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