Condensed Consolidated Statements of Equity (Parenthetical) - $ / shares	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Class of Stock [Line Items]
Cash dividends declared per share	$ 2.10	$ 1.95
Retained Earnings [Member]
Class of Stock [Line Items]
Cash dividends declared per share	$ 2.10	$ 1.95

XML

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Operating activities:
Net income (loss)	$ 532	$ (63)
Less: (Income) loss from discontinued operations, net of tax	(63)	416
Income from continuing operations	469	353
Depreciation of property, plant and equipment	121	123
Amortization of intangibles and other assets	32	32
Deferred income tax provision	48	5
Stock-based employee compensation expense	34	35
Contributions to employee savings plans in L-3 Holdings' common stock	92	87
Goodwill impairment charges		35
Amortization of pension and postretirement benefit plans net loss and prior service cost	37	50
Amortization of bond discounts and deferred debt issue costs (included in interest expense)	6	6
Loss related to business divestitures		29
Other non-cash items	8	(5)
Changes in operating assets and liabilities, excluding amounts from acquisitions and divestitures, and discontinued operations:
Billed receivables	(69)	36
Contracts in process	(193)	(181)
Inventories	(31)	(77)
Other assets	21	(11)
Accounts payable, trade	130	117
Accrued employment costs	8	41
Accrued expenses	3	(34)
Advance payments and billings in excess of costs incurred	(102)	6
Income taxes		(8)
Other current liabilities	(3)	(6)
Pension and postretirement benefits	(19)	(18)
All other operating activities	(13)	(18)
Net cash from operating activities from continuing operations	579	597
Investing activities:
Business acquisitions, net of cash acquired	(27)	(260)
Proceeds from the sale of businesses, net of closing date cash balances	561	308
Capital expenditures	(126)	(137)
Dispositions of property, plant and equipment	15	2
Other investing activities	7	5
Net cash from (used in) investing activities from continuing operations	430	(82)
Financing activities:
Borrowings under revolving credit facility	335	861
Repayment of borrowings under revolving credit facility	(335)	(861)
Redemption of senior notes	(298)
Common stock repurchased	(326)	(605)
Dividends paid on L-3 Holdings' common stock	(166)	(163)
Proceeds from exercises of stock options	49	41
Proceeds from employee stock purchase plan	23	26
Repurchases of common stock to satisfy tax withholding obligations	(20)	(33)
Other financing activities	(8)	(1)
Net cash used in financing activities from continuing operations	(746)	(735)
Effect of foreign currency exchange rate changes on cash and cash equivalents	(3)	(14)
Net cash (used in) from discontinued operations:
Operating activities	(56)	58
Investing activities		(4)
Net cash (used in) from discontinued operations	(56)	54
Change in cash balance in assets held for sale		61
Net increase (decrease) in cash and cash equivalents	204	(119)
Cash and cash equivalents, beginning of the period	207	442
Cash and cash equivalents, end of the period	$ 411	$ 323

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Description of Business

9 Months Ended

Sep. 23, 2016

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 7, 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 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. 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 Quarterly Report on Form 10-Q are to the Company’s continuing operations, unless specifically noted. See Note 5 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 the Company’s segments is included in Note 22 to the unaudited condensed consolidated financial statements and in Note 21 to the audited consolidated financial statements included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2015.

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Basis of Presentation

9 Months Ended

Sep. 23, 2016

Accounting Policies [Abstract]

Basis of Presentation

2.  Basis of Presentation

These unaudited condensed consolidated financial statements for the quarterly and year-to-date periods ended September 23, 2016 should be read in conjunction with the audited consolidated financial statements of L-3 Holdings and L-3 Communications included in their Annual Report on Form 10-K for the year ended December 31, 2015.

Principles of Consolidation and Reporting

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 unaudited financial information of L-3 Communications and its subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the disclosures required by U.S. GAAP for a complete set of annual audited financial statements. The December 31, 2015 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year.

It is generally the Company’s established practice to close its books for the quarters ending March, June and September on the Friday preceding the end of the calendar quarter. The interim unaudited condensed consolidated financial statements included herein have been prepared and are labeled based on that convention. The Company closes its books for annual periods on December 31 regardless of what day it falls on.

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

Accounting Estimates

The preparation of financial statements in conformity with 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 for L-3 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 valuation of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) 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 periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Sales and profits on 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. Approximately 49% of the Company’s net sales in 2015 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 POC method of accounting (fixed-price type contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus type contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material type contracts). 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 and profits on these fixed-price type contracts requires the preparation of estimates of: (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. 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. The profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to the current estimated total profit margin multiplied by the cumulative sales recognized, less the amount of cumulative profit previously recorded for the contract.

Sales and profits on cost-plus type contracts that are 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 arrangement types for the Company. 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.

Revisions or 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, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to POC accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s 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 $127 million, or 18%, of consolidated operating income ($1.03 per diluted share) for the year-to-date period ended September 23, 2016, and increases of $50 million, or 9%, of consolidated operating income ($0.49 per diluted share) for the year-to-date period ended September 25, 2015.

As previously disclosed, during the fourth quarter of 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech 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 a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015, associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $36 million. The Company recorded the $16 million increase in the product returns allowance as a reduction to net sales during 2016. The product returns allowance, net of refund payments made to eligible owners, was $8 million at September 23, 2016, and is included in other current liabilities on the unaudited condensed consolidated balance sheets. As of October 20, 2016, the Company had approved refunds at a cost of approximately $32 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material. Furthermore, during the third quarter of 2016, the Company recorded a $14 million pre-tax charge in the Electronics Systems segment for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS. See Note 18, Commitments and Contingencies for further details regarding the class action litigation.

For a more complete discussion of these estimates and assumptions, see the Annual Report on Form 10-K for the year ended December 31, 2015.

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New Accounting Standards Implemented

9 Months Ended

Sep. 23, 2016

Accounting Changes and Error Corrections [Abstract]

New Accounting Standards Implemented

3.  New Accounting Standards Implemented

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits will be classified as an operating activity on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 11 for additional information.

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Accounting Standards Issued and Not Yet Implemented

9 Months Ended

Sep. 23, 2016

Accounting Changes and Error Corrections [Abstract]

Accounting Standards Issued and Not Yet Implemented

4.  Accounting Standards Issued and Not Yet Implemented

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The new standard will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early adoption permitted. The adoption of this standard will not have an impact on the Company’s financial position or results of operations, however, the Company expects that there may be an immaterial reclassification of items within the operating, investing and financing activities on its statement of cash flows. The Company plans to early adopt this standard in the fourth quarter of 2016.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires 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 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 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 with disclosure of results under the new and old standards for the first year of adoption.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. The Company has evaluated the impact of the standard on all of its revenue streams and most of its contracts. The Company expects to complete the contract evaluations and validate the results by the first quarter of 2017. The Company has also made significant progress on drafting its accounting policies and evaluating the new disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, design any changes to such business processes, controls and systems by the middle of 2017, and implement the changes over the remainder of 2017.

Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to the customer, either at a point in time or over time. The Company expects to recognize revenue over time on most of its contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on certain of these contracts. The Company currently recognizes sales on fixed-priced production contracts that are covered by contract accounting standards, and under which units are produced and delivered in a continuous or sequential process as units are delivered, based on their contractual selling prices (units-of-delivery method). The Company expects to discontinue the use of the units-of-delivery method under the new standard. Approximately 50% of the Company’s net sales are generated from revenue arrangements accounted for under contract accounting standards, including approximately 15% that use the units-of-delivery method. While the Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements, related disclosures and the transition alternatives available, the Company will adopt the standard as of January 1, 2018. Furthermore, the Company expects to determine the transition method and the effect of this standard on the Company’s consolidated financial statements in the first quarter of 2017.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 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

9 Months Ended

Sep. 23, 2016

Business Combinations [Abstract]

Divestitures and Acquisitions

5.  Divestitures and Acquisitions

Discontinued Operations

As discussed in Note 1, on February 1, 2016, the Company completed the sale of its NSS business to CACI International Inc. for a sales price of $547 million. The sales price was finalized as of September 23, 2016, with no significant changes to preliminary amounts.

The table below presents statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation 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.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net sales	$	—	$	271		$	86		$	773
Cost of sales		—		(260	)		(92	)		(736	)
Gain related to business divestiture(1)		—		—			64			—
Goodwill impairment charges		—		(456	)		—			(456	)
Operating (loss) income from discontinued operations		—		(445	)		58			(419	)
Interest expense allocated to discontinued operations		—		(4	)		—			(15	)
(Loss) income from discontinued operations before income taxes		—		(449	)		58			(434	)
Income tax benefit		—		25			5			18
(Loss) income from discontinued operations, net of income taxes	$	—	$	(424	)	$	63		$	(416	)

⁽¹⁾ The year-to-date period ended September 23, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

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

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

⁽¹⁾ 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 NSS business sold.

Business Divestitures

2015 Business Divestitures

Marine Systems International (MSI) Divestiture. On May 29, 2015, the Company completed the sale of its MSI business to Wärtsilä Corporation for a sales 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 sales price was finalized as of June 24, 2016, with no significant changes to preliminary amounts. MSI was a sector within the Company’s Electronic Systems segment, primarily selling to the commercial shipbuilding industry. The Company recorded a pre-tax loss of $17 million ($6 million after income taxes) for the year-to-date period ended September 25, 2015, related to the divestiture of MSI.

Broadcast Sports Inc. (BSI) Divestiture. On April 24, 2015, the Company divested its BSI business for a sales price of $26 million. BSI provided 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 Company recorded a pre-tax loss of $1 million (less than $1 million after income taxes) and $4 million ($6 million after income taxes) for the quarterly and year-to-date periods ended September 25, 2015, respectively, related to the divestiture of BSI.

Tinsley Product Line Divestiture. On July 27, 2015, the Company divested its Tinsley Product Line for a sales price of $4 million. Tinsley provided 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 and year-to-date periods ended September 25, 2015.

Business Acquisitions

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

2016 Business Acquisitions

Advanced Technical Materials, Inc. (ATM) Acquisition. On January 22, 2016, the Company acquired the assets of ATM for a purchase price of $27 million, which was financed with cash on hand. The purchase price and purchase price allocation of ATM was finalized as of September 23, 2016, with no significant changes to preliminary amounts. ATM develops and manufactures a broad product line of passive microwave waveguides and specialized coaxial components. The aggregate goodwill recognized for this business was $20 million, which was assigned to the Communication Systems reportable segment, all of which is expected to be deductible for income tax purposes.

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. The purchase price and purchase price allocation of L-3 ForceX was finalized as of September 23, 2016, with no significant changes to preliminary amounts. 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 $53 million, which was assigned to the Electronic Systems reportable segment, of which $52 million is expected to be deductible for income tax purposes.

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. The purchase price and purchase price allocation of L-3 CTC was finalized as of June 24, 2016, with no significant changes to preliminary amounts. 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 $182 million, which was assigned to the Electronic Systems reportable segment, and is not expected to be deductible for income tax purposes.

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 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 provides 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.

Business Acquisitions Completed or Agreements to Acquire Businesses Entered Into After September 23, 2016

Agreement to Acquire Certain Assets of Implant Sciences. On October 10, 2016, the Company entered into an asset purchase agreement (APA) to acquire the explosives trace detection (ETD) business of Implant Sciences Corporation (Implant) at a future date for a purchase price of $118 million, in addition to the assumption of specified liabilities. The Company intends to finance the asset purchase with cash on hand. Implant filed for bankruptcy protection pursuant to Chapter 11 of the U.S. Bankruptcy Code on October 10, 2016. Accordingly, the completion of this sale transaction is subject to approval by the U.S. Bankruptcy Court. Pursuant to the terms of the APA, the Company will be, subject to U.S. Bankruptcy Court approval, entitled to a breakup fee and expense reimbursement if it does not prevail as the successful bidder after concluding a bankruptcy auction process.

Micreo Limited and Aerosim Acquisitions. On September 30, 2016, the Company acquired Micreo Limited (Micreo) and Flight Training Acquisitions LLC (Aerosim), in separate transactions, for an aggregate purchase price of approximately $82 million, which was financed with cash on hand. The final purchase prices are subject to customary adjustments for final working capital. Micreo specializes in solutions that utilize high-performance microwave, millimeter wave and photonic technology that complements the Company’s wide range of sensor products and is expected to strengthen the development of the Company’s future products in the higher Electronic Warfare (EW) radio frequency (RF) bandwidth. Micreo currently supports a variety of airborne, land and security programs in Australia. Aerosim provides innovative, portable and flexible pilot and maintenance technician training products and provides a flight school for prospective airline pilots. Aerosim’s commercial training capabilities are complementary to those offered by L-3 Commercial Training Solutions.

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the year-to-date period ended September 23, 2016 and the year ended December 31, 2015, assuming that the business acquisitions completed during these periods had occurred on January 1, 2015.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016		September 25, 2015
	(in millions, except per share data)
Pro forma net sales	$	2,505	$	2,577		$	7,522	$	7,661
Pro forma income from continuing operations attributable to L-3		148		127			458		350
Pro forma net income (loss) attributable to L-3		148		(297	)		521		(66	)
Pro forma diluted earnings per share from continuing operations		1.88		1.56			5.82		4.23
Pro forma diluted earnings (loss) per share		1.88		(3.66	)		6.62		(0.80	)

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 January 1, 2015.

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Contracts in Process

9 Months Ended

Sep. 23, 2016

Text Block [Abstract]

Contracts in Process

6.  Contracts in Process

The components of contracts in process are presented in the table below.

	September 23, 2016			December 31, 2015
	(in millions)
Unbilled contract receivables, gross	$	2,180		$	2,097
Unliquidated progress payments		(886	)		(869	)
Unbilled contract receivables, net		1,294			1,228
Inventoried contract costs, gross		1,165			975
Unliquidated progress payments		(194	)		(122	)
Inventoried contract costs, net		971			853
Total contracts in process	$	2,265		$	2,081

Inventoried Contract Costs. In accordance with contract accounting standards, the Company’s U.S. Government contractor businesses account for the portion of their general and administrative (G&A), independent research and development (IRAD) and bids and proposal (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. 

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Amounts included in inventoried contract costs at beginning of the period	$	163		$	126		$	137		$	117
Contract costs incurred:
IRAD and B&P		76			69			213			204
Other G&A		201			217			611			611
Total		277			286			824			815
Amounts charged to cost of sales		(270	)		(267	)		(791	)		(787	)
Amounts included in inventoried contract costs at end of the period	$	170		$	145		$	170		$	145

 

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 unaudited condensed consolidated statements of operations.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Selling, general and administrative expenses	$	53	$	53	$	164	$	200
Research and development expenses		16		13		40		38
Total	$	69	$	66	$	204	$	238

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Inventories

9 Months Ended

Sep. 23, 2016

Inventory Disclosure [Abstract]

Inventories

7.  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.

	September 23, 2016		December 31, 2015
	(in millions)
Raw materials, components and sub-assemblies	$	186	$	164
Work in process		107		103
Finished goods		68		66
Total	$	361	$	333

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Goodwill and Identifiable Intangible Assets

9 Months Ended

Sep. 23, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Identifiable Intangible Assets

8.  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). 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)
Goodwill	$	3,994		$	1,691		$	1,038		$	6,723
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
Balance at December 31, 2015		3,925			1,353			1,003			6,281
Business acquisitions(1)		2			—			20			22
Foreign currency translation adjustments(2)		(31	)		12			—			(19	)
Balance at September 23, 2016	$	3,896		$	1,365		$	1,023		$	6,284
Goodwill	$	3,965		$	1,703		$	1,058		$	6,726
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	3,896		$	1,365		$	1,023		$	6,284

⁽¹⁾ The net increase in goodwill for the Electronic Systems segment was due to the final purchase price allocations for the ForceX, Inc. and CTC Aviation Group business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM, Inc. business acquisition.

⁽²⁾ The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, partially offset by the weakening of the U.S. dollar against the Canadian dollar and the Euro during the year-to-date period ended September 23, 2016. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during the year-to-date period ended September 23, 2016.

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.

Identifiable Intangible Assets. The table below presents information for the Company’s identifiable intangible assets that are subject to amortization.

