24. Financial Information of L3 and Its Subsidiaries

The debt of L3, 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”). See Note 9 for additional information. The foreign subsidiaries and certain domestic subsidiaries of L3 (the “Non-Guarantor Subsidiaries”) do not guarantee the debt of L3. None of the debt of L3 has been issued by its subsidiaries.

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 L3, 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. There are no restrictions on the payment of dividends from the Guarantor Subsidiaries to L3.

In lieu of providing separate audited financial statements for the Guarantor Subsidiaries, the Company has included the accompanying condensed combining financial statements based on Rule 3-10 of SEC Regulation S-X. The Company does not believe that separate financial statements of the Guarantor Subsidiaries are material to users of the financial statements.

The following condensed combining financial information presents the results of operations, financial position and cash flows of: (1) L3 excluding its consolidated subsidiaries (the Parent), (2) the Guarantor Subsidiaries, (3) the Non-Guarantor Subsidiaries and (4) the eliminations to arrive at the information for L3 on a consolidated basis. As a result of the elimination of the holding company structure and the Merger discussed in Note 2, prior year amounts have been recast to conform to the current year presentation.

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(in millions)
Condensed Combining Balance Sheets:
At December 31, 2016:
Current assets:
Cash and cash equivalents	$	291	$	1	$	207	$	(136	)	$	363
Billed receivables, net		261		285		185		—			731
Contracts in process		694		1,125		236		—			2,055
Other current assets		236		187		125		—			548
Total current assets		1,482		1,598		753		(136	)		3,697
Goodwill		2,162		3,227		1,171		—			6,560
Other assets		705		591		312		—			1,608
Investment in and amounts due from consolidated subsidiaries		5,867		5,430		—		(11,297	)		—
Total assets	$	10,216	$	10,846	$	2,236	$	(11,433	)	$	11,865
Current liabilities	$	789	$	1,022	$	460	$	(136	)	$	2,135
Amounts due to consolidated subsidiaries		—		—		282		(282	)		—
Other long-term liabilities		1,549		200		32		—			1,781
Long-term debt		3,325		—		—		—			3,325
Total liabilities		5,663		1,222		774		(418	)		7,241
L3 shareholders’ equity		4,553		9,624		1,462		(11,086	)		4,553
Noncontrolling interests		—		—		—		71			71
Total equity		4,553		9,624		1,462		(11,015	)		4,624
Total liabilities and equity	$	10,216	$	10,846	$	2,236	$	(11,433	)	$	11,865

	L3		Guarantor Subsidiaries		Non- Guarantor Subsidiaries		Eliminations			Consolidated L3
	(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		800		496		260		—			1,556
Investment in and amounts due from consolidated subsidiaries		5,609		3,739		111		(9,459	)		—
Total assets	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069
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		3,127		—		—		—			3,127
Total liabilities		5,947		1,314		474		(95	)		7,640
L3 shareholders’ equity		4,355		7,950		1,583		(9,533	)		4,355
Noncontrolling interests		—		—		—		74			74
Total equity		4,355		7,950		1,583		(9,459	)		4,429
Total liabilities and equity	$	10,302	$	9,264	$	2,057	$	(9,554	)	$	12,069

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Operations:
For the year ended December 31, 2016:
Total net sales	$	3,388		$	6,063		$	1,379		$	(319	)	$	10,511
Total cost of sales		(3,078	)		(5,610	)		(1,134	)		319			(9,503	)
Operating income		310			453			245			—			1,008
Interest expense		(168	)		(1	)		—			—			(169	)
Interest and other income, net		11			1			6			—			18
Debt retirement charge		(7	)		—			—			—			(7	)
Income from continuing operations before income taxes		146			453			251			—			850
Provision for income taxes		(32	)		(101	)		(56	)		—			(189	)
Equity in net income of consolidated subsidiaries		596			—			—			(596	)		—
Income from continuing operations		710			352			195			(596	)		661
Income from discontinued operations, net of income tax		—			63			—			—			63
Net income		710			415			195			(596	)		724
Net income attributable to noncontrolling interests		—			—			—			(14	)		(14	)
Net income attributable to L3	$	710		$	415		$	195		$	(610	)	$	710
Comprehensive income attributable to L3	$	558		$	425		$	118		$	(543	)	$	558
For the year ended December 31, 2015:
Total net sales	$	3,580		$	5,265		$	1,935		$	(314	)	$	10,466
Total cost of sales		(3,283	)		(4,906	)		(1,701	)		314			(9,576	)
(Loss) gain related to business divestitures		(13	)		(31	)		13			—			(31	)
Goodwill impairment charges		—			(364	)		(20	)		—			(384	)
Operating income (loss)		284			(36	)		227			—			475
Interest expense		(167	)		(1	)		(1	)		—			(169	)
Interest and other income, net		16			—			1			—			17
Debt retirement charge		(1	)		—			—			—			(1	)
Income (loss) from continuing operations before income taxes		132			(37	)		227			—			322
(Provision) benefit for income taxes		(10	)		3			(18	)		—			(25	)
Equity in net loss of consolidated subsidiaries		(362	)		—			—			362			—
(Loss) income from continuing operations		(240	)		(34	)		209			362			297
Loss from discontinued operations, net of income tax		—			(522	)		—			—			(522	)
Net (loss) income		(240	)		(556	)		209			362			(225	)
Net income attributable to noncontrolling interests		—			—			—			(15	)		(15	)
Net (loss) income attributable to L3	$	(240	)	$	(556	)	$	209		$	347		$	(240	)
Comprehensive (loss) income attributable to L3	$	(230	)	$	(560	)	$	98		$	462		$	(230	)
For the year ended December 31, 2014:
Total net sales	$	3,586		$	5,460		$	2,218		$	(278	)	$	10,986
Total cost of sales		(3,255	)		(5,017	)		(1,980	)		278			(9,974	)
Operating income		331			443			238			—			1,012
Interest expense		(156	)		(2	)		—			—			(158	)
Interest and other income, net		15			—			3			—			18
Income from continuing operations before income taxes		190			441			241			—			872
Provision for income taxes		(49	)		(115	)		(63	)		—			(227	)
Equity in net income of consolidated subsidiaries		523			—			—			(523	)		—
Income from continuing operations		664			326			178			(523	)		645
Income from discontinued operations, net of income tax		—			32			—			—			32
Net income		664			358			178			(523	)		677
Net income attributable to noncontrolling interests		—			—			—			(13	)		(13	)
Net income attributable to L3	$	664		$	358		$	178		$	(536	)	$	664
Comprehensive income attributable to L3	$	190		$	356		$	47		$	(403	)	$	190