			September 23, 2016						December 31, 2015
	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		17	$	376	$	263	$	113	$	370	$	246	$	124
Technology		11		158		99		59		156		91		65
Other		18		21		12		9		21		11		10
Total		15	$	555	$	374	$	181	$	547	$	348	$	199

The table below presents amortization expense recorded by the Company for its identifiable intangible assets.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Amortization expense	$	9	$	9	$	26	$	26

Based on gross carrying amounts at September 23, 2016, 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	$	35	$	32	$	27	$	24	$	20

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Other Current Liabilities and Other Liabilities

9 Months Ended

Sep. 23, 2016

Text Block [Abstract]

Other Current Liabilities and Other Liabilities

9.  Other Current Liabilities and Other Liabilities

The table below presents the components of other current liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	84	$	82
Accrued product warranty costs		73		70
Accrued interest		43		45
Deferred revenues		39		32
Accruals for pending and threatened litigation (see Note 18)		15		6
Product returns allowance (see Note 2)		8		20
Other		142		139
Total other current liabilities	$	404	$	394

The table below presents the components of other liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 11)	$	117	$	161
Deferred compensation		48		45
Accrued product warranty costs		36		35
Accrued workers’ compensation		34		38
Notes payable and capital lease obligations		11		10
Other		80		79
Total other liabilities	$	326	$	368

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

	Year-to-Date Ended
	September 23, 2016			September 25, 2015
	(in millions)
Accrued product warranty costs:(1)
Balance at January 1	$	105		$	93
Acquisitions during the period		—			1
Accruals for product warranties issued during the period		38			46
Settlements made during the period		(33	)		(46	)
Foreign currency translation adjustments		(1	)		(1	)
Balance at end of period	$	109		$	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.

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Debt

9 Months Ended

Sep. 23, 2016

Debt Disclosure [Abstract]

Debt

10.  Debt

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

	September 23, 2016			December 31, 2015
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		200			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			350
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(6	)		(8	)
Deferred debt issue costs		(13	)		(18	)
Carrying amount of long-term debt		3,331			3,624
Current portion of long-term debt		(549	)		(499	)
Carrying amount of long-term debt, excluding current portion	$	2,782		$	3,125

⁽¹⁾ During the year-to-date period ended September 23, 2016, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were each $335 million. At September 23, 2016, L-3 Communications had the full availability of its $1 billion Credit Facility, which expires on February 3, 2017.

On March 24, 2016, the Company initiated a redemption of $300 million aggregate principal amount of its $500 million 3.95% Senior Notes due November 15, 2016 (the 2016 Notes). The redemption price was determined on May 17, 2016 at 101.475% of the principal amount thereof (Redemption Price). Interest on the 2016 Notes redeemed ceased to accrue on and after May 20, 2016 (Redemption Date) and the only remaining right of holders of such 2016 Notes was to receive payment of the Redemption Price and accrued interest. On May 20, 2016, the Company completed the partial redemption and recognized a debt retirement charge of $5 million. Following the partial redemption of the 2016 Notes, $200 million aggregate principal amount of the 2016 Notes remain outstanding.

In April 2015, the FASB issued ASU 2015-03 which requires that debt issuance costs be presented in the balance sheet as a direct deduction from the carrying amount of the associated debt liability. The Company adopted this standard during the first quarter of 2016.

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Income Taxes

9 Months Ended

Sep. 23, 2016

Income Tax Disclosure [Abstract]

Income Taxes

11.  Income Taxes

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. At September 23, 2016, the statutes of limitations for the Company’s U.S. Federal income tax returns for the years ended December 31, 2010 through 2015 were open. 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.

The effective income tax rate for the year-to-date period ended September 23, 2016 decreased to 21.7% from 22.9% for the year-to-date period ended September 25, 2015. The year-to-date period ended September 23, 2016 includes: (1) a benefit from the reinstatement of the Federal Research and Experimentation tax credit, (2) tax benefits of $21 million for the reversal of previously accrued amounts related to various U.S. Federal, foreign and state tax matters and (3) $16 million due to the early adoption of a new accounting standard related to income tax benefits from employee stock-based compensation awards (see Note 3). The year-to-date period ended September 25, 2015 included $36 million of tax benefits, including: (1) $17 million related to a legal restructuring of the Company’s foreign entities, (2) $10 million related to the resolution of various outstanding income tax matters with U.S. and foreign tax authorities, and (3) $9 million primarily associated with the release of valuation allowance for certain deferred tax assets. As of September 23, 2016, the Company anticipates that unrecognized tax benefits will decrease by approximately $6 million over the next 12 months due to the potential resolution of unrecognized tax benefits involving several jurisdictions and tax periods. The actual amount of the decrease over the next 12 months could vary significantly depending on the ultimate timing and nature of any settlements.

Current and non-current income taxes payable include accrued potential interest of $10 million ($6 million after income taxes) at September 23, 2016 and $18 million ($11 million after income taxes) at December 31, 2015, and potential penalties of $8 million at September 23, 2016 and $9 million at December 31, 2015.

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Accumulated Other Comprehensive (Loss) Income (AOCI)

9 Months Ended

Sep. 23, 2016

Equity [Abstract]

Accumulated Other Comprehensive (Loss) Income (AOCI)

12.  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 (losses) gains on hedging instruments			Unrecognized losses and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(27	)		2			—			(25	)
Amounts reclassified from AOCI, net of tax		—			8			24			32
Net current period other comprehensive income		(27	)		10			24			7
Balance at September 23, 2016	$	(128	)	$	2		$	(441	)	$	(567	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive loss before reclassifications, net of tax		(125	)		(13	)		—			(138	)
Amounts reclassified from AOCI, net of tax		41			10			41			92
Net current period other comprehensive (loss) income		(84	)		(3	)		41			(46	)
Balance at September 25, 2015	$	(65	)	$	(8	)	$	(557	)	$	(630	)

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

	Amount Reclassified from AOCI(a)												Affected Line Item in the Unaudited Condensed Consolidated Statements of Operations
	Third Quarter Ended						Year-to-Date Ended
Details About AOCI Components	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Foreign currency translation adjustment:
MSI divestiture	$	—		$	—		$	—		$	(41	)	Loss related to business divestitures
		—			—			—			(41	)	Income from continuing operations before income taxes
		—			—			—			—		Provision for income taxes
	$	—		$	—		$	—		$	(41	)	Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	—		$	—		$	(2	)	Loss related to business divestitures
Other		(4	)		(4	)		(8	)		(10	)	Cost of sales-products
		(4	)		(4	)		(8	)		(12	)	Income from continuing operations before income taxes
		—			—			—			2		Provision for income taxes
	$	(4	)	$	(4	)	$	(8	)	$	(10	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	—		$	—		$	(14	)	Loss related to business divestitures
Net loss		(12	)		(17	)		(37	)		(50	)	(b)
		(12	)		(17	)		(37	)		(64	)	Income from continuing operations before income taxes
		4			7			13			23		Provision for income taxes
	$	(8	)	$	(10	)	$	(24	)	$	(41	)	Income from continuing operations
Total reclassification for the period	$	(12	)	$	(14	)	$	(32	)	$	(92	)	Income from continuing operations

^(a)  Amounts in parenthesis indicate charges to the unaudited condensed 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

9 Months Ended

Sep. 23, 2016

Equity [Abstract]

Equity

13.  Equity

On December 4, 2014, 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, 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 2,677,840 shares of its common stock at an average price of $121.58 per share for an aggregate amount of $326 million from January 1, 2016 through September 23, 2016. All share repurchases of L-3 Holdings’ common stock have been recorded as treasury shares.

At September 23, 2016, the remaining dollar value of authorization under the December 4, 2014 share repurchase program was $480 million.

From September 24, 2016 through October 21, 2016, L-3 Holdings repurchased 112,846 shares of its common stock at an average price of $150.63 per share for an aggregate amount of $17 million.

On June 21, 2016, L-3 Holdings’ Board of Directors declared a cash dividend of $0.70 per share, paid on September 15, 2016 to shareholders of record at the close of business on August 17, 2016. During the year-to-date period ended September 23, 2016, the Company paid $166 million of cash dividends, including a $1 million net reduction of previously accrued dividends for employee held stock awards.

On October 18, 2016, L-3 Holdings’ Board of Directors declared a quarterly cash dividend of $0.70 per share, payable on December 15, 2016 to shareholders of record at the close of business on November 17, 2016.

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L-3 Holdings' Earnings Per Common Share

9 Months Ended

Sep. 23, 2016

Earnings Per Share [Abstract]

L-3 Holdings' Earnings Per Common Share

14.  L-3 Holdings’ Earnings Per Common Share

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

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	151		$	(296	)	$	532		$	(63	)
Net income from continuing operations attributable to noncontrolling interests		(3	)		(3	)		(10	)		(11	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	148		$	125		$	459		$	342
Discontinued operations, net of income tax		—			(424	)		63			(416	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Basic earnings (loss) per share:
Continuing operations	$	1.91		$	1.56		$	5.93		$	4.19
Discontinued operations, net of income tax		—			(5.30	)		0.81			(5.10	)
Net income (loss)	$	1.91		$	(3.74	)	$	6.74		$	(0.91	)
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Assumed exercise of stock options		3.0			2.2			2.5			2.4
Unvested restricted stock awards		1.0			1.2			1.0			1.3
Employee stock purchase plan contributions		0.1			0.2			0.1			0.1
Performance unit awards		0.1			0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.7	)		(2.5	)		(2.4	)		(2.7	)
Common and potential common shares		78.8			81.2			78.7			82.7
Diluted earnings (loss) per share:
Continuing operations	$	1.88		$	1.54		$	5.83		$	4.14
Discontinued operations, net of income tax		—			(5.22	)		0.80			(5.03	)
Net income (loss)	$	1.88		$	(3.68	)	$	6.63		$	(0.89	)

The computation of diluted EPS excludes shares for stock options and employee stock purchase plan contributions of 0.6 million for the year-to-date period ended September 23, 2016, and 0.9 million and 0.6 million for the quarterly and year-to-date periods ended September 25, 2015, respectively, as they were anti-dilutive.

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Fair Value Measurements

9 Months Ended

Sep. 23, 2016

Fair Value Disclosures [Abstract]

Fair Value Measurements

15.  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.

	September 23, 2016						December 31, 2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	128	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		9		—		—		2		—
Total assets	$	128	$	9	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	8	$	—	$	—	$	16	$	—

⁽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

9 Months Ended

Sep. 23, 2016

Investments, All Other Investments [Abstract]

Financial Instruments

16.  Financial Instruments

At September 23, 2016 and December 31, 2015, 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 the 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.

	September 23, 2016				December 31, 2015
	Carrying		Estimated		Carrying			Estimated
	Amount		Fair Value		Amount			Fair Value
	(in millions)
Senior Notes(1)	$	3,331	$	3,610	$	3,624		$	3,754
Foreign currency forward contracts(2)		1		1		(14	)		(14	)

⁽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 17 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

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Derivative Financial Instruments

9 Months Ended

Sep. 23, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Financial Instruments

17.  Derivative Financial Instruments

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

Foreign Currency Forward Contracts. 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 condensed consolidated 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 AOCI 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. 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 at September 23, 2016.

Currency	Notional Amounts
	(in millions)
Canadian dollar	$	128
U.S. dollar		69
Euro		42
British pound		5
Other		13
Total	$	257

At September 23, 2016, 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 condensed consolidated balance sheets.

	September 23, 2016								December 31, 2015
	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)	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1

⁽¹⁾  See Note 15 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

The effects from foreign currency forward contracts on the unaudited condensed consolidated statements of operations were pre-tax losses of $4 million for each of the quarterly periods ended September 23, 2016 and September 25, 2015, and $8 million and $12 million for the year-to-date periods ended September 23, 2016 and September 25, 2015, respectively. At September 23, 2016, the estimated net amount of existing losses that are expected to be reclassified into income within the next 12 months is $1 million.

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Commitments and Contingencies

9 Months Ended

Sep. 23, 2016

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

18.  Commitments and Contingencies

Procurement Regulations

A substantial majority of the Company’s revenues are generated from providing products and services under legally binding agreements or contracts with the U.S. Government, foreign government customers and state and local governments. 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, 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 9. Amounts recoverable from insurance contracts or third parties are recorded as assets when deemed probable. At September 23, 2016, the Company did not record any amounts for recoveries from insurance contracts or third parties in connection with the amount of liabilities recorded for pending and threatened litigation. 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. 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. In March 2016, two additional putative class action complaints were filed in the United States District Court for the Eastern District of Michigan, which assert similar claims against the Company. In August of 2016, all five cases were consolidated into a single, putative class action in the United States District Court for the Western District of Missouri. 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 statutes and unjust enrichment. In October 2016, the parties reached a settlement in principle to resolve the allegations in these cases. The proposed settlement is subject to court approval. The anticipated costs of this settlement are reflected in the Company’s financial results.

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. On March 30, 2016, the District Court dismissed with prejudice all claims against the Company’s officers and allowed the claim against the Company to proceed to discovery. Discovery has commenced. On June 30, 2016, the plaintiffs filed a motion for class certification, which is pending before the District Court. The Company believes the suit lacks merit and intends to defend itself vigorously. 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 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 and is currently in discussions with the government regarding a possible settlement. The Company does not currently believe that any such settlement will have a material financial impact on its financial position, results of operations or cash flows in future periods.

401(k) Plan Class Action. On June 24, 2016, a putative class action was filed in the United States District Court for the Southern District of New York on behalf of participants in and beneficiaries of a Company-sponsored 401(k) plan. An amended complaint was filed on September 29, 2016. As amended, the complaint alleges that certain of the Company’s officers breached fiduciary duties owed under the Employee Retirement Income Security Act by making the Company’s stock available as an investment alternative under the plan during a period prior to the disclosure of misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks, among other things, monetary damages, equitable relief, pre-judgment interest, and fees and expenses. The Company believes the suit lacks merit and intends to defend against it vigorously. 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.

Derivative Action. On July 13, 2016, a shareholder derivative complaint was filed in the Supreme Court of New York, County of New York, against certain of the Company’s current and former directors and officers. The complaint alleges, among other things, that the defendants breached fiduciary duties, caused corporate waste and were unjustly enriched in connection with misconduct and accounting errors identified by the Company at its Aerospace Systems segment. The complaint seeks monetary damages, pre- and post-judgment interest, equitable relief and fees and expenses on behalf of the Company. The Company believes the suit lacks merit and intends to defend itself vigorously. 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.

Bashkirian Airways. In March 2016, approximately $3.7 million was paid from the escrow account on behalf of the remaining four plaintiffs in full satisfaction of the amounts awarded to them. The remaining escrow balance was returned to the Company’s insurers.

HVC Alkmaar. On July 23, 2014, a notice of claim was received by our former 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.

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Pension and Other Postretirement Benefits

9 Months Ended

Sep. 23, 2016

Compensation and Retirement Disclosure [Abstract]

Pension and Other Postretirement Benefits

19.  Pension and Other Postretirement Benefits

The following table summarizes the components of net periodic benefit cost for the Company’s pension and other postretirement benefit plans.

	Pension Plans												Postretirement Benefit Plans
	Third Quarter Ended						Year-to-Date Ended						Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Components of net periodic benefit cost:
Service cost	$	25		$	29		$	80		$	93		$	—		$	—		$	1		$	2
Interest cost		32			38			101			112			1			1			4			5
Expected return on plan assets		(47	)		(51	)		(149	)		(155	)		(1	)		(1	)		(3	)		(3	)
Amortization of prior service costs (credits)		—			—			—			1			—			—			(1	)		(2	)
Amortization of net loss (gains)		13			17			39			51			(1	)		—			(1	)		—
Curtailment loss		—			3			—			3			—			—			—			—
Net periodic benefit cost	$	23		$	36		$	71		$	105		$	(1	)	$	—		$	—		$	2

Contributions. The Company contributed cash of $49 million to its pension plans and $4 million to its other postretirement benefit plans during the year-to-date period ended September 23, 2016. The Company expects to contribute an additional $51 million to its pension plans and $6 million to its other postretirement benefit plans during the remainder of 2016.

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Stock-Based Compensation

9 Months Ended

Sep. 23, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

20.  Stock-Based Compensation

On May 3, 2016, the stockholders of L-3 Holdings approved an amendment to its Amended and Restated 2008 Long Term Performance Plan (2008 LTPP) to increase the number of shares authorized for issuance by 6.8 million shares to approximately 26.0 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 23, 2016 is counted as 4.26 shares for purposes of the share limit. Each share issued under full value awards granted between February 26, 2013 and February 22, 2016 is counted as 3.69 shares for purposes of the share limit.

During the year-to-date period ended September 23, 2016, the Company granted stock-based compensation under the 2008 LTPP in the form of stock options, restricted stock units and performance units. The stock-based compensation awards granted during the year-to-date period ended September 23, 2016 are further discussed below.

Stock Options. The Company granted 617,575 stock options with a weighted average exercise price of $116.68 per option, which was equal to the closing price of L-3 Holdings’ common stock on the date of grant. The 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. The options granted to our Chairman and Chief Executive Officer are also subject to performance-based vesting conditions. The weighted average grant date fair value for the options of $15.90 per option was estimated using the Black-Scholes option-pricing model. The weighted average assumptions used in the valuation model for this grant are presented in the table below.

Expected holding period (in years)	5.0
Expected volatility	21.3	%
Expected dividend yield	2.8	%
Risk-free interest rate	1.1	%

Restricted Stock Units. The Company granted 394,086 restricted stock units with a weighted average grant date fair value of $116.72 per share. Restricted stock units typically vest three years after the grant date for employees and one year after the grant date for non-employee directors, or if earlier, on the date of the first annual stockholders meeting held after the grant date. The restricted stock units automatically convert into shares of L-3 Holdings’ common stock upon vesting.

Performance Units. The Company granted 51,892 performance units with a weighted average grant date fair value per unit of $116.20. The final payout for these units is based on the achievement of pre-determined EPS goals established by the compensation committee of the Company’s Board of Directors for the three-year period ending December 31, 2018. Units earned under the award can range from zero to 200% of the original number of units awarded, which are converted into shares of L-3 Holdings’ common stock.

Award Modifications. As disclosed in Note 5, the Company completed the sale of NSS on February 1, 2016. In connection with the divestiture of NSS, the Company modified unvested restricted stock unit and stock option awards held by approximately 300 NSS employees by converting each award into a right to receive a cash payment. The cash payment was based on the original number of units awarded, the closing price of L-3’s common stock on the closing date of the sale, and the portion of the three-year vesting period for the award that had been satisfied through the closing date, and additionally in the case of stock options, the exercise price of the options. As a result of the award modification, the Company reversed $4 million of previously recorded stock compensation expense relating to the original awards as a reduction to shareholders equity and recorded $5 million of expense based on the cash payments made to NSS employees in connection with the modified awards, each of which is included in the Company’s results from discontinued operations.

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Supplemental Cash Flow Information

9 Months Ended

Sep. 23, 2016

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

21.  Supplemental Cash Flow Information

	Year-to-Date Ended
	September 23, 2016		September 25, 2015
	(in millions)
Interest paid on outstanding debt	$	120	$	127
Income tax payments		85		114
Income tax refunds		4		6

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Segment Information

9 Months Ended

Sep. 23, 2016

Segment Reporting [Abstract]

Segment Information

22.  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, operating income and operating margin. Corporate expenses are allocated to the Company’s operating segments using an allocation methodology prescribed by U.S. Government regulations for government contractors. Accordingly, segment results include all costs and expenses, except for goodwill impairment charges, gains or losses related to business divestitures, and certain other items that are excluded by management for purposes of evaluating the operating performance of the Company’s business segments. Certain corporate expenses of $4 million and $11 million for the quarterly and year-to-date periods ended September 25, 2015, 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 (loss), depreciation and amortization and total assets by reportable segment.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net Sales:
Electronic Systems	$	1,024		$	1,023		$	2,970		$	3,138
Aerospace Systems		1,012			1,068			3,167			3,092
Communication Systems		509			518			1,485			1,490
Elimination of intercompany sales		(40	)		(45	)		(100	)		(125	)
Consolidated total	$	2,505		$	2,564		$	7,522		$	7,595
Operating Income:
Electronic Systems	$	119		$	121		$	339		$	352
Aerospace Systems		56			102			232			144
Communication Systems		40			52			143			139
Segment total		215			275			714			635
Loss related to business divestitures(1)		—			(9	)		—			(29	)
Goodwill impairment charges(2)		—			(35	)		—			(35	)
Consolidated total	$	215		$	231		$	714		$	571
Depreciation and amortization:
Electronic Systems	$	26		$	26		$	78		$	81
Aerospace Systems		13			13			40			37
Communication Systems		12			12			35			37
Consolidated total	$	51		$	51		$	153		$	155

⁽¹⁾ See Note 5 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015 related to a business retained by L-3 in connection with the sale of the NSS business. See Note 6 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.

	September 23, 2016		December 31, 2015
	(in millions)
Total Assets:
Electronic Systems	$	6,636	$	6,426
Aerospace Systems		2,704		2,630
Communication Systems		2,113		1,984
Corporate		358		363
Assets of discontinued operations		—		664
Consolidated total	$	11,811	$	12,067

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Employee Severance and Termination Costs

9 Months Ended

Sep. 23, 2016

Restructuring and Related Activities [Abstract]

Employee Severance and Termination Costs

23.  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 a total of $5 million and $11 million of employee severance and other termination costs, with respect to approximately 600 employees, during the quarterly and year-to-date periods ended September 23, 2016, respectively. During the year ended December 31, 2015, the Company recorded a total of $18 million of employee severance and other termination costs with respect to approximately 800 employees. Employee severance and other termination costs are reported within cost of sales on the unaudited condensed consolidated statements of operations. The remaining balance to be paid in connection with these initiatives was $8 million at September 23, 2016 and $9 million at December 31, 2015, which is expected to be paid primarily by the second quarter of 2017. Employee severance and other termination costs incurred by reportable segment are presented in the table below.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Reportable Segment
Electronic Systems	$	3	$	2	$	7	$	4
Aerospace Systems		1		1		1		3
Communication Systems		1		1		3		3
Consolidated	$	5	$	4	$	11	$	10

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

9 Months Ended

Sep. 23, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

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

24.  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 September 23, 2016:
Current assets:
Cash and cash equivalents	$	—		$	188		$	—		$	239		$	(16	)	$	411
Billed receivables, net		—			319			277			216			—			812
Contracts in process		—			959			1,053			253			—			2,265
Other current assets		—			273			139			109			—			521
Total current assets		—			1,739			1,469			817			(16	)		4,009
Goodwill		—			2,338			2,973			973			—			6,284
Other assets		—			765			490			263			—			1,518
Investment in and amounts due from consolidated subsidiaries		4,568			5,368			4,433			—			(14,369	)		—
Total assets	$	4,568		$	10,210		$	9,365		$	2,053		$	(14,385	)	$	11,811
Current portion of long-term debt	$	—		$	549		$	—		$	—		$	—		$	549
Current liabilities		—			892			856			469			(16	)		2,201
Amounts due to consolidated subsidiaries		—			—			—			159			(159	)		—
Other long-term liabilities		—			1,419			191			29			—			1,639
Long-term debt		—			2,782			—			—			—			2,782
Total liabilities		—			5,642			1,047			657			(175	)		7,171
L-3 shareholders’ equity		4,568			4,568			8,318			1,396			(14,282	)		4,568
Noncontrolling interests		—			—			—			—			72			72
Total equity		4,568			4,568			8,318			1,396			(14,210	)		4,640
Total liabilities and equity	$	4,568		$	10,210		$	9,365		$	2,053		$	(14,385	)	$	11,811
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 September 23, 2016:
Total net sales	$	—		$	877		$	1,258		$	444		$	(74	)	$	2,505
Total cost of sales		(15	)		(801	)		(1,182	)		(381	)		89			(2,290	)
Operating (loss) income		(15	)		76			76			63			15			215
Interest expense		—			(40	)		—			(1	)		—			(41	)
Interest and other income, net		—			4			—			2			—			6
(Loss) income from continuing operations before income taxes		(15	)		40			76			64			15			180
Benefit (provision) for income taxes		2			(7	)		(12	)		(10	)		(2	)		(29	)
Equity in net income of consolidated subsidiaries		161			115			—			—			(276	)		—
Net income		148			148			64			54			(263	)		151
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net income attributable to L-3	$	148		$	148		$	64		$	54		$	(266	)	$	148
Comprehensive income attributable to L-3	$	125		$	125		$	64		$	24		$	(213	)	$	125
For the quarter ended September 25, 2015:
Total net sales	$	—		$	873		$	1,334		$	443		$	(86	)	$	2,564
Total cost of sales		(12	)		(793	)		(1,201	)		(381	)		98			(2,289	)
Loss related to business divestitures		—			(8	)		(1	)		—			—			(9	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(12	)		72			106			53			12			231
Interest expense		—			(43	)		—			—			—			(43	)
Interest and other income, net		—			2			—			1			—			3
(Loss) income from continuing operations before income taxes		(12	)		31			106			54			12			191
Benefit (provision) for income taxes		4			(11	)		(30	)		(22	)		(4	)		(63	)
Equity in net loss of consolidated subsidiaries		(291	)		(319	)		—			—			610			—
(Loss) income from continuing operations		(299	)		(299	)		76			32			618			128
Loss from discontinued operations, net of income tax		—			—			(424	)		—			—			(424	)
Net (loss) income		(299	)		(299	)		(348	)		32			618			(296	)
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net (loss) income attributable to L-3	$	(299	)	$	(299	)	$	(348	)	$	32		$	615		$	(299	)
Comprehensive loss attributable to L-3	$	(351	)	$	(351	)	$	(354	)	$	(25	)	$	730		$	(351	)
Condensed Combining Statements of Operations:
For the year-to-date period ended September 23, 2016:
Total net sales	$	—		$	2,602		$	3,817		$	1,307		$	(204	)	$	7,522
Total cost of sales		(34	)		(2,343	)		(3,545	)		(1,124	)		238			(6,808	)
Operating (loss) income		(34	)		259			272			183			34			714
Interest expense		—			(124	)		—			(1	)		—			(125	)
Interest and other income, net		—			10			—			5			—			15
Debt retirement charge		—			(5	)		—			—			—			(5	)
(Loss) income from continuing operations before income taxes		(34	)		140			272			187			34			599
Benefit (provision) for income taxes		7			(31	)		(59	)		(40	)		(7	)		(130	)
Equity in net income of consolidated subsidiaries		549			413			—			—			(962	)		—
Income from continuing operations		522			522			213			147			(935	)		469
Income from discontinued operations, net of income tax		—			—			63			—			—			63
Net income		522			522			276			147			(935	)		532
Net income attributable to noncontrolling interests		—			—			—			—			(10	)		(10	)
Net income attributable to L-3	$	522		$	522		$	276		$	147		$	(945	)	$	522
Comprehensive income attributable to L-3	$	529		$	529		$	287		$	120		$	(936	)	$	529
For the year-to-date period ended September 25, 2015:
Total net sales	$	—		$	2,548		$	3,849		$	1,423		$	(225	)	$	7,595
Total cost of sales		(35	)		(2,332	)		(3,601	)		(1,252	)		260			(6,960	)
(Loss) gain related to business divestitures		—			(13	)		(29	)		13			—			(29	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(35	)		203			193			175			35			571
Interest expense		—			(123	)		(1	)		—			—			(124	)
Interest and other income, net		—			9			—			2			—			11
(Loss) income from continuing operations before income taxes		(35	)		89			192			177			35			458
Benefit (provision) for income taxes		8			(20	)		(44	)		(41	)		(8	)		(105	)
Equity in net loss of consolidated subsidiaries		(47	)		(143	)		—			—			190			—
(Loss) income from continuing operations		(74	)		(74	)		148			136			217			353
Loss from discontinued operations, net of income tax		—			—			(416	)		—			—			(416	)
Net (loss) income		(74	)		(74	)		(268	)		136			217			(63	)
Net income attributable to noncontrolling interests		—			—			—			—			(11	)		(11	)
Net (loss) income attributable to L-3	$	(74	)	$	(74	)	$	(268	)	$	136		$	206		$	(74	)
Comprehensive (loss) income attributable to L-3	$	(120	)	$	(120	)	$	(273	)	$	62		$	331		$	(120	)
Condensed Combining Statements of Cash Flows
For the year-to-date period ended September 23, 2016:
Operating activities:
Net cash from operating activities	$	492		$	196		$	301		$	159		$	(569	)	$	579
Investing activities:
Business acquisitions, net of cash acquired		—			(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balances		—			563			—			(2	)		—			561
Investments in L-3 Communications		(52	)		—			—			—			52			—
Other investing activities		—			(27	)		(47	)		(30	)		—			(104	)
Net cash (used in) from investing activities from continuing operations		(52	)		509			(47	)		(32	)		52			430
Financing activities:
Redemption of senior notes		—			(298	)		—			—			—			(298	)
Common stock repurchased		(326	)		—			—			—			—			(326	)
Dividends paid on L-3 Holdings common stock		(166	)		—			—			—			—			(166	)
Dividends paid to L-3 Holdings		—			(492	)		—			—			492			—
Investments from L-3 Holdings		—			52			—			—			(52	)		—
Other financing activities		52			84			(198	)		(50	)		156			44
Net cash used in financing activities from continuing operations		(440	)		(654	)		(198	)		(50	)		596			(746	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(3	)		—			(3	)
Net decrease in cash and cash equivalents of discontinued operations		—			—			(56	)		—			—			(56	)
Net increase in cash		—			51			—			74			79			204
Cash and cash equivalents, beginning of the period		—			137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	—		$	188		$	—		$	239		$	(16	)	$	411
For the year-to-date period ended September 25, 2015:
Operating activities:
Net cash from operating activities	$	768		$	370		$	282		$	65		$	(888	)	$	597
Investing activities:
Business acquisitions, net of cash acquired		—			(260	)		—			—			—			(260	)
Proceeds from sale of business, net of closing date cash balance		—			4			27			277			—			308
Investments in L-3 Communications		(34	)		—			—			—			34			—
Other investing activities		—			(62	)		(42	)		(26	)		—			(130	)
Net cash (used in) from investing activities from continuing operations		(34	)		(318	)		(15	)		251			34			(82	)
Financing activities:
Common stock repurchased		(605	)		—			—			—			—			(605	)
Dividends paid on L-3 Holdings common stock		(163	)		—			—			—			—			(163	)
Dividends paid to L-3 Holdings		—			(768	)		—			—			768			—
Investments from L-3 Holdings		—			34			—			—			(34	)		—
Other financing activities		34			491			(322	)		(337	)		167			33
Net cash used in financing activities from continuing operations		(734	)		(243	)		(322	)		(337	)		901			(735	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(14	)		—			(14	)
Net increase in cash and cash equivalents of discontinued operations		—			—			54			—			—			54
Change in cash balance in assets held for sale		—			—			1			60			—			61
Net (decrease) increase in cash		—			(191	)		—			25			47			(119	)
Cash and cash equivalents, beginning of the period		—			361			1			142			(62	)		442
Cash and cash equivalents, end of the period	$	—		$	170		$	1		$	167		$	(15	)	$	323

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Basis of Presentation (Policies)

9 Months Ended

Sep. 23, 2016

Principles of Consolidation and Reporting

Principles of Consolidation and Reporting

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 unaudited financial information of L-3 Communications and its subsidiaries.

The unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP) for interim financial information and in accordance with the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange Commission (SEC). Accordingly, they do not include all of the disclosures required by U.S. GAAP for a complete set of annual audited financial statements. The December 31, 2015 condensed consolidated balance sheet data was derived from audited financial statements, but does not include all disclosures required by U.S. GAAP. In the opinion of management, all adjustments (consisting of normal and recurring adjustments) considered necessary for a fair statement of the results for the interim periods presented have been included. The results of operations for the interim periods are not necessarily indicative of results for the full year.

It is generally the Company’s established practice to close its books for the quarters ending March, June and September on the Friday preceding the end of the calendar quarter. The interim unaudited condensed consolidated financial statements included herein have been prepared and are labeled based on that convention. The Company closes its books for annual periods on December 31 regardless of what day it falls on.

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

Accounting Estimates

Accounting Estimates

The preparation of financial statements in conformity with 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 for L-3 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 valuation of deferred tax assets, litigation reserves and environmental obligations, accrued product warranty costs, liabilities for the voluntary return program of various EoTech holographic weapons sight (HWS) 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 periods during which they become known. Actual amounts may differ from these estimates and could differ materially.

Sales and profits on 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. Approximately 49% of the Company’s net sales in 2015 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 POC method of accounting (fixed-price type contracts), (2) allowable costs incurred plus the estimated profit on those costs (cost-plus type contracts), or (3) direct labor hours expended multiplied by the contractual fixed rate per hour plus incurred costs for material (time-and-material type contracts). 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 and profits on these fixed-price type contracts requires the preparation of estimates of: (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. 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. The profit recorded on a contract in any period using either the units-of-delivery method or cost-to-cost method is equal to the current estimated total profit margin multiplied by the cumulative sales recognized, less the amount of cumulative profit previously recorded for the contract.

Sales and profits on cost-plus type contracts that are 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 arrangement types for the Company. 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.

Revisions or 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, as facts and circumstances change and as new information is obtained, even though the scope of work required under the contract may not change. Revisions or adjustments may also be required if contract modifications occur. The impact of revisions in profit (loss) estimates for all types of contracts subject to POC accounting are recognized on a cumulative catch-up basis in the period in which the revisions are made. The revisions in contract estimates, if significant, can materially affect the Company’s 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 $127 million, or 18%, of consolidated operating income ($1.03 per diluted share) for the year-to-date period ended September 23, 2016, and increases of $50 million, or 9%, of consolidated operating income ($0.49 per diluted share) for the year-to-date period ended September 25, 2015.