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
Condensed Combining Statements of Cash Flows: For the year ended December 31, 2016:
Operating activities:
Net cash from operating activities from continuing operations	$	482		$	542		$	259		$	(186	)	$	1,097

Investing activities:
Business acquisitions, net of cash acquired		(388	)		—			—			—			(388	)
Proceeds from sale of business, net of closing date cash balances		563			—			(2	)		—			561
Other investing activities		(60	)		(86	)		(43	)		—			(189	)
Net cash from (used in) investing activities from continuing operations		115			(86	)		(45	)		—			(16	)

Financing activities:
Proceeds from sale of senior notes		547			—			—			—			547
Redemption of senior notes		(856	)		—			—			—			(856	)
Common stock repurchased		(373	)		—			—			—			(373	)
Dividends paid on L3’s common stock		(220	)		—			—			—			(220	)
Other financing activities		459			(399	)		(159	)		145			46
Net cash used in financing activities from continuing operations		(443	)		(399	)		(159	)		145			(856	)
Effect of foreign currency exchange rate changes on cash		—			—			(13	)		—			(13	)
Net decrease in cash and cash equivalents of discontinued operations		—			(56	)		—			—			(56	)
Net increase in cash		154			1			42			(41	)		156
Cash and cash equivalents, beginning of the year		137			—			165			(95	)		207
Cash and cash equivalents, end of the year	$	291		$	1		$	207		$	(136	)	$	363

	L3			Guarantor Subsidiaries			Non- Guarantor Subsidiaries			Eliminations			Consolidated L3
	(in millions)
For the year ended December 31, 2015:
Operating activities:
Net cash from operating activities from continuing operations	$	616		$	422		$	216		$	(185	)	$	1,069

Investing activities:
Business acquisitions, net of cash acquired		(320	)		—			—			—			(320	)
Proceeds from sale of business, net of closing date cash balances		14			28			276			—			318
Other investing activities		(84	)		(69	)		(37	)		—			(190	)
Net cash (used in) from investing activities from continuing operations		(390	)		(41	)		239			—			(192	)

Financing activities:
Repurchases of senior notes		(297	)		—			—			—			(297	)
Common stock repurchased		(740	)		—			—			—			(740	)
Dividends paid on L3's common stock		(214	)		—			—			—			(214	)
Other financing activities		801			(434	)		(473	)		152			46
Net cash used in financing activities from continuing operations		(450	)		(434	)		(473	)		152			(1,205	)
Effect of foreign currency exchange rate changes on cash		—			—			(19	)		—			(19	)
Net increase in cash and cash equivalents of discontinued operations		—			51			—			—			51
Change in cash balance in assets held for sale		—			1			60			—			61
Net (decrease) increase in cash		(224	)		(1	)		23			(33	)		(235	)
Cash and cash equivalents, beginning of the year		361			1			142			(62	)		442
Cash and cash equivalents, end of the year	$	137		$	—		$	165		$	(95	)	$	207

For the year ended December 31, 2014:
Operating activities:
Net cash from operating activities from continuing operations	$	467		$	571		$	143		$	(93	)	$	1,088

Investing activities:
Business acquisitions, net of cash acquired		(57	)		—			—			—			(57	)
Other investing activities		(58	)		(85	)		(21	)		—			(164	)
Net cash used in investing activities from continuing operations		(115	)		(85	)		(21	)		—			(221	)

Financing activities:
Proceeds from sale of senior notes		996			—			—			—			996
Redemption of CODES		(935	)		—			—			—			(935	)
Common stock repurchased		(823	)		—			—			—			(823	)
Dividends paid on L3's common stock		(208	)		—			—			—			(208	)
Other financing activities		721			(530	)		(164	)		50			77
Net cash used in financing activities from continuing operations		(249	)		(530	)		(164	)		50			(893	)
Effect of foreign currency exchange rate changes on cash		—			—			(17	)		—			(17	)
Net increase in cash and cash equivalents of discontinued operations		—			46			—			—			46
Change in cash balance in assets held for sale		—			(1	)		(60	)		—			(61	)
Net increase (decrease) in cash		103			1			(119	)		(43	)		(58	)
Cash and cash equivalents, beginning of the year		258			—			261			(19	)		500
Cash and cash equivalents, end of the year	$	361		$	1		$	142		$	(62	)	$	442