As previously disclosed, during the fourth quarter of 2015, the Company commenced a voluntary return program and began accepting customer returns for various EoTech 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 a refund of the purchase price, including shipping costs. The Company initially recorded a reduction to net sales of $20 million in the Warrior Systems sector of the Electronic Systems segment in the fourth quarter of 2015, associated with establishing a product returns allowance to reflect the estimated cost of the return program. Beginning in the first quarter of 2016, with the benefit of a larger volume of actual refund transactions, the Company began using a statistical analysis of the voluntary return program to estimate the number and cost of future refunds. In its statistical analysis, the Company utilized empirical models to forecast the expected emergence pattern of new refunds over time to produce a probabilistic distribution of new refund costs that reflects the existing level of estimation uncertainty. Based on this analysis, the Company expects the total cost of the voluntary return program to be approximately $36 million. The Company recorded the $16 million increase in the product returns allowance as a reduction to net sales during 2016. The product returns allowance, net of refund payments made to eligible owners, was $8 million at September 23, 2016, and is included in other current liabilities on the unaudited condensed consolidated balance sheets. As of October 20, 2016, the Company had approved refunds at a cost of approximately $32 million, with an average refund cost per unit of $500. The Company will continue to monitor the product returns allowance. The Company’s ongoing evaluation may cause it to record further adjustments to the allowance in future periods. These adjustments could be material. Furthermore, during the third quarter of 2016, the Company recorded a $14 million pre-tax charge in the Electronics Systems segment for a settlement in principle of the class action litigation, which is subject to court approval, in connection with the EoTech HWS. See Note 18, Commitments and Contingencies for further details regarding the class action litigation.

For a more complete discussion of these estimates and assumptions, see the Annual Report on Form 10-K for the year ended December 31, 2015.

Adoption of New Accounting Standards

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows — Classification of Certain Cash Receipts and Cash Payments, which provides guidance regarding cash flow statement classification of: (1) debt prepayment or debt extinguishment costs, (2) settlement of zero-coupon debt instruments or other debt instruments with coupon interest rates that are insignificant in relation to the effective interest rate of the borrowing, (3) contingent consideration payments made after a business combination, (4) proceeds from the settlement of insurance claims, (5) proceeds from the settlement of corporate-owned life insurance policies, (6) distributions received from equity method investees, (7) beneficial interests in securitization transactions, and (8) separately identifiable cash flows and application of the predominance principle. The new standard will be effective for the Company for interim and annual reporting periods beginning on January 1, 2018, with early adoption permitted. The adoption of this standard will not have an impact on the Company’s financial position or results of operations, however, the Company expects that there may be an immaterial reclassification of items within the operating, investing and financing activities on its statement of cash flows. The Company plans to early adopt this standard in the fourth quarter of 2016.

In February 2016, the FASB issued ASU 2016-02, Leases, which updates the existing guidance on accounting for leases and requires 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 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 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 with disclosure of results under the new and old standards for the first year of adoption.

The Company has made progress toward completing its evaluation of the potential changes from adopting this new standard on its financial reporting and disclosures. The Company has evaluated the impact of the standard on all of its revenue streams and most of its contracts. The Company expects to complete the contract evaluations and validate the results by the first quarter of 2017. The Company has also made significant progress on drafting its accounting policies and evaluating the new disclosure requirements. The Company expects to complete the evaluation of the impact of the accounting and disclosure changes on its business processes, controls and systems during the first half of 2017, design any changes to such business processes, controls and systems by the middle of 2017, and implement the changes over the remainder of 2017.

Under the new standard, an entity recognizes revenue when or as it satisfies a performance obligation by transferring a good or service to the customer, either at a point in time or over time. The Company expects to recognize revenue over time on most of its contracts that are covered by contract accounting standards using cost inputs to measure progress toward completion of its performance obligations, which is similar to the POC cost-to-cost method currently used on certain of these contracts. The Company currently recognizes sales on fixed-priced production contracts that are covered by contract accounting standards, and under which units are produced and delivered in a continuous or sequential process as units are delivered, based on their contractual selling prices (units-of-delivery method). The Company expects to discontinue the use of the units-of-delivery method under the new standard. Approximately 50% of the Company’s net sales are generated from revenue arrangements accounted for under contract accounting standards, including approximately 15% that use the units-of-delivery method. While the Company is currently evaluating the expected impact of the adoption of this standard on its consolidated financial statements, related disclosures and the transition alternatives available, the Company will adopt the standard as of January 1, 2018. Furthermore, the Company expects to determine the transition method and the effect of this standard on the Company’s consolidated financial statements in the first quarter of 2017.

Other accounting standard updates effective for interim and annual periods beginning after December 31, 2016 are not expected to have an impact on the Company’s financial position, results of operations or cash flows.

Adjustments for New Accounting Pronouncement [Member]

Adoption of New Accounting Standards

In March 2016, the Financial Accounting Standards Board (FASB) issued ASU 2016-09, Improvements to Employee Share-Based Payment Accounting, which simplifies several aspects of the accounting for share-based payments, including the income tax consequences and classification on the statement of cash flows. Under the new standard, all excess tax benefits and tax deficiencies will be recognized as income tax expense or benefit in the income statement as discrete items in the reporting period in which they occur. Additionally, excess tax benefits will be classified as an operating activity on the statement of cash flows. ASU 2016-09 is effective for annual periods beginning after December 15, 2016 and interim periods within those annual periods, and early adoption is permitted. The amendments requiring recognition of excess tax benefits and tax deficiencies in the income statement must be applied prospectively, and entities may elect to apply the amendments related to the presentation of excess tax benefits on the statement of cash flows using either a prospective or retrospective transition method. Effective January 1, 2016, the Company adopted ASU 2016-09 and applied the amendments relating to the presentation of excess tax benefits on the statement of cash flows using a retrospective transition method. See Note 11 for additional information.

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Divestitures and Acquisitions (Tables)

9 Months Ended

Sep. 23, 2016

Unaudited Pro Forma Statements of Operations Data

The following unaudited pro forma Statements of Operations data present the combined results of the Company and its business acquisitions completed during the year-to-date period ended September 23, 2016 and the year ended December 31, 2015, assuming that the business acquisitions completed during these periods had occurred on January 1, 2015.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016		September 25, 2015
	(in millions, except per share data)
Pro forma net sales	$	2,505	$	2,577		$	7,522	$	7,661
Pro forma income from continuing operations attributable to L-3		148		127			458		350
Pro forma net income (loss) attributable to L-3		148		(297	)		521		(66	)
Pro forma diluted earnings per share from continuing operations		1.88		1.56			5.82		4.23
Pro forma diluted earnings (loss) per share		1.88		(3.66	)		6.62		(0.80	)

NSS [Member]

Statement of Operations Data Classified as Discontinued Operations

The table below presents statements of operations data for NSS, which was previously a reportable segment and has been classified as a discontinued operation 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.

	Third Quarter Ended					Year-to-Date Ended
	September 23, 2016		September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net sales	$	—	$	271		$	86		$	773
Cost of sales		—		(260	)		(92	)		(736	)
Gain related to business divestiture(1)		—		—			64			—
Goodwill impairment charges		—		(456	)		—			(456	)
Operating (loss) income from discontinued operations		—		(445	)		58			(419	)
Interest expense allocated to discontinued operations		—		(4	)		—			(15	)
(Loss) income from discontinued operations before income taxes		—		(449	)		58			(434	)
Income tax benefit		—		25			5			18
(Loss) income from discontinued operations, net of income taxes	$	—	$	(424	)	$	63		$	(416	)

⁽¹⁾ The year-to-date period ended September 23, 2016 includes a gain of $64 million (before and after income taxes) on the sale of the NSS business.

Schedule of Major Classes of Assets and Liabilities Included in Discontinued Operations

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

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

⁽¹⁾ 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 NSS business sold.

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Contracts in Process (Tables)

9 Months Ended

Sep. 23, 2016

Text Block [Abstract]

Components of Contracts in Process

The components of contracts in process are presented in the table below.

	September 23, 2016			December 31, 2015
	(in millions)
Unbilled contract receivables, gross	$	2,180		$	2,097
Unliquidated progress payments		(886	)		(869	)
Unbilled contract receivables, net		1,294			1,228
Inventoried contract costs, gross		1,165			975
Unliquidated progress payments		(194	)		(122	)
Inventoried contract costs, net		971			853
Total contracts in process	$	2,265		$	2,081

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.  

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Amounts included in inventoried contract costs at beginning of the period	$	163		$	126		$	137		$	117
Contract costs incurred:
IRAD and B&P		76			69			213			204
Other G&A		201			217			611			611
Total		277			286			824			815
Amounts charged to cost of sales		(270	)		(267	)		(791	)		(787	)
Amounts included in inventoried contract costs at end of the period	$	170		$	145		$	170		$	145

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 unaudited condensed consolidated statements of operations.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Selling, general and administrative expenses	$	53	$	53	$	164	$	200
Research and development expenses		16		13		40		38
Total	$	69	$	66	$	204	$	238

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Inventories (Tables)

9 Months Ended

Sep. 23, 2016

Inventory Disclosure [Abstract]

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.

	September 23, 2016		December 31, 2015
	(in millions)
Raw materials, components and sub-assemblies	$	186	$	164
Work in process		107		103
Finished goods		68		66
Total	$	361	$	333

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Goodwill and Identifiable Intangible Assets (Tables)

9 Months Ended

Sep. 23, 2016

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)
Goodwill	$	3,994		$	1,691		$	1,038		$	6,723
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
Balance at December 31, 2015		3,925			1,353			1,003			6,281
Business acquisitions(1)		2			—			20			22
Foreign currency translation adjustments(2)		(31	)		12			—			(19	)
Balance at September 23, 2016	$	3,896		$	1,365		$	1,023		$	6,284
Goodwill	$	3,965		$	1,703		$	1,058		$	6,726
Accumulated impairment losses		(69	)		(338	)		(35	)		(442	)
	$	3,896		$	1,365		$	1,023		$	6,284

⁽¹⁾ The net increase in goodwill for the Electronic Systems segment was due to the final purchase price allocations for the ForceX, Inc. and CTC Aviation Group business acquisitions. The increase in goodwill for the Communication Systems segment was due to the ATM, Inc. business acquisition.

⁽²⁾ The decrease in goodwill presented in the Electronic Systems segment was due to the strengthening of the U.S. dollar against the British pound, partially offset by the weakening of the U.S. dollar against the Canadian dollar and the Euro during the year-to-date period ended September 23, 2016. The increase in goodwill presented in the Aerospace Systems segment was due to the weakening of the U.S. dollar against the Canadian dollar during the year-to-date period ended September 23, 2016.

Identifiable Intangible Assets

The table below presents information for the Company’s identifiable intangible assets that are subject to amortization.

			September 23, 2016						December 31, 2015
	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		17	$	376	$	263	$	113	$	370	$	246	$	124
Technology		11		158		99		59		156		91		65
Other		18		21		12		9		21		11		10
Total		15	$	555	$	374	$	181	$	547	$	348	$	199

Amortization Expense

The table below presents amortization expense recorded by the Company for its identifiable intangible assets.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Amortization expense	$	9	$	9	$	26	$	26

Estimated Amortization Expense

Based on gross carrying amounts at September 23, 2016, 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	$	35	$	32	$	27	$	24	$	20

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Other Current Liabilities and Other Liabilities (Tables)

9 Months Ended

Sep. 23, 2016

Text Block [Abstract]

Other Current Liabilities

The table below presents the components of other current liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$	84	$	82
Accrued product warranty costs		73		70
Accrued interest		43		45
Deferred revenues		39		32
Accruals for pending and threatened litigation (see Note 18)		15		6
Product returns allowance (see Note 2)		8		20
Other		142		139
Total other current liabilities	$	404	$	394

Other Liabilities

The table below presents the components of other liabilities.

	September 23, 2016		December 31, 2015
	(in millions)
Other Liabilities:
Non-current income taxes payable (see Note 11)	$	117	$	161
Deferred compensation		48		45
Accrued product warranty costs		36		35
Accrued workers’ compensation		34		38
Notes payable and capital lease obligations		11		10
Other		80		79
Total other liabilities	$	326	$	368

Changes in Company's Accrued Product Warranty Costs

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

	Year-to-Date Ended
	September 23, 2016			September 25, 2015
	(in millions)
Accrued product warranty costs:(1)
Balance at January 1	$	105		$	93
Acquisitions during the period		—			1
Accruals for product warranties issued during the period		38			46
Settlements made during the period		(33	)		(46	)
Foreign currency translation adjustments		(1	)		(1	)
Balance at end of period	$	109		$	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.

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Debt (Tables)

9 Months Ended

Sep. 23, 2016

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.

	September 23, 2016			December 31, 2015
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility(1)	$	—		$	—
3.95% Senior Notes due 2016		200			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			350
Principal amount of long-term debt		3,350			3,650
Unamortized discounts		(6	)		(8	)
Deferred debt issue costs		(13	)		(18	)
Carrying amount of long-term debt		3,331			3,624
Current portion of long-term debt		(549	)		(499	)
Carrying amount of long-term debt, excluding current portion	$	2,782		$	3,125

⁽¹⁾ During the year-to-date period ended September 23, 2016, L-3 Communications’ aggregate borrowings and repayments under the Credit Facility were each $335 million. At September 23, 2016, L-3 Communications had the full availability of its $1 billion Credit Facility, which expires on February 3, 2017.

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Accumulated Other Comprehensive (Loss) Income (AOCI) (Tables)

9 Months Ended

Sep. 23, 2016

Equity [Abstract]

Summary of AOCI Balances Including 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 (losses) gains on hedging instruments			Unrecognized losses and prior service cost, net			Total accumulated other comprehensive loss
	(in millions)
Balance at December 31, 2015	$	(101	)	$	(8	)	$	(465	)	$	(574	)
Other comprehensive (loss) income before reclassifications, net of tax		(27	)		2			—			(25	)
Amounts reclassified from AOCI, net of tax		—			8			24			32
Net current period other comprehensive income		(27	)		10			24			7
Balance at September 23, 2016	$	(128	)	$	2		$	(441	)	$	(567	)
Balance at December 31, 2014	$	19		$	(5	)	$	(598	)	$	(584	)
Other comprehensive loss before reclassifications, net of tax		(125	)		(13	)		—			(138	)
Amounts reclassified from AOCI, net of tax		41			10			41			92
Net current period other comprehensive (loss) income		(84	)		(3	)		41			(46	)
Balance at September 25, 2015	$	(65	)	$	(8	)	$	(557	)	$	(630	)

Summary of Amounts Reclassified from AOCI into Net Income

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

	Amount Reclassified from AOCI(a)												Affected Line Item in the Unaudited Condensed Consolidated Statements of Operations
	Third Quarter Ended						Year-to-Date Ended
Details About AOCI Components	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Foreign currency translation adjustment:
MSI divestiture	$	—		$	—		$	—		$	(41	)	Loss related to business divestitures
		—			—			—			(41	)	Income from continuing operations before income taxes
		—			—			—			—		Provision for income taxes
	$	—		$	—		$	—		$	(41	)	Income from continuing operations
Loss on hedging instruments:
MSI divestiture	$	—		$	—		$	—		$	(2	)	Loss related to business divestitures
Other		(4	)		(4	)		(8	)		(10	)	Cost of sales-products
		(4	)		(4	)		(8	)		(12	)	Income from continuing operations before income taxes
		—			—			—			2		Provision for income taxes
	$	(4	)	$	(4	)	$	(8	)	$	(10	)	Income from continuing operations
Amortization of defined benefit pension items:
MSI divestiture	$	—		$	—		$	—		$	(14	)	Loss related to business divestitures
Net loss		(12	)		(17	)		(37	)		(50	)	(b)
		(12	)		(17	)		(37	)		(64	)	Income from continuing operations before income taxes
		4			7			13			23		Provision for income taxes
	$	(8	)	$	(10	)	$	(24	)	$	(41	)	Income from continuing operations
Total reclassification for the period	$	(12	)	$	(14	)	$	(32	)	$	(92	)	Income from continuing operations

^(a)  Amounts in parenthesis indicate charges to the unaudited condensed 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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L-3 Holdings' Earnings Per Common Share (Tables)

9 Months Ended

Sep. 23, 2016

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.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions, except per share data)
Reconciliation of net income (loss):
Net income (loss)	$	151		$	(296	)	$	532		$	(63	)
Net income from continuing operations attributable to noncontrolling interests		(3	)		(3	)		(10	)		(11	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) attributable to L-3 Holdings’ common shareholders:
Continuing operations	$	148		$	125		$	459		$	342
Discontinued operations, net of income tax		—			(424	)		63			(416	)
Net income (loss) attributable to L-3 Holdings’ common shareholders	$	148		$	(299	)	$	522		$	(74	)
Earnings (loss) per share attributable to L-3 Holdings’ common shareholders:
Basic:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Basic earnings (loss) per share:
Continuing operations	$	1.91		$	1.56		$	5.93		$	4.19
Discontinued operations, net of income tax		—			(5.30	)		0.81			(5.10	)
Net income (loss)	$	1.91		$	(3.74	)	$	6.74		$	(0.91	)
Diluted:
Common and potential common shares:
Weighted average common shares outstanding		77.3			80.0			77.4			81.5
Assumed exercise of stock options		3.0			2.2			2.5			2.4
Unvested restricted stock awards		1.0			1.2			1.0			1.3
Employee stock purchase plan contributions		0.1			0.2			0.1			0.1
Performance unit awards		0.1			0.1			0.1			0.1
Assumed purchase of common shares for treasury		(2.7	)		(2.5	)		(2.4	)		(2.7	)
Common and potential common shares		78.8			81.2			78.7			82.7
Diluted earnings (loss) per share:
Continuing operations	$	1.88		$	1.54		$	5.83		$	4.14
Discontinued operations, net of income tax		—			(5.22	)		0.80			(5.03	)
Net income (loss)	$	1.88		$	(3.68	)	$	6.63		$	(0.89	)

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Fair Value Measurements (Tables)

9 Months Ended

Sep. 23, 2016

Fair Value Disclosures [Abstract]

Company's Assets and Liabilities at Fair Value on Recurring Basis

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.

	September 23, 2016						December 31, 2015
Description	Level 1(1)		Level 2(2)		Level 3(3)		Level 1(1)		Level 2(2)		Level 3(3)
	(in millions)
Assets
Cash equivalents	$	128	$	—	$	—	$	187	$	—	$	—
Derivatives (foreign currency forward contracts)		—		9		—		—		2		—
Total assets	$	128	$	9	$	—	$	187	$	2	$	—
Liabilities
Derivatives (foreign currency forward contracts)	$	—	$	8	$	—	$	—	$	16	$	—

⁽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)

9 Months Ended

Sep. 23, 2016

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.

	September 23, 2016				December 31, 2015
	Carrying		Estimated		Carrying			Estimated
	Amount		Fair Value		Amount			Fair Value
	(in millions)
Senior Notes(1)	$	3,331	$	3,610	$	3,624		$	3,754
Foreign currency forward contracts(2)		1		1		(14	)		(14	)

⁽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 17 for additional disclosures regarding the notional amounts and fair values of foreign currency forward contracts.

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Derivative Financial Instruments (Tables)

9 Months Ended

Sep. 23, 2016

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 at September 23, 2016.

Currency	Notional Amounts
	(in millions)
Canadian dollar	$	128
U.S. dollar		69
Euro		42
British pound		5
Other		13
Total	$	257

Location of Company's Derivative Instruments Recorded at Fair Value on the Condensed Consolidated Balance Sheets

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

	September 23, 2016								December 31, 2015
	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)	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1
Total derivative instruments	$	7	$	2	$	8	$	—	$	1	$	1	$	15	$	1

⁽¹⁾  See Note 15 for a description of the fair value hierarchy related to the Company’s foreign currency forward contracts.

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Pension and Other Postretirement Benefits (Tables)

9 Months Ended

Sep. 23, 2016

Compensation and Retirement Disclosure [Abstract]

Components of Net Periodic Benefit Cost

The following table summarizes the components of net periodic benefit cost for the Company’s pension and other postretirement benefit plans.

	Pension Plans												Postretirement Benefit Plans
	Third Quarter Ended						Year-to-Date Ended						Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Components of net periodic benefit cost:
Service cost	$	25		$	29		$	80		$	93		$	—		$	—		$	1		$	2
Interest cost		32			38			101			112			1			1			4			5
Expected return on plan assets		(47	)		(51	)		(149	)		(155	)		(1	)		(1	)		(3	)		(3	)
Amortization of prior service costs (credits)		—			—			—			1			—			—			(1	)		(2	)
Amortization of net loss (gains)		13			17			39			51			(1	)		—			(1	)		—
Curtailment loss		—			3			—			3			—			—			—			—
Net periodic benefit cost	$	23		$	36		$	71		$	105		$	(1	)	$	—		$	—		$	2

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Stock-Based Compensation (Tables)

9 Months Ended

Sep. 23, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Weighted Average Assumptions in Valuation Model

The weighted average assumptions used in the valuation model for this grant are presented in the table below.

Expected holding period (in years)	5.0
Expected volatility	21.3	%
Expected dividend yield	2.8	%
Risk-free interest rate	1.1	%

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 23, 2016

Supplemental Cash Flow Elements [Abstract]

Supplemental Cash Flow Information

	Year-to-Date Ended
	September 23, 2016		September 25, 2015
	(in millions)
Interest paid on outstanding debt	$	120	$	127
Income tax payments		85		114
Income tax refunds		4		6

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Segment Information (Tables)

9 Months Ended

Sep. 23, 2016

Segment Reporting [Abstract]

Summary of Segment Information

The tables below present net sales, operating income (loss), depreciation and amortization and total assets by reportable segment.

	Third Quarter Ended						Year-to-Date Ended
	September 23, 2016			September 25, 2015			September 23, 2016			September 25, 2015
	(in millions)
Net Sales:
Electronic Systems	$	1,024		$	1,023		$	2,970		$	3,138
Aerospace Systems		1,012			1,068			3,167			3,092
Communication Systems		509			518			1,485			1,490
Elimination of intercompany sales		(40	)		(45	)		(100	)		(125	)
Consolidated total	$	2,505		$	2,564		$	7,522		$	7,595
Operating Income:
Electronic Systems	$	119		$	121		$	339		$	352
Aerospace Systems		56			102			232			144
Communication Systems		40			52			143			139
Segment total		215			275			714			635
Loss related to business divestitures(1)		—			(9	)		—			(29	)
Goodwill impairment charges(2)		—			(35	)		—			(35	)
Consolidated total	$	215		$	231		$	714		$	571
Depreciation and amortization:
Electronic Systems	$	26		$	26		$	78		$	81
Aerospace Systems		13			13			40			37
Communication Systems		12			12			35			37
Consolidated total	$	51		$	51		$	153		$	155

⁽¹⁾ See Note 5 for information regarding the Company’s business divestitures.

⁽²⁾ Represents non-cash goodwill impairment charges recorded during 2015 related to a business retained by L-3 in connection with the sale of the NSS business. See Note 6 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.

	September 23, 2016		December 31, 2015
	(in millions)
Total Assets:
Electronic Systems	$	6,636	$	6,426
Aerospace Systems		2,704		2,630
Communication Systems		2,113		1,984
Corporate		358		363
Assets of discontinued operations		—		664
Consolidated total	$	11,811	$	12,067

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Employee Severance and Termination Costs (Tables)

9 Months Ended

Sep. 23, 2016

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.

	Third Quarter Ended				Year-to-Date Ended
	September 23, 2016		September 25, 2015		September 23, 2016		September 25, 2015
	(in millions)
Reportable Segment
Electronic Systems	$	3	$	2	$	7	$	4
Aerospace Systems		1		1		1		3
Communication Systems		1		1		3		3
Consolidated	$	5	$	4	$	11	$	10

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

9 Months Ended

Sep. 23, 2016

Organization, Consolidation and Presentation of Financial Statements [Abstract]

Condensed Combining Balance Sheets

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 September 23, 2016:
Current assets:
Cash and cash equivalents	$	—	$	188	$	—	$	239	$	(16	)	$	411
Billed receivables, net		—		319		277		216		—			812
Contracts in process		—		959		1,053		253		—			2,265
Other current assets		—		273		139		109		—			521
Total current assets		—		1,739		1,469		817		(16	)		4,009
Goodwill		—		2,338		2,973		973		—			6,284
Other assets		—		765		490		263		—			1,518
Investment in and amounts due from consolidated subsidiaries		4,568		5,368		4,433		—		(14,369	)		—
Total assets	$	4,568	$	10,210	$	9,365	$	2,053	$	(14,385	)	$	11,811
Current portion of long-term debt	$	—	$	549	$	—	$	—	$	—		$	549
Current liabilities		—		892		856		469		(16	)		2,201
Amounts due to consolidated subsidiaries		—		—		—		159		(159	)		—
Other long-term liabilities		—		1,419		191		29		—			1,639
Long-term debt		—		2,782		—		—		—			2,782
Total liabilities		—		5,642		1,047		657		(175	)		7,171
L-3 shareholders’ equity		4,568		4,568		8,318		1,396		(14,282	)		4,568
Noncontrolling interests		—		—		—		—		72			72
Total equity		4,568		4,568		8,318		1,396		(14,210	)		4,640
Total liabilities and equity	$	4,568	$	10,210	$	9,365	$	2,053	$	(14,385	)	$	11,811
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

Condensed Combining Statements of Operations:
For the quarter ended September 23, 2016:
Total net sales	$	—		$	877		$	1,258		$	444		$	(74	)	$	2,505
Total cost of sales		(15	)		(801	)		(1,182	)		(381	)		89			(2,290	)
Operating (loss) income		(15	)		76			76			63			15			215
Interest expense		—			(40	)		—			(1	)		—			(41	)
Interest and other income, net		—			4			—			2			—			6
(Loss) income from continuing operations before income taxes		(15	)		40			76			64			15			180
Benefit (provision) for income taxes		2			(7	)		(12	)		(10	)		(2	)		(29	)
Equity in net income of consolidated subsidiaries		161			115			—			—			(276	)		—
Net income		148			148			64			54			(263	)		151
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net income attributable to L-3	$	148		$	148		$	64		$	54		$	(266	)	$	148
Comprehensive income attributable to L-3	$	125		$	125		$	64		$	24		$	(213	)	$	125
For the quarter ended September 25, 2015:
Total net sales	$	—		$	873		$	1,334		$	443		$	(86	)	$	2,564
Total cost of sales		(12	)		(793	)		(1,201	)		(381	)		98			(2,289	)
Loss related to business divestitures		—			(8	)		(1	)		—			—			(9	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(12	)		72			106			53			12			231
Interest expense		—			(43	)		—			—			—			(43	)
Interest and other income, net		—			2			—			1			—			3
(Loss) income from continuing operations before income taxes		(12	)		31			106			54			12			191
Benefit (provision) for income taxes		4			(11	)		(30	)		(22	)		(4	)		(63	)
Equity in net loss of consolidated subsidiaries		(291	)		(319	)		—			—			610			—
(Loss) income from continuing operations		(299	)		(299	)		76			32			618			128
Loss from discontinued operations, net of income tax		—			—			(424	)		—			—			(424	)
Net (loss) income		(299	)		(299	)		(348	)		32			618			(296	)
Net income attributable to noncontrolling interests		—			—			—			—			(3	)		(3	)
Net (loss) income attributable to L-3	$	(299	)	$	(299	)	$	(348	)	$	32		$	615		$	(299	)
Comprehensive loss attributable to L-3	$	(351	)	$	(351	)	$	(354	)	$	(25	)	$	730		$	(351	)
Condensed Combining Statements of Operations:
For the year-to-date period ended September 23, 2016:
Total net sales	$	—		$	2,602		$	3,817		$	1,307		$	(204	)	$	7,522
Total cost of sales		(34	)		(2,343	)		(3,545	)		(1,124	)		238			(6,808	)
Operating (loss) income		(34	)		259			272			183			34			714
Interest expense		—			(124	)		—			(1	)		—			(125	)
Interest and other income, net		—			10			—			5			—			15
Debt retirement charge		—			(5	)		—			—			—			(5	)
(Loss) income from continuing operations before income taxes		(34	)		140			272			187			34			599
Benefit (provision) for income taxes		7			(31	)		(59	)		(40	)		(7	)		(130	)
Equity in net income of consolidated subsidiaries		549			413			—			—			(962	)		—
Income from continuing operations		522			522			213			147			(935	)		469
Income from discontinued operations, net of income tax		—			—			63			—			—			63
Net income		522			522			276			147			(935	)		532
Net income attributable to noncontrolling interests		—			—			—			—			(10	)		(10	)
Net income attributable to L-3	$	522		$	522		$	276		$	147		$	(945	)	$	522
Comprehensive income attributable to L-3	$	529		$	529		$	287		$	120		$	(936	)	$	529
For the year-to-date period ended September 25, 2015:
Total net sales	$	—		$	2,548		$	3,849		$	1,423		$	(225	)	$	7,595
Total cost of sales		(35	)		(2,332	)		(3,601	)		(1,252	)		260			(6,960	)
(Loss) gain related to business divestitures		—			(13	)		(29	)		13			—			(29	)
Goodwill impairment charges		—			—			(26	)		(9	)		—			(35	)
Operating (loss) income		(35	)		203			193			175			35			571
Interest expense		—			(123	)		(1	)		—			—			(124	)
Interest and other income, net		—			9			—			2			—			11
(Loss) income from continuing operations before income taxes		(35	)		89			192			177			35			458
Benefit (provision) for income taxes		8			(20	)		(44	)		(41	)		(8	)		(105	)
Equity in net loss of consolidated subsidiaries		(47	)		(143	)		—			—			190			—
(Loss) income from continuing operations		(74	)		(74	)		148			136			217			353
Loss from discontinued operations, net of income tax		—			—			(416	)		—			—			(416	)
Net (loss) income		(74	)		(74	)		(268	)		136			217			(63	)
Net income attributable to noncontrolling interests		—			—			—			—			(11	)		(11	)
Net (loss) income attributable to L-3	$	(74	)	$	(74	)	$	(268	)	$	136		$	206		$	(74	)
Comprehensive (loss) income attributable to L-3	$	(120	)	$	(120	)	$	(273	)	$	62		$	331		$	(120	)

Condensed Combining Statements of Cash Flows

Condensed Combining Statements of Cash Flows
For the year-to-date period ended September 23, 2016:
Operating activities:
Net cash from operating activities	$	492		$	196		$	301		$	159		$	(569	)	$	579
Investing activities:
Business acquisitions, net of cash acquired		—			(27	)		—			—			—			(27	)
Proceeds from sale of businesses, net of closing date cash balances		—			563			—			(2	)		—			561
Investments in L-3 Communications		(52	)		—			—			—			52			—
Other investing activities		—			(27	)		(47	)		(30	)		—			(104	)
Net cash (used in) from investing activities from continuing operations		(52	)		509			(47	)		(32	)		52			430
Financing activities:
Redemption of senior notes		—			(298	)		—			—			—			(298	)
Common stock repurchased		(326	)		—			—			—			—			(326	)
Dividends paid on L-3 Holdings common stock		(166	)		—			—			—			—			(166	)
Dividends paid to L-3 Holdings		—			(492	)		—			—			492			—
Investments from L-3 Holdings		—			52			—			—			(52	)		—
Other financing activities		52			84			(198	)		(50	)		156			44
Net cash used in financing activities from continuing operations		(440	)		(654	)		(198	)		(50	)		596			(746	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(3	)		—			(3	)
Net decrease in cash and cash equivalents of discontinued operations		—			—			(56	)		—			—			(56	)
Net increase in cash		—			51			—			74			79			204
Cash and cash equivalents, beginning of the period		—			137			—			165			(95	)		207
Cash and cash equivalents, end of the period	$	—		$	188		$	—		$	239		$	(16	)	$	411
For the year-to-date period ended September 25, 2015:
Operating activities:
Net cash from operating activities	$	768		$	370		$	282		$	65		$	(888	)	$	597
Investing activities:
Business acquisitions, net of cash acquired		—			(260	)		—			—			—			(260	)
Proceeds from sale of business, net of closing date cash balance		—			4			27			277			—			308
Investments in L-3 Communications		(34	)		—			—			—			34			—
Other investing activities		—			(62	)		(42	)		(26	)		—			(130	)
Net cash (used in) from investing activities from continuing operations		(34	)		(318	)		(15	)		251			34			(82	)
Financing activities:
Common stock repurchased		(605	)		—			—			—			—			(605	)
Dividends paid on L-3 Holdings common stock		(163	)		—			—			—			—			(163	)
Dividends paid to L-3 Holdings		—			(768	)		—			—			768			—
Investments from L-3 Holdings		—			34			—			—			(34	)		—
Other financing activities		34			491			(322	)		(337	)		167			33
Net cash used in financing activities from continuing operations		(734	)		(243	)		(322	)		(337	)		901			(735	)
Effect of foreign currency exchange rate changes on cash		—			—			—			(14	)		—			(14	)
Net increase in cash and cash equivalents of discontinued operations		—			—			54			—			—			54
Change in cash balance in assets held for sale		—			—			1			60			—			61
Net (decrease) increase in cash		—			(191	)		—			25			47			(119	)
Cash and cash equivalents, beginning of the period		—			361			1			142			(62	)		442
Cash and cash equivalents, end of the period	$	—		$	170		$	1		$	167		$	(15	)	$	323

XML

Description of Business - Additional Information (Detail)	9 Months Ended
	Sep. 23, 2016 Segment
Organization, Consolidation and Presentation of Financial Statements [Abstract]
Number of reportable segments	3

XML

Basis of Presentation - Additional Information (Detail) $ / shares in Units, $ in Millions		3 Months Ended		9 Months Ended		12 Months Ended
	Oct. 20, 2016 USD ($) $ / Product	Sep. 23, 2016 USD ($)	Dec. 31, 2015 USD ($)	Sep. 23, 2016 USD ($) $ / shares	Sep. 25, 2015 USD ($) $ / shares	Dec. 31, 2015 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Percentage of net sales accounted for under contract accounting standards				50.00%		49.00%
Percentage of fixed-price type contracts						41.00%
Percentage of cost-plus type contracts						8.00%
Period of performance for contracts accounted for under the percentage-of-completion method of accounting, minimum				1 year
Increase in operating income due to changes in contract estimates				$ 127	$ 50
Percentage of increase in consolidated operating income due to changes in contract estimates				18.00%	9.00%
Increase in operating income due to changes in contract estimates, per diluted share | $ / shares				$ 1.03	$ 0.49
Product returns allowance		$ 8	$ 20	$ 8		$ 20
EoTech HWS [Member]
Summary Of Significant Accounting Policies [Line Items]
Total expected cost of the voluntary return program				36
Product returns allowance		8		8
EoTech HWS [Member] | Electronic Systems [Member]
Summary Of Significant Accounting Policies [Line Items]
Reduction to net sales			$ 20	$ 16
EoTech HWS [Member] | Electronic Systems [Member] | EoTech HWS Class Action [Member]
Summary Of Significant Accounting Policies [Line Items]
Pre-tax charge, litigation settlement		$ 14
Subsequent Event [Member] | EoTech HWS [Member]
Summary Of Significant Accounting Policies [Line Items]
Approved refunds cost	$ 32
Average refund cost per unit | $ / Product	500

XML

Accounting Standards Issued and Not Yet Implemented - Additional Information (Detail)	9 Months Ended	12 Months Ended
	Sep. 23, 2016	Dec. 31, 2015
Accounting Changes and Error Corrections [Abstract]
Percentage of sales accounted for under contract accounting standards	50.00%	49.00%
Percentage of net sales accounted based on units-of-delivery method	15.00%

XML

Divestitures and Acquisitions - Additional Information (Detail) € in Millions, £ in Millions		3 Months Ended		9 Months Ended
	Feb. 01, 2016 USD ($)	Sep. 23, 2016 USD ($)	Sep. 25, 2015 USD ($)	Sep. 23, 2016 USD ($)	Sep. 25, 2015 USD ($)	Oct. 10, 2016 USD ($)	Sep. 30, 2016 USD ($)	Jan. 22, 2016 USD ($)	Dec. 31, 2015 USD ($)	Oct. 13, 2015 USD ($)	Jul. 27, 2015 USD ($)	May 29, 2015 USD ($)	May 29, 2015 EUR (€)	May 27, 2015 USD ($)	May 27, 2015 GBP (£)	Apr. 24, 2015 USD ($)	Jan. 21, 2015 USD ($)
Business Acquisition [Line Items]
Gain (loss) related to business divestiture			$ (9,000,000)		$ (29,000,000)
Amount of goodwill recognized		$ 6,284,000,000		$ 6,284,000,000					$ 6,281,000,000
CACI International Inc [Member]
Business Acquisition [Line Items]
Proceeds from sale of discontinued operations	$ 547,000,000
MSI [Member]
Business Acquisition [Line Items]
Sale of business, base sales price												$ 318,000,000	€ 295
Estimated employee pension related liabilities | €													€ 60
Gain (loss) related to business divestiture					(17,000,000)
Gain (loss) related to business divestiture after income taxes					(6,000,000)
Broadcast Sports International, LLC [Member]
Business Acquisition [Line Items]
Sale of business, base sales price																$ 26,000,000
Gain (loss) related to business divestiture			(1,000,000)		(4,000,000)
Gain (loss) related to business divestiture after income taxes					(6,000,000)
Broadcast Sports International, LLC [Member] | Maximum [Member]
Business Acquisition [Line Items]
Gain (loss) related to business divestiture after income taxes			(1,000,000)
Tinsley Product Line [Member]
Business Acquisition [Line Items]
Sale of business, base sales price											$ 4,000,000
Gain (loss) related to business divestiture			(8,000,000)		(8,000,000)
Gain (loss) related to business divestiture after income taxes			$ (6,000,000)		$ (6,000,000)
CTC Aviation Group [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition														$ 236,000,000	£ 153
Acquisition date				May 27, 2015
Amount of goodwill recognized														$ 182,000,000
MITEQ, Inc. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition																	$ 41,000,000
Acquisition date				Jan. 21, 2015
Amount of goodwill recognized																	11,000,000
Goodwill deductible for income tax purposes																	$ 4,000,000
Advanced Technical Materials, Inc. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition								$ 27,000,000
Acquisition date				Jan. 22, 2016
Amount of goodwill recognized								$ 20,000,000
ForceX, Inc. [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition										$ 61,000,000
Acquisition date				Oct. 13, 2015
Amount of goodwill recognized										53,000,000
Goodwill deductible for income tax purposes										$ 52,000,000
Implant Sciences Corporation [Member]
Business Acquisition [Line Items]
Acquisition date				Oct. 10, 2016
Implant Sciences Corporation [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition						$ 118,000,000
Micreo Limited and Aerosim Technologies Inc [Member]
Business Acquisition [Line Items]
Acquisition date				Sep. 30, 2016
Micreo Limited and Aerosim Technologies Inc [Member] | Subsequent Event [Member]
Business Acquisition [Line Items]
Aggregate purchase price of acquisition							$ 82,000,000

XML

Divestitures and Acquisitions - Statement of Operations Data Classified as Discontinued Operations (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
(Loss) income from discontinued operations, net of income taxes		$ (424)	$ 63	$ (416)
NSS [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Net sales		271	86	773
Cost of sales		(260)	(92)	(736)
Gain related to business divestiture			64
Goodwill impairment charges		(456)		(456)
Operating (loss) income from discontinued operations		(445)	58	(419)
Interest expense allocated to discontinued operations		(4)		(15)
(Loss) income from discontinued operations before income taxes		(449)	58	(434)
Income tax benefit		25	5	18
(Loss) income from discontinued operations, net of income taxes		$ (424)	$ 63	$ (416)

XML

Divestitures and Acquisitions - Statement of Operations Data Classified as Discontinued Operations (Parenthetical) (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sale of business		$ (9)		$ (29)
NSS [Member]
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items]
Gain (loss) on sale of business			$ 64

XML

Divestitures and Acquisitions - Schedule of Major Classes of Assets and Liabilities Included in Discontinued Operations (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Assets
Current assets		$ 664
Liabilities
Current liabilities		220
NSS [Member] | Discontinued Operations, Held-for-sale [Member]
Assets
Current assets		201
Property, plant and equipment, net		25
Goodwill		390
Other assets		48
Total assets of discontinued operations		664
Liabilities
Accounts payable, trade		48
Other current liabilities		78
Current liabilities		126
Long-term liabilities		94
Total liabilities of discontinued operations		$ 220

XML

Divestitures and Acquisitions - Unaudited Pro Forma Statements of Operations Data (Detail) - USD ($) $ / shares in Units, $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Business Combinations [Abstract]
Pro forma net sales	$ 2,505	$ 2,577	$ 7,522	$ 7,661
Pro forma income from continuing operations attributable to L-3	148	127	458	350
Pro forma net income (loss) attributable to L-3	$ 148	$ (297)	$ 521	$ (66)
Pro forma diluted earnings per share from continuing operations	$ 1.88	$ 1.56	$ 5.82	$ 4.23
Pro forma diluted earnings (loss) per share	$ 1.88	$ (3.66)	$ 6.62	$ (0.80)

XML

Contracts in Process - Components of Contracts in Process (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Components of contracts in process
Unbilled contract receivables, gross	$ 2,180	$ 2,097
Unliquidated progress payments	(886)	(869)
Unbilled contract receivables, net	1,294	1,228
Inventoried contract costs, gross	1,165	975
Unliquidated progress payments	(194)	(122)
Inventoried contract costs, net	971	853
Total contracts in process	$ 2,265	$ 2,081

XML

Contracts in Process - General and Administrative, Independent Research and Development and Bids and Proposal Costs (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Inventory Disclosure [Abstract]
Amounts included in inventoried contract costs at beginning of the period	$ 163	$ 126	$ 137	$ 117
Contract costs incurred:
IRAD and B&P	76	69	213	204
Other G&A	201	217	611	611
Total	277	286	824	815
Amounts charged to cost of sales	(270)	(267)	(791)	(787)
Amounts included in inventoried contract costs at end of the period	$ 170	$ 145	$ 170	$ 145

XML

Contracts in Process - Selling, General and Administrative Expenses and Research and Development Expenses (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Inventory Disclosure [Abstract]
Selling, general and administrative expenses	$ 53	$ 53	$ 164	$ 200
Research and development expenses	16	13	40	38
Total	$ 69	$ 66	$ 204	$ 238

XML

Inventories - Inventories at Lower of Cost or Market (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Inventory Disclosure [Abstract]
Raw materials, components and sub-assemblies	$ 186	$ 164
Work in process	107	103
Finished goods	68	66
Total	$ 361	$ 333

XML

Goodwill and Identifiable Intangible Assets - Changes in Goodwill by Segment (Detail) $ in Millions	9 Months Ended
	Sep. 23, 2016 USD ($)
Goodwill [Line Items]
Goodwill	$ 6,723
Accumulated impairment losses	(442)
Balance, Beginning	6,281
Business acquisitions	22
Foreign currency translation adjustments	(19)
Balance, Ending	6,284
Goodwill	6,726
Accumulated impairment losses	(442)
Goodwill, net of accumulated impairment losses	6,284
Electronic Systems [Member]
Goodwill [Line Items]
Goodwill	3,994
Accumulated impairment losses	(69)
Balance, Beginning	3,925
Business acquisitions	2
Foreign currency translation adjustments	(31)
Balance, Ending	3,896
Goodwill	3,965
Accumulated impairment losses	(69)
Goodwill, net of accumulated impairment losses	3,896
Aerospace Systems [Member]
Goodwill [Line Items]
Goodwill	1,691
Accumulated impairment losses	(338)
Balance, Beginning	1,353
Business acquisitions
Foreign currency translation adjustments	12
Balance, Ending	1,365
Goodwill	1,703
Accumulated impairment losses	(338)
Goodwill, net of accumulated impairment losses	1,365
Communication Systems [Member]
Goodwill [Line Items]
Goodwill	1,038
Accumulated impairment losses	(35)
Balance, Beginning	1,003
Business acquisitions	20
Foreign currency translation adjustments
Balance, Ending	1,023
Goodwill	1,058
Accumulated impairment losses	(35)
Goodwill, net of accumulated impairment losses	$ 1,023

XML

Goodwill and Identifiable Intangible Assets - Identifiable Intangible Assets (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Dec. 31, 2015
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	15 years
Gross Carrying Amount	$ 555	$ 547
Accumulated Amortization	374	348
Net Carrying Amount	$ 181	199
Customer Contractual Relationships [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	17 years
Gross Carrying Amount	$ 376	370
Accumulated Amortization	263	246
Net Carrying Amount	$ 113	124
Technology [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	11 years
Gross Carrying Amount	$ 158	156
Accumulated Amortization	99	91
Net Carrying Amount	$ 59	65
Other [Member]
Finite-Lived Intangible Assets [Line Items]
Weighted Average Amortization Period (in years)	18 years
Gross Carrying Amount	$ 21	21
Accumulated Amortization	12	11
Net Carrying Amount	$ 9	$ 10

XML

Goodwill and Identifiable Intangible Assets - Amortization Expense (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Goodwill and Intangible Assets Disclosure [Abstract]
Amortization expense	$ 9	$ 9	$ 26	$ 26

XML

Goodwill and Identifiable Intangible Assets - Estimated Amortization Expense (Detail) $ in Millions	Sep. 23, 2016 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
Estimated amortization expense, 2016	$ 35
Estimated amortization expense, 2017	32
Estimated amortization expense, 2018	27
Estimated amortization expense, 2019	24
Estimated amortization expense, 2020	$ 20

XML

Other Current Liabilities and Other Liabilities - Other Current Liabilities (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Other Current Liabilities:
Estimated costs in excess of estimated contract value to complete contracts in process in a loss position	$ 84	$ 82
Accrued product warranty costs	73	70
Accrued interest	43	45
Deferred revenues	39	32
Accruals for pending and threatened litigation	15	6
Product returns allowance	8	20
Other	142	139
Total other current liabilities	$ 404	$ 394

XML

Other Current Liabilities and Other Liabilities - Other Liabilities (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Other Liabilities:
Non-current income taxes payable	$ 117	$ 161
Deferred compensation	48	45
Accrued product warranty costs	36	35
Accrued workers' compensation	34	38
Notes payable and capital lease obligations	11	10
Other	80	79
Total other liabilities	$ 326	$ 368

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Other Current Liabilities and Other Liabilities - Changes in Company's Accrued Product Warranty Costs (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Accrued product warranty costs:
Balance at January 1	$ 105	$ 93
Acquisitions during the period		1
Accruals for product warranties issued during the period	38	46
Settlements made during the period	(33)	(46)
Foreign currency translation adjustments	(1)	(1)
Balance at end of period	$ 109	$ 93

XML

Debt - Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Jun. 24, 2016	Mar. 24, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Carrying amount of long-term debt	$ 3,331			$ 3,624
Long-term debt, current and noncurrent
Current portion of long-term debt	(549)			(499)
Carrying amount of long-term debt, excluding current portion	2,782			3,125
Carrying amount of long-term debt	3,331			3,624
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	3,350			3,650
Unamortized discounts	(6)			(8)
Deferred debt issue costs	(13)			(18)
Carrying amount of long-term debt	3,331			3,624
Long-term debt, current and noncurrent
Current portion of long-term debt	(549)			(499)
Carrying amount of long-term debt, excluding current portion	2,782			3,125
Carrying amount of long-term debt	3,331			3,624
L-3 Communications Corporation [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Borrowings under Amended and Restated Revolving Credit Facility
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2016 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	200	$ 200	$ 500	500
L-3 Communications Corporation [Member] | 1.50% Senior Notes due 2017 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	350			350
L-3 Communications Corporation [Member] | 5.20% Senior Notes due 2019 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	1,000			1,000
L-3 Communications Corporation [Member] | 4.75% Senior Notes due 2020 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	800			800
L-3 Communications Corporation [Member] | 4.95% Senior Notes due 2021 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	650			650
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2024 [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt	$ 350			$ 350

XML

Debt - Components of Debt and Reconciliation to Carrying Amount of Current and Long-Term Debt (Parenthetical) (Detail) - USD ($) $ in Millions			9 Months Ended
	Sep. 23, 2016	Dec. 31, 2015	Sep. 23, 2016	Sep. 25, 2015
Debt Instrument [Line Items]
Repayments under the Credit Facility			$ 335	$ 861
Proceeds under the Credit Facility			$ 335	$ 861
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%
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%
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%
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%
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%
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%
Debt instrument maturity period	2024	2024
Revolving Credit Facility [Member] | L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Repayments under the Credit Facility			$ 335
Proceeds under the Credit Facility			335
Available borrowings under Credit Facility	$ 1,000		$ 1,000
Revolving credit facility expiration date			Feb. 03, 2017

XML

Debt - Additional Information (Detail) - USD ($) $ in Millions			6 Months Ended	9 Months Ended
	May 20, 2016	Mar. 24, 2016	Jun. 24, 2016	Sep. 23, 2016	Dec. 31, 2015
Debt Instrument [Line Items]
Debt retirement charge				$ (5)
L-3 Communications Corporation [Member]
Debt Instrument [Line Items]
Principal amount of long-term debt				3,350	$ 3,650
Debt retirement charge				(5)
L-3 Communications Corporation [Member] | 3.95% Senior Notes due 2016 [Member]
Debt Instrument [Line Items]
Redemption amount		$ 300
Principal amount of long-term debt		$ 500	$ 200	$ 200	$ 500
Redemption price as percentage of principal amount		101.475%
Redemption Date			May 20, 2016
Debt retirement charge	$ (5)

XML

Income Taxes - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015	Dec. 31, 2015
Operating Loss Carryforwards [Line Items]
Effective tax rate			21.70%	22.90%
Income tax expense (benefit)	$ 29	$ 63	$ 130	$ 105
Anticipated decrease in unrecognized tax benefits over the next 12 months	6		6
Income tax benefit				(36)
Foreign tax benefits related to a legal restructuring				(17)
Resolution of outstanding income tax matters with U.S. and foreign tax authorities				10
Valuation allowance for deferred tax assets				$ 9
Accrued potential interest included within current and non-current income taxes payable	10		10		$ 18
Accrued potential interest included within current and non-current income taxes payable, after income taxes	6		6		11
Potential penalties	$ 8		8		$ 9
Reversal Of Previously Accrued Taxes [Member]
Operating Loss Carryforwards [Line Items]
Income tax expense (benefit)			(21)
New Accounting Pronouncement, Early Adoption, Effect [Member]
Operating Loss Carryforwards [Line Items]
Income tax expense (benefit)			$ (16)

XML

Accumulated Other Comprehensive (Loss) Income (AOCI) - Summary of AOCI Balances Including Amounts Reclassified from AOCI into Net Income (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	$ 4,355
Ending Balance	4,568
Foreign Currency Translation Adjustment [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(101)	$ 19
Other comprehensive income (loss) before reclassifications, net of tax	(27)	(125)
Amounts reclassified from AOCI, net of tax		41
Net current period other comprehensive (loss) income	(27)	(84)
Ending Balance	(128)	(65)
Unrealized (Losses) Gains on Hedging Instruments [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(8)	(5)
Other comprehensive income (loss) before reclassifications, net of tax	2	(13)
Amounts reclassified from AOCI, net of tax	8	10
Net current period other comprehensive (loss) income	10	(3)
Ending Balance	2	(8)
Unrecognized Losses and Prior Service Cost, Net [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(465)	(598)
Other comprehensive income (loss) before reclassifications, net of tax
Amounts reclassified from AOCI, net of tax	24	41
Net current period other comprehensive (loss) income	24	41
Ending Balance	(441)	(557)
Accumulated Other Comprehensive Loss [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Beginning Balance	(574)	(584)
Other comprehensive income (loss) before reclassifications, net of tax	(25)	(138)
Amounts reclassified from AOCI, net of tax	32	92
Net current period other comprehensive (loss) income	7	(46)
Ending Balance	$ (567)	$ (630)

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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		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of sales-products	$ (1,355)	$ (1,409)	$ (4,095)	$ (4,312)
Loss related to business divestitures		(9)		(29)
Income from continuing operations before income taxes	180	191	599	458
Provision for income taxes	(29)	(63)	(130)	(105)
Income from continuing operations	151	128	469	353
MSI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Loss related to business divestitures				(17)
Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Income from continuing operations	(12)	(14)	(32)	(92)
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)
Provision for income taxes
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 (Losses) Gains on Hedging Instruments [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Cost of sales-products	(4)	(4)	(8)	(10)
Income from continuing operations before income taxes	(4)	(4)	(8)	(12)
Provision for income taxes				2
Income from continuing operations	(4)	(4)	(8)	(10)
Unrealized (Losses) Gains 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)
Amortization of Defined Benefit Pension Items [Member] | Amount Reclassified from AOCI [Member]
Reclassification Adjustment out of Accumulated Other Comprehensive Income [Line Items]
Net loss	(12)	(17)	(37)	(50)
Income from continuing operations before income taxes	(12)	(17)	(37)	(64)
Provision for income taxes	4	7	13	23
Income from continuing operations	(8)	(10)	(24)	(41)
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 ($)			1 Months Ended	3 Months Ended		9 Months Ended
	Oct. 18, 2016	Jun. 21, 2016	Oct. 21, 2016	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015	Dec. 04, 2014
Class of Stock [Line Items]
Aggregate amount of repurchased shares						$ 326,000,000	$ 605,000,000
Remaining authorized amount of share repurchase programs				$ 480,000,000		$ 480,000,000
Cash dividend declared per share		$ 0.70		$ 0.70	$ 0.65	$ 2.10	$ 1.95
Cash dividends						$ 166,000,000
Accrued dividends through payment						$ 1,000,000
Dividend paid, record date						Aug. 17, 2016
Dividend paid date						Sep. 15, 2016
Subsequent Event [Member]
Class of Stock [Line Items]
Cash dividend declared per share	$ 0.70
Dividend paid, record date	Nov. 17, 2016
Dividend paid date	Dec. 15, 2016
Treasury Stock [Member]
Class of Stock [Line Items]
Aggregate amount of repurchased shares						$ 326,000,000	$ 605,000,000
Share Repurchase Program December 4, 2014 [Member]
Class of Stock [Line Items]
Amount of shares authorized to be repurchased								$ 1,500,000,000
Average price per share of repurchased shares						$ 121.58
Aggregate amount of repurchased shares						$ 326,000,000
Share Repurchase Program December 4, 2014 [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Average price per share of repurchased shares			$ 150.63
Aggregate amount of repurchased shares			$ 17,000,000
Share Repurchase Program December 4, 2014 [Member] | Treasury Stock [Member]
Class of Stock [Line Items]
Number of common shares repurchased						2,677,840
Share Repurchase Program December 4, 2014 [Member] | Treasury Stock [Member] | Subsequent Event [Member]
Class of Stock [Line Items]
Number of common shares repurchased			112,846

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L-3 Holdings' Earnings 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		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Reconciliation of net income (loss):
Net income (loss)	$ 151	$ (296)	$ 532	$ (63)
Net income from continuing operations attributable to noncontrolling interests	(3)	(3)	(10)	(11)
Net income (loss) attributable to L-3	148	(299)	522	(74)
Earnings (loss) attributable to L-3 Holdings' common shareholders:
Continuing operations	148	125	459	342
Discontinued operations, net of income tax		(424)	63	(416)
Net income (loss) attributable to L-3 Holdings' common shareholders	$ 148	$ (299)	$ 522	$ (74)
Basic:
Weighted average common shares outstanding	77.3	80.0	77.4	81.5
Basic earnings (loss) per share:
Continuing operations	$ 1.91	$ 1.56	$ 5.93	$ 4.19
Discontinued operations, net of income tax		(5.30)	0.81	(5.10)
Net income (loss)	$ 1.91	$ (3.74)	$ 6.74	$ (0.91)
Common and potential common shares:
Weighted average common shares outstanding	77.3	80.0	77.4	81.5
Assumed purchase of common shares for treasury	(2.7)	(2.5)	(2.4)	(2.7)
Common and potential common shares	78.8	81.2	78.7	82.7
Diluted earnings (loss) per share:
Continuing operations	$ 1.88	$ 1.54	$ 5.83	$ 4.14
Discontinued operations, net of income tax		(5.22)	0.80	(5.03)
Net income (loss)	$ 1.88	$ (3.68)	$ 6.63	$ (0.89)
Stock Options [Member]
Common and potential common shares:
Common and potential common shares	3.0	2.2	2.5	2.4
Unvested Restricted Stock Awards [Member]
Common and potential common shares:
Common and potential common shares	1.0	1.2	1.0	1.3
Performance Unit Awards [Member]
Common and potential common shares:
Common and potential common shares	0.1	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	0.1	0.1

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L-3 Holdings' Earnings Per Common Share - Additional Information (Detail) - shares shares in Millions	3 Months Ended	9 Months Ended
	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Earnings Per Share [Abstract]
Shares excluded from computation of diluted earnings per share	0.9	0.6	0.6

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Fair Value Measurements - Company's Assets and Liabilities at Fair Value on Recurring Basis (Detail) - Fair Value, Measurements, Recurring [Member] - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Level 1 [Member]
Assets
Cash equivalents	$ 128	$ 187
Derivatives (foreign currency forward contracts)
Total assets	128	187
Liabilities
Derivatives (foreign currency forward contracts)
Level 2 [Member]
Assets
Cash equivalents
Derivatives (foreign currency forward contracts)	9	2
Total assets	9	2
Liabilities
Derivatives (foreign currency forward contracts)	8	16
Level 3 [Member]
Assets
Cash equivalents
Derivatives (foreign currency forward contracts)
Total assets
Liabilities
Derivatives (foreign currency forward contracts)

XML

Financial Instruments - Carrying Amounts and Estimated Fair Values of Company's Long-Term Debt and Foreign Currency Forward Contracts (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Senior Notes, Carrying Amount	$ 3,331	$ 3,624
Senior Notes, Estimated Fair Value	3,610	3,754
Estimated Fair Value [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency forward contracts, asset	1
Foreign currency forward contracts, liability		(14)
Carrying Amount [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Foreign currency forward contracts, asset	$ 1
Foreign currency forward contracts, liability		$ (14)

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Derivative Financial Instruments - Notional Amounts of Company's Outstanding Foreign Currency Forward Contracts by Currency (Detail)	Sep. 23, 2016 USD ($)
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	$ 257,000,000
Canadian Dollar [Member]
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	128,000,000
U.S. Dollar [Member]
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	69,000,000
Euro [Member]
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	42,000,000
British Pound [Member]
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	5,000,000
Other [Member]
Derivative [Line Items]
Notional amounts of foreign currency forward contracts	$ 13,000,000

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Derivative Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Derivative [Line Items]
Estimated net amount of existing losses expected to be reclassified into income within the next 12 months	$ 1		$ 1
Foreign Exchange Forward [Member]
Derivative [Line Items]
Foreign currency forward contracts, maturity year			2020
Pre-tax losses on Derivatives	$ 4	$ 4	$ 8	$ 12

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Derivative Financial Instruments - Location of Company's Derivative Instruments Recorded at Fair Value on the Condensed Consolidated Balance Sheets (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015
Other Current Liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	$ 8	$ 15
Other Current Liabilities [Member] | Foreign Exchange Forward [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities	8	15
Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities		1
Other Liabilities [Member] | Foreign Exchange Forward [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, liabilities		1
Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	7	1
Other Current Assets [Member] | Foreign Exchange Forward [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	7	1
Other Assets [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	2	1
Other Assets [Member] | Foreign Exchange Forward [Member] | Designated as Hedging Instruments [Member]
Derivatives, Fair Value [Line Items]
Total derivative instruments, assets	$ 2	$ 1

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Commitments and Contingencies - Additional Information (Detail) € in Millions, $ in Millions		1 Months Ended
	Jul. 21, 2013 EUR (€)	Mar. 25, 2016 USD ($) Plaintiff
Bashkirian Airways [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages | $		$ 3.7
Number of remaining plaintiffs | Plaintiff		4
Property Damages [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages	€ 11
Business Interruption [Member]
Contingencies And Commitments [Line Items]
Claims for estimated damages	€ 35

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Pension and Other Postretirement Benefits - Components of Net Periodic Benefit Cost (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Pension Plans [Member]
Components of net periodic benefit cost:
Service cost	$ 25	$ 29	$ 80	$ 93
Interest cost	32	38	101	112
Expected return on plan assets	(47)	(51)	(149)	(155)
Amortization of prior service costs (credits)				1
Amortization of net loss (gains)	13	17	39	51
Curtailment loss		3		3
Net periodic benefit cost	23	36	71	105
Postretirement Benefit Plans [Member]
Components of net periodic benefit cost:
Service cost			1	2
Interest cost	1	1	4	5
Expected return on plan assets	(1)	(1)	(3)	(3)
Amortization of prior service costs (credits)			(1)	(2)
Amortization of net loss (gains)	(1)		(1)
Curtailment loss
Net periodic benefit cost	$ (1)			$ 2

XML

Pension and Other Postretirement Benefits - Additional Information (Detail) $ in Millions	9 Months Ended
	Sep. 23, 2016 USD ($)
Pension Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Contribution to defined benefit plans	$ 49
Expected contributions to plans during the remainder of fiscal year	51
Postretirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Contribution to defined benefit plans	4
Expected contributions to plans during the remainder of fiscal year	$ 6

XML

Stock-Based Compensation - Additional Information (Detail) $ / shares in Units, $ in Millions			9 Months Ended
	May 03, 2016 shares	Feb. 01, 2016 USD ($) Employee	Sep. 23, 2016 $ / shares shares	Feb. 23, 2016 shares	Feb. 22, 2016 shares
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares of L-3 Holdings common stock available to be awarded				4.26	3.69
NSS [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period		3 years
Unvested restricted stock unit and stock option awards held by employees | Employee		300
Reversed previously recorded stock compensation expense relating to the original awards | $		$ 4
Stock compensation expense on cash payments made | $		$ 5
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock options granted			617,575
Weighted average exercise price | $ / shares			$ 116.68
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 | $ / shares			$ 15.90
Performance Units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Units granted			51,892
Weighted average grant date fair value | $ / shares			$ 116.20
Length of service after grant date			3 years
Minimum payout range			0.00%
Maximum payout range			200.00%
Unvested Restricted Stock Awards [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			3 years
Units granted			394,086
Weighted average grant date fair value | $ / shares			$ 116.72
Unvested Restricted Stock Awards [Member] | Non-Employee Directors [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period			1 year
Long Term Performance Plan 2008 [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Maximum number of shares authorized for issuance under the amendment	26,000,000
Maximum number of additional shares authorized for issuance under the amendment	6,800,000

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Stock-Based Compensation - Weighted Average Assumptions in Valuation Model (Detail) - Stock Options [Member]	9 Months Ended
	Sep. 23, 2016
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected holding period (in years)	5 years
Expected volatility	21.30%
Expected dividend yield	2.80%
Risk-free interest rate	1.10%

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Supplemental Cash Flow Information - Supplemental Cash Flow Information (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Additional Cash Flow Elements and Supplemental Cash Flow Information [Abstract]
Interest paid on outstanding debt	$ 120	$ 127
Income tax payments	85	114
Income tax refunds	$ 4	$ 6

XML

Segment Information - Additional Information (Detail) $ in Millions	3 Months Ended	9 Months Ended
	Sep. 25, 2015 USD ($)	Sep. 23, 2016 Segment	Sep. 25, 2015 USD ($)
Segment Reporting Information [Line Items]
Number of reportable segments | Segment		3
NSS [Member]
Segment Reporting Information [Line Items]
Corporate expenses | $	$ 4		$ 11

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Segment Information - Summary of Segment Information (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015	Dec. 31, 2015
Net Sales:
Net sales	$ 2,505	$ 2,564	$ 7,522	$ 7,595
Operating Income:
Loss related to business divestitures		(9)		(29)
Goodwill impairment charges		(35)		(35)
Operating Income (loss)	215	231	714	571
Depreciation and amortization:
Depreciation and amortization	51	51	153	155
Total Assets:
Assets of discontinued operations					$ 664
Total Assets	11,811		11,811		12,067
Operating Segments [Member]
Operating Income:
Operating Income (loss)	215	275	714	635
Operating Segments [Member] | Electronic Systems [Member]
Net Sales:
Net sales	1,024	1,023	2,970	3,138
Operating Income:
Operating Income (loss)	119	121	339	352
Depreciation and amortization:
Depreciation and amortization	26	26	78	81
Total Assets:
Total Assets	6,636		6,636		6,426
Operating Segments [Member] | Aerospace Systems [Member]
Net Sales:
Net sales	1,012	1,068	3,167	3,092
Operating Income:
Operating Income (loss)	56	102	232	144
Depreciation and amortization:
Depreciation and amortization	13	13	40	37
Total Assets:
Total Assets	2,704		2,704		2,630
Operating Segments [Member] | Communication Systems [Member]
Net Sales:
Net sales	509	518	1,485	1,490
Operating Income:
Operating Income (loss)	40	52	143	139
Depreciation and amortization:
Depreciation and amortization	12	12	35	37
Total Assets:
Total Assets	2,113		2,113		1,984
Corporate [Member]
Total Assets:
Total Assets	358		358		$ 363
Elimination of Intercompany Sales [Member]
Net Sales:
Net sales	$ (40)	$ (45)	$ (100)	$ (125)

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Employee Severance and Termination Costs - Additional Information (Detail) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 23, 2016 USD ($) Employee	Sep. 25, 2015 USD ($)	Sep. 23, 2016 USD ($) Employee	Sep. 25, 2015 USD ($)	Dec. 31, 2015 USD ($) Employee
Restructuring and Related Activities [Abstract]
Employee severance and other termination costs	$ 5	$ 4	$ 11	$ 10	$ 18
Number of employees terminated | Employee	600		600		800
Remaining balance of employee termination costs	$ 8		$ 8		$ 9

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Employee Severance and Termination Costs - Employee Severance and Other Termination Costs Incurred by Reportable Segment (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended		12 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015	Dec. 31, 2015
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 5	$ 4	$ 11	$ 10	$ 18
Electronic Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	3	2	7	4
Aerospace Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	1	1	1	3
Communication Systems [Member]
Restructuring Cost and Reserve [Line Items]
Employee severance and other termination costs	$ 1	$ 1	$ 3	$ 3

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Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries - Additional Information (Detail)	Sep. 23, 2016
L-3 Communications Corporation [Member]
Condensed Financial Statements, Captions [Line Items]
Ownership percentage	100.00%

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Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Balance Sheets (Detail) - USD ($) $ in Millions	Sep. 23, 2016	Dec. 31, 2015	Sep. 25, 2015	Dec. 31, 2014
Current assets:
Cash and cash equivalents	$ 411	$ 207	$ 323	$ 442
Billed receivables, net	812	746
Contracts in process	2,265	2,081
Other current assets	521	534
Assets of discontinued operations		664
Total current assets	4,009	4,232
Goodwill	6,284	6,281
Other assets	1,518	1,554
Investment in and amounts due from consolidated subsidiaries
Total assets	11,811	12,067
Current portion of long-term debt	549	499
Current liabilities	2,201	2,160
Liabilities of discontinued operations		220
Amounts due to consolidated subsidiaries
Other long-term liabilities	1,639	1,634
Long-term debt	2,782	3,125
Total liabilities	7,171	7,638
L-3 shareholders' equity	4,568	4,355
Noncontrolling interests	72	74
Total equity	4,640	4,429	4,659	5,360
Total liabilities and equity	11,811	12,067
L-3 Communications Holdings, Inc. [Member]
Current assets:
Cash and cash equivalents
Billed receivables, net
Contracts in process
Other current assets
Assets of discontinued operations
Total current assets
Goodwill
Other assets
Investment in and amounts due from consolidated subsidiaries	4,568	4,355
Total assets	4,568	4,355
Current portion of long-term debt
Current liabilities
Liabilities of discontinued operations
Amounts due to consolidated subsidiaries
Other long-term liabilities
Long-term debt
Total liabilities
L-3 shareholders' equity	4,568	4,355
Noncontrolling interests
Total equity	4,568	4,355
Total liabilities and equity	4,568	4,355
L-3 Communications Corporation [Member]
Current assets:
Cash and cash equivalents	188	137	170	361
Billed receivables, net	319	278
Contracts in process	959	872
Other current assets	273	288
Assets of discontinued operations
Total current assets	1,739	1,575
Goodwill	2,338	2,318
Other assets	765	798
Investment in and amounts due from consolidated subsidiaries	5,368	5,609
Total assets	10,210	10,300
Current portion of long-term debt	549	499
Current liabilities	892	911
Liabilities of discontinued operations
Amounts due to consolidated subsidiaries
Other long-term liabilities	1,419	1,410
Long-term debt	2,782	3,125
Total liabilities	5,642	5,945
L-3 shareholders' equity	4,568	4,355
Noncontrolling interests
Total equity	4,568	4,355
Total liabilities and equity	10,210	10,300
Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents			1	1
Billed receivables, net	277	297
Contracts in process	1,053	958
Other current assets	139	137
Assets of discontinued operations		664
Total current assets	1,469	2,056
Goodwill	2,973	2,973
Other assets	490	496
Investment in and amounts due from consolidated subsidiaries	4,433	3,739
Total assets	9,365	9,264
Current portion of long-term debt
Current liabilities	856	899
Liabilities of discontinued operations		220
Amounts due to consolidated subsidiaries
Other long-term liabilities	191	195
Long-term debt
Total liabilities	1,047	1,314
L-3 shareholders' equity	8,318	7,950
Noncontrolling interests
Total equity	8,318	7,950
Total liabilities and equity	9,365	9,264
Non-Guarantor Subsidiaries [Member]
Current assets:
Cash and cash equivalents	239	165	167	142
Billed receivables, net	216	171
Contracts in process	253	251
Other current assets	109	109
Assets of discontinued operations
Total current assets	817	696
Goodwill	973	990
Other assets	263	260
Investment in and amounts due from consolidated subsidiaries		111
Total assets	2,053	2,057
Current portion of long-term debt
Current liabilities	469	445
Liabilities of discontinued operations
Amounts due to consolidated subsidiaries	159
Other long-term liabilities	29	29
Long-term debt
Total liabilities	657	474
L-3 shareholders' equity	1,396	1,583
Noncontrolling interests
Total equity	1,396	1,583
Total liabilities and equity	2,053	2,057
Eliminations [Member]
Current assets:
Cash and cash equivalents	(16)	(95)	$ (15)	$ (62)
Billed receivables, net
Contracts in process
Other current assets
Assets of discontinued operations
Total current assets	(16)	(95)
Goodwill
Other assets
Investment in and amounts due from consolidated subsidiaries	(14,369)	(13,814)
Total assets	(14,385)	(13,909)
Current portion of long-term debt
Current liabilities	(16)	(95)
Liabilities of discontinued operations
Amounts due to consolidated subsidiaries	(159)
Other long-term liabilities
Long-term debt
Total liabilities	(175)	(95)
L-3 shareholders' equity	(14,282)	(13,888)
Noncontrolling interests	72	74
Total equity	(14,210)	(13,814)
Total liabilities and equity	$ (14,385)	$ (13,909)

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Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Statements of Operations (Detail) - USD ($) $ in Millions	3 Months Ended		9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015	Sep. 23, 2016	Sep. 25, 2015
Condensed Financial Statements, Captions [Line Items]
Total net sales	$ 2,505	$ 2,564	$ 7,522	$ 7,595
Total cost of sales	(2,290)	(2,289)	(6,808)	(6,960)
(Loss) gain related to business divestitures		(9)		(29)
Goodwill impairment charges		(35)		(35)
Operating (loss) income	215	231	714	571
Interest expense	(41)	(43)	(125)	(124)
Interest and other income, net	6	3	15	11
Debt retirement charge			(5)
(Loss) income from continuing operations before income taxes	180	191	599	458
Benefit (provision) for income taxes	(29)	(63)	(130)	(105)
Equity in net income of consolidated subsidiaries
Income from continuing operations	151	128	469	353
Income (loss) from discontinued operations, net of income tax		(424)	63	(416)
Net income (loss)	151	(296)	532	(63)
Net income attributable to noncontrolling interests	(3)	(3)	(10)	(11)
Net (loss) income attributable to L-3	148	(299)	522	(74)
Comprehensive (loss) income attributable to L-3	125	(351)	529	(120)
L-3 Communications Holdings, Inc. [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales
Total cost of sales	(15)	(12)	(34)	(35)
(Loss) gain related to business divestitures
Goodwill impairment charges
Operating (loss) income	(15)	(12)	(34)	(35)
Interest expense
Interest and other income, net
Debt retirement charge
(Loss) income from continuing operations before income taxes	(15)	(12)	(34)	(35)
Benefit (provision) for income taxes	2	4	7	8
Equity in net income of consolidated subsidiaries	161	(291)	549	(47)
Income from continuing operations		(299)	522	(74)
Income (loss) from discontinued operations, net of income tax
Net income (loss)	148	(299)	522	(74)
Net income attributable to noncontrolling interests
Net (loss) income attributable to L-3	148	(299)	522	(74)
Comprehensive (loss) income attributable to L-3	125	(351)	529	(120)
L-3 Communications Corporation [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales	877	873	2,602	2,548
Total cost of sales	(801)	(793)	(2,343)	(2,332)
(Loss) gain related to business divestitures		(8)		(13)
Goodwill impairment charges
Operating (loss) income	76	72	259	203
Interest expense	(40)	(43)	(124)	(123)
Interest and other income, net	4	2	10	9
Debt retirement charge			(5)
(Loss) income from continuing operations before income taxes	40	31	140	89
Benefit (provision) for income taxes	(7)	(11)	(31)	(20)
Equity in net income of consolidated subsidiaries	115	(319)	413	(143)
Income from continuing operations		(299)	522	(74)
Income (loss) from discontinued operations, net of income tax
Net income (loss)	148	(299)	522	(74)
Net income attributable to noncontrolling interests
Net (loss) income attributable to L-3	148	(299)	522	(74)
Comprehensive (loss) income attributable to L-3	125	(351)	529	(120)
Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales	1,258	1,334	3,817	3,849
Total cost of sales	(1,182)	(1,201)	(3,545)	(3,601)
(Loss) gain related to business divestitures		(1)		(29)
Goodwill impairment charges		(26)		(26)
Operating (loss) income	76	106	272	193
Interest expense				(1)
Interest and other income, net
Debt retirement charge
(Loss) income from continuing operations before income taxes	76	106	272	192
Benefit (provision) for income taxes	(12)	(30)	(59)	(44)
Equity in net income of consolidated subsidiaries
Income from continuing operations		76	213	148
Income (loss) from discontinued operations, net of income tax		(424)	63	(416)
Net income (loss)	64	(348)	276	(268)
Net income attributable to noncontrolling interests
Net (loss) income attributable to L-3	64	(348)	276	(268)
Comprehensive (loss) income attributable to L-3	64	(354)	287	(273)
Non-Guarantor Subsidiaries [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales	444	443	1,307	1,423
Total cost of sales	(381)	(381)	(1,124)	(1,252)
(Loss) gain related to business divestitures				13
Goodwill impairment charges		(9)		(9)
Operating (loss) income	63	53	183	175
Interest expense	(1)		(1)
Interest and other income, net	2	1	5	2
Debt retirement charge
(Loss) income from continuing operations before income taxes	64	54	187	177
Benefit (provision) for income taxes	(10)	(22)	(40)	(41)
Equity in net income of consolidated subsidiaries
Income from continuing operations		32	147	136
Income (loss) from discontinued operations, net of income tax
Net income (loss)	54	32	147	136
Net income attributable to noncontrolling interests
Net (loss) income attributable to L-3	54	32	147	136
Comprehensive (loss) income attributable to L-3	24	(25)	120	62
Eliminations [Member]
Condensed Financial Statements, Captions [Line Items]
Total net sales	(74)	(86)	(204)	(225)
Total cost of sales	89	98	238	260
(Loss) gain related to business divestitures
Goodwill impairment charges
Operating (loss) income	15	12	34	35
Interest expense
Interest and other income, net
Debt retirement charge
(Loss) income from continuing operations before income taxes	15	12	34	35
Benefit (provision) for income taxes	(2)	(4)	(7)	(8)
Equity in net income of consolidated subsidiaries	(276)	610	(962)	190
Income from continuing operations		618	(935)	217
Income (loss) from discontinued operations, net of income tax
Net income (loss)	(263)	618	(935)	217
Net income attributable to noncontrolling interests	(3)	(3)	(10)	(11)
Net (loss) income attributable to L-3	(266)	615	(945)	206
Comprehensive (loss) income attributable to L-3	$ (213)	$ 730	$ (936)	$ 331

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Condensed Combining Financial Information of L-3 Communications and Its Subsidiaries - Condensed Combining Statements of Cash Flows (Detail) - USD ($) $ in Millions	9 Months Ended
	Sep. 23, 2016	Sep. 25, 2015
Operating activities:
Net cash from operating activities	$ 579	$ 597
Investing activities:
Business acquisitions, net of cash acquired	(27)	(260)
Proceeds from sale of business, net of closing date cash balance	561	308
Investments in L-3 Communications
Other investing activities	(104)	(130)
Net cash from (used in) investing activities from continuing operations	430	(82)
Financing activities:
Redemption of senior notes	(298)
Common stock repurchased	(326)	(605)
Dividends paid on L-3 Holdings common stock	(166)	(163)
Dividends paid to L-3 Holdings
Investments from L-3 Holdings
Other financing activities	44	33
Net cash used in financing activities from continuing operations	(746)	(735)
Effect of foreign currency exchange rate changes on cash	(3)	(14)
Net decrease in cash and cash equivalents of discontinued operations	(56)	54
Change in cash balance in assets held for sale		61
Net (decrease) increase in cash	204	(119)
Cash and cash equivalents, beginning of the period	207	442
Cash and cash equivalents, end of the period	411	323
L-3 Communications Holdings, Inc. [Member]
Operating activities:
Net cash from operating activities	492	768
Investing activities:
Business acquisitions, net of cash acquired
Proceeds from sale of business, net of closing date cash balance
Investments in L-3 Communications	(52)	(34)
Other investing activities
Net cash from (used in) investing activities from continuing operations	(52)	(34)
Financing activities:
Redemption of senior notes
Common stock repurchased	(326)	(605)
Dividends paid on L-3 Holdings common stock	(166)	(163)
Dividends paid to L-3 Holdings
Investments from L-3 Holdings
Other financing activities	52	34
Net cash used in financing activities from continuing operations	(440)	(734)
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents of discontinued operations
Change in cash balance in assets held for sale
Net (decrease) increase in cash
Cash and cash equivalents, beginning of the period
Cash and cash equivalents, end of the period
L-3 Communications Corporation [Member]
Operating activities:
Net cash from operating activities	196	370
Investing activities:
Business acquisitions, net of cash acquired	(27)	(260)
Proceeds from sale of business, net of closing date cash balance	563	4
Investments in L-3 Communications
Other investing activities	(27)	(62)
Net cash from (used in) investing activities from continuing operations	509	(318)
Financing activities:
Redemption of senior notes	(298)
Common stock repurchased
Dividends paid on L-3 Holdings common stock
Dividends paid to L-3 Holdings	(492)	(768)
Investments from L-3 Holdings	52	34
Other financing activities	84	491
Net cash used in financing activities from continuing operations	(654)	(243)
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents of discontinued operations
Change in cash balance in assets held for sale
Net (decrease) increase in cash	51	(191)
Cash and cash equivalents, beginning of the period	137	361
Cash and cash equivalents, end of the period	188	170
Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities	301	282
Investing activities:
Business acquisitions, net of cash acquired
Proceeds from sale of business, net of closing date cash balance		27
Investments in L-3 Communications
Other investing activities	(47)	(42)
Net cash from (used in) investing activities from continuing operations	(47)	(15)
Financing activities:
Redemption of senior notes
Common stock repurchased
Dividends paid on L-3 Holdings common stock
Dividends paid to L-3 Holdings
Investments from L-3 Holdings
Other financing activities	(198)	(322)
Net cash used in financing activities from continuing operations	(198)	(322)
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents of discontinued operations	(56)	54
Change in cash balance in assets held for sale		1
Net (decrease) increase in cash
Cash and cash equivalents, beginning of the period		1
Cash and cash equivalents, end of the period		1
Non-Guarantor Subsidiaries [Member]
Operating activities:
Net cash from operating activities	159	65
Investing activities:
Business acquisitions, net of cash acquired
Proceeds from sale of business, net of closing date cash balance	(2)	277
Investments in L-3 Communications
Other investing activities	(30)	(26)
Net cash from (used in) investing activities from continuing operations	(32)	251
Financing activities:
Redemption of senior notes
Common stock repurchased
Dividends paid on L-3 Holdings common stock
Dividends paid to L-3 Holdings
Investments from L-3 Holdings
Other financing activities	(50)	(337)
Net cash used in financing activities from continuing operations	(50)	(337)
Effect of foreign currency exchange rate changes on cash	(3)	(14)
Net decrease in cash and cash equivalents of discontinued operations
Change in cash balance in assets held for sale		60
Net (decrease) increase in cash	74	25
Cash and cash equivalents, beginning of the period	165	142
Cash and cash equivalents, end of the period	239	167
Eliminations [Member]
Operating activities:
Net cash from operating activities	(569)	(888)
Investing activities:
Business acquisitions, net of cash acquired
Proceeds from sale of business, net of closing date cash balance
Investments in L-3 Communications	52	34
Other investing activities
Net cash from (used in) investing activities from continuing operations	52	34
Financing activities:
Redemption of senior notes
Common stock repurchased
Dividends paid on L-3 Holdings common stock
Dividends paid to L-3 Holdings	492	768
Investments from L-3 Holdings	(52)	(34)
Other financing activities	156	167
Net cash used in financing activities from continuing operations	596	901
Effect of foreign currency exchange rate changes on cash
Net decrease in cash and cash equivalents of discontinued operations
Change in cash balance in assets held for sale
Net (decrease) increase in cash	79	47
Cash and cash equivalents, beginning of the period	(95)	(62)
Cash and cash equivalents, end of the period	$ (16)	$ (15)